Miami homebuilder Lennar posts $1.25B loss


Published: Thursday, January 24, 2008 at 12:07 p.m.
Last Modified: Thursday, January 24, 2008 at 12:07 p.m.

MIAMI Lennar Corp. reported a $1.25 billion fourth-quarter loss Thursday the biggest in its history as the prolonged housing slump drove prices lower and the builder took hefty charges to write down land values.

One of the nation's largest homebuilders, Lennar also reported a $1.9 billion loss for all of 2007, a tough year for a U.S. housing market afflicted by weak demand, the subprime lending market collapse and credit troubles.

The Miami-based company said it anticipates more difficulties, but it was aggressively trying generate cash and lower inventory while taking heavy impairment charges as it deals with the market slowdown.

"As we look ahead to 2008, we are not expecting market conditions to improve, and perhaps might continue to decline in the near term," Lennar President and Chief Executive Stuart Miller said. The company did not provide specific earnings guidance for 2008.

Lennar said quarterly losses ballooned to $7.92 per share, from $195.6 million, or $1.24 per share, a year ago. Previously, Lennar's 2007 third-quarter loss of $513.9 million was the largest reported in the Miami-based company's 53-year history.

Excluding a charge of $7.50 per share to write down the value of land options, the company would have lost 42 cents per share in the latest period.

Revenue tumbled 49 percent to $2.18 billion from $4.27 billion in the 2006 period, as home deliveries fell 50 percent to 7,044 homes, and new orders slid 50 percent to 4,761 homes with a cancellation rate of 33 percent.

The results did beat average expectations of analysts surveyed by Thomson Financial, who had forecast a loss of $1.65 per share on revenue of $2.06 billion. Those estimates typically exclude one-time charges such as land write-downs.

The company cut its work force by 35 percent in 2007 and, in November, Standard & Poor's cut Lennar's credit ratings to junk status after earnings and industry data showed the sector's troubles continued to worsen.

For the year ended Nov. 30, Lennar reported a loss of $1.9 billion, or $12.31 per share, compared to earnings of $593.9 million, or $3.69 per share, in 2006.

On a conference call, Miller said Lennar has generated cash by reducing inventory through price cuts, higher incentives and asset sales that helped rid the company of land and homes under construction. Lennar saw an influx of cash with an $852 million tax refund resulting from losses on land sales.

Despite the heavy charges, Lennar's focus on cash flow has put the company in a "strong position," Banc of America Securities analyst Daniel Oppenheim wrote in a report.

"We continue to believe management is taking the right steps (discounting home prices, selling land) to generate cash and that the resulting balance sheet flexibility is critical to navigate the current downturn," Oppenheim wrote.

Lennar shares rose 52 cents, or more than 3 percent, to $15.46 in morning trading.

In the fourth quarter, revenues from home sales decreased 51 percent to $2 billion from $4 billion during the same time period in 2006.

The average sales price of homes decreased to $291,000 in the fourth quarter from $302,000 a year earlier. Incentives were valued at $58,800 per home delivered in the fourth quarter, compared to $47,300 in the same period last year.

Lennar lost $1.2 billion on land sales in the fourth quarter, including $740.4 million valuation adjustments on inventory sold in a deal with Morgan Stanley Real Estate.

Lennar sold 11,000 homesites in 32 communities to Morgan Stanley for $525 million, in return for 20 percent ownership and 50 percent voting rights on the investment venture. The properties Lennar sold had a value of about $1.3 billion, but Miller said the priority in the deal was to generate cash from outstanding inventory.

"We again reviewed our assets aggressively and impaired to the full extent of the current market slide," Miller said.

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