Lennar Corp., one of the nation’s largest home builders, on Tuesday said it expected a fourth-quarter loss and will continue to review the value of its assets as market conditions decline in many areas.
Lennar expects a quarterly loss of 88 cents to $1.28 per share after valuation adjustments and write-offs. The company will release official earnings for the quarter and fiscal year ended Nov. 30, 2006, before the market opens on Jan. 17.
New-home orders are expected to drop 6 percent in the fourth quarter to 9,606, and 3 percent for the fiscal year to 42,212. Home deliveries are expected to increase for the year, but drop for the quarter, with 49,568 homes delivered in 2006 and 14,006 homes delivered in the fourth quarter.
“Market conditions continued to weaken throughout the fourth quarter and we have not yet seen tangible evidence of a market recovery,” Stuart Miller, president and CEO of Lennar Corp., said in a statement. “While we are hopeful that low interest rates, strong employment and a healthy economy will help stimulate a recovery in 2007, we have continued to focus on strengthening our balance sheet by delivering our backlog, selling inventory aggressively and renegotiating our land positions. We ended the 2006 fiscal year with zero outstanding on our $2.7 billion revolving credit facility and over $600 million of cash on the balance sheet.”
The company also announced Tuesday an agreement to admit a new partner into its LandSource joint venture, resulting in a cash distribution to Lennar and its current partner, LNR Property Corp., of approximately $660 million each. The transaction is expected to generate profits for financial statement purposes of approximately $500 million for Lennar, of which approximately $125 million will be recognized at closing and approximately $375 million will be deferred over future years.
Lennar also said it will enter into option contracts with LandSource to purchase land contributed by the new partner and will retain its option contracts and rights of first offer to purchase land owned by LandSource prior to the transaction. In addition, the company will receive management fees over the next 11 years and will retain an interest in LandSource of approximately 19 percent.
Lennar will discuss the LandSource transaction and earnings during a conference call on Jan. 17.
