It would be easy to get discouraged by looking at the "black and white numbers" of Lennar's financials, Lennar CEO Stuart Miller told analysts during the company's Thursday, Jan. 24 conference call. Indeed, its $1.3 billion fourth-quarter loss and $1.9 billion year-end losses are bleak.

But instead, he urged, take a look at a successfully slimmed down Lennar Corp.; its fundamentals shrunk, in some cases, to half its size a year ago, skinny enough to fit a market that has proportionately become a shadow of its former self.

Absent a major market meltdown that no builder could withstand, Miller said Lennar is now appropriately sized, its building costs cut far enough, and its land values slashed low enough to make a profit in '08 on the homes it does sell.

"While the fourth quarter report card is disappointing, we made a great deal of progress to prepare for 2008 and beyond," he said. "We have really made an effort here to get ahead of the curve."

While the company's home deliveries were down 33% in its fiscal year ended Nov. 30, new orders down 39%, and backlog dollar value down 65%, it has been able to cut its home sites owned and controlled by 47% and its debt-to-capital ratio to 37.3%. It also cut its employees by half to about 3,500.

But probably one of the company's biggest achievements was extracting an $852 million federal tax refund check related to $1.7 billion in losses on land sales in '07 in what has to be record time.

The company had expected to be able to recoup taxes paid in its boon years based on losses in 2007 in relation to its November deal to sell $1.3 billion worth of land, 11,000 lots around the country, into a joint venture with Morgan Stanley Real Estate for $525 million, recouping $270 million in taxes because of the loss. But Lennar reported Thursday that the sale did not qualify under generally accepted accounting principals because the company maintained some ownership in the land as well as first rights to buy the land back.

Even though the company was able to collect the $525 million the joint venture paid Lennar for the lots, the land will remain on the company's books, and the company impaired it by $740.4 million, the difference between what it paid for the land and the sale price to the Morgan Stanley joint venture.

Despite not being able to book the Morgan Stanley sale loss, Lennar was still able to cobble together enough losses from other smaller land sales made last year to generate the tax refund check, said Miller. "In many instances we made an active decision to take what might have been an impairment and turned it into a realizable sales loss by actually concluding a sales transaction," he said. While the Morgan Stanley sale generated a lot of ink because of its size, "There were a number of asset sales that lay more behind the scenes that were part of the sales transactions that resulted in the tax recovery."

Still, the company had plenty of write offs to make as well. In addition to the $740.4 million impairment for the Morgan Stanley sale at 40 cents on the dollar, it also wrote off $229.7 million for impairments to other land, $217.6 million for option deposits and reacquisition costs on land it decided not to buy, $224.8 million on lots with homes, $227.3 in investments into its joint ventures, and $173.7 million in company goodwill.

Lennar's cash position remains strong with $642.5 million of cash on hand at the end of its fiscal year, plus the $852 million check from the government--despite paying off some of its loans.

In an unusual move, Miller took considerable time during the conference call to praise many of the company's employees by name for their hard work during the past quarter.

"It would have been easier for them to put their heads in the sand and avoid the harsh realities of these market conditions," Miller said. Instead they put in untold extra hours "confronting the storm that has been heaped upon us...They took personally the responsibility to fix what is broken."

In an effort to potentially boost the company's stock price, which some suggest has been depressed because of fears that the company's joint ventures hold unseen risk, Miller made an extra effort to talk about making information about the company's many joint ventures more transparent, promising more information about its stake in these ventures in the company's 10-K to be released next week. He also said that the company has been steadily reassessing the financial stability of the ventures and reducing the amount of recourse debt it has in the ventures as well as number it is involved in. While defending joint ventures as a tool to share risk, Miller said he expects Lennar to be less involved in them in the future.

"Certainly for the next many years the JV structures and other structures are not going to be needed...because of the availability of [less expensive] land."