Lennar 2Q Loss Widens On Higher Write-Downs; Revenue Off 21%

   DOW JONES NEWSWIRES 
 

Lennar Corp.'s (LEN) fiscal second-quarter loss widened on increased write-downs and charges as revenue continued to fall, though by a lesser amount that many other home builders.

President and Chief Executive Stuart Miller noted the housing market has seen higher new-home sales in recent months than early this year amid falling prices, low interest rates and government stimulus programs.

"While we are sensing pent-up demand in the market, rising unemployment, increased foreclosures and tighter credit standards continue to present challenges for the industry," he noted. Miller added it is difficult to project when the market might turn the corner.

Home builders suffered as the housing bubble deflated and then popped, leading to a credit crisis that only reinforced an extremely difficult dynamic in the housing market. Data released Wednesday from the U.S. Commerce Department showed new-home sales unexpectedly fell in May as Americans afraid of losing their jobs stayed out of the market or settled for a cheaper house discounted by foreclosure.

For the period ended May 31, Lennar posted a loss of $125.2 million, or 76 cents a share, compared with a year-earlier loss of $120.9 million, or 76 cents a share. There were 3.9% more shares outstanding in the more recent period. The latest results included 65 cents in write-downs and tax-valuation allowance charges, compared with 60 cents a year earlier.

Revenue dropped 21% to $891.9 million.

Analysts surveyed by Thomson Reuters expected a loss of 64 cents and revenue of $597 million.

Gross margin on home sales, excluding valuation adjustments, fell to 14% from 15.9%.

Orders fell 19% to 3,564 from a year earlier, although they grew 63% from the first quarter. The cancellation rate improved to 15% from 22% a year ago and 21% in the prior quarter. During the quarter, inventories tumbled 53%.

In April, Moody's Investors Service cut its credit ratings on Lennar further into junk territory, saying the company's debt repayments plus possible new land investments in the next three years will likely exceed its current cash position.

The company in March retired its $281 million 7.625% senior notes due that month. In April, it issued $400 million of 12.25% eight-year notes in a private placement. Last month, as part of its plan to raise capital, the company issued 12.8 million common shares, raising $126.3 million in gross proceeds.

Lennar's shares closed Wednesday at $7.82 and haven't traded premarket. The stock is off 17% in the last month and 46% in the last year.

-By Kerry E. Grace, Dow Jones Newswires; 201-938-5089; [e-mail]