Lennar Corporation reported results for its second quarter ended May 31, 2016. Earnings attributable to Lennar in 2016 were $218.5 million, or $0.95 per diluted share.
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This compares to second quarter net earnings attributable to Lennar in 2015 of $183.0 million, or $0.79 per diluted share.
Revenues from home sales increased 17% in the second quarter of 2016 to $2.4 billion from $2.1 billion in the second quarter of 2015. Revenues were higher primarily due to a 12% increase in the number of home deliveries, excluding unconsolidated entities, and a 4% increase in the average sales price of homes delivered.
New home deliveries, excluding unconsolidated entities, increased to 6,711 homes in the second quarter of 2016 from 5,989 homes in the second quarter of 2015.
There was an increase in home deliveries in all of the Company's Homebuilding segments, except in Homebuilding Houston and Homebuilding Other. The decrease in home deliveries in Houston was primarily due to less demand driven by volatility in the energy sector.
The decrease in home deliveries in Homebuilding Other was primarily due to a higher mix of start-up communities, which are earlier in the life cycle of delivering homes than non start-up communities. The average sales price of homes delivered increased to $362,000 in the second quarter of 2016 from $348,000 in the second quarter of 2015.
Sales incentives offered to homebuyers were $21,800 per home delivered in the second quarter of 2016, or 5.7% as a percentage of home sales revenue, compared to $21,500 per home delivered in the second quarter of 2015, or 5.8% as a percentage of home sales revenue, and $21,600 per home delivered in the first quarter of 2016, or 5.6% as a percentage of home sales revenue.
Gross margins on home sales were $561.5 million, or 23.1%, in the second quarter of 2016, compared to $495.9 million, or 23.8%, in the second quarter of 2015. Gross margin percentage on home sales decreased compared to the second quarter of 2015 primarily due to an increase in land costs, partially offset by an increase in the average sales price of homes delivered.
Selling, general and administrative expenses were $224.8 million in the second quarter of 2016, compared to $209.0 million in the second quarter of 2015.
As a percentage of revenues from home sales, selling, general and administrative expenses improved to 9.3% in the second quarter of 2016, from 10.0% in the second quarter of 2015, due to improved operating leverage as a result of an increase in home deliveries and benefits from the Company's focus on digital marketing.
Lennar Homebuilding equity in earnings (loss) from unconsolidated entities was ($9.6) million in the second quarter of 2016, compared to $6.5 million in the second quarter of 2015.
In the second quarter of 2016, Lennar Homebuilding equity in loss from unconsolidated entities was primarily attributable to the Company's share of costs associated with the FivePoint combination. This was partially offset by $6.7 million of equity in earnings from one of the Company's unconsolidated entities primarily due to sales of homesites to third parties.
In the second quarter of 2015, Lennar Homebuilding equity in earnings from unconsolidated entities included $11.6 million of equity in earnings from one of the Company's unconsolidated entities primarily due to the sale of a commercial property and homesites to third parties, partially offset by the Company's share of net operating losses from various unconsolidated entities.
Lennar Homebuilding other income (expense), net, was $14.9 million in the second quarter of 2016, compared to ($0.2) million in the second quarter of 2015. Other income, net in the second quarter of 2016 was primarily related to a profit participation received by one of Lennar Homebuilding's consolidated joint ventures.
Lennar Homebuilding interest expense was $63.9 million in the second quarter of 2016 ($62.1 million was included in cost of homes sold, $0.6 million in cost of land sold and $1.2 million in other interest expense), compared to $57.7 million in the second quarter of 2015 ($53.2 million was included in cost of homes sold, $0.6 million in cost of land sold and $3.8 million in other interest expense).
Interest expense included in cost of homes sold increased primarily due to an increase in the Company's outstanding homebuilding debt and an increase in home deliveries. ■