Lennar Posts Net Loss, Cuts Jobs
As Home Building Revenue Shrinks

Lennar Corp. swung to fiscal third-quarter net loss on continued write-downs and announced it has cut its work force by 35%, as the company leads off what promises to be a vicious period for homebuilders.

For the quarter ended Aug. 31, the Miami company reported a net loss of $513.9 million, or $3.25 a share, compared with year-earlier net income of $206.7 million, or $1.30 a share. The latest quarter's results included $344.7 million in land-sale losses and loss from unconsolidated entities of $127.4 million.

Revenue slumped 44% to $2.34 billion as homebuilding revenue sank 44% to $2.23 billion. The mean estimates of analysts surveyed by Thomson Financial were for a loss of 55 cents a share on revenue of $2.39 billion.

"It is already well documented that the housing market has continued to deteriorate throughout our third quarter," said Chief Executive Stuart Miller. "Heavy discounting by builders, and now the existing home market as well, has continued to drive pricing downward. Consumer confidence in housing has remained low, while the mortgage market has continued to redefine itself, creating higher cancellation rates."

To combat that, Mr. Miller said Lennar continues to "adjust prices to meet current market conditions in order to keep inventories low and to keep our balance sheet positioned for the future." But that has resulted in falling profit margins. Gross margins in the latest quarter fell to 14% from 19.5%.

As such, Lennar announced it has cut its work force by some 35% and Mr. Miller said the company expects "continued reductions" in its fiscal fourth quarter.

The homebuilding industry continued to be buffeted by fallout from the subprime mortgage credit meltdown over the summer. U.S. housing starts fell 2.6% in August and 6.9% in July. Sales of single-family homes dropped 3.9% in July. A tightening credit market, rising foreclosures and the sales slowdown have boosted housing inventory while forcing painful markdowns that have drawn blood on housing companies' bottom lines.

Lennar's former profit centers in California and Florida, where home prices have surged in recent years, have experienced the most dramatic slowdowns. According to a Credit Suisse analysis, 32% of builders' profits at the peak of the boom came from California, with another 14% picked up in Lennar's home state. Industry experts say they don't expect a full recovery until at least 2009.

Lennar recorded 7,266 home deliveries in its fiscal third quarter, down 41%, while the average sale price fell 6.3% to $296,000.

Lennar has been aggressive in trying to move its inventory. It was among the first homebuilders to slash prices at the beginning of the slump and has also raised incentives for new home buyers to an average of $46,000 in the latest quarter from $35,900 a year earlier.

On Thursday, another major single-family home builder, KB Home reports its quarterly results.

Lennar's shares closed Monday down $24.18 and there was no premarket trading. The company's shares are off more than 50% since the beginning of the year.

A conference call is scheduled for 11 a.m. EDT.

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