Lennar Corporation this morning reported a larger-than-expected net loss of$244.2 million, or $1.55 per share, for the second fiscal quarter of 2007.Analysts were expecting a gain of $0.05 per share.

Revenues were $2.9 billion, down 37% from the same quarter last year. Home building operations lost $351.7 million, including $329.1 million in FAS 144 valuation adjustements and write offs. Financial Services operating earnings fell to $14.2 million from $34.6 million in last year's second quarter. The company delivered 9,568 homes, down 28%; took new orders on 8,056 homes, down 31%; and posted a cancellation rate of 29%. Backlog dollar value of$2.8 billion was down 56%.

Stuart Miller, Lennar's president and CEO, said, "The housing market has continued to deteriorate throughout the second quarter. The supply of new and existing homes has continued to increase resulting in declining home prices across our markets. We have continued to adjust pricing to meet today's market conditions. This has allowed us to carefully manage inventory levels; however, it has also resulted in lower margins and further impairments."

Miller continued, "We have remained focused on our balance-sheet-first approach. Through our quarterly operating performance and asset management review process, we have refined individual asset strategies and values based on current market conditions. As the market and our operating results have declined, our focus on strong cash flow generation has continued to strengthen our balance sheet."

"Our management team continues to be very focused on daily operations. We are using the slow market conditions to refine our operating processes and improve efficiencies. We are focused on the four steps of our operatingstrategy: rightsizing SG&A expenses, reducing hard construction costs, driving sales and aggressively managing our assets. We continue to aggressively manage our inventory levels by converting inventory to cash, and reducing both land purchases and starts."

Miller concluded, "As we look to our third quarter and the remainder of 2007, we continue to see weak, and perhaps deteriorating, market conditions.Given uncertain market conditions, we continue to lack visibility as to future results, but we currently expect to be in a loss position in our third quarter."

Revenues from home sales decreased 33% in the second quarter of 2007 to $2.7 billion from $4.0 billion in 2006. Revenues were lower primarily due to a 29% decrease in the number of home deliveries and a 7% decrease in the average sales price of homes delivered in 2007.

The average sales price of homes delivered decreased to $298,000 in the second quarter of 2007 from $322,000 in the same period last year, primarily due to higher sales incentives offered to homebuyers ($43,700 per home delivered in the second quarter of 2007, compared to $24,700 per home delivered in the same period last year).

Gross margins on home sales excluding FAS 144 valuation adjustments were$364.8 million, or 13.6%, in the second quarter of 2007, compared to $955.2 million, or 23.7%, in 2006. Gross margin percentage on home sales decreased compared to last year in all of the Company's homebuilding segments primarily due to higher sales incentives offered to homebuyers.

Selling, general and administrative expenses decreased $78.9 million, or 17%, in the second quarter of 2007, compared to the same period last year.As a percentage of revenues from home sales, selling, general and administrative expenses increased to 14.7% in the second quarter of 2007, from 11.8% in 2006. The 290 basis point increase was primarily due to lower revenues and costs related to the consolidation of operations in certain markets.

Loss on land sales totaled $108.8 million in the second quarter of 2007, including $69.4 million of FAS 144 valuation adjustments and $48.9 million of write-offs of deposits and pre-acquisition costs related to approximately 5,400 homesites under option that the Company does not intend to purchase.In the second quarter of last year, gross profit from land sales totaled$41.1 million, net of $16.6 million of FAS 144 valuation adjustments and$21.8 million of write-offs of deposits and pre-acquisition costs related to approximately 4,800 homesites that were under option.

Operating earnings for the Financial Services segment were $14.2 million in the second quarter of 2007, compared to $34.6 million last year. The decrease was primarily due to decreased profitability from the segment's mortgage operations as a result of decreased volume and profit per loan, and$14.4 million of partial write-offs of land seller notes receivable due to the renegotiation of terms.

Corporate general and administrative expenses were reduced by $10.7 million, or 19%, in the second quarter of 2007, compared to the same period last year. As a percentage of total revenues, corporate general and administrative expenses increased to 1.6% in the second quarter of 2007, from 1.2% in 2006, primarily due to lower revenues.

For the first half of the 2007 fiscal year, revenues from home sales decreased 24% to $5.3 billion from $6.9 billion in 2006. Revenues were lower primarily due to an 18% decrease in the number of home deliveries and a 7% decrease in the average sales price of homes delivered in 2007. New home deliveries, excluding unconsolidated entities, decreased to 17,506 homes in the six months ended May 31, 2007 from 21,410 homes last year.

In the six months ended May 31, 2007, new home deliveries were lower in each of the Company's homebuilding segments and Homebuilding Other, compared to 2006. The average sales price of homes delivered decreased to $300,000 in the six months ended May 31, 2007 from $324,000 in 2006 primarily due to higher sales incentives offered to homebuyers ($44,600 per home delivered in 2007, compared to $20,200 per home delivered in 2006).

In February 2007, Lennar's LandSource joint venture admitted MW Housing Partners as a new strategic partner. The transaction resulted in a cash distribution to the Company of approximately $700 million. The Company's resulting ownership of LandSource is 16%. If LandSource reaches certain financial targets, the Company will have a disproportionate share of the entity's future positive net cash flow. As a result of the recapitalization, the Company recognized a pretax gain of $175.9 million in 2007 and could potentially recognize an additional $400 million in future years, in addition to profits from its continuing ownership interest.

Operating earnings for the Financial Services segment were $30.1 million in the six months ended May 31, 2007, compared to $45.2 million last year. The decrease was primarily due to $18.6 million of partial write-offs of land seller notes receivable due to the renegotiation of terms, and decreased profitability from the segment's title operations as a result of decreased volume and profit per transaction.