Lennar Reports Record Results for Third Quarter 2005

MIAMI, Sept. 26 /PRNewswire-FirstCall/ -- Lennar Corporation , one of the nation's largest homebuilders, today reported earnings for its third quarter ended August 31, 2005. Third quarter net earnings from continuing operations in 2005 were $337.3 million, or $2.06 per share diluted, compared to net earnings from continuing operations of $225.0 million, or $1.36 per share diluted, in 2004.

Stuart Miller, President and Chief Executive Officer of Lennar Corporation, said, "Our strong performance reflects the continued strength of the homebuilding market along with our intense focus on our homebuilding process. We exceeded our home delivery target through increased conversion of homes in backlog combined with a 340 basis point increase in gross margin percentage."

Mr. Miller continued, "New home sales activity continued to point to strong consumer demand as our new orders increased 24% year-over-year. As the industry continues to benefit from favorable market conditions, we continue to strengthen our position in strategic markets through organic and acquisitive growth."

Mr. Miller concluded, "Assuming general economic stability and minimal impact from the recent hurricane activity, our record-level $8.1 billion backlog, strong balance sheet and strategic positioning give us confidence in our future outlook. We are increasing our fiscal 2005 earnings per share goal from $7.80 to $8.10 per share and establishing a fiscal 2006 earnings per share goal of $9.25."

RESULTS OF OPERATIONS THREE MONTHS ENDED AUGUST 31, 2005 COMPARED TO THREE MONTHS ENDED AUGUST 31, 2004 Homebuilding

Revenues from home sales increased 30% in the third quarter of 2005 to $3.2 billion from $2.5 billion in 2004. Revenues were higher primarily due to a 14% increase in the number of home deliveries and a 14% increase in the average sales price of homes delivered in the third quarter of 2005. New home deliveries, excluding unconsolidated entities, increased to 10,503 homes in the third quarter of 2005 from 9,213 homes last year. In the third quarter of 2005, new home deliveries were higher in each of the Company's regions, compared to 2004. The average sales price of homes delivered increased to $306,000 in the third quarter of 2005 from $269,000 in 2004.

Gross margins on home sales were $846.4 million, or 26.3%, in the third quarter of 2005, compared to $566.5 million, or 22.9%, in 2004. Gross margin percentage on home sales increased 340 basis points primarily due to favorable pricing conditions. The most significant impact on the margin improvement came from Arizona, California, Florida, Maryland/Virginia, Nevada and Texas.

Selling, general and administrative expenses as a percentage of revenues from home sales were 11.0% in the third quarter of 2005, compared to 10.8% in 2004.

Gross profit on land sales totaled $46.4 million in the third quarter of 2005, compared to $53.9 million in 2004. Some of these land sales were from consolidated joint ventures, which resulted in minority interest expense. Minority interest expense from these land sales and other activities of the consolidated joint ventures was $13.2 million and $7.2 million, respectively, in the third quarter of 2005 and 2004 and is included in management fees and other income (expense), net. Management fees and other income (expense), net, totaled ($3.0) million in the third quarter of 2005, compared to $10.3 million in 2004. Equity in earnings from unconsolidated entities was $16.8 million in the third quarter of 2005, compared to $9.7 million last year. Sales of land, equity in earnings from unconsolidated entities and management fees and other income (expense), net may vary significantly from period to period depending on the timing of land sales and other transactions entered into by the Company and unconsolidated entities in which it has investments.

Financial Services

Operating earnings from continuing operations for the Financial Services Division were $34.9 million in the third quarter of 2005, compared to $22.9 million last year. The increase was primarily due to the Division's title operations, which generated higher volume and profit per transaction in the third quarter of 2005, compared to 2004.

Corporate General and Administrative Expenses

Corporate general and administrative expenses as a percentage of total revenues from continuing operations were 1.3% in the third quarter of 2005, compared to 1.2% last year.

NINE MONTHS ENDED AUGUST 31, 2005 COMPARED TO NINE MONTHS ENDED AUGUST 31, 2004 Homebuilding

Revenues from home sales increased 30% in the nine months ended August 31, 2005 to $8.1 billion from $6.2 billion in 2004. Revenues were higher primarily due to a 15% increase in the number of home deliveries and a 13% increase in the average sales price of homes delivered in 2005. New home deliveries, excluding unconsolidated entities, increased to 27,031 homes in the nine months ended August 31, 2005 from 23,473 homes last year. In the nine months ended August 31, 2005, new home deliveries were higher in each of the Company's regions, compared to 2004. The average sales price of homes delivered increased to $298,000 in the nine months ended August 31, 2005 from $264,000 in 2004.

Gross margins on home sales were $2.0 billion, or 25.4%, in the nine months ended August 31, 2005, compared to $1.4 billion, or 23.0%, in 2004. Gross margin percentage on home sales increased 240 basis points primarily due to favorable pricing conditions. The most significant impact to the margin improvement came from Arizona, California, Florida, Nevada and Texas.

Selling, general and administrative expenses as a percentage of revenues from home sales were 11.5% in the nine months ended August 31, 2005, compared to 11.6% in 2004.

Gross profit on land sales totaled $142.6 million in the nine months ended August 31, 2005, compared to $146.1 million in 2004. Some of these land sales were from consolidated joint ventures, which resulted in minority interest expense. Minority interest expense from these land sales and other activities of the consolidated joint ventures was $33.9 million and $7.8 million, respectively, in the nine months ended August 31, 2005 and 2004 and is included in management fees and other income, net. Management fees and other income, net, totaled $2.3 million in the nine months ended August 31, 2005, compared to $47.0 million in 2004. Equity in earnings from unconsolidated entities was $54.7 million in the nine months ended August 31, 2005, compared to $28.9 million last year. Sales of land, equity in earnings from unconsolidated entities and management fees and other income, net may vary significantly from period to period depending on the timing of land sales and other transactions entered into by the Company and unconsolidated entities in which it has investments.

Financial Services

Operating earnings from continuing operations for the Financial Services Division were $70.2 million in the nine months ended August 31, 2005, compared to $77.6 million last year. The decrease was primarily due to reduced profitability from the Division's mortgage operations as a result of a more competitive mortgage environment in 2005, as well as a $6.5 million pretax gain generated from monetizing a majority of the Division's alarm monitoring contracts in 2004. This decrease was partially offset by improved profitability from the Division's title operations in 2005.

Corporate General and Administrative Expenses

Corporate general and administrative expenses as a percentage of total revenues from continuing operations were 1.4% in both the nine months ended August 31, 2005 and 2004.

Loss on Redemption of 9.95% Senior Notes

In 2005, the Company redeemed all of its outstanding 9.95% senior notes, which resulted in a pretax loss on redemption of $34.9 million, or $0.13 per share diluted.

Discontinued Operations

In 2005, the Company generated a $15.8 million pretax gain on the sale of a subsidiary of the Financial Services Division's title company. As a result of the sale, the subsidiary's results are presented as discontinued operations for 2005 and 2004. Net earnings from discontinued operations for the nine months ended August 31, 2005 were $10.7 million, or $0.07 per share diluted, compared to $0.6 million in the prior year.

Lennar Corporation, founded in 1954, is headquartered in Miami, Florida and is one of the nation's leading builders of quality homes for all generations, building affordable, move-up and retirement homes. The Company operates primarily under the Lennar and U.S. Home brand names and utilizes a Dual Marketing strategy consisting of the Everything's Included(R) and Design Studio(SM) programs. Lennar's Financial Services Division provides mortgage financing, title insurance, closing services and insurance agency services for both buyers of the Company's homes and others. Its Strategic Technologies Division provides high-speed Internet and cable television services to residents of the Company's communities and others. Previous press releases may be obtained at http://www.lennar.com/ .

Some of the statements in this press release are "forward-looking statements," as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements regarding our business, financial condition, results of operations, strategies and prospects. You can identify forward-looking statements by the fact that these statements do not relate strictly to historical or current matters. Rather, forward-looking statements relate to anticipated or expected events, activities, trends or results. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties. Many factors could cause our actual activities or results to differ materially from the activities and results anticipated in forward-looking statements. These factors include those described under the caption "Risk Factors Relating to Our Business" included in our Annual Report on Form 10-K for our fiscal year ended November 30, 2004, and in our other filings with the Securities and Exchange Commission. We do not undertake any obligation to update forward-looking statements.

A conference call to discuss the Company's third quarter earnings will be held at 11:00 AM Eastern time on Tuesday, September 27, 2005. The call will be broadcast live on the Internet and can be accessed through the Company's website at http://www.lennar.com/ . If you are unable to participate in the conference call, the call will be archived at http://www.lennar.com/ for 90 days. A replay of the conference call will also be available later that day by calling 320-365-3844 and entering 795678 as the confirmation number.

LENNAR CORPORATION AND SUBSIDIARIES Selected Revenues and Earnings Information (In thousands, except per share amounts) (Unaudited) Three Months Ended Nine Months Ended August 31, August 31, 2005 2004 2005 2004 Revenues: Homebuilding $3,346,008 2,621,438 8,437,261 6,589,543 Financial services 152,324 125,891 399,776 361,998 Total revenues $3,498,332 2,747,329 8,837,037 6,951,541 Homebuilding operating earnings $552,577 372,680 1,314,557 924,570 Financial services operating earnings 34,939 22,930 70,188 77,611 Corporate general and administrative expenses 45,744 34,184 123,731 94,113 Loss on redemption of 9.95% senior notes -- -- 34,908 -- Earnings from continuing operations before provision for income taxes 541,772 361,426 1,226,106 908,068 Provision for income taxes 204,519 136,438 462,855 342,795 Earnings from continuing operations 337,253 224,988 763,251 565,273 Discontinued operations: Earnings from discontinued operations before provision for income taxes (1) -- 376 17,261 984 Provision for income taxes -- 142 6,516 372 Earnings from discontinued operations -- 234 10,745 612 Net earnings $ 337,253 225,222 773,996 565,885 Average shares outstanding: Basic 155,048 155,449 154,828 155,316 Diluted 164,917 167,022 165,828 167,410 Earnings per share: Basic: Earnings from continuing operations $ 2.18 1.45 4.93 3.64 Earnings from discontinued operations 0.00 0.00 0.07 0.00 Net earnings $ 2.18 1.45 5.00 3.64 Diluted: Earnings from continuing operations $ 2.06 1.36 4.64 3.42 Earnings from discontinued operations 0.00 0.00 0.07 0.00 Net earnings $2.06 1.36 4.71 3.42 Supplemental information: Interest incurred (2) $ 45,388 35,471 122,871 99,540 EBIT (3): Earnings from continuing operations before provision for income taxes $ 541,772 361,426 1,226,106 908,068 Earnings from discontinued operations before provision for income taxes (1) -- 376 17,261 984 Interest 44,190 33,729 121,794 89,171 EBIT $585,962 395,531 1,365,161 998,223 (1) Earnings from discontinued operations before provision for income taxes includes a gain of $15.8 million for the nine months ended August 31, 2005 related to the sale of a subsidiary of the Company's Financial Services Division's title company. (2) Homebuilding interest incurred is capitalized to inventories and relieved as cost of sales when homes are delivered or land is sold. (3) EBIT is a non-GAAP financial measure derived by adding back previously capitalized interest amortized to cost of sales that was reflected in earnings before provision for income taxes. The Company's management uses EBIT because it believes this financial measure helps to compare the Company's operations with those of its competitors, by eliminating factors that differ from company to company for reasons that often are not related to the efficiency and effectiveness of a particular company's operations. The Company believes EBIT provides useful information to investors and analysts, because it will help them compare the efficiency and effectiveness of the Company's operations with those of its competitors. LENNAR CORPORATION AND SUBSIDIARIES Homebuilding Segment Information (In thousands) (Unaudited) Three Months Ended Nine Months Ended August 31, August 31, 2005 2004 2005 2004 Revenues: Sales of homes $3,216,186 2,475,355 8,053,105 6,202,159 Sales of land 129,822 146,083 384,156 387,384 Total revenues 3,346,008 2,621,438 8,437,261 6,589,543 Costs and expenses: Cost of homes sold 2,369,738 1,908,815 6,008,132 4,778,115 Cost of land sold 83,413 92,159 241,542 241,293 Selling, general and administrative 354,075 267,727 930,002 721,480 Total costs and expenses 2,807,226 2,268,701 7,179,676 5,740,888 Equity in earnings from unconsolidated entities 16,793 9,685 54,679 28,920 Management fees and other income (expense), net (2,998) 10,258 2,293 46,995 Operating earnings $ 552,577 372,680 1,314,557 924,570 LENNAR CORPORATION AND SUBSIDIARIES Summary of Deliveries, New Orders and Backlog By Region (Dollars in thousands) (Unaudited) At or for the Three Months Ended Nine Months Ended August 31, August 31, 2005 2004 2005 2004 Deliveries: East 3,172 2,751 8,078 7,293 Central 3,541 3,102 8,791 7,587 West 4,224 3,562 11,087 9,116 Total 10,937 9,415 27,956 23,996 Of the total deliveries listed above, 434 and 925, respectively, represent deliveries from unconsolidated entities for the three and nine months ended August 31, 2005, compared to 202 and 523 deliveries in the same periods last year. New Orders: East 3,196 2,851 9,663 10,163 Central 3,517 3,054 10,208 8,379 West 4,901 3,433 13,298 10,965 Total 11,614 9,338 33,169 29,507 Of the total new orders listed above, 219 and 971, respectively, represent new orders from unconsolidated entities for the three and nine months ended August 31, 2005, compared to 541 and 1,351 new orders in the same periods last year. Backlog - Homes: East 9,220 9,053 Central 3,984 3,289 West 8,614 7,252 Total 21,818 19,594 Of the total homes in backlog listed above, 1,401 represents homes in backlog from unconsolidated entities at August 31, 2005, compared to 1,728 homes in backlog at August 31, 2004. Backlog - Dollar Value: East $3,253,404 2,515,212 Central 963,388 799,099 West 3,926,360 2,828,282 Total $8,143,152 6,142,593 Of the total dollar value of homes in backlog listed above, $593,238 represents the backlog dollar value from unconsolidated entities at August 31, 2005, compared to $703,856 of backlog dollar value at August 31, 2004.

Lennar's market regions consist of homebuilding divisions located in the following states:

East: Florida, Maryland, Virginia, New Jersey, North Carolina and South Carolina Central: Texas, Illinois and Minnesota West: California, Colorado, Arizona and Nevada LENNAR CORPORATION AND SUBSIDIARIES Supplemental Data (Dollars in thousands) (Unaudited) August 31, 2005 2004 Homebuilding debt $2,780,331 1,998,657 Stockholders' equity 4,719,312 3,688,431 Total capital $7,499,643 5,687,088 Homebuilding debt to total capital 37.1% 35.1%