Financial Highlights: * Full year 2006 net income: $9.0 million * Full year 2006 diluted EPS: $0.21 * Full year 2006 figures include $139.5 million of pre-tax asset impairments & write-offs * Full-year 2006 diluted EPS before impairments and write-downs: $2.16 * Fourth quarter net income: loss of $64.6 million * Fourth quarter diluted EPS: loss of $1.52 * Fourth quarter figures include $118.3 million of pre-tax asset impairments & write-offs * Fourth quarter diluted EPS before impairments and write-offs: $0.18 * 2006 year-end backlog: $911.2 million vs. $2.05 billion in 2005 * Projected 2007 cash flow from operations of approximately $1 billion * Projected year-end 2007 net debt to capital ratio of approximately 50%
BONITA SPRINGS, Fla., Feb. 27, 2007 (PRIME NEWSWIRE) -- WCI Communities, Inc. (NYSE:WCI), a leading builder of traditional and tower residences in highly amenitized lifestyle communities, today reported its results for the fourth quarter and full year ended December 31, 2006. For the twelve months ended December 31, 2006, net income fell to $9.0 million compared with $186.2 million in 2005, while diluted earnings per share (EPS) declined to $0.21 from $4.00 a year ago. If $139.5 million in pre-tax charges for asset impairments and land acquisition termination costs (collectively "Write-offs") were excluded, EPS would have approximated $2.16. Revenues for 2006 totaled $2.05 billion vs. $2.60 billion a year ago. Overall company gross margin for 2006 equaled 12.2% or 19.0% before Write-offs. In 2005, the total company gross margin was 23.0%.
For the fourth quarter, the company reported a net loss of $64.6 million compared with net income of $54.6 million for the fourth quarter of 2005. Diluted EPS for the quarter was a net loss of $1.52 versus net income of $1.20 in the same period a year ago. Net income and EPS before Write-offs of $118.3 million totaled $6.6 million and $0.18, respectively. Revenues for the fourth quarter of 2006 decreased to $526.3 million as compared with $843.4 million in the fourth quarter of 2005 as the result of lower sales during 2006, contract cancellations and defaults. Overall company gross margin as a percentage of revenue for the fourth quarter of 2006 was negative. Excluding Write-offs, company gross margin as a percentage of revenue for the fourth quarter of 2006 was 14.4% versus 22.9% in the fourth quarter of 2005.
"The past year was extremely challenging as consumer sentiment became progressively more negative leading to a severe decrease in demand and ultimately a sharp spike in cancellations and defaults," said Jerry Starkey, President and CEO of WCI Communities. "Rising inventories of unsold new and existing homes in all of our markets led to greater use of incentives and discounts thereby reducing margins in all WCI markets."
"During the fourth quarter, we recorded real estate inventory impairment losses totaling $91.4 million. At one community in Southwest Florida, a revised product and marketing plan introduced earlier in the year failed to produce sales as expected, which led us to conclude that additional pricing reductions were needed, which resulted in an impairment charge of approximately $84.9 million. The remaining inventory impairment charges related to price reductions implemented at various communities to sell out remaining finished inventory. Additionally, we re-evaluated all remaining contracted options to purchase additional land or lots and wrote off a total of $26.9 million during the quarter reflecting forfeited deposits, pre-acquisition costs, and estimated future payments for projects previously pursued that no longer make economic sense in today's housing market. In aggregate, the fourth quarter Write-offs of $118.3 million significantly reduced our fourth quarter and full year earnings."
Starkey continued, "Our Florida markets, which account for approximately 85% of our business, experienced the greatest slowdown during 2006. While traffic in Florida increased sequentially in January 2007 as compared to December 2006, it was nevertheless about 35% lower than January of 2006. Year-to-date 2007, we have seen a drop in Florida's Traditional Homebuilding cancellation rate, which has moved down to our historical average of 20%. Traffic always tends to pick up this time of the year in Florida and it is too early to gauge demand trends."
"Our principle business focus in 2007 is on maximizing cash flow, reducing debt, and improving our financial flexibility. We expect to generate approximately $1 billion of cash flow from operations during 2007. While all aspects of our business will contribute to this cash flow objective, completing and closing nine towers during the year is the primary driver. We expect around $1 billion in collections from the closing of those nine towers and from the closing of the remaining sold units from three towers that were completed in December 2006. The default rate for towers that closed during 2006, and particularly during the fourth quarter, was higher than our estimate and historical average, but generally lower than many analyst and investors predicted. Taking into consideration our recent tower closing experience and the individual locations and mix of sold units, we estimate that our tower defaults during 2007 will range from 8% to 10% in aggregate. As we close towers and collect the receivables, we expect to reduce our debt significantly, and ultimately lower our net debt to capital by year-end 2007 to about 50% from our year-end 2006 level of 66%. During 2006, we significantly reduced our overhead in response to lower demand and in 2007 we continue to focus on reducing construction costs, achieving additional operating efficiencies, and will sharply reduce spending on land and land improvement."
Earlier this month, the company announced the retention of Goldman Sachs to assist the Board and senior management in a thorough review of WCI's business plans, capital structure, and growth prospects, with the objective of enhancing value for all shareholders. Starkey added, "We are fully engaged with Goldman Sachs in the process to identify and evaluate a range of strategic alternatives most likely to increase shareholder value."
For the year ended December 31, 2006, the aggregate value of Traditional and Tower Homebuilding gross orders declined 55.9% to $1.05 billion over the same period a year ago while net orders declined 71.0% to $653.8 million. The number of gross unit orders declined 54.6% to 1,371, with net unit orders dropping 70.5% to 815. For the full year 2006, the average price of Traditional and Tower Homebuilding net orders combined averaged $802,000, slightly down from last year's average of $815,000, reflecting a smaller percentage of tower orders in the overall mix as well as mix changes in Traditional Homebuilding orders, including a higher contribution from the company's Northeast Division. The aggregate value and number of new Traditional and Tower Homebuilding net orders for the fourth quarter were negative, due to cancellations and defaults of 276 outnumbering gross orders of 262. The company's combined Traditional and Tower Homebuilding year-end backlog was $911.2 million, down 55.6% from the $2.05 billion reported a year earlier.
Traditional Homebuilding
For the year ended December 31, 2006, Traditional Homebuilding revenues declined 8.3% to $1.11 billion from $1.21 billion for 2005. The company closed 1,577 homes compared with 2,346 for the same period a year ago. Gross margin as a percentage of revenue totaled 10.8% for 2006. Excluding Write-offs, gross margin as a percent of revenue was 21.7% as compared with 18.5% for 2005.
Fourth quarter 2006 revenues in the Traditional Homebuilding Division were $349.5 million, down 21.0% from the $442.6 million posted in the fourth quarter of 2005 primarily because approximately 22% of contract purchasers scheduled to close defaulted this quarter, compared to an approximate 1% default rate in the fourth quarter of 2005. Fourth quarter unit deliveries totaled 434 compared with 859 during the same period last year. Gross margin as a percent of revenue was negative for the quarter, due to a total of $113.2 million of Write-offs. Absent these charges, gross margin as a percent of revenue equaled 18.9% versus 20.7% in the fourth quarter of 2005.
For 2006, the number of gross orders in the Traditional Homebuilding Division totaled 1,260 compared with 2,051 for 2005, while the number of net orders dropped to 750 from 1,795. The average sales price for Traditional Homebuilding orders for 2006 was $738,000 compared with $675,000 in 2005. The traditional home cancellation rate for the year was 40.5% compared to a long-term average cancellation rate of around 20%. Traditional Homebuilding gross orders for the fourth quarter 2006 totaled 257 units and were almost entirely offset by 249 cancellations, including 187 defaults of units in backlog scheduled for Q4 2006 settlement, resulting in only eight net orders for the period. Traditional Homebuilding backlog ended the year at $682.6 million, compared to year-end 2005 backlog of $1.19 billion.
Tower Homebuilding
For 2006, revenues in the Tower Homebuilding Division fell 29.9% to $729.5 million from $1.04 billion a year ago, as 14 towers were completed during the year and no new towers were started. Gross margin as a percentage of revenue declined to 19.2% from 26.0% in 2005, due principally to cost adjustments related to finished towers or towers under construction during the year, as well as higher interest charges due to longer tower construction cycles.
Fourth quarter 2006 revenues for the Tower Homebuilding Division declined 63.6% to $123.4 million from $339.3 million in the fourth quarter of 2005. No new towers began recognition of revenue during the quarter. Overall, 17 towers were under construction and recognizing revenue during the quarter compared with 25 in the same period a year ago. During each quarter, the company reviews the cost estimates for each tower under construction and makes adjustments to reflect actual increases or decreases in current and expected future costs. Unfavorable adjustments booked for the fourth quarter of 2006 for towers that were completed or are under construction totaled $21.5 million, including an $11.3 million increase in the default reserve for future tower closings to approximately 8% of sold units versus our prior expectation of 5%. Longer tower construction cycles resulted in $8.4 million of expected incremental interest and insurance costs. Due primarily to these adjustments during the period, gross margin as a percentage of revenue decreased to 7.9% from 27.1% in the same period last year.
Tower Homebuilding gross orders for 2006 decreased to 111 from the 968 recorded in 2005, while net orders were 65 and 966 for 2006 and 2005, respectively. The number of defaults for the year totaled 46 out of 713 units expected to close. In addition, as of the date of this release, 17 sold units in buildings that were recently completed have not yet closed. The company has reserved for 12 defaults of those 17 remaining units, which if realized, would result in a default rate of 8.1% for the year. The average sales price for Tower Homebuilding units sold in 2006 was $1.5 million compared with $1.1 million in 2005. The net number of new tower orders for the quarter was negative 22, as defaults of 27 outnumbered gross new orders of five. For the quarter, there were 27 defaults recorded out of 302 expected to close. The default rate would be 12.9% if the 12 defaults reserved for actually defaulted. Tower Homebuilding backlog at the end of 2006 totaled $228.6 as compared with $857.9 million at the end of 2005.
Real Estate Services
For the year ended December 31, 2006, Real Estate Services Division revenues totaled $109.4 million, down 30.2% from the $156.7 million recorded for the year ended December 31, 2005. Gross margin as a percentage of revenue over the period decreased to 5.0% from 15.5% in the same period a year ago, due to the drop in transaction volume as a result of the slowdown in the housing market.
Fourth quarter 2006 Real Estate Services Division revenues totaled $22.3 million, down 20.9% from $28.2 million recorded for the fourth quarter of 2005. Fourth quarter 2006 gross margin as a percentage of revenue was negative versus 7.4% in the same period a year ago. The decline in revenues and gross margin percentage experienced in the fourth quarter of 2006 versus the prior year was also due to a drop in transaction volume.
Other Items
The Amenities Division experienced a loss of $7.8 million for the full year 2006, and a loss of $6.4 for the fourth quarter versus a loss of $3.8 million for 2005 and a slight gain in the fourth quarter of 2005. Both 2006 periods were affected by asset impairment charges totaling $4.5 million due to the inability to realize planned revenue in a 22-unit marina that was constructed in conjunction with a Palm Beach tower.
Land sale revenues for 2006 totaled $11.7 million, including revenues of $4.2 million in the fourth quarter, compared with revenues of $110.3 million and $9.4 million, respectively, for the full year and fourth quarter periods of 2005. Gross margin as a percentage of revenue for land sales equaled 57.8% and 48.8% for the full year 2006 and fourth quarter, respectively, versus 76.6% and 77.3% in the year earlier periods.
Other income and hurricane recoveries, net of expenses, for 2006 totaled $12.8 million, including $1.1 million in the fourth quarter. In 2005, the items totaled $6.5 million for the year and resulted in a $801,000 loss for the fourth quarter of that year, due to hurricane costs. Interest expense for the year ended December 31, 2006 was $35.6 million compared with $35.8 million in 2005 and fourth quarter interest expense increased to $16.5 million from $10.8 million in the same period a year ago.
Selling, general, and administrative expenses, including real estate taxes, (SG&A) as a percentage of revenue for 2006 was 9.4%, up from 8.3% in 2005. For the fourth quarter of 2006, SG&A was 8.5%, compared with 7.2% in the fourth quarter of the previous year, although SG&A dollars declined $16.0 million versus the year-ago period, as the company's cost reduction efforts began to be realized.
The effective tax rate for year ended December 31, 2006 was 5.7% versus 39.1% in 2005. The reduction in the effective tax rate for 2006 was primarily due to a recurring manufacturing tax credit and recognition of approximately $3 million in tax benefits from tax positions asserted in prior year tax returns on which the statute of limitations has expired. The company expects its tax rate going forward to approximate 39%.
Cash Flow/Financial Position/Balance Sheet
For the year ended December 31, 2006, net cash used in operating activities, including the purchase and development of real estate inventories, totaled $489.6 million compared with cash used in operating activities of $8.9 million in the same period a year ago. Excluding land purchases of approximately $54.9 million, operating activities used net cash flow of approximately $434.7 million.
Total liquidity, measured as the sum of cash plus available capacity under the unsecured revolving facility, totaled approximately $468.1 million at December 31, 2006 based upon the maximum amount available to borrow under the company's senior unsecured revolving credit facility of $930 million. The ratio of net debt to net capitalization of was 66.3% compared with 55.1% at December 31, 2005. The company expects the ratio to decline to approximately 50.0% by the end of 2007, as tower closings are expected to generate approximately $1.0 billion, reducing total company debt by a similar amount.
Capped Call Options to Repurchase WCI Stock
During the fourth quarter of 2006, the company invested $25.7 million of equity in capped call options that give it the right to repurchase up to 5,000,000 shares of WCI common stock at an average price of $13.63. The company may choose to settle the derivative contracts in cash, in which case it would receive payment of the difference between the share price at the maturity date and an average exercise price of $13.63. The exercise price would rise dollar-for-dollar once the cap, averaging $25.55, is reached. Settlement is required to occur at the maturity date of one year from the derivative contract dates, which range between mid-September and mid-October 2007. Under certain circumstances, the derivative contracts may be unwound in advance of the maturity date. If the company elects to unwind the capped call option contracts, provided that the share price is above the exercise price, the company would receive a cash amount determined by a calculation that takes into account the spread between the share price and the exercise price and the length of time between termination and maturity of the contracts. Based upon the closing price of $21.68 on February 23, 2007, the estimated value if unwound would be approximately $34.5 million.
Conference Call
WCI will conduct a conference call today at 9:30 AM EST in conjunction with this release. The call will be broadcast live at http://www.wcicommunities.com in the Investor Relations area or can be accessed by telephone at (303) 262-2194 and asking for the WCI Communities conference call. A replay will be available after the call for a period of 36 hours by dialing (303) 590-3000 and entering conference code 11083834. The replay will also be available on the company's website. A slide presentation will accompany the call and can be accessed on the company's website in the Investor Relations section.
About WCI
WCI Communities, Inc., named America's Best Builder in 2004 by the National Association of Home Builders and Builder Magazine, has been creating amenity-rich, master-planned lifestyle communities since 1946. Florida-based WCI caters to primary, retirement, and second-home buyers in Florida, New York, New Jersey, Connecticut, Maryland and Virginia. The company offers traditional and tower home choices with prices from the high-$100,000s to more than $10 million and features a wide array of recreational amenities in its communities. In addition to homebuilding, WCI generates revenues from its Prudential Florida WCI Realty Division and its recreational amenities, as well as through land sales and joint ventures. The company currently owns and controls developable land on which the company plans to build about 20,000 traditional and tower homes.
For more information about WCI and its residential communities, visit www.wcicommunities.com
The WCI Communities, Inc. logo is available at http://www.primezone.com/newsroom/prs/?pkgid=3018
Certain information included herein and in other company reports, Securities and Exchange Commission filings, statements and presentations is forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements about the company's anticipated operating results, financial resources, ability to acquire land, ability to sell homes and properties, ability to deliver homes from backlog, and ability to secure materials and subcontractors. Such forward-looking information involves important risks and uncertainties that could significantly affect actual results and cause them to differ materially from expectations expressed herein and in other company reports, filings, statements and presentations. These risks and uncertainties include WCI's ability to compete in real estate markets where we conduct business; the availability and cost of land in desirable areas in its geographic markets and elsewhere and our ability to expand successfully into those areas; WCI's ability to obtain necessary permits and approvals for the development of its lands; the availability of capital to WCI and our ability to effect growth strategies successfully; WCI's ability to pay principal and interest on its current and future debts; WCI's ability to comply with outstanding debt agreements/covenants; S&P and/or Moody's downgrades; WCI's ability to maintain or increase historical revenues and profit margins; availability of labor and materials and material increases in labor and material costs; increases in interest rates and availability of mortgage financing; the level of consumer confidence; increased customer cancellations or defaults; adverse legislation or regulations; unanticipated litigation or legal proceedings; changes in accounting rules, including changes in percentage of completion accounting; natural disasters; lack of visibility in the marketplace and inability to gauge timing of market turnarounds; and changes in general economic, real estate and business conditions. If one or more of the assumptions underlying our forward-looking statements proves incorrect, then the company's actual results, performance or achievements could differ materially from those expressed in, or implied by the forward-looking statements contained in this report. Therefore, we caution you not to place undue reliance on our forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. This statement is provided as permitted by the Private Securities Litigation Reform Act of 1995.
WCI Communities, Inc. Condensed Consolidated Balance Sheets (Dollars in thousands) December 31, December 31, 2006 2005 ------------ ------------ Assets Cash and cash equivalents $ 41,876 $ 52,584 Contracts receivable 1,269,549 1,123,509 Real estate inventories 1,955,793 1,687,852 Property and equipment 274,720 208,205 Other assets 289,921 409,256 ---------- ---------- Total assets $3,831,859 $3,481,406 ========== ========== Liabilities and Shareholders' Equity Accounts payable, accruals and other liabilities $ 862,353 $1,070,047 ---------- ---------- Debt obligations: Senior unsecured credit facility 503,846 94,050 Senior unsecured term note 300,000 300,000 Mortgages and notes payable 363,261 203,214 Senior subordinated notes 525,000 530,473 Junior subordinated notes 165,000 100,000 Contingent convertible senior subordinated notes 125,000 125,000 ---------- ---------- Total debt obligations 1,982,107 1,352,737 ---------- ---------- Total shareholders' equity 987,399 1,058,622 ---------- ---------- Total liabilities and shareholders' equity $3,831,859 $3,481,406 ========== ========== Other Balance Sheet Data Debt $1,982,107 $1,352,737 Shareholders' equity 987,399 1,058,622 ---------- ---------- Capitalization $2,969,506 $2,411,359 ========== ========== Ratio of debt to capitalization 66.7% 56.1% Debt, net of cash and cash equivalents $1,940,231 $1,300,153 Shareholders' equity 987,399 1,058,622 ---------- ---------- Capitalization, net of cash and cash equivalents $2,927,630 $2,358,775 ========== ========== Ratio of net debt to net capitalization 66.3% 55.1% Shareholders' equity per share $ 23.57 $ 23.86 WCI Communities, Inc. Selected Revenues and Earnings Information (Dollars in thousands, except per share data) For the For the three months ended twelve months ended December 31, December 31, ---------------------- ---------------------- 2006 2005 2006 2005 ---------- ---------- ---------- ---------- REVENUES Homebuilding: Homes $ 330,855 $ 440,952 $1,068,393 $1,181,678 Lots 18,619 1,633 38,093 31,328 ---------- ---------- ---------- ---------- Total traditional 349,474 442,585 1,106,486 1,213,006 Towers 123,363 339,312 729,516 1,035,747 ---------- ---------- ---------- ---------- Total homebuilding 472,837 781,897 1,836,002 2,248,753 Real estate services 22,339 28,226 109,421 156,740 Amenity membership and operations 24,995 21,804 88,528 78,618 Land sales 4,221 9,431 11,739 110,330 Other 1,883 2,046 8,008 7,369 ---------- ---------- ---------- ---------- Total revenues 526,275 843,404 2,053,698 2,601,810 ---------- ---------- ---------- ---------- GROSS MARGIN Homebuilding: Homes (48,369) 91,221 113,339 215,959 Lots 1,270 463 6,402 8,628 ---------- ---------- ---------- ---------- Total traditional (47,099) 91,684 119,741 224,587 Towers 9,711 91,952 139,816 269,255 ---------- ---------- ---------- ---------- Total homebuilding (37,388) 183,636 259,557 493,842 Real estate services (494) 2,091 5,431 24,271 Amenity membership and operations (6,354) 25 (7,821) (3,795) Land sales 2,060 7,292 6,789 84,513 Other (245) (251) (13,578) (112) ---------- ---------- ---------- ---------- Total gross margin (a) (42,421) 192,793 250,378 598,719 ---------- ---------- ---------- ---------- OTHER INCOME AND EXPENSES Equity in (earnings) losses from joint ventures (211) 558 603 1,386 Other income (917) (5,887) (6,165) (10,804) Hurricane (recoveries) costs, net (211) 6,688 (6,646) 4,324 Selling, general and administrative, including real estate taxes, net 44,507 60,509 193,218 215,632 Depreciation and amortization 5,882 4,354 24,592 16,037 Interest expense, net 16,497 10,800 35,600 35,816 Expenses related to early repayment of debt -- 21,872 455 26,167 ---------- ---------- ---------- ---------- (Loss) income before minority interests and income taxes (107,968) 93,899 8,721 310,161 Minority interests (579) 2,563 (837) 4,537 Income tax (benefit) expense (42,827) 36,777 544 119,474 ---------- ---------- ---------- ---------- Net (loss) income $ (64,562) $ 54,559 $ 9,014 $ 186,150 ========== ========== ========== ========== (LOSS) EARNINGS PER SHARE Basic $ (1.55) $ 1.23 $ 0.21 $ 4.15 Diluted $ (1.52) $ 1.20 $ 0.21 $ 4.00 WEIGHTED AVERAGE NUMBER OF SHARES Basic 41,766 44,330 42,629 44,805 Diluted 42,421 45,486 43,449 46,579 OPERATING DATA Interest incurred, excluding warehouse credit facility $ 38,621 $ 30,456 $ 128,964 $ 106,859 Interest included in cost of sales $ 23,566 $ 26,847 $ 74,030 $ 73,070 Note (a) Total gross margin for the three and twelve months ended December 31, 2006 includes asset impairment charges and land acquisition termination costs of $118,281 and $139,519 respectively. WCI Communities, Inc. Non-GAAP Financial Measures (Dollars in thousands, except per share data) For the For the three months ended twelve months ended December 31, December 31, --------------------- -------------------- 2006 2005 2006 2005 --------- --------- --------- --------- Gross Margin Reconciliation Total gross margin - as reported $ (42,421) $ 192,793 $ 250,378 $ 598,719 Add: Asset impairments 91,418 -- 98,156 -- Add: Land acquisition termination costs 26,863 -- 41,363 -- --------- --------- --------- --------- Total gross margin excluding asset impairment and land acquisition termination charges $ 75,860 $ 192,793 $ 389,897 $ 598,719 Net Income Reconciliation (Loss) income before income taxes - as reported $(107,389) $ 91,336 $ 9,558 $ 305,624 Add: Asset impairments 91,418 -- 98,156 -- Add: Land acquisition termination costs 26,863 -- 41,363 -- --------- --------- --------- --------- Income before income taxes excluding asset impairment and land acquisition termination charges 10,892 91,336 149,077 305,624 Adjusted income tax expense (4,264) (36,881) (58,364) (123,411) --------- --------- --------- --------- Net income excluding asset impairment and land acquisition termination charges $ 6,628 $ 54,455 $ 90,713 $ 182,213 ========= ========= ========= ========= Diluted Earnings Per Share Reconciliation Diluted Earnings Per Share - as reported $ (1.52) $ 1.20 $ 0.21 $ 4.00 Add: Asset impairments 1.31 -- 1.37 -- Add: Land acquisition termination costs 0.39 -- 0.58 -- --------- --------- --------- --------- Diluted Earnings Per Share - excluding asset impairment and land acquisition termination charges $ 0.18 $ 1.20 $ 2.16 $ 4.00 ========= ========= ========= ========= Weighted Average Number of Shares Diluted 42,421 45,486 43,449 46,579 Reconciliation of EBITDA and Other Non-Cash Items (Loss) income before income taxes - as reported $(107,389) $ 91,336 $ 9,558 $ 305,624 Add: Interest expense, net 16,497 10,800 35,600 35,816 Add: Interest expense included in cost of sales 23,566 26,847 74,030 73,070 Add: Depreciation and amortization 5,882 4,354 24,592 16,037 Add: Asset impairment charges 91,418 -- 98,156 -- Add: Land acquisition termination charges 26,863 -- 41,363 -- Add: Expenses related to early repayment of debt -- 21,872 455 26,167 --------- --------- --------- --------- EBITDA $ 56,837 $ 155,209 $ 283,754 $ 456,714 ========= ========= ========= ========= Earnings before interest expense, income taxes, depreciation and amortization (EBITDA) is not a generally accepted accounting principle (GAAP) financial statement measurement. EBITDA should not be considered an alternative to cash flows from operations determined in accordance with GAAP as a measure of liquidity. The Company's management believes that EBITDA is an indication of the Company's ability to generate funds from operations that are available to pay principal and interest on debt obligations and to meet other cash needs. Gross margin, net income and diluted earnings per share before asset impairment and land acquisition termination charges are non-GAAP financial statement measures. The Company's management believes that providing these captions excluding these charges provides financial statement users with meaningful information that is relevant to the Company's ongoing operations. WCI Communities, Inc. Condensed Consolidated Statements of Cash Flows (Dollars in thousands) For the twelve months ended December 31, ---------------------- 2006 2005 --------- --------- Cash flows from operating activities: Net income $ 9,014 $ 186,150 Asset impairment and land acquisition termination charges 121,516 -- Increase in real estate inventories (372,669) (58,288) Increase in contracts receivable (146,040) (365,103) (Decrease) increase in customer deposits (106,332) 70,227 Decrease in restricted cash 65,815 51,591 (Decrease) increase in accounts payable and other liabilities (46,269) 27,076 Other (14,644) 79,403 ---------------------- Net cash used in operating activities (489,609) (8,944) --------- --------- Cash flows from investing activities: Net cash paid for acquisition -- (136,558) Additions to property and equipment, net (41,178) (50,049) Other (5,852) 22,715 --------- --------- Net cash used in investing activities (47,030) (163,892) --------- --------- Cash flows from financing activities: Net borrowings under debt obligations 630,501 184,230 Other (104,570) (20,802) --------- --------- Net cash provided by financing activities 525,931 163,428 --------- --------- Net decrease in cash and cash equivalents $ (10,708) $ (9,408) ========= ========= WCI Communities, Inc. Homebuilding Operational Data (Dollars in thousands) For the For the three months ended twelve months ended December 31, December 31, -------------------- ---------------------- 2006 2005 2006 2005 --------- --------- ---------- ---------- Combined Traditional and Tower Homebuilding ---------------------- Homes Closed (Units)(a) 668 1,026 2,215 2,909 Net New Orders (Units) (14) 334 815 2,761 Net Contract Values of New Orders $ (39,432) $ 321,921 $ 653,783 $2,250,591 Average Selling Price Per New Order, Net NM $ 964 $ 802 $ 815 Traditional Homebuilding ------------- Homes Closed (Units) Florida 362 695 1,312 1,916 Northeast U.S. 33 103 152 293 Mid-Atlantic U.S. 39 61 113 137 --------- --------- ---------- ---------- Total 434 859 1,577 2,346 --------- --------- ---------- ---------- Revenues, excluding lot revenues Florida $ 260,874 $ 304,053 $ 845,141 $ 852,565 Northeast U.S. 21,437 60,163 85,426 171,588 Mid-Atlantic U.S. 48,544 76,736 137,826 157,525 --------- --------- ---------- ---------- Total $ 330,855 $ 440,952 $1,068,393 $1,181,678 --------- --------- ---------- ---------- Average Selling Price Per Home Closed Florida $ 721 $ 437 $ 644 $ 445 Northeast U.S. 650 584 562 586 Mid-Atlantic U.S. 1,245 1,258 1,220 1,150 --------- --------- ---------- ---------- Total $ 762 $ 513 $ 677 $ 504 --------- --------- ---------- ---------- Gross New Orders (Units) Florida 207 195 902 1,736 Northeast U.S. 35 38 288 209 Mid-Atlantic U.S. 15 21 70 106 --------- --------- ---------- ---------- Total 257 254 1,260 2,051 --------- --------- ---------- ---------- Cancellations (Units) Florida (232) (33) (437) (201) Northeast U.S. (12) (8) (44) (49) Mid-Atlantic U.S. (5) (1) (29) (6) --------- --------- ---------- ---------- Total (249) (42) (510) (256) --------- --------- ---------- ---------- Net New Orders (Units) Florida (25) 162 465 1,535 Northeast U.S. 23 30 244 160 Mid-Atlantic U.S. 10 20 41 100 --------- --------- ---------- ---------- Total 8 212 750 1,795 --------- --------- ---------- ---------- Gross Contract Values of New Orders Florida $ 127,665 $ 157,427 $ 658,744 $1,085,313 Northeast U.S. 21,553 21,471 153,158 121,808 Mid-Atlantic U.S. 16,789 27,560 89,677 135,836 --------- --------- ---------- ---------- Total $ 166,007 $ 206,458 $ 901,579 $1,342,957 --------- --------- ---------- ---------- Contract Values of Cancellations Florida $(166,329) $ (20,271) $ (288,871) $ (100,803) Northeast U.S. (7,088) (4,577) (22,854) (23,998) Mid-Atlantic U.S. (4,292) (994) (36,231) (6,625) --------- --------- ---------- ---------- Total $(177,709) $ (25,842) $ (347,956) $ (131,426) --------- --------- ---------- ---------- Net Contract Values of New Orders Florida $ (38,664) $ 137,156 $ 369,873 $ 984,510 Northeast U.S. 14,465 16,894 130,304 97,810 Mid-Atlantic U.S. 12,497 26,566 53,446 129,211 --------- --------- ---------- ---------- Total $ (11,702) $ 180,616 $ 553,623 $1,211,531 --------- --------- ---------- ---------- Gross Average Selling Price Per New Order Florida $ 617 $ 807 $ 730 $ 625 Northeast U.S. 616 565 532 583 Mid-Atlantic U.S. 1,119 1,312 1,281 1,281 --------- --------- ---------- ---------- Total $ 646 $ 813 $ 716 $ 655 --------- --------- ---------- ---------- Tower Homebuilding ------------------ Homes Closed (Units) Florida 234 167 638 563 --------- --------- ---------- ---------- Total 234 167 638 563 --------- --------- ---------- ---------- Revenues Florida $ 99,108 $ 291,077 $ 671,425 $ 987,512 Northeast U.S. 24,255 48,235 58,091 48,235 --------- --------- ---------- ---------- Total $ 123,363 $ 339,312 $ 729,516 $1,035,747 --------- --------- ---------- ---------- Gross New Orders (Units) Florida 5 111 104 797 Northeast U.S. -- 12 7 171 --------- --------- ---------- ---------- Total 5 123 111 968 --------- --------- ---------- ---------- Defaults (Units) Florida (26) (1) (45) (2) Northeast U.S. (1) -- (1) -- --------- --------- ---------- ---------- Total (27) (1) (46) (2) --------- --------- ---------- ---------- Net New Orders (Units) Florida (21) 110 59 795 Northeast U.S. (1) 12 6 171 --------- --------- ---------- ---------- Total (22) 122 65 966 --------- --------- ---------- ---------- Gross Contract Values of New Orders Florida $ 5,374 $ 129,048 $ 134,520 $ 879,149 Northeast U.S. -- 13,307 12,153 161,906 --------- --------- ---------- ---------- Total $ 5,374 $ 142,355 $ 146,673 $1,041,055 --------- --------- ---------- ---------- Contract Values of Defaults Florida $ (31,479) $ (1,050) $ (44,888) $ (1,995) Northeast U.S. (1,625) -- (1,625) -- --------- --------- ---------- ---------- Total $ (33,104) $ (1,050) $ (46,513) $ (1,995) --------- --------- ---------- ---------- Net Contract Values of New Orders Florida $ (26,105) $ 127,998 $ 89,632 $ 877,154 Northeast U.S. (1,625) 13,307 10,528 161,906 --------- --------- ---------- ---------- Total $ (27,730) $ 141,305 $ 100,160 $1,039,060 --------- --------- ---------- ---------- Gross Average Selling Price Per New Order Florida $ 1,075 $ 1,163 $ 1,293 $ 1,103 Northeast U.S. NM $ 1,109 $ 1,736 $ 947 --------- --------- ---------- ---------- Total $ 1,075 $ 1,157 $ 1,321 $ 1,075 --------- --------- ---------- ---------- Towers under construction recognizing revenue during the period 17 25 24 29 December 31, ------------------------ 2006 2005 ---------- ---------- Combined Traditional and Tower Homebuilding ----------------------- Aggregate Backlog Contract Values, Traditional and Tower Homebuilding $ 911,156 $2,049,377 Traditional Homebuilding ------------------------ Backlog (Units) 870 1,697 Backlog Contract Values $ 682,577 $1,191,439 Tower Homebuilding ------------------ Cumulative Units in Backlog 1,297 1,870 Cumulative Contract Values $1,521,420 $1,987,107 Less: Cumulative Revenues Recognized (1,292,841) (1,129,169) ---------- ---------- Backlog Contract Values $ 228,579 $ 857,938 ========== ========== (a) The Company uses the percentage of completion method to recognize revenue on sold tower units. Accordingly, the closing of tower homes corresponds with the collection of contracts receivable. NM: Data not meaningful 2006 Tower Profile (as of 2/23/07) Proj. No. of Sell-out % % Average HUD Units Value Sold Complete Deposit Bldg(b) --------------------------------------------------------------------- Closed to Date Anchorage at Jupiter Yacht Club 34 $32M 100% 100% 20% No Commodore at Jupiter Yacht Club 22 $21M 100% 100% 20% No San Andres at Lost Key 45 $28M 100% 100% 18% No Serano at Hammock Bay 116 $68M 100% 100% 20% No Navona at The Colony 100 $61M 100% 100% 20% Yes Santo Amaro at Lost Key 45 $27M 96% 100% 18% No LaSalbadora at Lost Key 45 $26M 73% 100% 17% No One Singer Island 15 $47M 80% 100% 20% No Casa at Castella (The Colony) 24 $25M 38% 100% 16% Yes Mansion at Castella (The Colony) 24 $26M 58% 100% 15% Yes Villa at Castella (The Colony) 24 $26M 42% 100% 17% Yes Costa Verano at Jacksonville Beach 100 $95M 95% 97% 20% No Tuscany at Hammock Dunes 64 $82M 86% 100% 20% No Mosaic at Miami Beach 91 $124M 99% 100% 20% No --------------------------------------------------------------------- Totals 749 $688M 91% 100% 19% ===================================================================== Under Construction Resort at Singer Island Condo 66 $106M 97% 96% 20% Yes Resort at Singer Island Condo/Hotel(a) 229 $152M 100% 95% 20% Yes Lesina at Hammock Bay 116 $130M 64% 94% 19% Yes The Galia at Lost Key Marina 70 $50M 56% 94% 19% No Le Jardin at Hammock Dunes 26 $67M 69% 82% 18% No San Anton at Lost Key 54 $38M 78% 92% 19% No One Bal Harbour Condo 185 $377M 100% 94% 19% Yes One Bal Harbour Condo/Hotel(a) 115 $111M 100% 96% 20% Yes Castillo at Westshore 80 $81M 90% 86% 18% Yes The Watermark(c) 206 $233M 86% 62% 10% Yes Florencia at The Colony 116 $123M 78% 79% 19% Yes Oceanside B 186 $237M 63% 59% 18% Yes --------------------------------------------------------------------- Totals 1,449 $1,705M 84% 86% 18% ===================================================================== Expected Contract Start Closing Date Date Date(d) ------------------------------------------------------- Closed to Date Anchorage at Jupiter Yacht Club 2Q 2004 2Q 2004 Jan-06 Commodore at Jupiter Yacht Club 2Q 2004 2Q 2004 Jan-06 San Andres at Lost Key 4Q 2004 4Q 2004 Feb-06 Serano at Hammock Bay 4Q 2004 3Q 2004 Apr-06 Navona at The Colony 2Q 2004 2Q 2004 May-06 Santo Amaro at Lost Key 4Q 2004 4Q 2004 Jun-06 LaSalbadora at Lost Key 4Q 2004 4Q 2004 Aug-06 One Singer Island 2Q 2004 3Q 2004 Nov-06 Casa at Castella (The Colony) 3Q 2004 1Q 2005 Nov-06 Mansion at Castella (The Colony) 1Q 2005 1Q 2005 Nov-06 Villa at Castella (The Colony) 2Q 2005 1Q 2005 Nov-06 Costa Verano at Jacksonville Beach 3Q 2004 3Q 2004 Dec-06 Tuscany at Hammock Dunes 4Q 2004 2Q 2005 Dec-06 Mosaic at Miami Beach 3Q 2004 4Q 2004 Dec-06 ------------------------------------------------------- Totals ======================================================= Under Construction Resort at Singer Island Condo 3Q 2004 3Q 2004 Mar-07 Resort at Singer Island Condo/Hotel(a) 3Q 2004 3Q 2004 Mar-07 Lesina at Hammock Bay 2Q 2005 3Q 2005 Mar - Apr 07 The Galia at Lost Key Marina 4Q 2005 4Q 2005 Mar - Apr 07 Le Jardin at Hammock Dunes 4Q 2005 4Q 2005 May - Jun 07 San Anton at Lost Key 2Q 2005 3Q 2005 May - Jun 07 One Bal Harbour Condo 4Q 2003 2Q 2004 Jun - Jul 07 One Bal Harbour Condo/Hotel(a) 4Q 2004 2Q 2004 Jun - Jul 07 Castillo at Westshore 3Q 2005 4Q 2005 Jun - Jul 07 The Watermark(c) 2Q 2005 3Q 2005 Sept - Oct 07 Florencia at The Colony 3Q 2005 3Q 2005 Oct - Nov 07 Oceanside B 3Q 2005 4Q 2005 Feb - Mar 08 -------------------------------------------------------- Totals ======================================================== (a) Does not count as a separate tower (b) In the event of a default in a HUD building, the company may retain no more than 15% of the total purchase price of the unit. Any additional deposit must be returned to the buyer. (c) An additional 10% is due when the tower is topped off. (d) Expected closing date based on current construction schedule. Summary of Land Controlled December 31, 2006 Finished Remaining Units in Value in Spec Spec and Planned Backlog as Backlog as Units Model Region Units of 12/31/06 of 12/31/06 in WIP Units --------------------------------------------------------------------- Traditional Homebuilding (Including Lots) Florida Miami / Ft. Lauderdale 2,065 302 $280.6 48 79 Naples / Ft. Myers 4,213 109 72.8 118 105 Palm Beach / Indian River 560 16 13.8 10 23 Palm Coast / Jacksonville 25 1 1.1 13 11 Perdido Key 114 -- -- 11 1 Tampa / Sarasota 4,653 180 147.6 54 128 Mid-Atlantic 306 30 47.4 16 31 Northeast 2,114 232 119.3 20 24 --------------------------------------------------------------------- Traditional Homebuilding Total 14,050 870 682.6 290 402 Tower Homebuilding Florida Miami / Ft. Lauderdale 1,272 454 90.1 68 2 Naples / Ft. Myers 1,021 164 21.9 68 41 Palm Beach / Indian River 587 293 11.4 2 3 Palm Coast / Jacksonville 591 56 26.9 13 9 Perdido Key 1,554 81 2.0 43 14 Tampa / Sarasota 652 72 10.1 8 -- Mid-Atlantic 278 -- -- -- -- Northeast 480 177 66.1 29 -- --------------------------------------------------------------------- Tower Homebuilding Total 6,435 1,297 228.5 231 69 Total Homebuilding Florida Miami / Ft. Lauderdale 3,337 756 370.7 116 81 Naples / Ft. Myers 5,234 273 94.7 186 146 Palm Beach / Indian River 1,147 309 25.2 12 26 Palm Coast / Jacksonville 616 57 28.1 21 20 Perdido Key 1,668 81 2.0 54 15 Tampa / Sarasota 5,305 252 157.7 62 128 Mid-Atlantic 584 30 47.4 16 31 Northeast 2,594 409 185.4 49 24 --------------------------------------------------------------------- Total Homebuilding Total 20,485 2,167 911.1 521 471 ===================================================================== Total Units % Region Remaining Owned --------------------------------------------------------- Traditional Homebuilding (Including Lots) Florida Miami / Ft. Lauderdale 1,636 100% Naples / Ft. Myers 3,881 100% Palm Beach / Indian River 511 100% Palm Coast / Jacksonville -- 100% Perdido Key 102 100% Tampa / Sarasota 4,291 83% Mid-Atlantic 229 100% Northeast 1,838 76% --------------------------------------------------------- Traditional Homebuilding Total 12,488 91% Tower Homebuilding Florida Miami / Ft. Lauderdale 748 87% Naples / Ft. Myers 748 100% Palm Beach / Indian River 289 61% Palm Coast / Jacksonville 513 100% Perdido Key 1,416 100% Tampa / Sarasota 572 75% Mid-Atlantic 278 100% Northeast 274 43% --------------------------------------------------------- Tower Homebuilding Total 4,838 87% Total Homebuilding Florida Miami / Ft. Lauderdale 2,384 95% Naples / Ft. Myers 4,629 100% Palm Beach / Indian River 800 80% Palm Coast / Jacksonville 518 100% Perdido Key 1,518 100% Tampa / Sarasota 4,863 82% Mid-Atlantic 507 100% Northeast 2,112 70% --------------------------------------------------------- Total Homebuilding Total 17,326 90% ========================================================= Remaining Planned Units December 31, 2006 Total Owned Optioned Controlled Traditional Homebuilding 12,754 1,296 14,050 Tower Homebuilding 5,606 829 6,435 ------------------------------------------------ Total Homebuilding 18,360 2,125 20,485 ================================================