Lennar Corporation (NYSE:LEN) this morning reported a loss of $88.2 million($0.56 per share) for the first fiscal quarter of 2008, ended Feb. 29. The loss was due to a 62% drop in revenues, which fell to $1.06 billion from $2.79 billion during the same quarter last year, as well as impairments and write-downs of $107.1 million for the quarter.
The results beat Wall Street estimates, which were for a loss of $1.07 per share, handily. Lennar also beat the expectations of analysts in cancellation rates, which were 26% compared to one analyst's expectations of 29% to 33%, and in gross margins, which came in at 14.3% against expectations in the 11% range.
As a result, Lennar stock was up 4% in early morning trading and appeared to be taking the rest of the builder group with it.
The operating loss in home building for the quarter was $109.8 million, including the $107.1 million in charges. Home deliveries were down 60% from this time last year to 3,596 and new orders were down 57% to 3,045 homes.
The company drew down the dollar value of its backlog by 67%, to $1.2 billion, and ended the quarter with $1.1 billion in cash and no outstanding balance on its revolver. The home building debt-to-capital ration was 38.2% at quarter's end.
The average sales price fell 8.2% to $278,000 in the first quarter of 2008 from $303,000 in the same period last year. The average value of incentives increased to $48,000 from $45,500 last year.
Selling, general and administrative expenses fell 53% to $194.4 million, primarily due to reductions in headcount and selling expense. As a percentage of revenues from home sales, selling, general and administrative expenses increased to 18.4% in the first quarter of 2008, from 14.1% in 2007, which was primarily due to lower revenues.
The company took a loss land sales of $26.5 million, which included $15.5 million of SFAS 144 valuation adjustments and $16.9 million of write-offs of deposits and pre-acquisition costs related to 2,600 homesites under option that the Company does not intend to purchase. Coincidentally, the same amount was lost in the first quarter of last year, when the loss on land sales also totaled $26.5 million, including $13.2 million of SFAS 144 valuation adjustments and $21.0 million of write-offs of deposits and pre-acquisition costs related to 4,000 homesites that were under option.
Lennar CEO Stuart Miller said the company had slashed the number of joint venture partnerships from their peak levels in 2006 by approximately a third to 180 and the related recourse debt by half to $917 million.
Equity in loss from unconsolidated entities was $23.0 million in the first quarter of 2008, which included $18.9 million of SFAS 144 valuation adjustments related to assets, compared to equity in loss from unconsolidated entities of $14.2 million in the first quarter of 2007.
Lennar posted an operating loss of $9.7 million in its financial services unit, compared to earnings of $15.9 million last year. The decline was due to lower transactions in the segment's title operations as a result of the overall weakness in the housing market, the company said.
Said Miller, "While sales are occurring and clearing prices are being reached, the pace of overall housing inventory growth is exceeding absorption at the current time. Concurrently, lower consumer confidence has quieted demand among prospective homebuyers and deterred them from a buying decision, while contraction in the lending markets has reduced the availability of credit for those prospective homebuyers that do wish to buy a home."
He added, "On a more optimistic note, numerous initiatives, both private and public, have been designed and proposed to move towards stabilization and resolution. There is a growing consensus that the deterioration of the housing market has likely led us into recession, and the stabilization and recovery of the housing market will likely lead us out. Accordingly, we expect that some of these initiatives and the many that are being discussed will lead to a bottom and recovery."