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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended November 30, 2000
Commission file number 1-11749
Lennar Corporation
(Exact name of registrant as specified in its charter)
Delaware 95-4337490
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
700 Northwest 107th Avenue, Miami, Florida 33172
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (305) 559-4000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- -------------------
Common Stock, par value 10 (cent) New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
NONE
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
As of January 31, 2001, registrant had outstanding 53,245,331 shares of
common stock and 9,848,112 shares of Class B common stock (which can be
converted into common stock). Of the total shares outstanding, 52,096,377 shares
of common stock and 29,251 shares of Class B common stock, having a combined
aggregate market value (assuming the Class B shares were converted) on that date
of $1,918,223,110, were held by non-affiliates of the registrant.
Documents incorporated by reference:
Related
Section Documents
- --------------------------------------------------------------------------------
II Pages 36 through 64 of the Annual Report to
Stockholders for the year ended November 30, 2000.
III Definitive Proxy Statement to be filed pursuant to
Regulation 14A on or before March 30, 2001.
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PART I
Item 1. Business.
General Development of Business
Lennar Corporation (together with its subsidiaries, the "Company") is
one of the nation's largest homebuilders and is a provider of residential
financial services. The Company's homebuilding operations include the sale and
construction of single-family attached and detached homes, as well as the
purchase, development and sale of residential land directly and through its
partnerships. The financial services operations provide mortgage financing,
title insurance and closing services for Lennar homebuyers and others, package
and resell residential mortgage loans, perform mortgage loan servicing
activities and provide high speed Internet access, cable television and home
monitoring services to residents of Lennar communities and others.
On May 3, 2000, the Company acquired U.S. Home Corporation ("U.S.
Home") in a transaction in which U.S. Home stockholders received a total of
approximately $243 million in cash and 13 million shares of the Company's common
stock amounting to approximately $267 million. U.S. Home is primarily a
homebuilder, with operations in 13 states. U.S. Home had total revenues of $1.8
billion and net income of $72.4 million in 1999, and it delivered 9,246 homes
(including joint ventures) during that year.
Financial Information about Operating Segments
The Company has two operating segments - homebuilding and financial
services. The financial information related to these operating segments is
contained in the financial statements incorporated by reference to pages 44
through 63 of the Company's 2000 Annual Report to Stockholders.
Narrative Description of Business
HOMEBUILDING
The Company and its predecessor began building homes in Florida in
1954. The Company believes that since its acquisition of Development Corporation
of America in 1986, it has delivered more homes in Florida each year than any
other homebuilder. The Company has been building homes in Arizona since 1972,
where it currently is one of the leading homebuilders. In 1991, the Company
began building homes in Dallas, Texas. In 1992, it started homebuilding
operations in Houston, Texas. During 1995, the Company entered the California
homebuilding market through the acquisition of Bramalea California, Inc. and
expanded in this market in 1996 through the acquisition of Renaissance Homes,
Inc. and through several partnership investments. During 1996, the Company also
significantly expanded its operations in Texas with the acquisition of the
assets and operations of Houston-based Village Builders (a homebuilder) and
Friendswood Development Company (a developer of master-planned communities).
During 1997, the Company continued its expansion in California through homesite
acquisitions and additional partnership investments. Additionally during 1997,
the Company acquired Pacific Greystone Corporation which further expanded its
operations in California and Arizona and brought it into the Nevada homebuilding
market. During 1998, the Company acquired the properties of two California
homebuilders, ColRich Communities and Polygon Communities, and acquired a
Northern California homebuilder, Winncrest Homes. During 2000, the Company
expanded its operations into New Jersey, Maryland/Virginia, Minnesota, Ohio,
Colorado, North Carolina and Michigan with the acquisition of U.S. Home.
1
Under the Lennar Family of Builders banner, the Company includes the
following brand names: Lennar Homes, U.S. Home, Greystone, Village Builders,
Renaissance, Orrin Thompson, Lundgren Bros., Winncrest and Rutenberg Homes. The
Company's active adult and retiree communities are primarily marketed under the
Heritage and Greenbriar brand names.
The Company, through its own efforts and partnerships in which it has
interests, is involved in all phases of planning and building in its residential
communities, including land acquisition, site planning, preparation and
improvement of land, and design, construction and marketing of homes. The
Company subcontracts virtually all aspects of development and construction.
The Company primarily sells single-family attached and detached homes.
The homes are targeted primarily at first-time, move-up, active adult and
retiree homebuyers. The average sales price of a Lennar home was $226,000 in
fiscal 2000.
Current Homebuilding Activities
The table on the following page summarizes information about the
Company's recent homebuilding activities:
2
HOMEBUILDING ACTIVITIES
Homesites at November 30, 2000
----------------------------------------------------------
Lennar Corporation Partnerships
------------------ ----------------------
Estimated number Estimated number
of homes that could of homes that could
Homes delivered be constructed on be constructed on land
in the years ended land currently owned currently controlled
November 30, or controlled (1)(2) (1)(2)(3) Total
----------------------------- ------------------ ------- owned and
Region 2000 1999 1998 Owned Controlled Controlled controlled
- ------------------- ------- ------- ------- ------- ------- ------- -------
Florida 5,361 4,241 3,761 15,557 10,092 18,691 44,340
Maryland/Virginia 466 -- -- 2,442 1,045 242 3,729
New Jersey 328 -- -- 1,161 927 462 2,550
------- ------- ------- ------- ------- ------- -------
East Region 6,155 4,241 3,761 19,160 12,064 19,395 50,619
------- ------- ------- ------- ------- ------- -------
Texas 4,696 3,107 2,484 12,472 1,848 9,332 23,652
Minnesota 472 -- -- 2,229 3,508 -- 5,737
Ohio 35 -- -- 282 -- -- 282
------- ------- ------- ------- ------- ------- -------
Central Region 5,203 3,107 2,484 14,983 5,356 9,332 29,671
------- ------- ------- ------- ------- ------- -------
California 3,805 3,731 3,029 13,090 2,147 16,388 31,625
Colorado 984 -- -- 5,397 1,461 2,113 8,971
Arizona 1,568 1,064 1,090 4,150 -- 1,752 5,902
Nevada 521 446 413 1,037 391 -- 1,428
------- ------- ------- ------- ------- ------- -------
West Region 6,878 5,241 4,532 23,674 3,999 20,253 47,926
------- ------- ------- ------- ------- ------- -------
Joint ventures 342 17 -- -- -- 1,280 1,280
------- ------- ------- ------- ------- ------- -------
Total 18,578 12,606 10,777 57,817 21,419 50,260 129,496
======= ======= ======= ======= ======= ======= =======
Notes:
(1) Based on current management estimates, which are subject to change.
(2) Includes homesites that may be sold to other builders.
(3) Represents partnerships and similar entities in which the Company has
less than a controlling interest and are accounted for by the equity
method.
3
Management and Operating Structure
The Company balances a local operating structure with centralized
corporate-level management. The Company's local managers, who have significant
experience in the homebuilding industry generally and in their respective
markets, are responsible for operating decisions regarding land identification,
home design, construction and marketing. Decisions related to overall Company
strategy, acquisitions of land and businesses, financing and cash management are
centralized at the corporate level.
The Company views partnerships and similar entities as a means to both
expand its market opportunities and manage its risk profile. Typically, the
Company acts as the general partner and the day-to-day manager.
Property Acquisition
From time-to-time, the Company acquires land for its development and
sales programs. Such land is utilized in the Company's homebuilding operations
and is also sold to third parties. Land acquisitions are subject to strict
underwriting criteria and may be made directly or through partnerships with
other entities to diversify risk. In some instances, the Company acquires land
through option contracts, enabling it to purchase parcels as they are needed to
build homes on them. Most of the Company's land is not subject to mortgages. The
majority of land acquired by partnerships is subject to purchase money
mortgages. The Company generally does not acquire land for speculation.
Construction and Development
The Company supervises and controls the development and building of its
own residential communities. It employs subcontractors for site improvements and
virtually all of the work involved in the construction of homes. In almost all
instances, the arrangements between the Company and the subcontractors commit
the subcontractors to complete specified work in accordance with written price
schedules. These price schedules normally change to meet changes in labor and
material costs. The Company does not own heavy construction equipment and
generally only has a labor force used to supervise development and construction
and perform routine maintenance and minor amounts of other work.
The Company generally finances construction and land activities with
cash generated from operations as well as from borrowings under its unsecured
working capital lines and issuances of public debt.
Marketing
The Company generally has an inventory of homes under construction. A
majority of these homes are sold (i.e., the Company has received executed sales
contracts and deposits) before the Company starts construction.
The Company employs sales associates who are paid salaries, commissions
or both to make on-site sales of the Company's homes. The Company also sells
through independent brokers. The Company advertises its communities through
local media and through its web site, www.lennar.com. In addition, the Company
advertises its active adult and retiree communities in areas where potential
active adults and retirees live. The Company markets under its "Everything's
Included SM" and "Design Studio SM" programs. The Company sells primarily from
models that it has designed and constructed.
Mortgage Financing
The Company's financial services subsidiaries make conventional,
FHA-insured and VA-guaranteed mortgage loans available to qualified purchasers
of the Company's homes. Because of the availability of mortgage loans from the
Company's financial services subsidiaries, as well as independent mortgage
lenders, the Company believes access to financing has not been, and is not, a
significant problem for most purchasers of the Company's homes.
4
Quality Service
The Company employs a process which is intended to provide a positive
atmosphere for each customer throughout the pre-sale, sale, building, closing
and post-closing periods. The participation of sales representatives, on-site
construction supervisors and post-closing customer care personnel, working in a
team effort, is intended to foster the Company's reputation for quality service
and ultimately lead to enhanced customer retention and referrals.
Competition
The housing industry is highly competitive. In its activities, the
Company competes with numerous developers and builders in and near the areas
where the Company's communities are located, including homebuilders with
nationwide operations. Competition is on the basis of location, design, quality,
amenities and price. Some of the Company's principal competitors include KB
Home, Centex Corporation, D.R. Horton, Inc. and Pulte Corporation. However, in
many instances, the Company's principal competitors are local or regional
homebuilders.
FINANCIAL SERVICES
The Company's financial services subsidiaries provide mortgage
financing, title insurance and closing services for Lennar homebuyers and
others, package and resell residential mortgage loans, perform mortgage loan
servicing activities and provide high speed Internet access, cable television
and home monitoring services to residents of Lennar communities and others.
Mortgage Origination
The Company provides conventional, FHA-insured and VA-guaranteed
mortgage loans to buyers of the Company's homes and others through the Company's
financial services subsidiaries: (1) Universal American Mortgage Company in
Florida, California, Arizona, Texas and Nevada; (2) U.S. Home Mortgage
Corporation in Florida, California, Arizona, Texas, Nevada, Virginia, Maryland,
New Jersey, Colorado, Minnesota and Ohio; (3) Eagle Home Mortgage, Inc. in
Nevada, Oregon, Utah and Washington; and (4) AmeriStar Financial Services, Inc.
in California and Nevada. In 2000, loans to buyers of the Company's homes
represented approximately 61% of the Company's $3.2 billion of loan
originations.
The Company sells the loans it originates into the secondary mortgage
market, generally on a non-recourse basis. The Company either retains the
servicing on the loans it sells or sells the servicing rights on the loans it
originates. The Company has a corporate risk management policy under which it
hedges its interest rate locked loan commitments and loans held for sale against
exposure to interest rate fluctuations. The Company finances its mortgage loan
and servicing activities with borrowings under the financial services
subsidiaries' warehouse lines of credit. At November 30, 2000, the Company had
two lines of credit totaling $360 million which were collateralized by mortgage
loans and servicing rights.
Mortgage Servicing
The Company generates earnings from servicing loans originated or
acquired by its financial services subsidiaries. It services loans for the
Government National Mortgage Association (Ginnie Mae), the Federal National
Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation
(Freddie Mac) and other mortgage investors. At November 30, 2000, it had a
servicing portfolio of approximately 29,000 loans with an unpaid principal
balance of approximately $2.3 billion.
Title Insurance and Closing Services
The Company arranges title insurance for, and provides closing services
to, buyers of the Company's homes and others. It provided these services in
connection with approximately 120,000 real estate transactions during 2000. The
Company provides these services through Universal Title Insurors in Florida,
Regency Title, Southwest Land Title and Texas Professional Title in Texas,
TitleAmerica Insurance in Florida and Texas and North American Title in
California, Arizona and Colorado.
5
Strategic Technologies
The Company's subsidiary, Strategic Technologies, Inc., provides high
speed Internet access, cable television and home monitoring services to
residents of the Company's communities and others. At November 30, 2000, the
Company had approximately 3,300 cable television subscribers in California and
approximately 8,800 alarm monitoring customers in Florida and California.
RELATIONSHIP WITH LNR
In connection with the 1997 transfer of the Company's commercial real
estate investment and management business to LNR, and the spin-off of LNR to the
Company's stockholders, the Company entered into an agreement which, among other
things, prevents the Company from engaging at least until 2002 in any of the
businesses in which LNR was engaged, or anticipated becoming engaged, at the
time of the spin-off, and prohibited LNR from engaging, at least until 2002, in
any of the businesses in which the Company was engaged, or anticipated becoming
engaged, at the time of the spin-off (except in limited instances in which the
activities or anticipated activities of the Company and LNR overlapped).
Specifically, the Company is precluded, at least until 2002, from engaging in
the business of (i) acquiring and actively managing commercial or residential
multi-family rental real estate, other than as an incident to, or otherwise in
connection with, their homebuilding business, (ii) acquiring portfolios of
commercial mortgage loans or real estate assets acquired through foreclosures of
mortgage loans, other than real estate acquired as sites of homes to be built or
sold as part of its homebuilding business, (iii) making or acquiring mortgage
loans, other than mortgage loans secured by detached or attached homes or
residential condominium units, (iv) constructing office buildings or other
commercial or industrial buildings, other than small shopping centers,
professional office buildings and similar facilities which will be adjuncts to
its residential developments, (v) purchasing commercial mortgage-backed
securities or real estate asset-backed securities or (vi) acting as a servicer
or special servicer with regard to securitized commercial mortgage pools. The
Company is not, however, prevented from owning or leasing office buildings in
which it occupies a majority of the space; acquiring securities backed by pools
of residential mortgages; acquiring an entity which, when it is acquired, is
engaged in one of the prohibited activities as an incidental part of its
activities; owning as a passive investor an interest of less than 10% of a
publicly traded company which is engaged in a prohibited business; acquiring
commercial paper or short-term debt instruments of entities engaged in one or
more of the prohibited businesses; or owning an interest in, and managing,
Lennar Land Partners.
The Company and LNR are separate publicly-traded companies and neither
company has any financial interest in the other. The Company and LNR each have
50% interests in a number of partnerships. Stuart Miller, the Company's
President and Chief Executive Officer, is the Chairman of the Board of Directors
of LNR, and Steven Saiontz, one of the Company's Directors, is the Chief
Executive Officer and a Director of LNR. In addition, Leonard Miller, the
Chairman of the Board of Directors of the Company, owns stock which gives him
voting control of both companies. There are provisions both in the by-laws of
Lennar and in those of LNR requiring approval by an Independent Directors
Committee of any significant transactions between the Company and LNR or any of
its subsidiaries. The Company leases some office space, including its principal
offices, from LNR.
REGULATIONS
Homes and residential communities built by the Company must comply with
state and local laws and regulations relating to, among other things, zoning,
treatment of waste, construction materials which must be used, density
requirements, building design and minimum elevation of properties. These include
laws requiring use of construction materials which reduce the need for
energy-consuming heating and cooling systems. These laws and regulations are
subject to frequent change and often increase construction costs. In some cases,
there are laws which require that commitments to provide roads and other offsite
infrastructure be in place prior to the commencement of new construction. These
laws and regulations are usually administered by individual counties and
municipalities and may result in fees and assessments or building moratoriums.
In addition, certain new development projects are subject to assessments for
schools, parks, streets and highways and other public improvements, the costs of
which can be substantial.
6
The residential homebuilding industry also is subject to a variety of
local, state and federal statutes, ordinances, rules and regulations concerning
the protection of health and the environment. Environmental laws and conditions
may result in delays, may cause the Company to incur substantial compliance and
other costs, and can prohibit or severely restrict homebuilding activity in
environmentally sensitive regions or areas.
In recent years, several cities and counties in which the Company has
developments have submitted to voters "slow growth" initiatives and other ballot
measures which could impact the affordability and availability of homes and land
within those localities. Although many of these initiatives have been defeated,
the Company believes that if similar initiatives were approved, residential
construction by the Company and others within certain cities or counties could
be seriously impacted.
In order to make it possible for purchasers of some of the Company's
homes to obtain FHA-insured or VA-guaranteed mortgages, the Company must
construct those homes in compliance with regulations promulgated by those
agencies.
The Company has registered condominium communities with the appropriate
authorities in Florida and California. Sales in other states would require
compliance with laws in those states regarding sales of condominium homes.
The Company's title insurance agency subsidiaries must comply with
applicable insurance laws and regulations. The Company's mortgage financing
subsidiaries must comply with applicable real estate lending laws and
regulations.
The Company's subsidiaries which underwrite title insurance are
licensed in the states in which they do business and must comply with laws and
regulations in those states regarding title insurance companies. These laws and
regulations include provisions regarding capitalization, investments, forms of
policies and premiums.
7
MARKET RISK
The tables on the following pages provide information at November 30,
2000 and 1999 about the Company's significant derivative financial instruments
and other financial instruments used for purposes other than trading that are
sensitive to changes in interest rates. For mortgage loans held for sale or
disposition, mortgage loans, investments and mortgage notes and other debts
payable, the tables present principal cash flows and related weighted average
effective interest rates by expected maturity dates and estimated fair market
values at November 30, 2000 and 1999. Weighted average variable interest rates
are based on the variable interest rates at November 30, 2000 and 1999. For
interest rate swaps, the tables present notional amounts and weighted average
interest rates by contractual maturity dates and estimated fair market values at
November 30, 2000 and 1999. Notional amounts are used to calculate the
contractual cash flows to be exchanged under the contracts.
See Management's Discussion and Analysis of Financial Condition and
Results of Operations in Item 7 and Notes 1 and 12 of Notes to Consolidated
Financial Statements in Item 14 for a further discussion of these items and the
Company's strategy of mitigating its interest rate risk.
8
Information Regarding Interest Rate Sensitivity
Principal (Notional) Amount by Expected Maturity
Average Interest Rate
Years Ending November 30, Fair Market Value
----------------------------------------------- There- at November 30,
(Dollars in millions) 2001 2002 2003 2004 2005 after Total 2000
- -----------------------------------------------------------------------------------------------------------------------------------
ASSETS
Financial Services:
Mortgage loans held for sale or
disposition, net:
Fixed rate $ -- -- -- -- -- 374.5 374.5 377.5
Average interest rate -- -- -- -- -- 7.8% -- --
Variable rate $ -- -- -- -- -- 2.0 2.0 2.0
Average interest rate -- -- -- -- -- 7.9% -- --
Mortgage loans and investments:
Fixed rate $ 23.6 1.1 3.3 1.3 0.3 25.4 55.0 54.5
Average interest rate 6.4% 9.6% 8.3% 7.2% 9.4% 9.2% -- --
LIABILITIES
Homebuilding:
Mortgage notes and other debts
payable:
Fixed rate $ 14.8 19.4 5.4 5.3 6.5 1,203.3 1,254.7 1,287.9
Average interest rate 9.0% 8.3% 8.2% 9.0% 8.7% 7.9% -- --
Financial Services:
Notes and other debts payable:
Fixed rate $ 0.7 0.1 0.1 -- -- -- 0.9 0.9
Average interest rate 4.9% 9.8% 9.8% -- -- -- -- --
Variable rate $ 428.1 -- -- -- -- -- 428.1 428.1
Average interest rate 6.7% -- -- -- -- -- -- --
OFF-BALANCE SHEET
FINANCIAL INSTRUMENTS
Homebuilding:
Interest rate swaps:
Variable to fixed-
notional amount $ -- -- -- -- 100.0 300.0 400.0 (5.7)
Average pay rate -- -- -- -- 6.7% 6.6% -- --
Average receive rate LIBOR LIBOR
9
Information Regarding Interest Rate Sensitivity
Principal (Notional) Amount by Expected Maturity
Average Interest Rate
Years Ending November 30, Fair Market Value
------------------------------------------------ There- at November 30,
(Dollars in millions) 2000 2001 2002 2003 2004 after Total 1999
- -----------------------------------------------------------------------------------------------------------------------------------
ASSETS
Financial Services:
Mortgage loans held for sale or
disposition, net:
Fixed rate $ -- -- -- -- -- 191.8 191.8 193.9
Average interest rate -- -- -- -- -- 7.8% -- --
Variable rate $ -- -- -- -- -- 37.2 37.2 37.2
Average interest rate -- -- -- -- -- 7.2% -- --
Mortgage loans and investments:
Fixed rate $ 8.4 1.3 0.3 1.5 1.4 18.6 31.5 31.0
Average interest rate 5.3% 7.3% 9.4% 7.0% 7.3% 9.4% -- --
LIABILITIES
Homebuilding:
Mortgage notes and other debts
payable:
Fixed rate $ 11.3 4.9 -- -- -- 507.5 523.7 466.3
Average interest rate 7.4% 9.3% -- -- -- 6.2% -- --
Financial Services:
Notes and other debts payable:
Fixed rate $ 0.7 0.7 0.1 0.2 -- -- 1.7 1.6
Average interest rate 7.2% 4.9% 11.0% 9.0% -- -- -- --
Variable rate $ 248.8 1.4 1.1 -- -- -- 251.3 251.3
Average interest rate 5.1% 8.3% 8.3% -- -- -- -- --
OFF-BALANCE SHEET
FINANCIAL INSTRUMENTS
Homebuilding:
Interest rate swaps:
Variable to fixed-
notional amount $ -- -- 200.0 -- -- -- 200.0 1.7
Average pay rate -- -- 6.1% -- -- -- -- --
Average receive rate 30-day LIBOR
10
CAUTIONARY STATEMENTS
Certain statements in this Report may be "forward-looking statements"
as defined in the Private Securities Litigation Reform Act of 1995. By their
nature, forward-looking statements involve risks, uncertainties and other
factors that may cause actual results to differ materially from those which are
anticipated. With regard to the Company, these factors include, but are not
limited to, changes in general economic conditions, the market for homes
generally and in areas where the Company has developments, the availability and
cost of land suitable for residential development, materials prices, labor
costs, interest rates, consumer confidence, competition, environmental factors
and government regulations affecting the Company's operations.
The following factors, among others, could particularly affect the
Company's operations and financial results and cause results to differ from
those anticipated by forward-looking statements in this Report.
Real Estate, Economic and Certain Other Conditions
The residential homebuilding industry is cyclical and is highly
sensitive to changes in general economic conditions, such as levels of
employment, consumer confidence and income, availability of financing, interest
rate levels and demand for housing. Sales of new homes are also affected by the
condition of the resale market for used homes, including foreclosed homes.
The residential homebuilding industry has, from time-to-time,
experienced fluctuating lumber prices and supply, as well as shortages of
materials and labor, including insulation, drywall, concrete, carpenters,
electricians and plumbers. Delays in construction of homes due to these factors
or due to weather conditions could have an adverse effect upon the Company's
operations.
Inflation can increase the cost of building materials and labor and
other construction related costs. Conversely, deflation can reduce the value of
the Company's inventory and make it more difficult to include the full cost of
previously purchased land in home sale prices.
Interest Rates and Mortgage Financing
Virtually all of the purchasers of the Company's homes finance their
acquisitions through the Company's financial services subsidiaries or
third-party lenders. In general, housing demand is adversely affected by
increases in interest rates and by decreases in the availability of mortgage
financing. If effective mortgage interest rates increase and the ability or
willingness of prospective buyers to finance home purchases is adversely
affected, the Company's operating results may be negatively affected. The
Company's homebuilding activities also are dependent upon the availability and
cost of mortgage financing for buyers of homes currently owned by potential
purchasers of the Company's homes, who cannot purchase the Company's homes until
they sell their current homes.
Variability of Results
The Company has historically experienced, and in the future expects to
continue to experience, variability in operating results on a quarterly basis.
Factors which may contribute to this variability include, among others (i) the
timing of home closings; (ii) the timing of land sales; (iii) the timing of
receipt of regulatory approvals for the construction of homes; (iv) the
condition of the real estate market and general economic conditions; (v) the
cyclical nature of the homebuilding industry; (vi) prevailing interest rates and
availability of mortgage financing; (vii) pricing policies of the Company's
competitors; (viii) the timing of the opening of new residential communities;
(ix) weather and (x) the cost and availability of materials and labor. The
Company's historical financial performance is not necessarily a meaningful
indicator of future results and, in particular, the Company expects its
financial results to continue to vary from quarter to quarter.
11
Dependence on Key Personnel
The success of the Company depends to a significant degree on the
efforts of the Company's senior management. The Company's operations may be
adversely affected if one or more members of senior management cease to be
active in the Company. The Company has designed its compensation structure and
employee benefit programs to encourage long-term employment of executive
officers.
EMPLOYEES
At November 30, 2000, the Company employed 7,140 individuals of whom
4,460 were involved in homebuilding operations and 2,680 were involved in
financial services operations. The Company does not have collective bargaining
agreements relating to any of its employees. However, some of the subcontractors
the Company uses have employees who are represented by labor unions.
Item 2. Properties.
For information about properties owned by the Company for use in its
homebuilding activities, see Item 1.
The Company leases and maintains its executive offices, financial
services subsidiary headquarters and principal Miami-Dade County, Florida
homebuilding office in an office complex built by the Company and now owned by
LNR. The leases for these offices expire in 2002. Other Company offices are
located in Company-owned communities or in leased space.
Item 3. Legal Proceedings.
The Company and certain subsidiaries are parties to various claims and
lawsuits which arise in the ordinary course of business. Although the specific
allegations in the lawsuits differ, most of them involve claims that the Company
failed to construct buildings in particular communities in accordance with plans
and specifications and applicable construction codes, and seek reimbursement for
sums allegedly needed to remedy the alleged deficiencies, or assert contract
issues or relate to personal injuries. Suits of these types are common within
the homebuilding industry. The Company does not believe that these claims or
lawsuits will have a material effect upon the Company.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
PART II
Item 5. Market for the Registrant's Common Stock and Related Security Holder
Matters.
Information concerning the market data for the Company's common stock
and related security holder matters is incorporated by reference to page 64 of
the Company's 2000 Annual Report to Stockholders.
Item 6. Selected Financial Data.
Selected financial data is incorporated by reference to page 36 of the
Company's 2000 Annual Report to Stockholders.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Management's discussion and analysis of financial condition and results
of operations is incorporated by reference to pages 37 through 41 of the
Company's 2000 Annual Report to Stockholders.
12
Item 7A. Market Risk.
For information on the Company's market risk, see Item 1.
Item 8. Financial Statements and Supplementary Data.
Consolidated financial statements and supplementary data about the
Company are incorporated by reference to pages 44 through 63 of the Company's
2000 Annual Report to Stockholders.
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant.
Information about the Company's directors is incorporated by reference
to the Company's definitive proxy statement, which will be filed with the
Securities and Exchange Commission not later than March 30, 2001 (120 days after
the end of the Company's fiscal year). The following people were the executive
officers of Lennar Corporation on February 21, 2001:
Name/Position Age Year of Election
------------- --- ----------------
Stuart A. Miller,
President and Chief Executive Officer 43 1997
Robert J. Strudler,
Vice Chairman and Chief Operating Officer 58 2000
Bruce E. Gross,
Vice President and Chief Financial Officer 42 1997
Marshall H. Ames,
Vice President 57 1982
Diane J. Bessette,
Vice President and Controller 40 1997
Jonathan M. Jaffe,
Vice President 41 1994
Craig M. Johnson,
Vice President, Community Development 47 2000
Waynewright Malcolm,
Vice President and Treasurer 37 1997
David B. McCain,
Vice President, General Counsel and Secretary 40 1998
Allan J. Pekor,
Vice President 64 1997
The year of election represents the year that the executive officer was
elected to his or her current position.
Mr. Stuart Miller (who is the son of Leonard Miller, the Chairman of
the Board of Directors of the Company) has been President and Chief Executive
Officer since April 1997 and is a Director of the Company. Prior to that, Mr.
Miller held various executive positions with the Company and had been a Vice
President since 1985. Mr. Miller is also the Chairman of the Board of LNR
Property Corporation.
Mr. Strudler has been Vice Chairman of the Board of Directors and Chief
Operating Officer since May 2000. Prior to that, Mr. Strudler was the Chairman
and Co-Chief Executive Officer of U.S. Home Corporation.
13
Mr. Gross has been Vice President and Chief Financial Officer since
1997. Prior to that, Mr. Gross was employed as Senior Vice President, Controller
and Treasurer of Pacific Greystone Corporation since its inception in 1991.
Mr. Ames has been a Vice President since 1982 and has held various
positions in the Company's Homebuilding Division.
Ms. Bessette has been employed by the Company since 1995, has been the
Company's Controller since 1997 and became a Vice President in 2000. Prior to
that, Ms. Bessette was employed as a Financial Senior Manager at the Holson
Burnes Group, Inc. and before that, was employed by Price Waterhouse LLP.
Mr. Jaffe has been a Vice President since 1994 and serves as a Regional
President in the Company's Homebuilding Division. Mr. Jaffe is a Director of the
Company.
Mr. Johnson has been a Vice President of the Company since May 2000 and
is President of Strategic Technologies, Inc. Prior to that, Mr. Johnson was
Senior Vice President of U.S. Home Corporation.
Mr. Malcolm joined the Company as Treasurer in 1997 and became a Vice
President in 2000. Prior to that, Mr. Malcolm was employed as Director, Finance
and Regulatory Affairs at Citizens Utilities Company.
Mr. McCain has been employed by the Company since 1998 as Vice
President, General Counsel and Secretary. Prior to joining the Company, Mr.
McCain was employed at John Alden Asset Management Company for more than 10
years, where he last served as Vice President, General Counsel and Secretary.
Mr. Pekor has held various executive positions with the Company since
1979. Mr. Pekor presently serves as Vice President of the Company and has served
as President of Lennar Financial Services, Inc. since 1997.
Item 11. Executive Compensation.
The information called for by this item is incorporated by reference to
the Company's definitive proxy statement, which will be filed with the
Securities and Exchange Commission not later than March 30, 2001 (120 days after
the end of the Company's fiscal year).
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information called for by this item is incorporated by reference to
the Company's definitive proxy statement, which will be filed with the
Securities and Exchange Commission not later than March 30, 2001 (120 days after
the end of the Company's fiscal year).
Item 13. Certain Relationships and Related Transactions.
The information called for by this item is incorporated by reference to
the Company's definitive proxy statement, which will be filed with the
Securities and Exchange Commission not later than March 30, 2001 (120 days after
the end of the Company's fiscal year).
14
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) Documents filed as part of this Report.
1. The following financial statements are incorporated by
reference in Item 8:
Page in 2000 Annual
Financial Statements Report to Stockholders
-------------------- ----------------------
Report of Independent Auditors 42
Consolidated Balance Sheets
as of November 30, 2000 and
1999 44
Consolidated Statements of
Earnings for the Years Ended
November 30, 2000, 1999 and
1998 45
Consolidated Statements of
Stockholders' Equity for the
Years Ended November 30, 2000,
1999 and 1998 46
Consolidated Statements of
Cash Flows for the Years Ended
November 30, 2000, 1999 and
1998 47
Notes to Consolidated Financial
Statements 49
2. The following financial statement schedule is included in
this Report:
Financial Statement Schedule Page in this Report
---------------------------- -------------------
Independent Auditors' Report on
Schedule 21
II - Valuation and Qualifying
Accounts 22
Information required by other schedules has either been
incorporated in the financial statements and accompanying
notes or is not applicable to the Company.
3. The following exhibits are filed with this Report or
incorporated by reference:
1(a). Purchase Agreement, dated April 28, 2000, by
and among Lennar Corporation, Deutsche Bank
Securities Inc. and Banc One Capital
Markets, Inc., Banc of America Securities
LLC, Credit Lyonnais Securities USA Inc. and
Wachovia Securities, Inc. (the "Initial
Purchasers") - Incorporated by reference to
Registration Statement No. 333-41316.
3(a). Certificate of Amendment of Certificate of
Incorporation, dated April 9, 1999.
3(b). Amended and Restated Certificate of
Incorporation, dated April 28, 1998 -
Incorporated by reference to Annual Report
on Form 10-K for the year ended November 30,
1998.
3(c). Bylaws - Incorporated by reference to Form
8-K dated October 31, 1997, file number
1-11749.
15
4(a). Indenture, dated as of December 31, 1997,
between Lennar Corporation and The First
National Bank of Chicago, as trustee -
Incorporated by Reference to Registration
Statement No. 333-45527.
4(b). First Supplemental Indenture, dated as of
July 29, 1998, between Lennar Corporation
and The First National Bank of Chicago, as
trustee (relating to Lennar's Zero Coupon
Senior Convertible Debentures due 2018) -
Incorporated by reference to Form 8-K dated
July 24, 1998, file number 1-11749.
4(c). Second Supplemental Indenture, dated as of
February 19, 1999, between Lennar
Corporation and The First National Bank of
Chicago, as trustee (relating to Lennar's 7
5/8% Senior Notes due 2009) - Incorporated
by reference to Form 8-K dated February 19,
1999, file number 1-11749.
4(d). Third Supplemental Indenture, dated May 3,
2000, by and among Lennar Corporation and
Bank One Trust Company, N.A., as successor
trustee to The First National Bank of
Chicago (relating to Lennar's 7 5/8% Senior
Notes due 2009).
4(e). Fourth Supplemental Indenture, dated May 3,
2000, by and among Lennar Corporation and
Bank One Trust Company, N.A., as successor
trustee to The First National Bank of
Chicago (relating to Lennar's Zero Coupon
Senior Convertible Debentures due 2018).
4(f). Indenture, dated May 3, 2000, by and among
the Lennar Corporation and Bank One Trust
Company, N.A., as trustee, including Form of
9.95% Series A Senior Notes due 2010 and
Form of 9.95% Series B Senior Notes due 2010
- Incorporated by reference to Registration
Statement No. 333-41316.
4(g). Registration Rights Agreement, dated May 3,
2000, by and among Lennar Corporation and
the Initial Purchasers - Incorporated by
reference to Registration Statement No.
333-41316.
10(a). Amended and Restated Lennar Corporation 1997
Stock Option Plan - Incorporated by
reference to Annual Report on Form 10-K for
the year ended November 30, 1997.
10(b). Lennar Corporation 1991 Stock Option Plan -
Incorporated by reference to Registration
Statement No. 33-45442.
10(c). Lennar Corporation Employee Stock Ownership
Plan and Trust - Incorporated by reference
to Registration Statement No. 2-89104.
10(d). Amendment dated December 13, 1989 to Lennar
Corporation Employee Stock Ownership Plan -
Incorporated by reference to Annual Report
on Form 10-K for the year ended November 30,
1990.
10(e). Lennar Corporation Employee Stock
Ownership/401k Trust Agreement dated
December 13, 1989 - Incorporated by
reference to Annual Report on Form 10-K for
the year ended November 30, 1990.
10(f). Amendment dated April 18, 1990 to Lennar
Corporation Employee Stock Ownership/401k
Plan - Incorporated by reference to Annual
Report on Form 10-K for the year ended
November 30, 1990.
16
10(g). Partnership Agreement for Lennar Land
Partners by and between Lennar Land Partners
Sub, Inc. and LNR Land Partners Sub, Inc.,
dated October 24, 1997 - Incorporated by
reference to Annual Report on Form 10-K for
the year ended November 30, 1997. Lennar
Land Partners Sub II, Inc. and LNR Land
Partners Sub II, Inc. entered into an
identical Partnership Agreement for Lennar
Land Partners II on June 28, 1999.
10(h). Separation and Distribution Agreement, dated
June 10, 1997, between Lennar Corporation
and LNR Property Corporation - Incorporated
by reference to Registration Statement No.
333-35671.
10(i). Credit Agreement, dated October 31, 1997, by
and among Lennar Land Partners and the
Lenders named therein and a Guaranty
Agreement of Lennar Corporation, dated
October 31, 1997 - Incorporated by reference
to Annual Report on Form 10-K for the year
ended November 30, 1997.
10(j). Revolving Credit Agreement (Facilities A and
B), dated October 31, 1997, among Lennar
Corporation and Certain Subsidiaries and The
First National Bank of Chicago, as agent -
Incorporated by reference to Annual Report
on Form 10-K for the year ended November 30,
1997.
10(k). First Amendment to Revolving Credit
Agreement (Facilities A and B) dated January
20, 1998, among Lennar Corporation and
Certain Subsidiaries and The First National
Bank of Chicago, as agent - Incorporated by
reference to Annual Report on Form 10-K for
the year ended November 30, 1997.
10(l). Equity Draw-Down Agreement, dated March 25,
1998, between Lennar Corporation and HSBC
James Capel Canada, Inc. - Incorporated by
reference to Annual Report on Form 10-K for
the year ended November 30, 1998.
10(m). Voting Agreement, dated June 10, 1997,
between Lennar Corporation, Warburg Pincus
Investors, L.P. and Pacific Greystone
Corporation - Incorporated by reference to
Form 8-K dated June 10, 1997, file number
1-11749.
10(n). Plan and Agreement of Merger, dated as of
February 16, 2000, between Lennar
Corporation, U.S. Home Corporation and Len
Acquisition Corporation - Incorporated by
reference to Form 8-K dated February 23,
2000, file number 1-11749.
10(o). Credit Agreement, dated May 3, 2000, among
Lennar Corporation and various lenders.
10(p). Lennar Corporation 2000 Stock Option and
Restricted Stock Plan, which is subject to
stockholder approval at the 2001 annual
meeting of the Company's stockholders.
13. Pages 36 through 64 of the 2000 Annual
Report to Stockholders.
21. List of subsidiaries.
23. Independent Auditors' Consent.
99. Financial statements of Lennar Corporation's
guarantor subsidiaries.
17
(b) Reports on Form 8-K filed during the quarter ended November
30, 2000. Not applicable.
(c) The exhibits to this Report are listed in Item 14(a)3.
(d) The financial statement schedules required by Regulation S-X
which are excluded from the Annual Report to Stockholders as
permitted by Rule 14a-3(b)(1) are listed in Item 14(a)2.
18
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
LENNAR CORPORATION
/s/ Stuart A. Miller
----------------------------------------
Stuart A. Miller
President, Chief Executive Officer
and Director
Date: February 28, 2001
19
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Company and in the capacities and on the dates indicated:
Principal Executive Officer:
----------------------------
Stuart A. Miller /s/ STUART A. MILLER
President, Chief Executive Officer and Director -----------------------------
Date: February 28, 2001
Principal Financial Officer:
----------------------------
Bruce E. Gross /s/ BRUCE E. GROSS
Vice President and Chief Financial Officer -----------------------------
Date: February 28, 2001
Principal Accounting Officer:
-----------------------------
Diane J. Bessette /s/ DIANE J. BESSETTE
Vice President and Controller -----------------------------
Date: February 28, 2001
Directors:
----------
Irving Bolotin /s/ IRVING BOLOTIN
-----------------------------
Date: February 28, 2001
Steven L. Gerard /s/ STEVEN L. GERARD
-----------------------------
Date: February 28, 2001
Jonathan M. Jaffe /s/ JONATHAN M. JAFFE
-----------------------------
Date: February 28, 2001
R. Kirk Landon /s/ R. KIRK LANDON
-----------------------------
Date: February 28, 2001
Sidney Lapidus /s/ SIDNEY LAPIDUS
-----------------------------
Date: February 28, 2001
Leonard Miller /s/ LEONARD MILLER
-----------------------------
Date: February 28, 2001
Herve Ripault /s/ HERVE RIPAULT
-----------------------------
Date: February 28, 2001
Arnold P. Rosen /s/ ARNOLD P. ROSEN
-----------------------------
Date: February 28, 2001
Steven J. Saiontz /s/ STEVEN J. SAIONTZ
-----------------------------
Date: February 28, 2001
Robert J. Strudler /s/ ROBERT J. STRUDLER
-----------------------------
Date: February 28, 2001
20
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Lennar Corporation:
We have audited the consolidated financial statements of Lennar Corporation and
subsidiaries (the "Company") as of November 30, 2000 and 1999 and for each of
the three years in the period ended November 30, 2000, and have issued our
report thereon dated January 9, 2001; such financial statements and report are
included in your 2000 Annual Report to Stockholders and are incorporated herein
by reference. Our audits also included the financial statement schedule of the
Company, listed in Item 14(a)2. The financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audits. In our opinion, such financial statement schedule,
when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/s/ DELOITTE & TOUCHE LLP
Certified Public Accountants
Miami, Florida
January 9, 2001
21
LENNAR CORPORATION AND SUBSIDIARIES
Schedule II
Valuation and Qualifying Accounts
Years Ended November 30, 2000, 1999 and 1998
Additions
----------------------
Charged Charged
Beginning to costs to other Ending
Description balance and expenses accounts Deductions balance
- ------------------------------------------------------------ ---------- --------- --------- ---------- ----------
Year ended November 30, 2000
Allowances deducted from assets to which they apply:
Allowances for doubtful accounts and notes receivable $2,471,000 3,834,000 28,000 (1,145,000) 5,188,000
========== ========= ========= ========== ==========
Deferred income and unamortized discounts $1,128,000 -- 7,896,000 (679,000) 8,345,000
========== ========= ========= ========== ==========
Loan loss reserve $3,778,000 -- -- (133,000) 3,645,000
========== ========= ========= ========== ==========
Valuation allowance $1,249,000 -- 903,000 (775,000) 1,377,000
========== ========= ========= ========== ==========
Deferred tax asset valuation allowance $8,508,000 -- -- (1,391,000) 7,117,000
========== ========= ========= ========== ==========
Year ended November 30, 1999
Allowances deducted from assets to which they apply:
Allowances for doubtful accounts and notes receivable $4,075,000 2,011,000 38,000 (3,653,000) 2,471,000
========== ========= ========= ========== ==========
Deferred income and unamortized discounts $ 231,000 -- 1,156,000 (259,000) 1,128,000
========== ========= ========= ========== ==========
Loan loss reserve $3,090,000 1,200,000 21,000 (533,000) 3,778,000
========== ========= ========= ========== ==========
Valuation allowance $1,903,000 93,000 56,000 (803,000) 1,249,000
========== ========= ========= ========== ==========
Deferred tax asset valuation allowance $7,659,000 -- 849,000 -- 8,508,000
========== ========= ========= ========== ==========
Year ended November 30, 1998
Allowances deducted from assets to which they apply:
Allowances for doubtful accounts and notes receivable $1,952,000 1,505,000 1,091,000 (473,000) 4,075,000
========== ========= ========= ========== ==========
Deferred income and unamortized discounts $ 85,000 -- 146,000 -- 231,000
========== ========= ========= ========== ==========
Loan loss reserve $3,531,000 722,000 -- (1,163,000) 3,090,000
========== ========= ========= ========== ==========
Valuation allowance $2,176,000 -- 290,000 (563,000) 1,903,000
========== ========= ========= ========== ==========
Deferred tax asset valuation allowance $7,659,000 -- -- -- 7,659,000
========== ========= ========= ========== ==========
22
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
4(d). Third Supplemental Indenture, dated May 3, 2000, by and among Lennar
Corporation and Bank One Trust Company, N.A., as successor trustee to
The First National Bank of Chicago (relating to Lennar's 7 5/8% Senior
Notes due 2009).
4(e). Fourth Supplemental Indenture, dated May 3, 2000, by and among Lennar
Corporation and Bank One Trust Company, N.A., as successor trustee to
The First National Bank of Chicago (relating to Lennar's Zero Coupon
Senior Convertible Debentures due 2018).
10(o). Credit Agreement, dated May 3, 2000, among Lennar Corporation and
various lenders.
10(p). Lennar Corporation 2000 Stock Option and Restricted Stock Plan, which
is subject to stockholder approval at the 2001 annual meeting of the
Company's stockholders.
13. Pages 36 through 64 of the 2000 Annual Report to Stockholders.
21. List of subsidiaries.
23. Independent Auditors' Consent.
99. Financial statements of Lennar Corporation's guarantor subsidiaries.