UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Lennar Corporation
(Exact name of registrant as specified in its charter)
Delaware 95-4337490
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
|
700 Northwest 107th Avenue, Miami, Florida 33172
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (305) 559-4000
Common shares outstanding as of September 30, 2002:
Common 55,165,332
----------
Class B Common 9,700,462
----------
================================================================================
|
Part I. Financial Information
Item 1. Financial Statements
Lennar Corporation and Subsidiaries Consolidated Condensed Balance Sheets
(In thousands, except per share amounts)
(Unaudited)
August 31, November 30,
2002 2001
--------------------------------------------------------------------------------------------------------------------
ASSETS
Homebuilding:
Cash $ 58,363 824,013
Receivables, net 87,465 24,345
Inventories 3,576,443 2,416,541
Investments in unconsolidated partnerships 353,708 300,064
Other assets 332,644 253,933
----------------------------------
4,408,623 3,818,896
Financial services 800,422 895,530
--------------------------------------------------------------------------------------------------------------------
Total assets $ 5,209,045 4,714,426
====================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Homebuilding:
Accounts payable and other liabilities $ 892,098 755,726
Senior notes and other debts payable, net 1,643,008 1,505,255
----------------------------------
2,535,106 2,260,981
Financial services 674,038 794,183
--------------------------------------------------------------------------------------------------------------------
Total liabilities 3,209,144 3,055,164
Stockholders' equity:
Preferred stock - -
Common stock of $0.10 par value per share,
64,924 shares issued at August 31, 2002 6,492 6,412
Class B common stock of $0.10 par value per share,
9,700 shares issued at August 31, 2002 970 974
Additional paid-in capital 870,134 843,924
Retained earnings 1,314,732 996,998
Unearned restricted stock (8,114) (10,833)
Treasury stock, at cost; 9,848 common shares at August 31, 2002 (158,992) (158,927)
Accumulated other comprehensive loss (25,321) (19,286)
--------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 1,999,901 1,659,262
--------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 5,209,045 4,714,426
====================================================================================================================
|
See accompanying notes to consolidated condensed financial statements.
Lennar Corporation and Subsidiaries Consolidated Condensed Statements of Earnings
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended Nine Months Ended
August 31, August 31,
------------------------ -------------------------
2002 2001 2002 2001
-------------------------------------------------------------------------------------------------------
Revenues:
Homebuilding $ 1,745,347 1,466,792 4,349,270 3,761,959
Financial services 115,456 110,836 330,894 311,244
-------------------------------------------------------------------------------------------------------
Total revenues 1,860,803 1,577,628 4,680,164 4,073,203
-------------------------------------------------------------------------------------------------------
Costs and expenses:
Homebuilding 1,487,676 1,267,745 3,764,972 3,275,443
Financial services 85,382 86,169 250,685 245,664
Corporate general and administrative 19,575 19,545 55,979 53,720
Interest 39,706 30,681 94,284 83,795
-------------------------------------------------------------------------------------------------------
Total costs and expenses 1,632,339 1,404,140 4,165,920 3,658,622
-------------------------------------------------------------------------------------------------------
Earnings before income taxes 228,464 173,488 514,244 414,581
Income taxes 86,245 66,793 194,127 159,614
-------------------------------------------------------------------------------------------------------
Net earnings $ 142,219 106,695 320,117 254,967
=======================================================================================================
Basic earnings per share $ 2.22 1.69 5.03 4.07
=======================================================================================================
Diluted earnings per share $ 2.01 1.53 4.55 3.68
=======================================================================================================
-------------------------------------------------------------------------------------------------------
Cash dividends per common share $ 0.0125 0.0125 0.0375 0.0375
-------------------------------------------------------------------------------------------------------
Cash dividends per Class B common share $ 0.01125 0.01125 0.03375 0.03375
=======================================================================================================
|
See accompanying notes to consolidated condensed financial statements.
Lennar Corporation and Subsidiaries Consolidated Condensed Statements of Cash Flows
(Unaudited)
(In thousands)
Nine Months Ended
August 31,
-------------------------
2002 2001
---------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net earnings $ 320,117 254,967
Adjustments to reconcile net earnings to net cash
used in operating activities:
Depreciation and amortization 32,211 35,867
Amortization of discount on debt 18,889 14,123
Tax benefit from exercise of stock options 9,550 8,600
Equity in earnings from unconsolidated partnerships (17,083) (8,843)
Increase in deferred income taxes 6,079 40,901
Changes in assets and liabilities, net of effect from acquisitions:
Increase in receivables (96,359) (86,137)
Increase in inventories (627,574) (411,912)
(Increase) decrease in other assets 5,542 (7,320)
Decrease in financial services loans held for sale or disposition 175,525 56,138
Increase (decrease) in accounts payable and other liabilities 802 (112,677)
---------------------------------------------------------------------------------------------------------
Net cash used in operating activities (172,301) (216,293)
---------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Net additions to operating properties and equipment (7,420) (11,301)
Increase in investments in unconsolidated partnerships, net (47,283) (70,587)
Decrease in financial services mortgage loans 12,092 12,090
Decrease in financial services mortgage servicing rights - 10,812
Purchases of investment securities (25,924) (11,124)
Proceeds from investment securities 17,452 10,800
Acquisitions, net of cash acquired (390,393) -
---------------------------------------------------------------------------------------------------------
Net cash used in investing activities (441,476) (59,310)
---------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net borrowings under revolving credit facilities 42,300 -
Net repayments under financial services short-term debt (126,558) (9,826)
Net proceeds from issuance of 5.125% zero-coupon convertible
senior subordinated notes - 224,250
Proceeds from other borrowings 20,075 110
Principal payments on other borrowings (91,699) (25,542)
Limited-purpose finance subsidiaries, net 126 1,962
Common stock:
Issuance, net 17,048 18,933
Dividends (2,383) (2,327)
---------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (141,091) 207,560
---------------------------------------------------------------------------------------------------------
Net decrease in cash (754,868) (68,043)
Cash at beginning of period 877,274 333,877
---------------------------------------------------------------------------------------------------------
Cash at end of period $ 122,406 265,834
=========================================================================================================
|
Lennar Corporation and Subsidiaries Consolidated Condensed Statements of Cash Flows -- Continued
(Unaudited)
(In thousands)
Nine Months Ended
August 31,
----------------------------------
2002 2001
--------------------------------------------------------------------------------------------------------------------------
Summary of cash:
Homebuilding $ 58,363 208,570
Financial services 64,043 57,264
--------------------------------------------------------------------------------------------------------------------------
$ 122,406 265,834
--------------------------------------------------------------------------------------------------------------------------
Supplemental disclosures of cash flow information:
Cash paid for interest, net of amounts capitalized $ 13,836 21,114
Cash paid for income taxes $ 185,714 146,102
Supplemental disclosures of non-cash investing and financing activities:
Purchases of inventory financed by sellers $ 9,820 19,480
==========================================================================================================================
|
See accompanying notes to consolidated condensed financial statements.
Lennar Corporation and Subsidiaries
Notes to Consolidated Condensed Financial Statements
(Unaudited)
(1) Basis of Presentation
The accompanying consolidated condensed financial statements include the accounts of Lennar Corporation and all subsidiaries, partnerships and other entities in which a controlling interest is held (the "Company"). The Company's investments in unconsolidated partnerships in which a significant, but less than controlling, interest is held are accounted for by the equity method. Controlling interest is determined based on a number of factors, which include the Company's ownership interest and participation in the management of the partnership. All significant intercompany transactions and balances have been eliminated. The financial statements have been prepared by management without audit by independent public accountants and should be read in conjunction with the November 30, 2001 audited financial statements in the Company's Annual Report on Form 10-K for the year then ended. However, in the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for fair presentation of the accompanying consolidated condensed financial statements have been made. Certain prior year amounts in the consolidated condensed financial statements have been reclassified to conform with the current period presentation.
The Company historically has experienced, and expects to continue to experience, variability in quarterly results. The consolidated condensed statements of earnings for the three and nine months ended August 31, 2002 are not necessarily indicative of the results to be expected for the full year.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
(2) Operating and Reporting Segments
The Company has two operating and reporting segments: Homebuilding and Financial Services. The Company's reportable segments are strategic business units that offer different products and services.
Homebuilding operations include the sale and construction of single-family attached and detached homes. These activities also include the purchase, development and sale of residential land by the Company and unconsolidated partnerships in which it has investments.
The Financial Services Division provides mortgage financing, title insurance and closing services for both the Company's homebuyers and others. This Division resells the residential mortgage loans it originates in the secondary mortgage market and also provides high-speed Internet access, cable television and alarm monitoring services for both the Company's homebuyers and other customers.
(3) Acquisitions
During 2002, the Company acquired eight regional homebuilders which marked the Company's entry into Chicago, Baltimore and the Carolinas and expanded the Company's presence in several other states. In connection with these acquisitions, total consideration, including debt of acquired companies, totaled approximately $575 million. The results of operations of the acquired homebuilders are included in the Company's results of operations since their respective acquisition dates. The pro forma effect of these acquisitions on the results of operations was not presented as their effect is not considered material.
(4) Earnings Per Share
Basic earnings per share is computed by dividing net earnings attributable to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company. Basic and diluted earnings per share were calculated as follows (unaudited):
Three Months Ended Nine Months Ended
August 31, August 31,
---------------------------- -------------------------
(In thousands, except per share amounts) 2002 2001 2002 2001
-------------------------------------------------------------------------------------------------------------
Numerator:
Numerator for basic earnings per share -
net earnings $ 142,219 106,695 320,117 254,967
Interest on zero-coupon senior convertible
debentures due 2018, net of tax 1,610 1,529 4,787 4,545
-------------------------------------------------------------------------------------------------------------
Numerator for diluted earnings per share $ 143,829 108,224 324,904 259,512
=============================================================================================================
Denominator:
Denominator for basic earnings per share -
weighted average shares 63,992 63,025 63,673 62,607
Effect of dilutive securities:
Employee stock options and restricted stock 1,447 1,695 1,580 1,803
Zero-coupon senior convertible debentures
due 2018 6,105 6,105 6,105 6,105
-------------------------------------------------------------------------------------------------------------
Denominator for diluted earnings per share -
adjusted weighted average shares and
assumed conversions 71,544 70,825 71,358 70,515
=============================================================================================================
Basic earnings per share $ 2.22 1.69 5.03 4.07
=============================================================================================================
Diluted earnings per share $ 2.01 1.53 4.55 3.68
=============================================================================================================
|
(4) Earnings Per Share, Continued
In the second quarter of 2001, the Company issued zero-coupon convertible senior subordinated notes due 2021 (the "Notes"). The Notes are convertible into the Company's common stock if the sale price of the Company's common stock exceeds certain thresholds or in other specified instances, at the rate of approximately 6.4 shares per $1,000 face amount at maturity, which would total approximately 4 million shares. These shares were not included in the calculation of diluted earnings per share for the three and nine months ended August 31, 2002 and 2001 because the average closing price of the Company's common stock over the last twenty trading days of the third quarter did not exceed 110% ($67.32 per share at August 31, 2002) of the accreted conversion price.
(5) Financial Services
The assets and liabilities related to the Company's financial services operations are summarized as follows:
(Unaudited)
August 31, November 30,
(In thousands) 2002 2001
-----------------------------------------------------------------------------------------------------
Assets:
Cash and receivables, net $ 239,057 161,060
Mortgage loans held for sale or disposition, net 415,907 587,694
Mortgage loans, net 29,628 41,590
Title plants 15,586 15,530
Goodwill, net 30,236 25,158
Other 59,684 51,352
Limited-purpose finance subsidiaries 10,324 13,146
-----------------------------------------------------------------------------------------------------
$ 800,422 895,530
=====================================================================================================
Liabilities:
Notes and other debts payable $ 570,756 693,931
Other 92,958 87,106
Limited-purpose finance subsidiaries 10,324 13,146
-----------------------------------------------------------------------------------------------------
$ 674,038 794,183
=====================================================================================================
|
(6) Cash
Cash as of August 31, 2002 and November 30, 2001 included $59.9 million and $64.4 million, respectively, of cash held in escrow for approximately three days.
(7) Debt
In May 2002, the Company amended and restated its senior secured credit facilities (the "Amended Facilities"), to provide the Company with up to $1.3 billion of financing. The Amended Facilities consist of a $653 million revolving credit facility maturing in April 2006, a $273 million 364-day revolving credit facility maturing in April 2003 and a $393 million term loan B maturing in May 2007. The Company may elect to convert borrowings under the 364-day revolving credit facility to a term loan, which would mature in April 2006. At August 31, 2002, $392.0 million and $42.3 million were outstanding under the term loan B and the revolving credit facilities, respectively. Interest rates are LIBOR-based and the margins are set by a pricing grid with thresholds that adjust based on changes in the Company's leverage ratio and the Amended Facilities' credit rating.
(8) Comprehensive Income
The Company has various interest rate swap agreements which effectively fix the variable interest rate on approximately $300 million of outstanding debt related to its homebuilding operations. The swap agreements have been designated as cash flow hedges and, accordingly, are reflected at their fair value in the consolidated condensed balance sheets. The related loss is deferred, net of tax, in stockholders' equity as accumulated other comprehensive loss.
Comprehensive income consists of net earnings adjusted for the change in accumulated other comprehensive loss in the consolidated condensed balance sheets. Comprehensive income was $314.1 million and $238.7 million for the nine months ended August 31, 2002 and 2001, respectively.
(9) Deferred Compensation
In June 2002, the Company adopted the Lennar Corporation Nonqualified Deferred Compensation Plan (the "Plan") that allows a selected group of members of management to defer a portion of their salaries and bonuses and up to 100% of their restricted stock. All participant contributions to the Plan are vested. Salaries and bonuses that are deferred under the Plan are credited with earnings or losses based on investment decisions made by the participants.
Restricted stock is deferred under the Plan by surrendering the restricted stock in exchange for the right to receive in the future a number of shares equal to the number of restricted shares that are surrendered. The surrender is reflected as a reduction in stockholders' equity equal to the value of the restricted stock when it was issued, with an offsetting increase in stockholders' equity to reflect a deferral of the compensation expense related to the surrendered restricted stock. Changes in the value of the shares that will be issued in the future are not reflected in the financial statements.
By August 31, 2002, approximately 60,000 shares of restricted stock had been surrendered under the Plan, resulting in a reduction in stockholders' equity of $1.1 million fully offset by an increase in stockholders' equity to reflect the deferral of compensation in that amount. Shares that the Company is obligated to issue in the future under the Plan are treated as outstanding shares in both the Company's basic and diluted earnings per share calculations for the three and nine months ended August 31, 2002.
(10) New Accounting Pronouncements
In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 142, Goodwill and Other Intangible Assets. SFAS No. 142 no longer requires or permits the amortization of goodwill and indefinite-lived assets. Instead, these assets must be reviewed annually (or more frequently under certain conditions) for impairment in accordance with this statement. This impairment test uses a fair value approach rather than the undiscounted cash flows approach previously required by SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. The Company adopted SFAS No. 142 on December 1, 2001. No impairment charges were recognized from the adoption of this statement.
(10) New Accounting Pronouncements, Continued
Pro forma net earnings for the three and nine months ended August 31, 2001 were $108.2 million, or $1.55 per diluted share ($1.72 per basic share), and $259.6 million, or $3.75 per diluted share ($4.15 per basic share), respectively, after adding back amortization of goodwill, net of tax, of $1.5 million and $4.6 million, respectively.
In October 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. SFAS No. 144 provides guidance for financial accounting and reporting for impairment or disposal of long-lived assets. SFAS No. 144 supercedes SFAS No. 121. SFAS No. 144 is effective for the Company in fiscal 2003. Management does not currently believe that the implementation of SFAS No. 144 will have a material impact on the Company's financial condition or results of operations.
(11) Supplemental Financial Information
During May 2000, the Company issued $325 million of 9.95% senior notes due 2010. The Company's obligations to pay principal, premium, if any, and interest under the notes are guaranteed on a joint and several basis by substantially all of its subsidiaries, other than subsidiaries engaged in mortgage and title reinsurance activities. The guarantees are full and unconditional and the guarantor subsidiaries are 100% owned by Lennar Corporation. The Company has determined that separate, full financial statements of the guarantors would not be material to investors and, accordingly, supplemental financial information for the guarantors is presented.
Consolidating Condensed Balance Sheet August 31, 2002
(Unaudited)
Lennar Guarantor Non-Guarantor
(In thousands) Corporation Subsidiaries Subsidiaries Eliminations Total
-----------------------------------------------------------------------------------------------------------------------
ASSETS
Homebuilding:
Cash and receivables, net $ (76,198) 222,026 - - 145,828
Inventories - 3,569,922 6,521 - 3,576,443
Investments in unconsolidated
partnerships - 353,708 - - 353,708
Other assets 75,037 257,607 - - 332,644
Investments in subsidiaries 2,451,386 275,957 - (2,727,343) -
-----------------------------------------------------------------------------------------------------------------------
2,450,225 4,679,220 6,521 (2,727,343) 4,408,623
Financial services - 29,658 800,799 (30,035) 800,422
-----------------------------------------------------------------------------------------------------------------------
Total assets $ 2,450,225 4,708,878 807,320 (2,757,378) 5,209,045
=======================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Homebuilding:
Accounts payable and other liabilities $ 279,653 612,827 90 (472) 892,098
Senior notes and other debts
payable, net 1,518,446 154,125 - (29,563) 1,643,008
Intercompany (1,347,775) 1,483,362 (135,587) - -
-----------------------------------------------------------------------------------------------------------------------
450,324 2,250,314 (135,497) (30,035) 2,535,106
Financial services - 7,178 666,860 - 674,038
------------------------------------------------------------------------------------------------------------------------
Total liabilities 450,324 2,257,492 531,363 (30,035) 3,209,144
Stockholders' equity 1,999,901 2,451,386 275,957 (2,727,343) 1,999,901
-----------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders'
equity $ 2,450,225 4,708,878 807,320 (2,757,378) 5,209,045
=======================================================================================================================
|
(11) Supplemental Financial Information, Continued
Consolidating Condensed Balance Sheet November 30, 2001
Lennar Guarantor Non-Guarantor
(In thousands) Corporation Subsidiaries Subsidiaries Eliminations Total
-----------------------------------------------------------------------------------------------------------------------
ASSETS
Homebuilding:
Cash and receivables, net $ 710,748 137,610 - - 848,358
Inventories - 2,410,117 6,424 - 2,416,541
Investments in unconsolidated
partnerships - 300,064 - - 300,064
Other assets 83,983 169,950 - - 253,933
Investments in subsidiaries 1,955,678 197,821 - (2,153,499) -
-----------------------------------------------------------------------------------------------------------------------
2,750,409 3,215,562 6,424 (2,153,499) 3,818,896
Financial services - 24,762 870,768 - 895,530
----------------------------------------------------------------------------------------------------------------------
Total assets $ 2,750,409 3,240,324 877,192 (2,153,499) 4,714,426
======================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Homebuilding:
Accounts payable and other liabilities $ 295,188 460,320 218 - 755,726
Senior notes and other debts
payable, net 1,460,610 44,645 - - 1,505,255
Intercompany (664,651) 773,091 (108,440) - -
----------------------------------------------------------------------------------------------------------------------
1,091,147 1,278,056 (108,222) - 2,260,981
Financial services - 6,590 787,593 - 794,183
----------------------------------------------------------------------------------------------------------------------
Total liabilities 1,091,147 1,284,646 679,371 - 3,055,164
Stockholders' equity 1,659,262 1,955,678 197,821 (2,153,499) 1,659,262
----------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders'
equity $ 2,750,409 3,240,324 877,192 (2,153,499) 4,714,426
======================================================================================================================
|
(11) Supplemental Financial Information, Continued
Consolidating Condensed Statement of Earnings Three Months Ended August 31, 2002
(Unaudited)
Lennar Guarantor Non-Guarantor
(In thousands) Corporation Subsidiaries Subsidiaries Eliminations Total
-----------------------------------------------------------------------------------------------------------------------
Revenues:
Homebuilding $ - 1,745,347 - - 1,745,347
Financial services - 14,764 101,750 (1,058) 115,456
-----------------------------------------------------------------------------------------------------------------------
Total revenues - 1,760,111 101,750 (1,058) 1,860,803
-----------------------------------------------------------------------------------------------------------------------
Costs and expenses:
Homebuilding - 1,487,539 137 - 1,487,676
Financial services - 13,999 71,383 - 85,382
Corporate general and administrative 19,575 - - - 19,575
Interest - 40,764 - (1,058) 39,706
-----------------------------------------------------------------------------------------------------------------------
Total costs and expenses 19,575 1,542,302 71,520 (1,058) 1,632,339
-----------------------------------------------------------------------------------------------------------------------
Earnings (loss) before income taxes (19,575) 217,809 30,230 - 228,464
Provision (benefit) for income taxes (7,458) 82,223 11,480 - 86,245
Equity in earnings from subsidiaries 154,336 18,750 - (173,086) -
-----------------------------------------------------------------------------------------------------------------------
Net earnings $ 142,219 154,336 18,750 (173,086) 142,219
=======================================================================================================================
|
Consolidating Condensed Statement of Earnings Three Months Ended August 31, 2001
(Unaudited)
Lennar Guarantor Non-Guarantor
(In thousands) Corporation Subsidiaries Subsidiaries Eliminations Total
-----------------------------------------------------------------------------------------------------------------------
Revenues:
Homebuilding $ - 1,466,792 - - 1,466,792
Financial services - 15,868 94,968 - 110,836
-----------------------------------------------------------------------------------------------------------------------
Total revenues - 1,482,660 94,968 - 1,577,628
-----------------------------------------------------------------------------------------------------------------------
Costs and expenses:
Homebuilding - 1,267,629 116 - 1,267,745
Financial services - 15,864 70,305 - 86,169
Corporate general and administrative 19,545 - - - 19,545
Interest - 30,681 - - 30,681
-----------------------------------------------------------------------------------------------------------------------
Total costs and expenses 19,545 1,314,174 70,421 - 1,404,140
-----------------------------------------------------------------------------------------------------------------------
Earnings (loss) before income taxes (19,545) 168,486 24,547 - 173,488
Provision (benefit) for income taxes (8,086) 64,866 10,013 - 66,793
Equity in earnings from subsidiaries 118,154 14,534 - (132,688) -
-----------------------------------------------------------------------------------------------------------------------
Net earnings $ 106,695 118,154 14,534 (132,688) 106,695
=======================================================================================================================
|
(11) Supplemental Financial Information, Continued
Consolidating Condensed Statement of Earnings Nine Months Ended August 31, 2002
(Unaudited)
Lennar Guarantor Non-Guarantor
(In thousands) Corporation Subsidiaries Subsidiaries Eliminations Total
--------------------------------------------------------------------------------------------------------------------
Revenues:
Homebuilding $ - 4,349,264 6 - 4,349,270
Financial services - 39,135 292,817 (1,058) 330,894
--------------------------------------------------------------------------------------------------------------------
Total revenues - 4,388,399 292,823 (1,058) 4,680,164
--------------------------------------------------------------------------------------------------------------------
Costs and expenses:
Homebuilding - 3,764,548 424 - 3,764,972
Financial services - 34,266 216,419 - 250,685
Corporate general and administrative 55,979 - - - 55,979
Interest - 95,342 - (1,058) 94,284
--------------------------------------------------------------------------------------------------------------------
Total costs and expenses 55,979 3,894,156 216,843 (1,058) 4,165,920
--------------------------------------------------------------------------------------------------------------------
Earnings (loss) before income taxes (55,979) 494,243 75,980 - 514,244
Provision (benefit) for income taxes (21,012) 186,577 28,562 - 194,127
Equity in earnings from subsidiaries 355,084 47,418 - (402,502) -
--------------------------------------------------------------------------------------------------------------------
Net earnings $ 320,117 355,084 47,418 (402,502) 320,117
====================================================================================================================
|
Consolidating Condensed Statement of Earnings Nine Months Ended August 31, 2001
(Unaudited)
Lennar Guarantor Non-Guarantor
(In thousands) Corporation Subsidiaries Subsidiaries Eliminations Total
--------------------------------------------------------------------------------------------------------------------
Revenues:
Homebuilding $ - 3,761,955 4 - 3,761,959
Financial services - 40,941 270,303 - 311,244
--------------------------------------------------------------------------------------------------------------------
Total revenues - 3,802,896 270,307 - 4,073,203
--------------------------------------------------------------------------------------------------------------------
Costs and expenses:
Homebuilding - 3,275,071 372 - 3,275,443
Financial services - 47,127 198,537 - 245,664
Corporate general and administrative 53,720 - - - 53,720
Interest - 83,795 - - 83,795
--------------------------------------------------------------------------------------------------------------------
Total costs and expenses 53,720 3,405,993 198,909 - 3,658,622
--------------------------------------------------------------------------------------------------------------------
Earnings (loss) before income taxes (53,720) 396,903 71,398 - 414,581
Provision (benefit) for income taxes (20,497) 152,807 27,304 - 159,614
Equity in earnings from subsidiaries 288,190 44,094 - (332,284) -
--------------------------------------------------------------------------------------------------------------------
Net earnings $ 254,967 288,190 44,094 (332,284) 254,967
====================================================================================================================
|
11) Supplemental Financial Information, Continued
Consolidating Condensed Statement of Cash Flows Nine Months Ended August 31, 2002
(Unaudited)
Lennar Guarantor Non-Guarantor
(In thousands) Corporation Subsidiaries Subsidiaries Eliminations Total
-------------------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net earnings (loss) $ 320,117 355,084 47,418 (402,502) 320,117
Adjustments to reconcile net earnings
to net cash provided by (used in)
operating activities (312,434) (642,277) 89,354 372,939 (492,418)
-------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in)
operating activities 7,683 (287,193) 136,772 (29,563) (172,301)
-------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Increase in investments in
unconsolidated partnerships, net - (47,283) - - (47,283)
Acquisitions, net of cash acquired - (387,406) (2,987) - (390,393)
Other (624) (2,345) (831) - (3,800)
-------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (624) (437,034) (3,818) - (441,476)
-------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net borrowings (repayments)
under revolving credit facilities and
other borrowings 39,300 (98,163) - 29,563 (29,300)
Net repayments under financial
services debt - - (126,582) - (126,582)
Limited-purpose finance
subsidiaries, net - - 126 - 126
Common stock:
Issuance, net 17,048 - - - 17,048
Dividends (2,383) - - - (2,383)
Intercompany (848,837) 844,526 4,311 - -
-------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in)
financing activities (794,872) 746,363 (122,145) 29,563 (141,091)
-------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash (787,813) 22,136 10,809 - (754,868)
Cash at beginning of period 710,325 113,722 53,227 - 877,274
-------------------------------------------------------------------------------------------------------------------------------
Cash at end of period $ (77,488) 135,858 64,036 - 122,406
===============================================================================================================================
|
11) Supplemental Financial Information, Continued
Consolidating Condensed Statement of Cash Flows Nine Months Ended August 31, 2001
(Unaudited)
Lennar Guarantor Non-Guarantor
(In thousands) Corporation Subsidiaries Subsidiaries Eliminations Total
--------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net earnings (loss) $ 254,967 288,190 44,094 (332,284) 254,967
Adjustments to reconcile net earnings
to net cash provided by (used in)
operating activities (278,924) (502,361) (22,259) 332,284 (471,260)
--------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in)
operating activities (23,957) (214,171) 21,835 - (216,293)
--------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
(Increase) decrease in investments in
unconsolidated partnerships, net - (70,606) 19 - (70,587)
Other - (5,782) 17,059 - 11,277
--------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in)
investing activities - (76,388) 17,078 - (59,310)
--------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net borrowings (repayments)
under revolving credit facilities and
other borrowings 221,250 (21,843) - - 199,407
Net repayments under financial
services debt - - (10,415) - (10,415)
Limited-purpose finance
subsidiaries, net - - 1,962 - 1,962
Common stock:
Issuance 18,933 - - - 18,933
Dividends (2,327) - - - (2,327)
Intercompany (301,007) 314,949 (13,942) - -
--------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in)
financing activities (63,151) 293,106 (22,395) - 207,560
--------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash (87,108) 2,547 16,518 - (68,043)
Cash at beginning of period 205,783 88,221 39,873 - 333,877
--------------------------------------------------------------------------------------------------------------------
Cash at end of period $ 118,675 90,768 56,391 - 265,834
====================================================================================================================
|
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Some of the statements contained in the following Management's Discussion and Analysis of Financial Condition and Results of Operations are "forward-looking statements" as that term is defined in the Private Securities Litigation Reform Act of 1995. By their nature, forward-looking statements involve risks, uncertainties and other factors that may cause actual results to differ materially from those which the statements anticipate. Factors which may affect our results include, but are not limited to, changes in general economic conditions, the market for homes and prices for homes generally and in areas where we have developments, the availability and cost of land suitable for residential development, materials prices, labor costs, interest rates, consumer confidence or competition, as well as terrorist acts or other acts of war, environmental factors and government regulations affecting our operations. See our Annual Report on Form 10-K for the year ended November 30, 2001 for a further discussion of these and other risks and uncertainties applicable to our business.
(1) Results of Operations
Overview
Net earnings were $142.2 million, or $2.01 per share diluted ($2.22 per share basic), in the third quarter of 2002, compared to $106.7 million, or $1.53 per share diluted ($1.69 per share basic), in the third quarter of 2001. For the nine months ended August 31, 2002, net earnings were $320.1 million, or $4.55 per share diluted ($5.03 per share basic), compared to $255.0 million, or $3.68 per share diluted ($4.07 per share basic) in 2001.
Homebuilding
The following tables set forth selected financial and operational information related to our Homebuilding Division for the periods indicated (unaudited):
Three Months Ended Nine Months Ended
August 31, August 31,
(Dollars in thousands, except --------------------------- ---------------------------
average sales price) 2002 2001 2002 2001
------------------------------------------------------------------------------------------------------
Revenues:
Sales of homes $ 1,691,282 1,422,056 4,198,652 3,674,906
Sales of land and other revenues 49,890 42,408 133,535 78,210
Equity in earnings from
unconsolidated partnerships 4,175 2,328 17,083 8,843
------------------------------------------------------------------------------------------------------
Total revenues 1,745,347 1,466,792 4,349,270 3,761,959
Costs and expenses:
Cost of homes sold 1,276,772 1,082,643 3,192,277 2,813,991
Cost of land and other expenses 31,567 38,196 101,366 66,474
Selling, general and administrative 179,337 146,906 471,329 394,978
------------------------------------------------------------------------------------------------------
Total costs and expenses 1,487,676 1,267,745 3,764,972 3,275,443
------------------------------------------------------------------------------------------------------
Operating earnings $ 257,671 199,047 584,298 486,516
======================================================================================================
Gross margin on home sales 24.5% 23.9% 24.0% 23.4%
S,G&A expenses as a % of
revenues from home sales 10.6% 10.3% 11.2% 10.7%
----------------------------------------------------------
Operating margin as a % of
revenues from home sales 13.9% 13.5% 12.7% 12.7%
----------------------------------------------------------
Average sales price $ 242,000 232,000 237,000 233,000
======================================================================================================
|
Summary of Home and Backlog Data By Region
(Dollars in thousands)
At or for the Nine
Three Months Ended Months Ended
August 31, August 31,
------------------ ------------------------
Deliveries 2002 2001 2002 2001
---------------------------------------------------------------------------------------
East 2,289 2,046 5,808 5,244
Central 1,978 1,969 5,223 4,714
West 2,726 2,119 6,652 5,786
---------------------------------------------------------------------------------------
Subtotal 6,993 6,134 17,683 15,744
Unconsolidated partnerships 134 154 370 675
---------------------------------------------------------------------------------------
Total 7,127 6,288 18,053 16,419
=======================================================================================
New Orders
---------------------------------------------------------------------------------------
East 2,573 2,128 7,619 6,513
Central 1,828 1,562 5,460 5,322
West 2,975 2,059 8,209 6,598
---------------------------------------------------------------------------------------
Subtotal 7,376 5,749 21,288 18,433
Unconsolidated partnerships 201 113 554 742
---------------------------------------------------------------------------------------
Total 7,577 5,862 21,842 19,175
=======================================================================================
Backlog - Homes
---------------------------------------------------------------------------------------
East 5,447 4,037
Central 3,008 2,535
West 5,913 4,263
---------------------------------------------------------------------------------------
Subtotal 14,368 10,835
Unconsolidated partnerships 460 284
---------------------------------------------------------------------------------------
Total 14,828 11,119
=======================================================================================
Backlog Dollar Value
(including unconsolidated partnerships) $ 3,910,682 2,701,382
=======================================================================================
|
Our market regions consist of the following states: East: Florida, Maryland, Virginia, New Jersey, North Carolina and South Carolina. Central: Texas, Illinois and Minnesota. West: California, Colorado, Arizona and Nevada. In addition, we have unconsolidated partnerships in other states.
Revenues from sales of homes increased 19% and 14% in the three and nine months ended August 31, 2002, respectively, compared to the same periods in 2001. Revenues were higher due primarily to a 14% and 12% increase in the number of new home deliveries and a 4% and 2% increase in the average sales price for the three and nine months ended August 31, 2002, respectively, compared to the same periods in 2001. New home deliveries were higher primarily due to a strong homebuilding market, combined with our homebuilding acquisitions this year.
Gross margin percentages on home sales were 24.5% and 24.0% in the three and nine months ended August 31, 2002, respectively, compared to 23.9% and 23.4% in the same periods last year. Margins increased primarily due to strength in the Florida and California markets, partially offset by the Texas market, which is continuing to offer additional sales incentives. Margins were negatively impacted 20 basis points for the three months ended August 31, 2002 due to purchase accounting associated with our recent homebuilding acquisitions.
Selling, general and administrative expenses as a percentage of revenues from home sales were 10.6% and 11.2% in the three and nine months ended August 31, 2002, respectively, compared to 10.3% and 10.7% in the same periods last year. The increases in 2002 were primarily due to an increase in insurance costs, compared to the same periods last year.
Sales of land and other revenues, net totaled $18.3 million and $32.2 million in the three and nine months ended August 31, 2002, respectively, compared to $4.2 million and $11.7 million in the same periods in 2001. Equity in earnings from unconsolidated partnerships was $4.2 million and $17.1 million in the three and nine months ended August 31, 2002, respectively, compared to $2.3 million and $8.8 million in the same periods last year. Margins achieved on land sales and equity in earnings from unconsolidated partnerships may vary significantly from period to period depending on the timing of land sales by us and our unconsolidated partnerships.
At August 31, 2002, our backlog of sales contracts was 14,828 homes ($3.9 billion), compared to 11,119 homes ($2.7 billion) at August 31, 2001. The higher backlog was primarily attributable to our recent homebuilding acquisitions and growth in the number of active communities, which resulted in higher new orders in 2002 compared to 2001.
Financial Services
The following table presents selected financial data related to our Financial Services Division for the periods indicated (unaudited):
Three Months Ended Nine Months Ended
August 31, August 31,
------------------------- -------------------------
(Dollars in thousands) 2002 2001 2002 2001
-------------------------------------------------------------------------------------------------------
Revenues $ 115,456 110,836 330,894 311,244
Costs and expenses 85,382 86,169 250,685 245,664
-------------------------------------------------------------------------------------------------------
Operating earnings $ 30,074 24,667 80,209 65,580
=======================================================================================================
Dollar value of mortgages originated $ 1,536,196 1,348,992 3,956,280 3,591,132
-------------------------------------------------------------------------------------------------------
Number of mortgages originated 8,400 8,000 22,600 21,900
-------------------------------------------------------------------------------------------------------
Mortgage capture rate of Lennar
homebuyers 80% 78% 80% 78%
-------------------------------------------------------------------------------------------------------
Number of title transactions 46,000 47,000 140,000 125,000
=======================================================================================================
|
Operating earnings from our Financial Services Division increased to $30.1 million and $80.2 million in the three and nine months ended August 31, 2002, respectively, compared to $24.7 million and $52.3 million (excluding a $13 million gain on the sale of mortgage servicing rights in 2001) in the same periods last year. The increase in both periods was a result of a higher volume of new home deliveries and a higher profit per loan originated in 2002. The three month increase was partially offset by a lower level of refinance transactions in our title operations in the third quarter of 2002, compared to 2001.
Corporate General and Administrative
Corporate general and administrative expenses as a percentage of total revenues were 1.1% and 1.2% in the three and nine months ended August 31, 2002, respectively, compared to 1.2% and 1.3% in the same periods last year.
Interest
Interest expense totaled $39.7 million, or 2.1% of total revenues, and $94.3 million, or 2.0% of total revenues, in the three and nine months ended August 31, 2002, respectively, compared to interest expense of $30.7 million, or 1.9% of total revenues, and $83.8 million, or 2.1% of total revenues, respectively, in the same periods last year. The weighted average interest rate for interest incurred was 7.7% in both the nine months ended August 31, 2002 and 2001. The average debt outstanding was $1.6 billion for the nine months ended August 31, 2002 compared to $1.5 billion in the same period last year.
(2) Liquidity and Financial Resources
In the nine months ended August 31, 2002, $172.3 million of cash was used in operating activities, compared to $216.3 million in 2001. Cash generated in 2002 was primarily due to net earnings of $320.1 million and $175.5 million of cash received from the sale in 2002 of loans which we had originated near the end of fiscal 2001. Cash received from the sale of loans was used to pay down our financial services warehouse lines of credit. The generation of cash was offset primarily by $627.6 million of cash used to increase inventories due to a higher number of active communities as we continue to grow and $96.4 million used to fund an increase in receivables in the nine months ended August 31, 2002.
Earnings before interest, income taxes, depreciation and amortization ("EBITDA") were $280.4 million and $640.7 million in the three and nine months ended August 31, 2002, respectively, compared to $216.1 million and $534.2 million in the same periods last year.
Cash used in investing activities totaled $441.5 million in the nine months ended August 31, 2002, compared to $59.3 million in the corresponding period in 2001. In the first nine months of 2002, we used $390.4 million of cash for acquisitions.
The majority of our short-term financing needs are met with cash generated from operations and funds available under our senior secured credit facilities. In May 2002, we amended and restated our senior secured credit facilities (the "Amended Facilities"), to provide us with up to $1.3 billion of financing. The Amended Facilities consist of a $653 million revolving credit facility maturing in April 2006, a $273 million 364-day revolving credit facility maturing in April 2003 and a $393 million term loan B maturing in May 2007. We may elect to convert borrowings under the 364-day revolving credit facility to a term loan, which would mature in April 2006. At August 31, 2002, $392.0 million and $42.3 million were outstanding under the term loan B and the revolving credit facilities, respectively. Interest rates are LIBOR-based and the margins are set by a pricing grid with thresholds that adjust based on changes in our leverage ratio and the Amended Facilities' credit rating. At August 31, 2002, we had letters of credit outstanding in the amount of $423.6 million, of which $288.8 million were collateralized against certain borrowings available under the Amended Facilities.
Our Financial Services Division finances its mortgage loan activities by pledging them as collateral for borrowings under a line of credit totaling $405 million. Borrowings under the financial services line of credit were $375.9 million at August 31, 2002.
In the normal course of business, we enter into partnerships that acquire and develop land for our homebuilding operations or for sale to third parties. Through these partnerships, we reduce and share our risk and the amount invested in land while increasing access to potential future homesites. Partnerships are either consolidated with our operations or accounted for by the equity method of accounting. The selection between these two methods involves judgment as to the level of control we have over the partnerships. Controlling interest is determined based on a number of factors, which include our ownership interest and participation in the management of the partnership. Our investments in unconsolidated partnerships in which a significant, but less than controlling, interest is held are accounted for by the equity method of accounting. Many of the partnerships in which we invest are accounted for by the equity method of accounting. We do not include in our income our pro rata partnership earnings resulting from land sales to our homebuilding divisions. Instead, we account for those earnings as a reduction of our cost of purchasing the land from the partnerships. This in effect defers recognition of our share of the partnership earnings until title passes to a third party homebuyer.
In some instances, we and/or our partners in unconsolidated partnerships have provided guarantees of partnership debt. At August 31, 2002, we had recourse guarantees of $52.7 million and limited maintenance guarantees of $138.9 million. When we provide guarantees, the partnership generally receives more favorable terms from its lenders. A limited maintenance guarantee only applies if the partnership defaults on its loan arrangements and the fair value of the collateral (generally land and improvements) is less than a specified percentage of the loan balance. If we were required to make a payment under one of these guarantees to bring the fair value of the collateral above the specified percentage of the loan balance, the payment constitutes a capital contribution or loan to the unconsolidated partnership and increases our share of any funds distributed by the partnership.
During 2002, we acquired eight regional homebuilders which marked our entry into Chicago, Baltimore and the Carolinas and expanded our presence in several other states. In connection with these acquisitions, total consideration, including debt of acquired companies, totaled approximately $575 million. The results of operations of the acquired homebuilders are included in our results of operations since their respective acquisition dates.
In June 2001, our Board of Directors increased our previously authorized stock repurchase program to permit future purchases of up to 10 million shares of our outstanding common stock. We may repurchase these shares in the open market from time-to-time. At August 31, 2002, no shares had been repurchased under this authorization. During the nine months ended August 31, 2002, our treasury stock increased by approximately 1,000 shares related to share reacquisitions at the time of vesting of restricted stock.
We have shelf registration statements under the Securities Act of 1933, as amended, relating to up to $970 million of equity or debt securities which we may sell for cash and up to $400 million of equity or debt securities which we may issue in connection with acquisitions of companies or interests in them, businesses or assets. As of August 31, 2002, no securities had been issued under these registration statements.
Although the homebuilding business historically has been cyclical, it has not undergone a down cycle in many years. This has led some people to assert that the prices of homes and the stocks of homebuilding companies are overvalued and will decline rapidly when the market for new homes begins to weaken. A decline in prices of
stocks of homebuilding companies would make it more expensive, and could make it more difficult, for us to raise funds through stock issuances if we wanted to do so.
Even if there is a period when we are not able to raise funds through stock issuances, based on our financial condition and financial market resources, our management believes that our operations and access to financing will provide for our current and long-term requirements at our anticipated levels of growth.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risks related to fluctuations in interest rates on our debt obligations, mortgage loans and mortgage loans held for sale or disposition. We utilize derivative instruments, including interest rate swaps, to manage our exposure to changes in interest rates. We also utilize forward commitments and option contracts to mitigate the risk associated with our mortgage loan portfolio.
Our Annual Report on Form 10-K for the year ended November 30, 2001 contains information about market risks under "Item 7A. Quantitative and Qualitative Disclosures About Market Risk." There have been no material changes in our market risks during the nine months ended August 31, 2002.
Item 4. Controls and Procedures
We have for many years had procedures in place for gathering the information that is needed to enable us to file required quarterly and annual reports with the Securities and Exchange Commission ("SEC"). However, because of additional disclosure requirements imposed by the SEC in August 2002, as required by the Sarbanes-Oxley Act of 2002, we formed a committee consisting of the people who are primarily responsible for preparation of those reports, including our general counsel and our principal accounting officer, to review and formalize our procedures, and to have ongoing responsibility for designing and implementing our disclosure controls and procedures (i.e., the controls and procedures by which we ensure that information we are required to disclose in the annual and quarterly reports we file with the SEC is processed, summarized and reported within the required time periods). On October 11, 2002, our chief executive officer and our chief financial officer met with that committee to evaluate the disclosure controls and procedures we had in place and the steps that are being taken to formalize those procedures and to introduce some additional steps to the information-gathering process. Based upon that evaluation, our chief executive officer and our chief financial officer concluded that, while the procedures we have had in place appear to have provided all the information we have needed to date, the committee should proceed to formalize and supplement our disclosure controls and procedures in order to ensure that all the information required to be disclosed in our reports is accumulated and communicated to the people responsible for preparing those reports, and to our principal executive and financial officers, at times and in a manner that will allow timely decisions regarding required disclosures.
We constantly review the internal controls we have in place to ensure that all transactions in which we are involved are properly recorded and to safeguard our assets. This includes reviews and evaluations by our accounting department, discussions with our outside auditors and
discussions with members of our internal audit group. While we are constantly taking steps to improve our internal controls and to apply our internal controls to new types of transactions or situations in which we are involved, we have not since October 11, 2002 (the day on which our chief executive officer and chief financial officer met with the committee that has on-going responsibility for designing and implementing our disclosure controls and procedures), or at any other time within 90 days before the filing of this report, made any significant changes in our internal controls or in other factors that could significantly affect these controls, including taking any corrective actions with regard to significant deficiencies or material weaknesses. This has been confirmed by our chief executive officer and our chief financial officer.
Part II. Other Information
Items 1-5. Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
10. Lennar Corporation Nonqualified Deferred Compensation Plan
99. Certification by Stuart A. Miller, President and Chief Executive Officer, and Bruce E. Gross, Vice President and Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K:
We filed a current report on Form 8-K dated July 28, 2002, which provided information relating to the change of control of our Company resulting from the death of Leonard Miller.
We filed a current report on Form 8-K dated August 13, 2002, which contained a Statement under Oath Regarding Facts and Circumstances Relating to Exchange Act Filings by each of our Chief Executive Officer and Chief Financial Officer, as contemplated by a Securities and Exchange Commission Order dated June 27, 2002. We also filed an amended current report on Form 8-K dated August 13, 2002, which corrected an error in those sworn statements.
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: October 15, 2002 /s/ Bruce E. Gross
---------------- ----------------------------------
Bruce E. Gross
Vice President and
Chief Financial Officer
Date: October 15, 2002 /s/ Diane J. Bessette
---------------- ----------------------------------
Diane J. Bessette
Vice President and
Controller
|
Chief Executive Officer's Certification
I, Stuart A. Miller, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Lennar Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Securities Exchange Act Rule 13a-14) for the registrant and we have:
a. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which the registrant's periodic reports are being prepared;
b. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
c. presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
a. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: October 15, 2002 /s/ Stuart A. Miller
------------------------------------
Name: Stuart A. Miller
Title: President and
Chief Executive Officer
|
Chief Financial Officer's Certification
I, Bruce E. Gross, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Lennar Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Securities Exchange Act Rule 13a-14) for the registrant and we have:
a. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which the registrant's periodic reports are being prepared;
b. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
c. presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
a. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: October 15, 2002 /s/ Bruce E. Gross
-----------------------------------
Name: Bruce E. Gross
Title: Vice President and
Chief Financial Officer
|
Exhibit Index
Ex# Exhibit Description
10. Lennar Corporation Nonqualified Deferred Compensation Plan
99. Certification by Stuart A. Miller, President and Chief Executive Officer,
and Bruce E. Gross, Vice President and Chief Financial Officer, pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
|
Exhibit 10
ARTICLE I
PURPOSE AND EFFECTIVE DATE
The purpose of the Lennar Corporation Nonqualified Deferred Compensation Plan ("Plan") is to aid Lennar Corporation and its subsidiaries in retaining and attracting executive employees by providing them with tax deferred savings opportunities. The Plan provides a select group of management and highly compensated employees within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of the Employee Retirement Income Security Act of 1974, as amended (ERISA), of Lennar Corporation with the opportunity to elect to defer receipt of specified portions of compensation, and to have these deferred amounts treated as if invested in specified hypothetical investment benchmarks. The Plan shall be effective as of June 21, 2002.
ARTICLE II
DEFINITIONS
For the purposes of this Plan, the following words and phrases shall have the meanings indicated, unless the context clearly indicates otherwise:
Section 2.01 Administrative Committee. "Administrative Committee" means the committee appointed by the Compensation Committee of the Board.
Section 2.02 Base Salary. "Base Salary" means the rate of cash compensation and
other cash allowances paid by the Company to or for the benefit of a Participant
for services rendered or labor performed while a Participant, including pay a
Participant could have received in cash in lieu of (A) deferrals pursuant to
Section 4.02 and (B) contributions made on his behalf to any qualified plan
maintained by the Company or to any cafeteria plan under Section 125 of the
Internal Revenue Code maintained by the Company.
Section 2.03 Base Salary Deferral. "Base Salary Deferral" means the amount of a Participant's Base Salary which the Participant elects to have withheld on a pre-tax basis from his Base Salary and credited to his Deferral Account pursuant to Section 4.02.
Section 2.04 Beneficiary. "Beneficiary" means the person, persons or entity designated by the Participant to receive any benefits payable under the Plan pursuant to Article IX.
Section 2.05 Board. "Board" means the Board of Directors of Lennar Corporation.
Section 2.06 Bonus. "Bonus" means the annual cash bonus paid by the Company.
Section 2.07 Bonus Deferral. "Bonus Deferral" means the amount of a
Participant's annual cash bonus which the Participant elects to have withheld on
a pre-tax basis from his Bonus and credited to his Deferral Account pursuant to
Section 4.02.
Section 2.08 Change in Control. For purposes of this Plan, a "Change in Control" shall be deemed to have occurred as of the first day any one or more of the following conditions shall have been satisfied:
(A) any person or group (within the meaning of Section 13(d)(3) or 14(d)(2)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"))
acquires beneficial ownership (within the meaning of Rule 13d-3 under the
Exchange Act) of 25% or more of either (i) the then outstanding shares of common
stock of Lennar Corporation or (ii) the combined voting power of the then
outstanding voting securities of Lennar Corporation entitled to vote generally
in the election of directors, provided that the
following acquisitions shall not constitute a Change in Control: (i) any acquisition directly from Lennar Corporation (excluding any acquisition by virtue of the exercise of a conversion privilege), (ii) any acquisition by Lennar Corporation; (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by Lennar Corporation, or any corporation controlled by Lennar Corporation, or (iv) any acquisition by any corporation pursuant to a reorganization, merger or consolidation, if following such reorganization, merger or consolidation the conditions described in clause (iii) of paragraph (c) below are met;
(B) individuals who, as of June 21, 2002, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to June 21, 2002, whose election, or nomination for election by Lennar Corporation's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board; or
(C) the stockholders of Lennar Corporation approve: (i) a plan of complete liquidation of Lennar Corporation; or (ii) an agreement for the sale or disposition of all or substantially all of Lennar Corporation's assets; or (iii) a merger, consolidation, or reorganization of Lennar Corporation with or involving any other corporation, limited liability entity or similar person, other than a merger, consolidation, or reorganization that would result in the voting securities of Lennar Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least seventy-five percent (75%) of the combined voting power of the voting securities of Lennar Corporation (or such surviving entity) outstanding immediately after such merger, consolidation, or reorganization.
Section 2.09 Code. "Code" shall mean the Internal Revenue Code of 1986, as amended. References to any provision of the Code or regulation (including a proposed regulation) thereunder shall include any successor provisions or regulations.
Section 2.10 Common Stock. "Common Stock" means the common stock of Lennar Corporation
Section 2.11 Company. "Company" means Lennar Corporation, its successors or affiliated organizations authorized by the Board or the Compensation Committee to participate in the Plan and any organization into which or with which Lennar Corporation may merge or consolidate or to which all or substantially all of its assets may be transferred.
Section 2.12 Compensation Committee. "Compensation Committee" means the compensation committee of the Board.
Section 2.13 Consideration Shares. "Consideration Shares" means shares of Common Stock owned by a Participant for six months or longer.
Section 2.14 Deferral Account. "Deferral Account" means the account maintained on the books of the Administrative Committee for zeach Participant pursuant to Article VII.
Section 2.15 Deferral Period. "Deferral Period" is defined in Section 4.02.
Section 2.16 Deferred Amount. "Deferred Amount" is defined in Section 4.02.
Section 2.17 Designee. "Designee" shall mean the Company's senior human resources officers, or other individuals to whom the Compensation Committee has delegated the authority to take action under the Plan. Wherever Compensation Committee is referenced in the Plan, it shall be deemed to also refer to Designee to the extent such Designee has been delegated such authority or responsibility.
Section 2.18 Disability. "Disability" means eligibility for disability benefits under the terms of the Company's Long-Term Disability Plan.
Section 2.19 Eligible Compensation. "Eligible Compensation" means any Base Salary, Bonus, Incentive Compensation, Restricted Stock and/or Gain Shares otherwise payable with respect to a Plan Year that the Administrative Committee deems eligible for deferral under the Plan.
Section 2.20 ERISA. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended.
Section 2.21 Form of Payment. "Form of Payment" means payment in one lump sum or in substantially equal annual installments of up to 15 years.
Section 2.22 Gain Share Account. "Gain Share Account" means the account maintained on the books by the Administrative Committee for the Participant of the number of Phantom Share Units related to Gain Shares, adjusted for hypothetical gains, earnings, dividends, losses, distributions, withdrawals and other similar activities.
Section 2.23 Gain Shares. "Gain Shares" means the shares of Common Stock so determined under Section 5.05 as resulting from the exercise of any Option pursuant to Article V.
Section 2.24 Hardship Withdrawal. "Hardship Withdrawal" means the early payment of all or part of the balance in a Deferral Account(s) in the event of an Unforeseeable Emergency.
Section 2.25 Hypothetical Investment Benchmark. "Hypothetical Investment Benchmark" shall mean the phantom investment benchmarks that are used to measure the return credited to a Participant's Deferral Account.
Section 2.26 Incentive Compensation. "Incentive Compensation" means the amount awarded to a Participant for a Plan Year under any incentive plan maintained by the Company other than the annual bonus plan and any commission plan or scheme, determined to be eligible for deferral by the Administrative Committee.
Section 2.27 Incentive Compensation Deferral. "Incentive Compensation Deferral" means the amount of a Participant's Incentive Compensation which the Participant elects to have withheld on a pre-tax basis from his Incentive Compensation and credited to his account pursuant to Section 4.02.
Section 2.28 Option. "Option" means a nonqualified stock option to purchase shares of Common Stock.
Section 2.29 Participant. "Participant" means any individual who is eligible or makes an election to participate in this Plan and who elects to participate by filing a Participation Agreement or a Restricted Stock Deferral Agreement as provided in Article IV or a Stock Option Gain Deferral Agreement as provided in Article V.
Section 2.30 Participation Agreement. "Participation Agreement" means an agreement filed by a Participant in accordance with Article IV.
Section 2.31 Phantom Share Units. "Phantom Share Units" means units of deemed investment in shares of Lennar Corporation Common Stock so determined under Sections 5.06 & 8.02 (B).
Section 2.32 Plan Year. "Plan Year" means a twelve-month period beginning January 1 and ending the following December 31. For the first Plan Year this means the period beginning June 21, 2002, and ending December 31, 2002.
Section 2.33 Restricted Stock. "Restricted Stock" means the shares of Common Stock so determined under Section 8.02(B)(i).
Section 2.34 Restricted Stock Account. "Restricted Stock Account" means the account maintained on the books by the Administrative Committee for the Participant of the number of Phantom Share Units related to Restricted Stock Shares, adjusted for hypothetical gains, earnings, dividends, losses, distributions, withdrawals and other similar activities.
Section 2.35 Restricted Stock Deferral Agreement. "Restricted Stock Deferral Agreement" means an agreement filed by a Participant in accordance with Article VI to defer receipt of Restricted Stock upon vesting under any restricted stock plan determined by the Administrative Committee to be eligible for deferral under this Plan.
Section 2.36 Retirement. "Retirement" means retirement of a Participant from the Company after attaining age 65 or age 50 with at least ten years of service (in accordance with the method of determining years of service adopted by the Company).
Section 2.37 Stock Option Gain Deferral Agreement. "Stock Option Gain Deferral Agreement" means an agreement filed by a Participant in accordance with Article V to defer receipt of Gain Shares from the exercise of an Option.
Section 2.38 Termination of Employment. "Termination of Employment" means the cessation of a Participant's services as a full-time employee of the Company for any reason other than Retirement.
Section 2.39 Unforeseeable Emergency. "Unforeseeable Emergency" means severe financial hardship to the Participant resulting from a sudden and unexpected illness or accident of the Participant or a dependent of the Participant, loss of the Participant's property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant.
Section 2.40 Valuation Date. "Valuation Date" means the last day of each calendar month or such other date as the Administrative Committee in its sole discretion may determine.
ARTICLE III
ADMINISTRATION
Section 3.01 Compensation Committee and Administrative Committee Duties. This Plan shall be administered by the Compensation Committee. A majority of the members of the Compensation Committee shall constitute a quorum for the transaction of business. All resolutions or other action taken by the Compensation Committee shall be by a vote of a majority of its members present at any meeting or, without a meeting, by an instrument in writing signed by all its members. Members of the Compensation Committee may participate in a meeting of such committee by means of a conference telephone or similar communications equipment that enables all persons participating in the meeting to hear each other, and such participation in a meeting shall constitute presence in person at the meeting and waiver of notice of such meeting. The Compensation Committee shall be responsible for the administration of this Plan and shall have all powers necessary to administer this Plan, including discretionary authority to determine eligibility for benefits and to decide claims under the terms of this Plan, except to the extent that any such powers are vested in any other person administering this Plan by the Compensation Committee. The Compensation Committee may from time to time establish rules for the administration of this Plan, and it shall have the exclusive right to interpret this Plan and to decide any matters arising in connection with the administration and operation of this Plan. All rules, interpretations and decisions of the Compensation Committee shall be conclusive and binding on the Company, Participants and Beneficiaries.
The Compensation Committee has delegated to the Administrative Committee responsibility for performing certain administrative and ministerial functions under this Plan. The Administrative Committee shall be responsible for determining in the first instance issues related to eligibility, Hypothetical Investment Benchmarks, distribution of Deferred Amounts, determination of account balances, crediting of hypothetical earnings and debiting of hypothetical losses and of distributions, in-service withdrawals, deferral elections and any other duties concerning the day-to-day operation of this Plan. The Compensation Committee shall have discretion to delegate to the Administrative Committee such additional duties as it may determine. The Administrative Committee may designate one of its members as a chairperson and may retain and supervise outside providers, third party administrators, record keepers and professionals (including in-house professionals) to perform any or all of the duties delegated to it hereunder.
Neither the Compensation Committee nor a member of the Board nor any member of the Administrative Committee shall be liable for any act or action hereunder, whether of omission or commission, by any other member or employee or by any agent to whom duties in connection with the administration of this Plan have been delegated or for anything done or omitted to be done in connection with this Plan. The Compensation Committee and the Administrative Committee shall keep records of all of their respective proceedings and the Administrative Committee shall keep records of all payments made to Participants or Beneficiaries and payments made for expenses or otherwise.
The Company shall, to the fullest extent permitted by law, indemnify each director, officer or employee of the Company (including the heirs, executors, administrators and other personal representatives of such person), each member of the Compensation Committee and Administrative Committee against expenses (including attorneys' fees), judgments, fines, amounts paid in settlement, actually and reasonably incurred by such person in connection with any threatened, pending or actual suit, action or proceeding (whether civil, criminal, administrative or investigative in nature or otherwise) in which such person may be involved by reason of the fact that he or she is or was serving this Plan in any capacity at the request of the Company, the Compensation Committee or Administrative Committee.
Any expense incurred by the Company, the Compensation Committee or the Administrative Committee relative to the administration of this Plan shall be paid by the Company and/or, prior to a Change in Control, may be deducted from the Deferral Accounts of the Participants as determined by the Compensation Committee.
Section 3.02 Claim Procedure. If a Participant or Beneficiary makes a written request alleging a right to receive payments under this Plan or alleging a right to receive an adjustment in benefits being paid under this Plan, such actions shall be treated as a claim for benefits. All claims for benefits under this Plan shall be sent to the Administrative Committee. If the Administrative Committee determines that any individual who has claimed a right to receive benefits, or different benefits, under this Plan is not entitled to receive all or any part of the benefits claimed, the Administrative Committee shall inform the claimant in writing of such determination and the reasons therefor in terms calculated to be understood by the claimant. The notice shall be sent within 90 days of the claim unless the Administrative Committee determines that additional time, not exceeding 90 days, is needed and so notifies the Participant. The notice shall make specific reference to the pertinent Plan provisions on which the denial is based, and shall describe any additional material or information that is necessary.
ARTICLE IV
PARTICIPATION
Section 4.01 Participation. Participation in the Plan shall be limited to executives who (i) meet such eligibility criteria as the Administrative Committee shall establish from time to time, and (ii) elect to participate in this Plan by filing a Participation Agreement or a Stock Option Gain Deferral Agreement or a Restricted Stock Deferral Agreement with the Administrative Committee. A Participation Agreement must be filed prior to the November 30th immediately preceding the Plan Year for which it is effective; provided, however that in the first year in which an individual first becomes eligible to participate in the Plan, the newly eligible Participant may make an election to defer compensation for services to be performed subsequent to the election within 30 days after the date the individual becomes eligible to participate. The Administrative Committee shall have the discretion to establish special deadlines regarding the filing of Participation Agreements, Stock Option Gain Deferral Agreements, and Restricted Stock Deferral Agreements for Participants.
Section 4.02 Contents of Participation Agreement. Subject to Article VIII, each Participation Agreement shall set forth: (i) the amount of Eligible Compensation for the Plan Year or performance period to which the Participation Agreement relates that is to be deferred under the Plan (the "Deferred Amount"), expressed as either a dollar amount or a percentage of the Base Salary, Bonus, or Incentive Compensation for such Plan Year or performance period that the Participant wishes to make; (ii) the period after which payment of the Deferred Amount is to be made or begin to be made (the "Deferral Period"), which shall be the earlier of (A) a number of full years, not less than three, (B) the period ending upon the Retirement or prior Termination of Employment of the Participant, and (iii) the form in which payments are to be made, which may be a lump sum or in substantially equal annual installments of up to 15 years.
Section 4.03 Modification or Revocation of Election by Participant. A Participant may not change the amount of his Base Salary Deferrals during a Plan Year. However, a Participant may discontinue a Base Salary Deferral election at any time by filing, on such forms and subject to such limitations and restrictions as the Administrative Committee may prescribe in its discretion, a revised Participation Agreement with the Administrative Committee. If approved by the Administrative Committee, revocation shall take effect as soon as possible following its filing. If a Participant discontinues a Base Salary Deferral election during a Plan Year, he will not be permitted to elect to make Base Salary Deferrals again until the later of the next Plan Year or six months from the date of discontinuance. In addition, the Deferral Period may be extended if an amended Participation Agreement is filed with the Administrative Committee at least one full calendar year before the Deferral Period (as in effect before such amendment) ends. Under no circumstances may a Participant's Participation Agreement be made, modified or revoked retroactively, nor may a deferral period be shortened or reduced.
ARTICLE V
STOCK OPTION GAIN DEFERRALS
Section 5.01 In General. Subject to provisions of this Article V, Participants may elect to defer receipt and distribution of the gain related to the exercise of Options and resulting Gain Shares until the end of an elected Deferral Period by filing a Stock Option Gain Deferral Agreement with the Administrative Committee. The stock option gain deferral features of the Plan are effective for deferral elections made on or after June 21, 2002.
Section 5.02 Timing of Filing Stock Option Gain Deferral Agreement. A Stock Option Gain Deferral Agreement must be filed at least six months prior to the Date of Exercise, prior to the calendar year in which occurs the Date of Exercise, and no later than the day before the first day of the six month period ending on the Option Expiration Date. An Option with respect to which a Stock Option Gain Deferral Agreement has been filed may not be exercised prior to the dates specified in the preceding sentence.
Section 5.03 Contents of Stock Option Gain Deferral Agreement. Each Stock Option Gain Deferral Agreement shall set forth: (i) the number of Options to be exercised in connection with the deferrals hereunder; (ii) the date of grant of the Options; (iii) the Deferral Period, which is not to be less than three years; (iv) any other item determined to be appropriate by the Administrative Committee. A Participant may elect to defer gain in increments of 25%, 50%, 75% or 100% of the number of Gain Shares resulting from Options exercised on any one Date of Exercise.
Section 5.04 Manner of Exercising Option Shares. A Participant who desires to exercise an Option and to defer current receipt and distribution of the related Gain Shares must follow the procedures and requirements that are applicable to the Option pursuant to the Lennar Corporation Stock Option and Restricted Stock Plan, including the procedures and requirements relating to the exercise of an Option; provided, however, that in the case of a deferral of Gain Shares under this Plan, the Participant shall only be permitted to tender Consideration Shares to pay the entire exercise price for any such Option exercised. Notwithstanding the foregoing, the Administrative Committee may in its discretion accept the Participant's attestation that he or she owns the number of Consideration Shares necessary to effectuate the stock swap contemplated hereunder.
Section 5.05 Determination of Gain Shares. Upon exercise of an Option, the Gain Shares from which the Participant has elected to defer hereunder shall be determined as follows: (i) the aggregate exercise price for all exercised Option Shares shall be determined; (ii) the number of Consideration Shares needed to pay the exercise price for such Option Shares shall be determined; (iii) the difference between the number of exercised Option Shares and the number of Consideration Shares shall be the number of Gain Shares resulting from such exercise. Any fractional Gain Share that results from the computations hereunder shall be rounded up to the nearest whole number.
Section 5.06 Conversion of Gain Shares to Phantom Share Units. As of the Date of Exercise, Gain Shares shall be converted to Phantom Share Units by dividing the amount of the aggregate Fair Market Value of the Gain Shares as of the Date of Exercise by the Fair Market Value of one share of Common Stock as of the Date of Exercise. The resulting number of Phantom Share Units shall be credited to the Participant's Gain Share Account. Any fractional Phantom Share Unit that results from the computations hereunder shall be rounded up to the nearest 1/100.
Section 5.07 Changes to the Stock Option Gain Deferral Agreement. A Stock Option Gain Deferral Agreement may not be amended or revoked after the day on which it is filed with the Administrative Committee, except that the Deferral Period may be extended if an amended Stock Option Gain Deferral Agreement is filed with the Administrative Committee at least one full calendar year before the Deferral Period (as in effect before such amendment) ends.
Section 5.08 Failure to Properly Exercise. If a Participant makes a valid election under this Article V to defer Gain Shares and if the Option expires without a proper exercise of the Option by the Participant or if the Participant fails to properly tender or attest to the Consideration Shares by the last day of the Option term, the Participant shall forfeit any opportunity to exercise the Option and the Option shall be canceled as of the end of the last business day of the Option term, according to the terms of the Lennar Corporation Stock Option and Restricted Stock Plan.
Section 5.09 Delivery of Gain and Restricted Stock Shares. The gain and restricted stock shares may be physically delivered to a rabbi trustee or delivered to such other entity as may be designated by the Administrative Committee for safe keeping.
ARTICLE VI
RESTRICTED STOCK DEFERRALS
Section 6.01 In General. Subject to provisions of this Article VI, Participants may elect to defer receipt of Restricted Stock Shares until the end of an elected Deferral Period by filing a Restricted Stock Deferral Agreement with the Administrative Committee. The restricted stock deferral features of the Plan are effective for deferral elections made on or after June 21, 2002.
Section 6.02 Timing of Filing Restricted Stock Deferral Agreement. A Restricted Stock Deferral Agreement must be filed at least six months prior to the vesting of such Restricted Stock grant, except for the first plan year in which case the deferral much be completed prior to the vesting date. In the future or subsequent years in which a new participant becomes eligible such deferral agreement must be filed within 30 days of the date which such participant first becomes eligible.
Section 6.03 Contents of Restricted Stock Deferral Agreement. Each Restricted Stock Deferral Agreement shall set forth: (i) the number of shares to be deferred hereunder; (ii) the Deferral Period, which is not to be less than one year; (iii) any other item determined to be appropriate by the Administrative Committee.
Section 6.04 Conversion of Restricted Stock to Phantom Share Units. As of the Date of deferral, Restricted Stock shall be converted to Phantom Share Units by dividing the amount of the aggregate Fair Market Value of the Restricted Stock as of the Date of vesting by the Fair Market Value of one share of Common Stock as of the Date of deferral. The resulting number of Phantom Share Units shall be credited to the Participant's Restricted Stock Account. Any fractional Phantom Share Unit that results from the computations hereunder shall be rounded up to the nearest whole number.
Section 6.05 Changes to the Restricted Stock Deferral Agreement. A Restricted Stock Deferral Agreement may not be amended or revoked after the day on which it is filed with the Administrative Committee, except that the Deferral Period may be extended if an amended Restricted Stock Deferral Agreement is filed with the Administrative Committee at least one full calendar year before the Deferral Period (as in effect before such amendment) ends.
Section 6.06 Delivery of Restricted Stock Shares. The restricted stock shares may be physically delivered to a rabbi trustee or delivered to such other entity as may be designated by the Administrative Committee for safekeeping.
ARTICLE VII
DEFERRED COMPENSATION
Section 7.01 Elective Deferred Compensation. The Deferred Amount of a Participant with respect to each Plan Year of participation in the Plan shall be credited by the Administrative Committee to the Participant's Deferral Account as and when such Deferred Amount would otherwise have been paid to the Participant. To the extent that the Company is required to withhold any taxes or other amounts from the Deferred Amount pursuant to any state, Federal or local law, such amounts shall be taken out of compensation eligible to be paid to the Participant that is deferred under this Plan.
Section 7.02 Vesting of Deferral Account. A Participant shall be 100% vested in his/her Deferral Account at all times.
ARTICLE VIII
MAINTENANCE AND INVESTMENT OF ACCOUNTS
Section 8.01 Maintenance of Accounts. Separate Deferral Accounts shall be maintained for each Participant. More than one Deferral Account may be maintained for a Participant as necessary to reflect (a) various Hypothetical Investment Benchmarks and/or (b) separate Participation Agreements or other election forms specifying different Deferral Periods and/or forms of payment. A Participant's Deferral Account(s) shall be utilized solely as a device for the measurement and determination of the amounts to be paid to the Participant pursuant to this Plan, and shall not constitute or be treated as a trust fund of any kind. The Administrative Committee shall determine the balance of each Deferral Account, as of each Valuation Date, by adjusting the balance of such Deferral Account as of the immediately preceding Valuation Date to reflect changes in the value of the deemed investments thereof, credits and debits pursuant to Section 7.01 and Section 8.02, distributions pursuant to Article VIII with respect to such Deferral Account since the preceding Valuation Date.
Section 8.02 Hypothetical Investment Benchmarks. (A) Each Participant shall be entitled to direct the manner in which his/her Deferral Accounts will be deemed to be invested, selecting among the Hypothetical Investment Benchmarks specified in Appendix A hereto, as amended by the Administrative Committee from time to time, and in accordance with such rules, regulations and procedures as the Administrative Committee may establish from time to time.
(B) (i) The Hypothetical Investment Benchmarks available for Gain Share Accounts and restricted Stock Accounts consist solely of the "Lennar Corporation Share Fund." The Lennar Corporation Share Fund shall consist of deemed investments in shares of Lennar Corporation Common Stock. Amounts that are deemed to be invested in the Lennar Corporation Share Fund shall be converted into Phantom Share Units based upon the Fair Market Value of the Common Stock as of the date(s) the amounts are to be credited to a Restricted Stock Gain Shares Account, or Gain Share Account. To the extent that a participant elects to defer receipt of restricted stock pursuant to the terms of the Plan, such deferred stock will be deemed invested in the Lennar Corporation Share Fund, and may not be deemed invested in any other Hypothetical Investment. Dividends paid on the Lennar Corporation Share Fund shall be deemed invested in the Guaranteed Income Funds, or any other such investment benchmark as may be deemed by the Administrative Committee.
(ii) When a distribution of all or a portion of a Deferral Account that is invested in the Lennar Corporation Share Fund is to be made, the balance in such a Deferral Account shall be determined by multiplying the Fair Market Value of one share of Common Stock on the most recent Valuation Date preceding the date of such reallocation or distribution by the number of Phantom Share Units to be reallocated or distributed. Upon a lump sum distribution, the amounts in the Lennar Corporation Share Fund shall be distributed in the form of actual shares of Common Stock.
(iii) In the event of a stock dividend, split-up or combination of the Common Stock, merger, consolidation, reorganization, recapitalization, or other change in the corporate structure or capitalization affecting the Common Stock, such that an adjustment is determined by the Administrative Committee to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under this Plan, then the Lennar Corporation Nonqualified Deferred Compensation Plan Administrative Committee may make appropriate adjustments to the number of deemed shares credited to any Deferral Account. The determination of the Administrative Committee as to such adjustments, if any, to be made shall be conclusive.
(iv) Notwithstanding any other provision of this Plan, the Administrative Committee shall adopt such procedures as it may determine are necessary to ensure that with respect to any Participant who is actually or potentially subject to Section 16(b) of the Securities Exchange Act of 1934, as amended, the crediting of deemed shares to his or her Deferral Account is not deemed to be a non-exempt purchase for purposes of such Section 16(b), including without limitation requiring that no shares of Common Stock or cash relating to such deemed shares may be distributed for six months after being credited to such Deferral Account.
Section 8.03 Statement of Accounts. The Administrative Committee shall submit to each Participant quarterly statements of his/her Deferral Account(s), Restricted Stock Accounts and/or Gain Share Accounts(s) in such form as the Administrative Committee deems desirable, setting forth the balance to the credit of such Participant in his/her Deferral Account(s) and/or Gain Share Account(s) and/or Restricted Stock Account(s) as of the end of the most recently completed quarter.
ARTICLE IX
BENEFITS
Section 9.01 Time and Form of Payment. The Company shall pay to the Participant the balance of such Deferral Account at the time or times elected by the Participant in the applicable Participation Agreement, Restricted Stock Deferral Agreement, or Stock Option Gain Deferral Agreement, provided that if the Participant has elected to receive payments from a Deferral Account in a lump sum, the Company shall pay the balance in such Deferral Account (determined as of the most recent Valuation Date preceding the end of the Deferral Period) in a lump sum in cash (plus any shares of Common Stock from any investment in the Lennar Corporation Share Fund) as soon as practicable after the end of the Deferral Period. If the Participant has elected to receive payments from a Deferral Account in installments, the Company shall make annual payments from such Deferral Account, each of which shall consist of an amount equal to (i) the balance of such Deferral Account as of the most recent Valuation Date preceding the payment date times (ii) a fraction, the numerator of which is one and the denominator of which is the number of remaining installments (including the installment being paid). The first such installment shall be paid as soon as practicable after the end of the Deferral Period and each subsequent installment shall be paid on or about the anniversary of such first payment. Each such installment shall be deemed to be made on a pro rata basis from each of the different deemed investments of the Deferral Account (if there is more than one such deemed investment). At the end of the Deferral Period for each Restricted Stock Account or Gain Share Account, the Company shall deliver to the Participant the balance of such Restricted Stock Account or Gain Share Account at the time or times elected by the Participant in the applicable Restricted Stock Agreement or Stock Option Gain Deferral Agreement in the form of actual shares of Common Stock.
Section 9.02 In-Service Distributions. Subject to Sections 9.01, 9.04, 9.05, 9.06 and 9.07 hereof, if a Participant has elected to defer Eligible Compensation under the Plan for a stated number of years, the account balance of the Participant (determined as of the most recent Valuation Date preceding such Deferral Period) shall be distributed in installments or a lump sum in accordance with the Plan and as elected in the Participant Agreement or Restricted Stock Deferral Agreement or Stock Option Gain Deferral Agreement.
Section 9.03 Retirement. Subject to Sections 9.01, 9.04, 9.05, 9.06 and 9.07 hereof, if a Participant has elected to have the balance of his/her Deferral Account or Restricted Stock Accounts or Gain Share Account distributed upon Retirement, the account balance of the Participant (determined as of the most recent Valuation Date preceding such Retirement) shall be distributed upon Retirement in installments or a lump sum in accordance with the Plan and as elected in the Participant Agreement or Restricted Stock Deferral Agreement or Stock Option Gain Deferral Agreement.
Section 9.04 Termination of Employment. Notwithstanding the provisions of Sections 9.02, 9.03 and 9.05 hereof and any Participation Agreement or other election form, if a Participant has a Termination of Employment prior to Retirement, the Company shall pay the remaining balance (determined as of the most recent Valuation Date preceding such event) to the Participant or his or her Beneficiary or Beneficiaries (as the case may be) in one lump sum within 90 days or as otherwise requested by the participant and approved by Administrative Committee following the Termination of Employment, in cash only or in Common Stock with respect to payment of Restricted Stock Accounts or Gain Share Accounts as soon as practicable following the occurrence of such event, unless the Administrative Committee in its sole discretion determines otherwise. Subject to Section 8.02(a) hereof, the amount distributable under the preceding sentence of this Section 9.04 shall be based on the Participant's investment elections.
Section 9.05 Other Than Retirement and Termination of Employment.
Notwithstanding the provisions of Sections 9.02, 9.03 and 9.04 hereof and any
Participation Agreement or other election form, if a Participant dies or has a
Disability prior to Retirement, the Company shall pay the remaining balance
(determined as of the most recent Valuation Date preceding such event) to the
Participant or his or her Beneficiary or Beneficiaries (as the case may be) in a
lump sum, or installment payments at the request of the participant and at the
digression of the Administrative Committee, in cash only or in Common Stock with
respect to payment of Restricted Stock Accounts or Gain Share Accounts as soon
as practicable following the occurrence of such event, unless the Administrative
Committee in its sole discretion determines otherwise. Subject to Section
8.02(a) hereof, the amount distributable under the preceding sentence of this
Section 9.05 shall be based on the Participant's investment elections.
Section 9.06 Hardship Withdrawals. Notwithstanding the provisions of Section 9.01 and any Participation Agreement, a Participant shall be entitled to early payment of all or part of the balance in his/her Deferral Account(s), or Restricted Stock Account(s) or Gain Share Account(s) in the event of an Unforeseeable Emergency, in accordance with this Section 9.06. A distribution pursuant to this Section 9.06 may only be made to the extent reasonably needed to satisfy the Unforeseeable Emergency need, and may not be made if such need is or may be relieved (i) through reimbursement or compensation by insurance or otherwise, (ii) by liquidation of the Participant's assets to the extent such liquidation would not itself cause severe financial hardship, or (iii) by cessation of participation in the Plan. An application for an early payment under this Section 9.06 shall be made to the Administrative Committee in such form and in accordance with such procedures as the Administrative Committee shall determine from time to time. The determination of whether and in what amount and form a distribution will be permitted pursuant to this Section 9.06 shall be made by the Administrative Committee.
Section 9.07 Early Withdrawal. Notwithstanding the provisions of Section 9.01
and any Participation Agreement, a Participant shall be entitled to elect to
withdraw all or any part of the vested balance in his/her Deferral Account(s),
Restricted Stock Account(s) or Gain Share Account(s) in accordance with this
Section 9.07 by filing with the Administrative Committee such forms, in
accordance with such procedures, as the Administrative Committee shall determine
from time to time. As soon as practicable after receipt of such form by the
Administrative Committee, the Company shall pay an amount equal to ninety
percent of the vested balance in such Participant's Deferral Account(s) and/or
Restricted Stock Account(s) and/or Gain Share Account(s) (determined as of the
most recent Valuation Date preceding the date such election is filed) to the
electing Participant in a lump sum in cash or in Common Stock with respect to
payment of Restricted Stock account and/or Gain Share Account, and the
Participant shall forfeit the remainder of such Deferral Account(s). All
Participation Agreements previously filed by a Participant who elects to make a
withdrawal under this Section 9.07 shall be null and void after such election is
filed (including without limitation Participation Agreements with respect to
Plan Years or performance periods that have not yet been completed), and such a
Participant shall not thereafter be entitled to file any Participation
Agreements under the Plan with respect to the first Plan Year that begins after
such election is made.
Section 9.08 Change in Control. In the event of a Change in Control that is recommended for approval to the shareholders by the Board, no immediate special payment shall be made to any Participant and the terms and conditions of the Plan shall remain in full force and effect. Notwithstanding anything contained in this Plan to the contrary, upon a hostile Change in Control, the Company shall immediately pay to each Participant in a lump sum in cash or in Common Stock, with respect to payment of Restricted Stock Accounts and/or Gain Share Accounts, the balance in his/her Gain Share Accounts and Deferral Account(s) (determined as of the most recent Valuation Date preceding the Change in Control). Hostile Change in Control is defined as a Change in Control of the Company which is not recommended for approval to the shareholders by the Board.
Section 9.09 Payout Upon Taxable Event. In the event any Participant or his or her Beneficiary is determined to be subject to federal income tax on any amount to the credit of his or her account under the Plan prior to the time of payment under the Plan, a portion of such taxable amount equal to the federal, state and local taxes (excluding any interest or penalties) owed on such taxable amount, shall be distributed to the Participant or his or her Beneficiary, as the case may be, as soon thereafter as practicable. Any such distribution, whether directly from the Company or from a trust, shall reduce the Company's liability to such Participant or Beneficiary under the Plan with such reductions to be made on a pro rata basis over the term of benefit payments under the Plan. In addition, Participants or Beneficiaries, as the case may be, shall be reimbursed for any interest or penalties in respect of such taxes upon receipt of documentation of same.
Section 9.10 Withholding of Taxes. Notwithstanding any other provision of this Plan, the Company shall withhold from payments made hereunder any amounts required to be so withheld by any applicable law or regulation.
ARTICLE X
BENEFICIARY DESIGNATION
Section 10.01 Beneficiary Designation. Each Participant shall have the right, at any time, to designate any person, persons or entity as his Beneficiary or Beneficiaries. A Beneficiary designation shall be made, and may be amended, by the Participant by filing a written designation with the Administrative Committee, on such form and in accordance with such procedures as the Administrative Committee shall establish from time to time.
Section 10.02 No Beneficiary Designation. If a Participant fails to designate a Beneficiary as provided above, or if all designated Beneficiaries predecease the Participant, then the Participant's Beneficiary shall be deemed to be the Participant's estate.
ARTICLE XI
AMENDMENT AND TERMINATION OF PLAN
Section 11.01 Amendment. The Board or the Compensation Committee may at any time amend this Plan in whole or in part, provided, however, that no amendment shall be effective to decrease the balance in any Deferral Account as accrued at the time of such amendment, nor shall any amendment otherwise have a retroactive effect.
Section 11.02 Company's Right to Terminate. The Board or the Compensation Committee may at any time terminate the Plan with respect to future Participation Agreements. The Board or the Compensation Committee may also terminate the Plan in its entirety at any time for any reason, including without limitation if, in its judgment, the continuance of the Plan, the tax, accounting, or other effects thereof, or potential payments thereunder would not be in the best interests of the Company, and upon any such termination, the Company shall immediately pay to each Participant in a lump sum the accrued balance in his Deferral Account, Restricted Stock Account, and/or Gain Share Account (determined as of the most recent Valuation Date preceding the termination date).
ARTICLE XII
MISCELLANEOUS
Section 12.01 Funded Plan. This Plan is intended to be a funded plan maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees, within the meaning of Sections 201, 301 and 401 of ERISA. All payments pursuant to the Plan shall be made from the general funds of the Company and no special or separate fund shall be established or other segregation of assets made to assure payment. No Participant or other person shall have under any circumstances any interest in any particular property or assets of the Company as a result of participating in the Plan. Notwithstanding the foregoing, the Company may (but shall not be obligated to) create one or more grantor trusts, the assets of which are subject to the claims of the Company's creditors, to assist it in accumulating funds to pay its obligations under the Plan.
Section 12.02 Nonassignability. Except as specifically set forth in the Plan with respect to the designation of Beneficiaries, neither a Participant nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate or convey in advance of actual receipt the amounts, if any, payable hereunder, or any part thereof, which are, and all rights to which are, expressly declared to be unassignable and non-transferable. No part of the amounts payable shall, prior to actual payment, be subject to seizure or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other person, nor be transferable by operation of law in the event of a Participant's or any other person's bankruptcy or insolvency.
Section 12.03 Validity and Severability. The invalidity or unenforceability of any provision of this Plan shall not affect the validity or enforceability of any other provision of this Plan, which shall remain in full force and effect, and any prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
Section 12.04 Governing Law. The validity, interpretation, construction and performance of this Plan shall in all respects be governed by the laws of the State of Florida, without reference to principles of conflict of law, except to the extent preempted by federal law.
Section 12.05 Employment Status. This Plan does not constitute a contract of employment or impose on the Participant or the Company any obligation for the Participant to remain an employee of the Company or change the status of the Participant's employment or the policies of the Company and its affiliates regarding termination of employment.
Section 12.06 Underlying Incentive Plans and Programs. Nothing in this Plan shall prevent the Company from modifying, amending or terminating its compensation or incentive plans and programs.
Section 12.07 Successors. Lennar Corporation shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of its business or assets to expressly assume and agree to perform under this Plan in the same manner and to the same extent that it would be required to perform if no such succession had taken place. As used in this Plan, the term "Lennar Corporation" shall mean any successor that expressly assumes and agrees to perform this Plan or which otherwise becomes bound by all the terms and provisions of this Plan by operation of law; provided, however, that nothing contained in this Section 12.07 shall be interpreted to negate the occurrence of a Change in Control.
APPENDIX A
Guaranteed Income Fund
TimesSquare Corporate Bond Fund
Large Cap Value/John A. Levin & Co. Fund
S & P 500 Index Fund
Large Cap Growth/Goldman Sachs Fund
Mid Cap Value Fund
Mid Cap Growth/Artisan Partners
Small Cap Value/Berger Fund
Small Cap Growth/TimesSquare Fund
Janus Adviser Worldwide Account
American Century International Growth Account
Lennar Corporation Share Fund
Exhibit 99
Officers' Certification
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Each of the undersigned officers of Lennar Corporation, a Delaware corporation (the "Company"), hereby certifies that (i) the Company's Quarterly Report on Form 10-Q for the quarterly period ended August 31, 2002 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and (ii) the information contained in the Company's Quarterly Report on Form 10-Q for the quarterly period ended August 31, 2002 fairly presents, in all material respects, the financial condition and results of operations of the Company, at and for the periods indicated.
Date: October 15, 2002 /s/ Stuart A. Miller
-------------------------------------
Name: Stuart A. Miller
Title: President and
Chief Executive Officer
/s/ Bruce E. Gross
------------------------------------
Name: Bruce E. Gross
Title: Vice President and
Chief Financial Officer
|