Lennar Corporation · NYSE:LEN
Lennar — Lennar Corp /New/ — Investor Presentation (January 2009)
33 slides from Lennar's investor presentation, Jan 15, 2009
Slide 1: Strategic Overview
Strategic Overview Exhibit 99.1
Slide 2: Disclaimer Statement
1 This presentation includes "forward-looking statements," as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements regarding our business, financial condition, results of operations, cash flows, strategies and prospects. Yo
Slide 3: Business Overview
2 Business Overview
Slide 4: Market Conditions Remain Challenging
3 Business Overview Market Conditions Remain Challenging Business Overview Market Conditions Remain Challenging Market weakness has accelerated as a result of increased foreclosures, weakened consumer confidence and tightened mortgage lending standards. Additional government actions will be necessar
Slide 5: Operating Focus
4 Business Overview Operating Focus Significant Progress on Our Balance Sheet Significant Progress On JV’s & Recourse Debt Significant Progress on Rebuilding Operating Profitability Business Overview Operating Focus Focus on a Strong Balance Sheet: Aggressive Asset Management Leading to Strong Cash
Slide 6: Significant Balance Sheet Progress
5 Significant Balance Sheet Progress
Slide 7: Strong Cash Flow Generation and Low Leverage
6 Significant Balance Sheet Progress Strong Cash Flow Generation and Low Leverage 25% 30% 35% 40% 45% 50% 55% 60% 65% 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 1,000 1,100 Significant Balance HB Debt / Total Capital Goal 35% - 45% Operating Cash Flow (Dollars in Millions)
Slide 8: Long-Term Fixed Rate Debt Maturities
7 Significant Balance Sheet Progress Long-Term Fixed Rate Debt Maturities $300 $250 $350 $250 $500 $250 $282 Mar-09 Oct-10 Oct-11 2012 Mar-13 Sep-14 May-15 Apr-16 Weighted average maturity of 4.1 years Weighted average interest rate of 5.8% At November 30, 2008 Repayment Schedule 6.50% Senior Notes
Slide 9: Aggressive Inventory Reduction
8 Significant Balance Sheet Progress Aggressive Inventory Reduction $3.2 $5.4 $1.7 $2.1 (Dollars in Billions) $8.6* $3.8* Peak 2006 Q4 2008 *Excludes consolidated inventory not owned Inventory 56% Land, Land Under Development and Option Deposits Construction in Progress and Finished Homesites
Slide 10: Land Acquisition & Development
9 Significant Balance Sheet Progress Land Acquisition & Development $2,892 $1,432 $2,135 $787 $720 $194 (Dollars in Millions) $914 2008 Land Development Land Acquisition $4,324 $2,922 2006 2007
Slide 11: Significant Joint Venture Progress
10 Significant Joint Venture Progress
Slide 12: Joint Ventures Mitigating Risk
11 Joint Ventures Mitigating Risk Joint Ventures Mitigating Risk Joint ventures were structured strategically to mitigate risk. Strategic partners with specific expertise JV with partner who brings specific expertise (e.g. commercial or infill experience) JV with other builders Joint bid on land par
Slide 13: Number of Joint Ventures
12 Significant Joint Venture Progress Number of Joint Ventures Peak 2006 Q4 2008 Number of Joint Ventures 57% Joint Venture Detail JVs with recourse debt JVs with non-recourse debt JVs without debt ____________________________ JV total
Slide 14: Joint Ventures Have Substantial Equity
13 Significant Joint Venture Progress Joint Ventures Have Substantial Equity 2008 2007 Assets: Cash and cash equivalents $135,081 $301,468 Inventories 7,115,360 7,941,835 Other Assets 541,984 827,208 $7,792,425 $9,070,511 Liabilities and equity: Accounts payable and other liabilities $1,042,002 $1,2
Slide 15: Joint Ventures Aren't Overleveraged
14 Significant Joint Venture Progress Joint Ventures Aren’t Overleveraged 2008 2007 Debt $4,062,058 $5,116,670 Equity 2,688,365 2,739,467 Total capital $6,750,423 $7,856,137 Debt to total capital of Lennar's unconsolidated entities 60.2% 65.1% Debt to total capital of Lennar's unconsolidated entitie
Slide 16: Off-Balance Sheet Debt Details
15 Significant Joint Venture Progress Off-Balance Sheet Debt Details (Dollars in Thousands) 2008 2007 Lennar's net recourse exposure $392,450 $794,934 Reimbursement agreements from partners 127,428 238,692 Lennar's maximum recourse exposure $519,878 $1,033,626 Partner several recourse 285,519 465,64
Slide 17: Recourse Debt Exposure & Equity
16 Significant Joint Venture Progress Recourse Debt Exposure & Equity $1,034 $520 Q4 2007 Q4 2008 Maximum Unconsolidated Entity Recourse Debt Exposure (Dollars in Millions) 50% $909 $1,282 Q4 2007 Q4 2008 Equity in Unconsolidated Entities with Recourse Debt (Dollars in Millions) 41%
Slide 18: Continued Progress on Recourse Debt Reduction
17 Significant Joint Venture Progress Continued Progress on Recourse Debt Reduction (Dollars in Thousands) 2008 2007 Several recourse debt - repayment $78,547 $123,022 Several recourse debt - maintenance 167,941 355,513 Joint and several recourse debt - repayment 138,169 263,364 Joint and several re
Slide 19: Significant Operating Profitability Progress
18 Significant Operating Profitability Progress
Slide 20: Focus on Positive Operating Margins
19 Significant Operating Profitability Progress Focus on Positive Operating Margins 3% 13% 13% 15% 17% 12% 12% 9% 2% 2% -1% 0% -3% -1% 1% 2% -5% 0% 5% 10% 15% 20% 25% Q1 '05 Q2 '05 Q3 '05 Q4 '05 Q1 '06 Q2 '06 Q3 '06 Q4 '06 Q1' Q2 '07 Q3 '07 Q4 '07 Q1 '08 Q2 '08 Q3 '08 Q4 '08 (Pre-impairment OM%)
Slide 21: Focus on Rebuilding Gross Margin
20 Significant Operating Profitability Progress Focus on Rebuilding Gross Margin 17% 25% 25% 26% 27% 25% 24% 20% 14% 16% 14% 14% 12% 17% 16% 18% 0% 5% 10% 15% 20% 25% 30% Q1 '05 Q2 '05 Q3 '05 Q4 '05 Q1 '06 Q2 '06 Q3 '06 Q4 '06 Q1' Q2 '07 Q3 '07 Q4 '07 Q1 '08 Q2 '08 Q3 '08 Q4 '08 Lennar was ahead of
Slide 22: Focus on S,G&A Reduction
21 Significant Operating Profitability Progress Focus on S,G&A Reduction S,G&A Expenses ($) Associate Headcount $484 $167 Peak 2006 Q4 2008 4,913 14,064 Peak 2006 Q4 2008 (Dollars in Millions) 65% 65%
Slide 23: Response to Recent Allegations
22 Response to Recent Allegations
Slide 24: Jon Jaffe's Loan
23 Response To Recent Allegations Jon Jaffe’s Loan Lennar’s Chief Operating Officer, Jon Jaffe, did not receive a mortgage on his home or any other indebtedness connected to the company Loan was obtained from sources wholly independent from Lennar and with no assistance from Lennar or any of its bus
Slide 25: Joint Ventures
24 Response To Recent Allegations Joint Ventures Lennar never “treated its joint ventures like a Ponzi scheme” Lennar has never siphoned cash from one joint venture to another Lennar has never pledged our interest in any joint venture for the benefit of another There is no cross collateralization of
Slide 26: Litigation
25 Response To Recent Allegations Litigation Lennar’s litigation is accurately reported and reserved for in accordance with generally accepted accounting principles and the reserves and processes for determining them are audited by its outside independent accounting firm Lennar has never used lawsui
Slide 27: The Bridges Lawsuit
26 Response To Recent Allegations The Bridges Lawsuit No money was ever misdirected in The Bridges project Lennar did not divert a $37.5 million judgment contributed by Nicholas Marsch to the venture; Lennar and Marsch had a 50-50 interest in the judgment Proceeds from judgment were used for the ben
Slide 28: LandSource
27 Response To Recent Allegations LandSource LandSource was an arm’s length transaction involving large, sophisticated financial institutions that fully reviewed, vetted and appraised the terms of the venture The claim that Lennar caused the other investors and lenders to lose approximately $1 billi
Slide 29: Chinese Drywall
28 Response To Recent Allegations Chinese Drywall Lennar never ordered imported drywall from China and never received a discount for its use as a substitute material Lennar has been cited by the media as “the most responsive builder” in dealing with the industry wide issue of imported drywall Lennar
Slide 30: Whistleblower
29 Response To Recent Allegations Whistleblower There have been no reports of any whistleblower complaints concerning these matters to Lennar management, the Board of Directors, independent auditors or an outside employee hotline Lennar has extensive procedures in place to ensure the free flow of co
Slide 31: Conclusion
30 Conclusion
Slide 32: Moving From Defense to Offense
31 Conclusion “Moving From Defense to Offense” Lennar Fund Fund Homebuilding Manufacturing Plant Product simplification & offering Cost reduction Cycle time reduction Customer experience Land Asset Manager Due diligence focused Evaluate & underwrite distressed opportunities Ability to manage assets
Slide 33: Will The Cycle Be Our Ally?
32 Lennar Will The Cycle Be Our Ally? Starts Notes: - 2008 net earnings before impairments excludes deferred tax valuation allowance. - 2008 National single unit starts at Nov. 2008. $- $200 $400 $600 $800 $1,000 $1,200 $1,400 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 200
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