-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, M9REscEwhT82DtAChfayuNeJbK3Q82LGvPtSi0bFeFA70YDGjrW6urYvvOx8VPCX frY5NjkuO08NA73WkiX3eg== 0000950170-95-000192.txt : 19951016 0000950170-95-000192.hdr.sgml : 19951016 ACCESSION NUMBER: 0000950170-95-000192 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950831 FILED AS OF DATE: 19951013 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: LENNAR CORP CENTRAL INDEX KEY: 0000058696 STANDARD INDUSTRIAL CLASSIFICATION: OPERATIVE BUILDERS [1531] IRS NUMBER: 591281887 STATE OF INCORPORATION: DE FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-06643 FILM NUMBER: 95580537 BUSINESS ADDRESS: STREET 1: 700 NW 107TH AVE CITY: MIAMI STATE: FL ZIP: 33172 BUSINESS PHONE: 3055594000 10-Q 1 LENNAR CORPORATION FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended AUGUST 31, 1995 Commission file number: 1-6643 LENNAR CORPORATION - ------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) DELAWARE 59-1281887 - ------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 700 NORTHWEST 107 AVENUE, MIAMI, FLORIDA 33172 - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (305) 559-4000 - ------------------------------------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No Common shares outstanding as of the end of the current fiscal quarter: Common 25,840,444 Class B Common 9,985,731 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS
LENNAR CORPORATION AND SUBSIDIARIES Consolidated Condensed Balance Sheets (In thousands) (Unaudited) August 31, November 30, ASSETS 1995 1994 - ---------------------------------------------------------------------------------------------------------- HOMEBUILDING, INVESTMENT AND FINANCIAL SERVICES: Homebuilding and investment assets: Cash and cash equivalents $ 13,601 16,801 Receivables, net 37,312 48,165 Inventories: Construction in progress and model homes 233,590 175,547 Land held for development 294,684 300,488 --------------------------- Total inventories 528,274 476,035 Land held for investment 75,202 80,747 Operating properties and equipment, net 191,269 193,621 Investments in and advances to partnerships 121,717 106,637 Other assets 34,665 29,598 Financial services assets 319,140 252,195 - ---------------------------------------------------------------------------------------------------------- Total assets - homebuilding, investment and financial services 1,321,180 1,203,799 - ---------------------------------------------------------------------------------------------------------- LIMITED-PURPOSE FINANCE SUBSIDIARIES - COLLATERAL FOR BONDS AND NOTES PAYABLE 78,236 89,424 - ---------------------------------------------------------------------------------------------------------- $ 1,399,416 1,293,223 - ---------------------------------------------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY - ---------------------------------------------------------------------------------------------------------- HOMEBUILDING, INVESTMENT AND FINANCIAL SERVICES: Homebuilding and investment liabilities: Accounts payable and accrued liabilities $ 107,026 102,582 Customer deposits 19,205 15,271 Income taxes: Currently payable 7,102 10,205 Deferred 50,249 50,796 Mortgage notes and other debts payable 327,347 328,936 Financial services liabilities 231,978 168,348 - ---------------------------------------------------------------------------------------------------------- Total liabilities - homebuilding, investment and financial services 742,907 676,138 - ---------------------------------------------------------------------------------------------------------- LIMITED-PURPOSE FINANCE SUBSIDIARIES - BONDS AND NOTES PAYABLE 73,942 82,997 - ---------------------------------------------------------------------------------------------------------- STOCKHOLDERS' EQUITY: Common stock 2,584 2,578 Class B common stock 999 999 Additional paid-in capital 170,291 169,605 Retained earnings 408,693 360,906 - ---------------------------------------------------------------------------------------------------------- Total stockholders' equity 582,567 534,088 - ---------------------------------------------------------------------------------------------------------- $ 1,399,416 1,293,223 ==========================================================================================================
See accompanying notes to consolidated condensed financial statements. 1
LENNAR CORPORATION AND SUBSIDIARIES Consolidated Condensed Statements of Earnings (Unaudited) (In thousands, except per share amounts) Three Months Ended Nine Months Ended August 31, August 31, 1995 1994 1995 1994 - -------------------------------------------------------------------------------------------------- REVENUES: Homebuilding $ 159,902 143,727 445,523 461,941 Investment 28,077 40,415 104,845 86,582 Financial services 14,875 13,022 40,193 42,683 Limited-purpose finance subsidiaries 1,876 2,260 5,884 7,362 - -------------------------------------------------------------------------------------------------- Total revenues 204,730 199,424 596,445 598,568 - -------------------------------------------------------------------------------------------------- COSTS AND EXPENSES: Homebuilding 146,153 127,988 409,997 412,658 Investment 14,388 23,487 51,311 44,712 Financial services 9,469 9,139 26,638 31,493 Limited-purpose finance subsidiaries 1,883 2,161 5,881 7,320 Corporate general and administrative 2,343 2,849 7,640 7,979 Interest 4,733 3,545 12,358 10,424 - -------------------------------------------------------------------------------------------------- Total costs and expenses 178,969 169,169 513,825 514,586 - -------------------------------------------------------------------------------------------------- EARNINGS BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES 25,761 30,255 82,620 83,982 INCOME TAXES 10,047 11,799 32,222 32,753 - -------------------------------------------------------------------------------------------------- EARNINGS BEFORE CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES 15,714 18,456 50,398 51,229 CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES FOR: Income taxes -- -- -- 4,745 Purchased mortgage servicing rights -- -- -- (3,784) - -------------------------------------------------------------------------------------------------- NET EARNINGS $ 15,714 18,456 50,398 52,190 ================================================================================================== AVERAGE SHARES OUTSTANDING 36,107 36,056 36,081 36,108 ================================================================================================== NET EARNINGS PER SHARE: BEFORE CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES $ .44 .51 1.40 1.42 CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES -- -- -- .03 - -------------------------------------------------------------------------------------------------- NET EARNINGS PER SHARE $ .44 .51 1.40 1.45 ================================================================================================== ================================================================================================== CASH DIVIDENDS PER COMMON SHARE $ 0.025 0.025 0.075 0.07 - -------------------------------------------------------------------------------------------------- CASH DIVIDENDS PER CLASS B COMMON SHARE $ 0.0225 0.0225 0.0675 0.062 ==================================================================================================
See accompanying notes to consolidated condensed financial statements. 2
LENNAR CORPORATION AND SUBSIDIARIES Consolidated Condensed Statements of Cash Flows (Unaudited) (In thousands) Nine Months Ended August 31, 1995 1994 - -------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $ 50,398 52,190 Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: Depreciation and amortization 8,048 6,859 Equity in earnings of partnerships (22,838) (17,225) Gain on sales of other real estate (15,086) (8,942) Decrease in deferred income taxes (547) (2,120) Cumulative effect of changes in accounting principles -- (961) Changes in assets and liabilities, net of effects from accounting changes: Decrease in receivables 11,608 21,343 Increase in inventories (56,071) (60,121) Decrease in financial services' loans held for sale or disposition 48 117,699 Increase (decrease) in accounts payable and accrued liabilities 6,099 (29,474) Decrease in income taxes currently payable (3,103) (3,836) Other, net 3,934 1,163 - -------------------------------------------------------------------------------------------------------------- Net cash provided by (used in) operating activities (17,510) 76,575 - -------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to operating properties and equipment (8,768) (9,628) Sales of operating properties and equipment 20,444 20,007 Sales of land held for investment 9,833 1,096 Decrease (increase) in investments in and advances to partnerships 7,758 (1,675) Additions to financial services' loans held for investment (37,115) (52,408) Sales and collections of financial services' loans held for investment 3,880 40,546 Purchase of commercial mortgage-backed securities (21,345) (29,121) Other, net 1,417 7,082 - -------------------------------------------------------------------------------------------------------------- Net cash used in investing activities (23,896) (24,101) - -------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Net borrowings under revolving credit agreement 68,300 8,700 Net borrowings (repayments) under financial services' warehouse lines of credit 12,600 (104,534) Mortgage notes and other debts payable: Proceeds from borrowings 152,486 60,371 Principal payments (191,118) (16,660) Limited-purpose finance subsidiaries: Principal reduction of mortgage loans and other receivables 11,175 35,319 Principal reduction of bonds and notes payable (9,630) (33,513) Common stock: Issuance 692 716 Dividends (2,611) (2,420) - -------------------------------------------------------------------------------------------------------------- Net cash provided by (used in) financing activities 41,894 (52,021) - -------------------------------------------------------------------------------------------------------------- Net increase in cash and cash equivalents 488 453 Cash and cash equivalents at beginning of period 17,942 14,225 - -------------------------------------------------------------------------------------------------------------- Cash and cash equivalents at end of period $ 18,430 14,678 ============================================================================================================== Summary of cash and cash equivalent balances: Homebuilding and investment $ 13,601 10,158 Financial services 4,829 4,520 - -------------------------------------------------------------------------------------------------------------- $ 18,430 14,678 ============================================================================================================== Supplemental disclosures of cash flow information: Cash paid for interest, net of amounts capitalized $ 15,746 8,804 Cash paid for income taxes $ 36,361 37,798 ==============================================================================================================
See accompanying notes to consolidated condensed financial statements. 3 LENNAR CORPORATION AND SUBSIDIARIES Notes to Consolidated Condensed Financial Statements (1) BASIS OF CONSOLIDATION The accompanying consolidated condensed financial statements include the accounts of Lennar Corporation and all wholly-owned subsidiaries (the "Company"). All significant intercompany transactions and balances have been eliminated. The Company's investments in partnerships are accounted for by the equity method. The financial statements have been prepared by management without audit by independent public accountants and should be read in conjunction with the November 30, 1994 audited financial statements in the Company's Annual Report on Form 10-K for the year then ended. However, in the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for fair presentation of the accompanying consolidated condensed financial statements have been made. (2) BUSINESS SEGMENTS The Company has three business segments: Homebuilding, Investment and Financial Services. The limited-purpose finance subsidiaries are not considered a business segment. Homebuilding operations include the construction and sale of single-family and multi-family homes. These activities also include the purchase, development and sale of residential land. The Investment Division is involved in the development, management and leasing, as well as the acquisition and sale, of commercial and residential properties and land. This division also manages and participates in partnerships with financial institutions. During 1994, the Investment Division began acquiring, at a discount, the unrated portions of debt securities which are collateralized by real estate loans. The division has only invested in securities in which it is the special servicer on behalf of all the certificate holders of the security. The division earns interest on these investments as well as fees for the special servicing activities. Financial services activities are conducted primarily through Lennar Financial Services, Inc. ("LFS") and five subsidiaries: Universal American Mortgage Company, AmeriStar Financial Services, Inc., Universal Title Insurors, Inc., Lennar Capital Corporation and TitleAmerica Insurance Corporation. These companies arrange mortgage financing, title insurance and closing services for Lennar homebuyers and others, acquire, package and resell home mortgage loans and perform mortgage loan servicing activities. This division also invests in rated portions of commercial real estate mortgage-backed securities for which Lennar's Investment Division is the special servicer and an investor in the unrated portion of those securities. The limited-purpose finance subsidiaries of LFS have placed mortgages and other receivables as collateral for various long-term financings. These limited-purpose finance subsidiaries are not considered a part of the financial services operations and are reported separately. (3) NET EARNINGS PER SHARE Net earnings per share is calculated by dividing net earnings by the weighted average number of the total of common shares, Class B common shares and common equivalent shares outstanding during the period. 4 (4) RESTRICTED CASH Cash includes restricted deposits of $3.0 million and $3.7 million as of August 31, 1995 and November 30, 1994, respectively. These balances are comprised primarily of escrow deposits held related to condominium purchases and security deposits from tenants of commercial and apartment properties. (5) FINANCIAL SERVICES The assets and liabilities related to the Company's financial services operations (as described in Note 2) are summarized as follows:
(Unaudited) August 31, November 30, (In thousands) 1995 1994 ----------------------------------------------------------------------- Assets: Loans held for sale or disposition, net $ 124,452 124,324 Loans and mortgage-backed securities held for investment, net 172,600 107,989 Cash and receivables, net 14,855 11,579 Servicing acquisition costs 2,681 3,949 Other 4,552 4,354 ----------------------------------------------------------------------- $ 319,140 252,195 ======================================================================= Liabilities: Notes and other debts payable $ 216,678 154,379 Other 15,300 13,969 ----------------------------------------------------------------------- $ 231,978 168,348 =======================================================================
(6) ACCOUNTING CHANGES Effective December 1, 1993, the Company adopted the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes". This change in accounting principle resulted in an increase to net earnings of $4.7 million in the first quarter of 1994. The change in accounting for income taxes did not have a significant impact on the Company's results of operations. The first quarter of 1994 also included a charge of $3.8 million (net of income taxes of $2.4 million) for the cumulative effect on prior years of a change in accounting for purchased mortgage servicing rights. The Company changed the way in which it evaluates these assets for impairment from an undiscounted and disaggregated cash flow basis to a discounted and disaggregated cash flow basis. (7) SUMMARY OF NONCASH INVESTING AND FINANCING ACTIVITIES During the nine months ended August 31, 1995, the Company acquired commercial mortgage-backed securities for $40.0 million. Of this amount, $21.3 million was paid in cash and $18.7 million was financed by the sellers. During the same period in 1994, the Company acquired $64.0 million of commercial mortgage-backed securities of which $29.1 million was paid in cash and $34.9 million was financed by the sellers. (8) RECLASSIFICATIONS Certain prior year amounts in the consolidated condensed financial statements have been reclassified to conform with the current period presentation. 5 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (1) MATERIAL CHANGES IN RESULTS OF OPERATIONS OVERVIEW Net earnings before the cumulative effect of changes in accounting principles were $15.7 million and $50.4 million, respectively, for the three-month and nine-month periods ended August 31, 1995, compared to $18.5 million and $51.2 million, respectively, for the three-month and nine-month periods ended August 31, 1994. The decrease in 1995 third quarter net earnings before changes in accounting principles was due to lower operating earnings from the Homebuilding and Investment Divisions and higher interest expense. These decreases were partially offset by higher operating earnings from the Financial Services Division. Operating earnings in the third quarter of 1994 included a significant sale of real estate in the Investment Division. The decrease in the 1995 nine-month net earnings before changes in accounting principles was due to lower operating earnings from the Homebuilding Division and higher interest expense which were partially offset by higher operating earnings from the Investment and Financial Services Divisions. In the first quarter of 1994, the Company made two one-time adjustments for changes in accounting principles which increased net earnings by approximately $1.0 million. There were no accounting changes in 1995. HOMEBUILDING The following tables set forth selected financial and operational information related to the Homebuilding Division for the periods indicated (unaudited):
Three Months Ended Nine Months Ended (DOLLARS IN THOUSANDS, EXCEPT August 31, August 31, AVERAGE SALES PRICES) 1995 1994 1995 1994 - -------------------------------------------------------------------------------------- REVENUES: Sales of homes $156,751 142,009 433,244 451,919 Other 3,151 1,718 12,279 10,022 - -------------------------------------------------------------------------------------- Total revenues 159,902 143,727 445,523 461,941 COSTS AND EXPENSES: Cost of homes sold 127,997 113,176 351,187 360,362 Cost of other revenues 1,875 1,068 9,159 7,126 Selling, general and administrative 16,281 13,744 49,651 45,170 - -------------------------------------------------------------------------------------- Total costs and expenses 146,153 127,988 409,997 412,658 - -------------------------------------------------------------------------------------- OPERATING EARNINGS $ 13,749 15,739 35,526 49,283 ====================================================================================== Gross profit - home sales $ 28,754 28,833 82,057 91,557 Gross profit percentage 18.3% 20.3% 18.9% 20.3% S,G&A as a percentage of homebuilding revenues 10.2% 9.6% 11.1% 9.8% Average sales price $133,600 125,600 137,400 125,400 ======================================================================================
6
SUMMARY OF HOME AND BACKLOG DATA Three Months Ended Nine Months Ended August 31, August 31, DELIVERIES 1995 1994 1995 1994 - -------------------------------------------------------------------------------------- Florida 803 800 2,243 2,642 Arizona 124 151 356 505 Texas 246 180 554 458 - -------------------------------------------------------------------------------------- 1,173 1,131 3,153 3,605 ====================================================================================== NEW ORDERS - -------------------------------------------------------------------------------------- Florida 878 882 2,642 2,660 Arizona 175 94 419 377 Texas 247 166 630 544 - -------------------------------------------------------------------------------------- 1,300 1,142 3,691 3,581 ====================================================================================== BACKLOG - HOMES - -------------------------------------------------------------------------------------- Florida 1,721 1,696 Arizona 301 212 Texas 219 173 - -------------------------------------------------------------------------------------- 2,241 2,081 ====================================================================================== BACKLOG - DOLLAR VALUE (in thousands) $317,702 287,651 ======================================================================================
Homebuilding revenues in the three-month and nine-month periods ended August 31, 1995 were $159.9 million and $445.5 million, respectively, compared to $143.7 million and $461.9 million, respectively, in the same periods of 1994. Homebuilding revenues were higher in the 1995 third quarter due to a higher number of home deliveries and an increase in the average sales price. Homebuilding revenues were lower in the 1995 nine-month period due to a lower number of home deliveries, partially offset by an increase in the average sales price. New home deliveries for the 1995 three-month and nine-month periods were 1,173 and 3,153, respectively, compared to 1,131 and 3,605, respectively, for the same periods of 1994. The average sales price of a home delivered during the three-month and nine-month periods ended August 31, 1995 was $133,600 and $137,400, respectively, compared to $125,600 and $125,400, respectively, in the corresponding periods of the prior year. The higher average sales price was due to a proportionately greater number of sales of higher-priced homes, as well as price increases for existing products. Gross profit percentages from the sales of homes were 18.3% and 18.9%, respectively, in the three-month and nine-month periods ending August 31, 1995, compared to 20.3% in both of the corresponding periods of the prior year. These decreases were primarily attributable to an increase in land costs related to the mix of homes delivered. Selling, general and administrative expenses increased to $16.3 million and $49.7 million for the three-month and nine-month periods ended August 31, 1995, respectively, from $13.7 million and $45.2 million, respectively, for the comparable periods in 1994. As a percentage of homebuilding revenues, selling, general and administrative expenses increased to 10.2% and 11.1%, respectively, for the three-month and nine-month periods ended August 31, 1995 from 9.6% and 9.8%, respectively, for the comparable periods in 1994. These increases were primarily the result of increased advertising and promotional expenses, increased expenses associated with the opening of new communities and a higher level of outside broker participation in the sale of homes. 7 At August 31, 1995, the Company had approximately $318 million (2,241 homes) of sales contracts in backlog, compared to $288 million (2,081 homes) at the end of the same period in the prior year. The increase in backlog is attributable to the increase in new orders in 1995. INVESTMENT The following table presents selected financial data related to the Investment Division for the periods indicated (unaudited):
Three Months Ended Nine Months Ended August 31, August 31, (IN THOUSANDS) 1995 1994 1995 1994 - -------------------------------------------------------------------------------------- REVENUES: Rental income $11,652 9,965 37,330 31,843 Equity in earnings of partnerships 7,401 5,802 22,838 17,225 Management fees 2,095 3,141 7,293 10,144 Sales of other real estate 4,592 20,000 30,271 21,083 Other 2,337 1,507 7,113 6,287 - -------------------------------------------------------------------------------------- Total revenues 28,077 40,415 104,845 86,582 COST OF SALES AND EXPENSES 14,388 23,487 51,311 44,712 - -------------------------------------------------------------------------------------- OPERATING EARNINGS $13,689 16,928 53,534 41,870 ======================================================================================
For the three-month and nine-month periods ended August 31, 1995, Investment Division revenues were $28.1 million and $104.8 million, respectively, compared to $40.4 million and $86.6 million, respectively, in the same periods of 1994. Operating earnings were $13.7 million and $53.5 million, respectively, in the third quarter and first nine months of 1995, compared to $16.9 million and $41.9 million, respectively, in the corresponding periods of 1994. The decrease in operating earnings for the third quarter of 1995 was primarily due to the decrease in sales of other real estate and slightly lower partnership management fees. In the third quarter of 1995, sales of real estate totaled $4.6 million. In the third quarter of 1994, a significant sale of real estate totaling $20.0 million occurred. The decrease in operating earnings from sales of other real estate was partially offset by increased rental income as a result of the acquisition of additional operating properties late in fiscal 1994 and an increase in equity in earnings of partnerships. A significant portion of partnership earnings are derived from loan payoffs and asset sales which can vary substantially from period to period. For the first nine months of 1995, revenues and earnings increased as a result of increased sales of other real estate, increased rental income on operating properties and an increase in equity in earnings of partnerships. This increase was partially offset by lower partnership management fees. 8 FINANCIAL SERVICES The following table presents selected financial data related to the Financial Services Division for the periods indicated (unaudited):
Three Months Ended Nine Months Ended August 31, August 31, (DOLLARS IN THOUSANDS) 1995 1994 1995 1994 - ------------------------------------------------------------------------------------------ REVENUES $ 14,875 13,022 40,193 42,683 COSTS AND EXPENSES 9,469 9,139 26,638 31,493 INTERCOMPANY INTEREST EXPENSE 653 830 1,853 2,022 - ------------------------------------------------------------------------------------------ OPERATING EARNINGS $ 4,753 3,053 11,702 9,168 - ------------------------------------------------------------------------------------------ Dollar volume of mortgages originated $ 191,135 177,335 456,113 773,567 - ------------------------------------------------------------------------------------------ Number of mortgages originated 1,700 1,700 4,200 7,400 - ------------------------------------------------------------------------------------------ Principal balance of servicing portfolio $ 3,388,265 3,337,338 - ------------------------------------------------------------------------------------------ Number of loans serviced 44,500 44,800 ==========================================================================================
Operating earnings of the Financial Services Division were $4.8 million and $11.7 million, respectively, for the three-month and nine-month periods ended August 31, 1995, compared to $3.1 million and $9.2 million, respectively, for the same periods of 1994. The increases in operating earnings were primarily the result of earnings from the division's investment in the rated portions of commercial real estate mortgage-backed securities. The Financial Services Division began acquiring these investments during the third quarter of 1994. Therefore, earnings from these investments for the first nine months of 1995 were significantly greater than for the same period last year. Additionally, earnings from Financial Services' title operations increased for both the third quarter and first nine months of 1995, when compared to the same periods of last year. Earnings from the division's mortgage operations increased slightly for the 1995 third quarter compared to the 1994 third quarter, whereas year-to-date 1995 operating earnings from mortgage operations decreased from the same period in 1994. INTEREST EXPENSE Interest expense during the three-month and nine-month periods ended August 31, 1995 was $4.7 million and $12.4 million, respectively, compared to $3.5 million and $10.4 million, respectively, in the corresponding periods of the prior year. The increase in interest expense was primarily the result of higher debt levels and interest rates. Previously capitalized interest charged to interest expense during the third quarter and first nine months of 1995 was $4.3 million and $11.6 million, respectively, compared to $3.5 million and $10.4 million, respectively, for the comparable periods last year. ACCOUNTING CHANGES Effective December 1, 1993, the Company adopted the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes". This change in accounting principle resulted in an increase to net earnings of $4.7 million in the first quarter of 1994. The change in accounting for income taxes did not have a significant impact on the Company's results of operations. The first quarter of 1994 also included a charge of $3.8 million (net of income taxes of $2.4 million) for the cumulative effect on prior years of a change in accounting for purchased mortgage servicing rights. The Company changed the way in which it evaluates these assets for impairment from an undiscounted and disaggregated cash flow basis to a discounted and disaggregated cash flow basis. 9 (2) MATERIAL CHANGES IN FINANCIAL CONDITION During the nine months ended August 31, 1995, $17.5 million was used in the Company's operations, compared to $76.6 million provided by operations during the corresponding period of the prior year. The primary use of cash in operations during 1995 was $56.1 million used to increase inventories through land purchases, land development and construction. The use of cash was partially offset by $11.6 million of cash provided by a decrease in receivables and $6.1 million of cash provided by an increase in accounts payable and accrued liabilities. During the nine months ended August 31, 1994, cash was primarily provided from net earnings of $52.2 million, a $117.7 million decrease in loans held for sale or disposition by the Financial Services Division and a $21.3 million decrease in receivables. These increases in cash were partially offset by the use of $60.1 million to increase inventories and $29.5 million to decrease accounts payable and accrued liabilities. Cash used in investing activities was $23.9 million in the first nine months of 1995, compared to $24.1 million of cash used in the first nine months of 1994. During 1995, cash was primarily used to acquire loans held for investment by the Company's financial services operations, additional commercial mortgage-backed securities and operating properties. These uses of cash were partially offset by sales of operating properties and land held for investment and cash provided by the Company's investments in partnerships. During 1994, the Company's primary use of cash in investing activities was to acquire loans held for investment by the Company's financial services operations, commercial mortgage-backed securities and operating properties. These uses of cash were partially offset by sales and collections of financial services' loans held for investment and sales of operating properties. During fiscal 1995, the Company amended its unsecured revolving credit agreement to provide for a five-year commitment of $310 million. At August 31, 1995, $244.0 million was outstanding on the revolving credit agreement. A majority of the Company's variable rate borrowings are based on the London Interbank Offering Rate ("LIBOR") index. In June 1995, the Company entered into seven-year interest rate swap agreements which fixed the LIBOR index at 5.99% - 6.06% on $200 million of variable debt. 10 PART II. OTHER INFORMATION ITEMS 1-5. NOT APPLICABLE ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibit: (27) Financial Data Schedule. (b) Reports on Form 8-K: Registrant was not required to file, and has not filed, a Form 8-K during the quarter for which this report is being filed. 11 SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. LENNAR CORPORATION ------------------------ (Registrant) Date: OCTOBER 13, 1995 ALLAN J. PEKOR ---------------- ------------------------ Allan J. Pekor Financial Vice President Chief Financial Officer Date: OCTOBER 13, 1995 JAMES T. TIMMONS ---------------- ------------------------ James T. Timmons Controller Chief Accounting Officer 12 EX-99 2 INDEX TO EXHIBITS INDEX TO EXHIBITS EXHIBIT NUMBER DESCRIPTION PAGE - ------- ----------- ---- 27. Financial Data Schedule 14 13 EX-27 3 ART 5 FDS FOR 3RD QUARTER 10-Q
5 1,000 9-MOS NOV-30-1995 AUG-31-1995 18,430 0 47,338 0 528,274 594,042 226,419 (35,150) 1,399,416 148,633 617,967 3,583 0 0 578,984 1,399,416 433,244 596,445 351,187 444,176 57,291 0 12,358 82,620 32,222 50,398 0 0 0 50,398 1.40 1.40
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