This summary is based on the second quarter fiscal 2008 earnings call conducted by Lennar Corp. (LEN: chart) on June 26, 2008.

Management:

- President and Chief Executive Officer: Stuart Miller
- Director of Investor Relations: Scott Shipley
- Vice President and Chief Financial Officer: Bruce Gross
- Vice President and Treasurer: Diane Bessette
- Controller: David Collins

Key Investors Issues

- Total revenues dropped 61.5% from $2.88 billion in the prior year to $1.1 billion.
- The firm realized a loss of $120.9 million, or 76 cents per diluted share, up 50.5% from a net loss of $244.2 million, or $1.55 a share in 2007.
- New orders of 4,396 homes were down 45%.

Half Year Highlights:

- Revenues from home sales decreased 63% to $2.0 billion from $5.3 billion in 2007.
- The firm realized a loss of $209 million or $1.32 a share from a loss of $176 million or $1.12 in the prior year.

Second Quarter Highlights

Inventory levels have been reduced by 47% from $7.3 billion in the prior year’s second quarter to $3.8 billion during the current quarter excluding consolidated inventory not owned.

- The finished homes and construction in progress inventory was reduced 39% from $3.6 billion to $2.2 billion year-over-year and land under development was also reduced 56% from $3.7 billion to $1.6 billion.
- The firm continued to cleanse the balance sheet as it aggressively reduced unsold completed homes by 70% from 1,441 in the prior year to 428.
- Land purchases were $162 million and that is a 72% decline from the prior year.

Inclusive of impairments, the net home building debt to total capital improved to 28.7% from 29.6% in the prior year and the home building debt to total capital was 39.5% versus 31.6% in the prior year’s quarter.

- There has been significant progress made in both the reduction in the number of joint ventures as well as the reduction in joint venture recourse, from a peak of 270 JV’s in 2006 to 163 joint ventures as of the end of the second quarter.
- Of these joint ventures, however, only 57 have recourse debt. 31 have non-recourse debt and 75 have no debt.
- The primary focus has been to reduce the joint ventures with recourse debt which is already down from 100 in 2006 to the 57 remaining joint ventures with recourse debt at the end of this quarter.

The firm realized a loss of $120.9 million, or 76 cents per diluted share, up 50.5% from a net loss of $244.2 million, or $1.55 a share in 2007 as revenues from home sales decreased 62% to $1 billion.

- The revenue decline was driven by a 58% decrease in home deliveries and an 8% decrease in average sales price to $274,000.
- The average sales price is net of sales incentives which averaged $48,700 per home during the quarter which increased about $5,000 per home compared to the prior year.
- The average sales price by region is as follows, East $254,000 which was down 11% from the prior year; Central $210,000 which was up 1%; West $364,000 which was down 16% and the “Other” region was $302,000 which was down 5%.
- Gross margin was 15.9% before valuation adjustments and selling, general and administrative expenses were 15.4% resulting in a 50 basis point positive operating margin.
- The pre-impairment gross margin improved 230 basis points over the prior year due to a lower land basis and the focus on repositioning and re-designing products to meet market demand while continuing to aggressively focus on reducing construction costs.

The firm has acted aggressively to right-size SG&A during the downturn and made significant progress on reducing the variable component of SG&A.

- SG&A was reduced by $239 million which is a 60% reduction from the second quarter of last year.
- New orders were down 45% as the number of homes in backlog declined 52% year-over-year and the firm delivered over 100% of the backlog.
- The backlog conversion rate was 113% and the firm had a 22% cancellation rate compared to 29% in the prior year’s quarter.
- The financial services profits decreased from $14.2 million profit to a loss of $3 million.

Mortgage increased from $4.6 million of profit last year to $8.1 million in the current year due to the prior year having a $14.4 million land note receivable write down.

- The mortgage capture rate improved from 72% to 85% year-over-year and almost all of the loans in this quarter were fixed rate, conforming loans.
- The title company experienced a $10.7 million loss that compares to an $8.1 million profit in the prior year as a result of fewer transactions as well as $6.7 million of non-recurring expenses primarily related to severance and lease termination costs.

Macroeconomic Perspectives:

- The housing market has continued to deteriorate throughout the first half of 2008 and this has now spread to the overall economy.
- Even as the FED recently noted that the threat to growth had eased, that is until the stimulus checks are spent, it is apparent that inflation moves as a driver of potentially higher interest rates if not sooner than probably later.
- There are not yet signs of stabilization in the field and demand patterns are inconsistent and erratic and there is a constant and increasing flow of foreclosures that are maintaining downward pressure on prices and appraisals.
- In many markets it is apparent that the flow of foreclosed homes is expanding rather than subsiding.