Maurice Tutor
$15/per page/Negotiable
HOME BUILDING BLUES
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LENNAR CORPORATION AND SUBSIDIARIES* |
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| Â |
2008 |
2007 |
2006 |
|
Revenues: |
(Dollars in thousands, except per share amounts) |
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|
Homebuilding |
$4,263,038 |
9,730,252 |
15,623,040 |
|
Financial services |
312,379 |
456,529 |
643,622 |
|
Total revenues |
4,575,417 |
10,186,781 |
16,266,662 |
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Costs and expenses: |
 |  |  |
|
Homebuilding (1) |
4,541,881 |
12,189,077 |
14,677,565 |
|
Financial services (2) |
343,369 |
450,409 |
493,819 |
|
Corporate general and administrative |
129,752 |
173,202 |
193,307 |
|
Total costs and expenses |
5,015,002 |
12,812,688 |
15,364,691 |
|
Gain on recapitalization of unconsolidated entity |
133,097 |
175,879 |
— |
|
Goodwill impairments |
— |
190,198 |
— |
|
Equity in loss from unconsolidated entities (3) |
59,156 |
362,899 |
12,536 |
|
Management fees and other income (expense), net (4) |
199,981 |
76,029 |
66,629 |
|
Minority interest income (expense), net |
4,097 |
1,927 |
13,415 |
| Â |
561,528 |
3,081,081 |
942,649 |
|
Earnings (loss) before (provision) benefit for income taxes (Provision) benefit for income taxes (5) |
547,557 |
1,140,000 |
348,780 |
|
Net earnings (loss) |
$1,109,085 |
1,941,081 |
593,869 |
|
Basic earnings (loss) per share |
($7.00) |
12.31 |
3.76 |
|
Diluted earnings (loss) per share |
($7.00) |
12.31 |
3.69 |
(1) Homebuilding costs and expenses include $340.5 million, $2,445.1 million, and $501.8 million, respectively, of valuation adjustments and writeoffs of option deposits and preacquisition costs for the years ended November 30, 2008, 2007 and 2006.
(2) Financial Services costs and expenses for the year ended November 30, 2008 include a $27.2 million impairment of goodwill.
(3) Equity in loss from unconsolidated entities includes $32.2 million, $364.2 million, and 126.4 million, respectively, of the Company’s share of SFAS 144 valuation adjustments related to assets of unconsolidated entities in which the Company has investments for the years ended November 30, 2008, 2007, and 2006.
(4) Management fees and other income (expense), net includes $172.8 million, $132.2 million, and $14.5 million, respectively, of APB 18 valuation adjustments to the Company’s investments in unconsolidated entities for the years ended November 30, 2008, 2007, and 2006.
(5) (Provision) benefit for income taxes for the year ended November 30, 2008 includes a valuation allowance of $730.8 million that the Company recorded against its deferred tax assets.
Required
a. Would you consider the presentation to be a multiplestep income statement or a singlestep income statement? Comment.
b. Does it appear that there is a 100% ownership in all consolidated subsidiaries?
c. If a subsidiary were not consolidated but rather accounted for using the equity method, would this change net earnings (loss)? Explain.
d. Describe equity in loss from unconsolidated entities (see Note 3).
e. Comment on Note 1. Does this note project favorably on the future of Lennar Corporation? Explain.
f. Comment on Note 2. Why take an impairment for goodwill under financial services? Why is this goodwill impairment disclosed separately from the line item goodwill impairments for 2007 ($190,198,000)?