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Lennar Corporation Q3 net earnings $223.3 million

Staff writer ▼ | September 22, 2015
Lennar Corporation reported results for its third quarter ended August 31, 2015. Net earnings attributable to Lennar in 2015 were $223.3 million, or $0.96 per diluted share.
Lennar
Lennar Corporation   $0.96 per diluted share
This compares to third quarter net earnings attributable to Lennar in 2014 of $177.8 million, or $0.78 per diluted share.

Revenues from home sales increased 22% in the third quarter of 2015 to $2.2 billion from $1.8 billion in the third quarter of 2014. Revenues were higher primarily due to a 16% increase in the number of home deliveries, excluding unconsolidated entities, and a 5% increase in the average sales price of homes delivered.

New home deliveries, excluding unconsolidated entities, increased to 6,314 homes in the third quarter of 2015 from 5,450 homes in the third quarter of 2014. There was an increase in home deliveries in all of the Company's Homebuilding segments, except in Southeast Florida and in Homebuilding Other.

The average sales price of homes delivered increased to $350,000 in the third quarter of 2015 from $332,000 in the third quarter of 2014.

Sales incentives offered to homebuyers were $20,700 per home delivered in the third quarter of 2015, or 5.6% as a percentage of home sales revenue, compared to $20,400 per home delivered in the third quarter of 2014, or 5.8% as a percentage of home sales revenue, and $21,500 per home delivered in the second quarter of 2015, or 5.8% as a percentage of home sales revenue.

Gross margins on home sales were $531.4 million, or 24.1%, in the third quarter of 2015, compared to $456.2 million, or 25.2%, in the third quarter of 2014.

Gross margin percentage on home sales decreased primarily due to an increase in land costs, partially offset by an increase in the average sales price of homes delivered. Gross profits on land sales were $6.7 million in the third quarter of 2015, compared to $4.3 million in the third quarter of 2014.

Selling, general and administrative expenses were $219.0 million in the third quarter of 2015, compared to $188.0 million in the third quarter of 2014.

As a percentage of revenues from home sales, selling, general and administrative expenses improved to 9.9% in the third quarter of 2015, from 10.4% in the third quarter of 2014 primarily due to improved operating leverage as a result of an increase in home deliveries.

Lennar Homebuilding equity in earnings (loss) from unconsolidated entities was $13.3 million in the third quarter of 2015, compared to ($2.1) million in the third quarter of 2014.

In the third quarter of 2015, Lennar Homebuilding equity in earnings from unconsolidated entities included $21.5 million of equity in earnings from El Toro, one of the Company's unconsolidated entities, due to a gain on debt extinguishment and the sale of homesites to a third party.

This was partially offset by the Company's share of net operating losses from various Lennar Homebuilding unconsolidated entities. In the third quarter of 2014, Lennar Homebuilding equity in loss from unconsolidated entities related to the Company's share of net operating losses from various Lennar Homebuilding unconsolidated entities.

Lennar Homebuilding interest expense was $58.9 million in the third quarter of 2015 ($55.5 million was included in cost of homes sold, $0.6 million in cost of land sold and $2.8 million in other interest expense), compared to $51.4 million in the third quarter of 2014 ($42.6 million was included in cost of homes sold, $0.4 million in cost of land sold and $8.4 million in other interest expense).

Interest expense increased primarily due to an increase in the Company's outstanding debt and an increase in home deliveries, partially offset by an increase in qualifying assets eligible for interest capitalization and lower borrowing costs.

Operating earnings for the Lennar Financial Services segment were $39.4 million in the third quarter of 2015, compared to $27.1 million in the third quarter of 2014.

The increase in profitability was primarily due to an increase in mortgage originations driven by a stronger refinance market and an increase in purchase volume as a result of increased Lennar home deliveries and an increase in purchase mortgages originated for non-Lennar homebuyers. The increase in volume also benefited the title operations.

Operating earnings for the Rialto segment were $9.0 million in the third quarter of 2015 (which included $7.0 million of operating earnings and an add back of $2 million of net loss attributable to noncontrolling interests), compared to operating earnings of $12.4 million in the third quarter of 2014 (which included $7.8 million of operating earnings and an add back of $4.5 million of net loss attributable to noncontrolling interests).

Revenues in this segment were $51.6 million in the third quarter of 2015, compared to $40.8 million in the third quarter of 2014.

Expenses in this segment were $53.3 million in the third quarter of 2015, compared to $47.6 million in the third quarter of 2014. Expenses increased primarily due to an increase in RMF securitization expenses and other general and administrative expenses.

Rialto equity in earnings from unconsolidated entities was $7.6 million and $20 million in the third quarter of 2015 and 2014, respectively, primarily related to the segment's share of earnings from the Rialto real estate funds.

Operating earnings (loss) for the Lennar Multifamily segment was ($3) million in the third quarter of 2015, compared to $8.5 million in the third quarter of 2014.

In the third quarter of 2015, the operating loss primarily related to general and administrative expenses, partially offset by management fee income and by the segment's $5.7 million share of a gain as a result of the sale of an operating property by one of Lennar Multifamily's unconsolidated entities.

In the third quarter of 2014, operating earnings primarily related to the segment's $14.7 million share of gains as a result of the sale of two operating properties by Lennar Multifamily unconsolidated entities and management fee income, partially offset by general and administrative expenses.

During the third quarter of 2015, the Lennar Multifamily segment completed the closing of the Lennar Multifamily Venture for the development, construction and property management of class-A multifamily assets.

With the first close, the Venture will have approximately $1.1 billion of equity commitments, including a $504 million co-investment commitment by Lennar, comprised of cash, undeveloped land and preacquisition costs. It will be seeded with 19 undeveloped multifamily assets that were previously purchased or under contract by the Lennar Multifamily segment, totaling 6,120 apartments.

Corporate general and administrative expenses were $56.5 million, or 2.3% as a percentage of total revenues, in the third quarter of 2015, compared to $43.1 million, or 2.1% as a percentage of total revenues, in the third quarter of 2014.


 

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