Lennar Corporation (LEN)
Q1 2009 Earnings Call Transcript
March 31, 2009 11:00 a.m. ET

Executives

Scott Shipley - Director of Investor Relations
Stuart A. Miller – President, Chief Executive Officer & Director
Bruce E. Gross – Executive Vice President & Chief Financial Officer
David M. Collins - Controller

Analysts

Dennis McGill - Zelman & Associates
Carl Reichardt - Wachovia Securities
David Goldberg – UBS
Rob Hansen - Deutsche Bank
Jay McCanless - FTN Midwest Securities
Stephen East - Pali Capital, Inc.
Michael Rehaut – JPMorgan
Daniel Oppenheim - Credit Suisse
Josh Levin – Citigroup
Timothy Jones - Wasserman & Associates
Susan Berliner – JPMorgan

Presentation

Operator

Hello, and welcome to Lennar’s first quarter earnings conference call. At this time, all participants will be in a listen-only mode. After the presentation, we will conduct a question-and-answer session. Today''s conference is being recorded. If you have any objections, please disconnect at this time. I will now turn the call over to Mr. Scott Shipley, Director of Investor Relations for the reading of the forward-looking statement.

Scott Shipley

Good morning. Today''s conference call may include forward-looking statements that are subject to risks and uncertainties relating to Lennar''s future business and financial performance. These forward-looking statements may include statements regarding Lennar’s business, financial condition, results of operation, cash flow, strategies and prospects. Forward-looking statements represent only Lennar''s estimates on the date of this conference call and are not intended to give any assurance as to actual future results.

Because forward-looking statements relate to matters that have not yet occurred these statements are inherently subject to risks and uncertainties. Many factors could cause Lennar''s actual activities or results to differ materially from the activities and results anticipated in forward-looking statements. These factors include those described under the caption “Risk Factors” contained in Lennar''s Annual Report on Form 10-K most recently filed with the SEC. Please note that Lennar assumes no obligation to update any forward-looking statements.

Operator

I would like to introduce your speaker for today''s call, Mr. Stuart Miller, President and CEO. Mr. Miller, you may begin.

Stuart A. Miller

Thank you, and good morning, everyone. Thank you for joining us for our 2009 first quarter update. I''m joined this morning by Bruce Gross, our Chief Financial Officer, Diane Bessette, our Vice President and Treasurer, and David Collins, our Controller. After my opening remarks, Bruce will provide additional detail on our numbers and then we will open the phone to your questions. David and Diane will be available to answer questions as well.

Now just as a housekeeping item, before I begin, I would like to request that during our question-and-answer period that you please limit to just one question and one follow up so that we can be as fair as possible to all of our participants.

This morning I would like to begin with a brief overview of the state of the current housing environment, then comment on our efforts to streamline our home building operations for profitability as the market stabilizes, and finally, to focus on the progress that we’ve made on managing our balance sheet and our joint ventures. Throughout our first quarter the housing market continued its downward slide driven by a combination of mortgage foreclosures adding to inventories of homes for sale, increased and escalating levels of unemployment, and declining consumer confidence. These factors maintained a steady downward pressure on home prices and sales space as home inventories have continued to rise while home buyers have remained on the sidelines.

While there are to be sure some indicators that suggest that the market is beginning to stabilize, they do not feel like they are actually defining a trend yet. The slight increase in the number of home transactions still appears to be primarily driven by investors purchasing investment properties from banks at distressed prices. The stabilization of inventory seems to derive primarily from the postponement of foreclosures by many banks and the GSCs at the end of last year. And the stabilization of existing home prices in February over January seems to have more to do with a seasonal bump in demand than market strength.

Nevertheless, interest rates are at an historical low and have been falling. Lower rates together with seasonal trends have clearly moved sales higher in the past few weeks and rates are likely to continue to have that affect if they continue to drop. Affordability is at an unusually high level across the country given the fact that home prices have come down dramatically and that combined with low interest rates; ensure that monthly payments in relationship to income are low. The $8,000 first time purchaser tax credit nationally and the additional $10,000 tax credit in California are drawing attention to the home purchase opportunity. Sales have been higher in the beginning of the second quarter and we are hopeful that the broader impact of the national stimulus plan will continue to support this trend as we start to see the gap that separates the fear of purchase and price decline from a sense of opportunity from market recovery having that gap converge.

In the context of difficult market conditions, Lennar''s strategy has been to streamline our core home building operations for profitability, and to position it as a pure play home builder in a stabilizing and then recovering market. Concurrently, we have been recasting the asset management side of our business to move from defense to offense as distressed market conditions give rise to unique opportunities to combine capital with management expertise, to position good assets for an evolving market. We''ve continued to make significant progress in both of these areas.