Lennar Posts Larger than Expected 3Q Loss

Lennar Corp., (LEN) one of the nation's largest homebuilders, reported a fiscal third-quarter loss and sharply lower revenues Tuesday because of falling home prices and hefty charges to write down land values.

Losses for the quarter ended Aug. 31 totaled $513.9 million, or $3.25 per share, compared with a profit of $206.7 million, or $1.30 per share, in the 2006 period. Latest-quarter results included a charge of $3.33 per share related to valuation adjustments and writing off land option deposits, among other items.

Revenue fell 44 percent to $2.34 billion from $4.18 billion a year ago, primarily due to a 41 percent drop in the number of home deliveries and a 6 percent decrease in the average sales price of homes delivered in 2007.

Analysts surveyed by Thomson Financial had expected Lennar to post a loss of 55 cents per share on revenue of $2.39 billion. Wall Street estimates typically exclude one-time charges and gains.

In June, Lennar warned that it would likely post a loss through at least the third quarter but offered no specific guidance. The Miami-based homebuilder has been cutting prices and offering incentives to get rid of homes, which has cut into profits.

Homebuilders have been forced to absorb charges to write down the value of homes they cannot sell, or to forfeit deposits on land they no longer want to buy. Lennar said it has cut its work force by 35 percent and expects continued job cuts in the fourth quarter.

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

The average sales price of homes delivered sank to $296,000 from $316,000 in the same period last year, mainly due to higher sales incentives.

New home deliveries decreased to 7,266 homes in the third quarter of 2007 from 12,337 homes last year. New home orders were down 48 percent to 5,804, with a cancellation rate of 32 percent.

Loss on land sales totaled $344.7 million in the third quarter, including $114.6 million of valuation adjustments and $242.5 million of write-offs of deposits and pre-acquisition costs related to 15,000 home sites under option that Lennar does not intend to buy.