Lennar's quarterly loss narrows

Homebuilder says revenue fell 61% as the housing market continues to slide.

Last Updated: June 26, 2008: 8:33 AM EDT

MIAMI (AP) -- Homebuilder Lennar Corp., said Friday its fiscal second-quarter loss narrowed, but the company continued to struggle through the housing market doldrums, posting a 61% drop in revenue and taking hefty charges to write down land values and deposits.

The Miami-based company, one of the nation's largest builders of residential homes, also said it expects further deterioration in the housing market this year.

For the three months ended May 31, Lennar reported a loss of $120.9 million, or 76 cents per share. That compares with a loss of $244.2 million, or $1.55 per share, in the same period a year earlier.

The latest quarter included a 60 cent per-share charge stemming from write-downs and write-offs related to land option deposits and other costs.

All told, the company booked $5.4 million in losses on land sales, including $2.1 million in valuation adjustments and $6.6 million in write-offs on deposits and costs related to lots the company had under option but now does not plan to buy.

Revenue plunged to $1.1 billion from $2.8 billion last year.

Analysts surveyed by Thomson Financial were looking for a loss of 55 cents per share on revenue of $1.09 billion. The earnings estimates typically exclude one-time items.

"Consistent with our expectations, the housing market has continued its downward trend throughout our second quarter," Lennar President and Chief Executive Stuart Miller said in a statement.

Miller noted rising foreclosures and still-high levels of unsold homes on the market continue to be a drag on home prices and sales.

"The prospect of further deterioration in the home-building industry will likely become reality absent Federal government action," he said, echoing calls by the industry for lawmakers to pass a tax credit for home buyers in a housing stimulus package being considered by Congress.

On Wednesday, the Commerce Department reported that sales of new, single-family homes slipped 2.5% in May to an annual rate of 512,000 units.

The slowdown in sales threatens to prolong the amount of time unsold homes remain on the market, further depressing home prices. The inventory of new homes for sale in the U.S. declined 1.7% in May to 453,000 units, which translates into nearly an 11-month supply.

Housing prices, meanwhile, fell at the sharpest rates ever in April, according to data released this week by Standard & Poor's/Case-Shiller.

Lennar (LEN, Fortune 500) has homebuilding operations in 14 states, including California and Florida, the hardest-hit housing markets in the nation.

In the most recent quarter, it delivered 3,830 homes, down 60% from last year.

The average sale price of homes delivered fell to $274,000 during the quarter compared with $298,000 in the same quarter a year ago.

The drop was due pricing discounts and higher sales incentives, the company said.

New orders totaled 4,396 homes, a 45% drop.

The cancellation rate from buyers backing out on home contracts was 22%, improving from 29% in the same quarter last year.

Lennar's backlog, or homes under contract yet to be delivered, fell during the quarter. As of May 31, the figure stood at 3,958, compared with 8,199 units at the close of the same quarter last year.

The value of homes in backlog plunged by 56% from a year ago to $1.3 billion.

Lennar ended the quarter with about $880 million in cash and selling, general and administrative expenses were reduced by $238.9 million, or about 60%.

"We recognize that the remainder of 2008 will likely see further deterioration in overall market conditions; however, we are confident that we remain well positioned with a strong balance sheet and properly scaled operations to navigate the current market downturn as a leaner and more efficient homebuilder," Miller said.

For the first six months of Lennar's fiscal year, the company's net loss widened to $209.1 billion, or $1.32 per share. That compares to a loss of $175.6 billion, or $1.12 per share, in the same period last year.

Revenue fell to $2.2 billion, compared with $5.67 billion in the same period last year.