Third Quarter Financial Highlights: * Net loss: $69.7 million * Basic and diluted EPS: loss of $1.66 * Recorded pre-tax impairments and write-offs of $35.9 million * Revenues: $166.0 million -- down 61.0% * Gross new orders: $139.1 million -- down 22.5% * Backlog at September 30, 2007: $517.0 million
BONITA SPRINGS, Fla., Nov. 8, 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 third quarter of 2007. For the three months ended September 30, 2007, WCI reported a net loss of $69.7 million, compared with net income of $10.7 million in the third quarter of 2006. Diluted earnings per share (EPS) from continuing operations was a loss of $1.66, compared to income of $0.24 for the same period a year ago. Revenues for the third quarter of 2007 were $166.0 million, compared with $425.6 million for the third quarter of 2006, a 61.0% decrease. Of this decrease, $88.9 million was due to reversal of Tower Homebuilding revenue related to defaults recorded this quarter.
Company gross margin for the third quarter of 2007 was negative $40.6 million versus positive $62.6 million, or 14.7% of revenue, for the third quarter of 2006, a decrease of $103.2 million. Of this decrease, $23.7 million was due to reversal of Tower Homebuilding gross margin related to defaults and default reserves recorded this quarter. Other unfavorable adjustments of estimates totaling $12.9 million were also recorded to the Tower Homebuilding gross margin this quarter. In addition, real estate inventory impairment charges and write-offs totaled $35.9 million in this third quarter. Excluding all of these items, Company gross margin would have totaled $31.9 million ($-40.6 million as reported plus $23.7 million, $12.9 million and $35.9 million), or 12.5% of $254.9 million of revenue before effect of the recorded contract defaults ($166.0 million as reported plus $88.9 million cited in the prior paragraph).
"Demand continues to be unpredictable from week to week and we saw an increase in defaults and cancellations during the third quarter," said Jerry Starkey, President and CEO of WCI Communities. "We are focused on reducing our costs of operation and recently announced a restructuring that we expect will enable us to lower our annual salary and benefit expenses by about $46 million. As a part of this restructuring, we have combined geographic regions and retained the top talent capable of taking on expanded roles and responsibility during this downturn. During the quarter, we experienced higher tower defaults and increased our reserves for future tower defaults. This resulted in revenue and earnings reversals and had a negative impact on our financial performance during the period. We also wrote down our traditional and tower inventory to reflect impairments caused by expected lower prices and slower absorption in some product lines. While lower demand and increased defaults have severely hampered our earnings, we continue to expect significant cash flow in the fourth quarter to result in about $210 million to $460 million of cash flow for the full year ($200 million to $450 million from operating activities and $10 million from investing activities). The Company's expected cash flow from operations includes 275 to 300 traditional homes closings in the fourth quarter. The backlog of 591 traditional homes as of September 30, 2007 includes 273 homes scheduled to close by year end."
For the nine month period ended September 30, 2007, net loss totaled $118.8 million compared with net income of $73.6 million during the first nine months of 2006. Diluted EPS from continuing operations declined to a loss of $3.17 versus income of $1.64 for the same period a year ago. Revenues decreased 51.0% to $746.5 million from $1.52 billion for the nine months ended September 30, 2006.
For the three months ended September 30, 2007, gross new orders totaled 197 units, a decline of 13.6% compared to the same quarter in 2006, with a value for the third quarter of 2007 of $139.1 million, down 22.5% from 2006. Due largely to the reversal of orders upon recording tower defaults, aggregate net orders were a negative $14.3 million for this quarter, while the number of net unit orders declined 82.9% to 24.
Traditional Homebuilding
Third quarter 2007 revenues for Traditional Homebuilding, including lot sales, fell 25.9% to $157.0 million from $211.9 million for the third quarter of 2006. The Company closed 212 homes compared with 279 for the same period a year ago. Florida revenues totaled $108.8 million, or 69.3% of total Traditional Homebuilding revenues, versus $159.9 million, or 75.5%, for the third quarter of 2006. Revenues from WCI's Northeast Division accounted for 18.3% of Traditional Homebuilding revenues during the third quarter of 2007 vs. 4.7% during the same period a year ago and the Company's Mid-Atlantic Division accounted for 12.4% and 19.8% of revenues for the third quarters of 2007 and 2006, respectively. Gross margin as a percentage of revenue for Traditional Homebuilding totaled 8.0% for the third quarter of 2007, down from 22.6% in the same period a year ago, due in large part to the greater extent of discounts and incentives that homebuyers now closing received at the point of sale and impairment charges of $4.9 million recorded this quarter to reflect lower anticipated selling prices on traditional home inventories and the utilization of significant discounts and incentives to sell finished spec inventory. Excluding impairments, gross margin as a percent of revenue would have been 11.1%.
For the nine month period ended September 30, 2007, Traditional Homebuilding revenues decreased 27.3% to $550.2 million. The Company closed 735 homes compared with 1,143 for the same period a year ago. Gross margin as a percentage of revenue declined to 9.1% vs. 22.0% for the first nine months of 2006. Excluding impairments, gross margin as a percent of revenue would have been 13.3%. The average price of traditional homes closed year to date was $715,000 in 2007 compared to $729,000 in 2006.
For the third quarter of 2007, the number of gross and net orders declined 13.7% and 27.1%, respectively. The value of Traditional Homebuilding gross orders declined 23.6% to $129.7 million and the value of net orders dropped 45.1% to $65.2 million. The cancellation rate for the third quarter of 2007 was 44.4%, down slightly from 47.8% in the second quarter of the 2007. Cancellations during the quarter totaled 84, up from 75 during the same period in 2006. The average price for Traditional Homebuilding gross orders for the third quarter of 2007 declined 11.5% to $686,000 compared with $775,000 for the third quarter of 2006, due to mix changes and a higher percentage of discounts and incentives during the quarter (approximately 25% compared to approximately 13% on orders in the same period a year ago). In total, 131 gross spec homes were sold during the quarter, with an average projected gross margin as a percent of revenues of 2.0%, approximately 1490 basis points below the average gross margin percentage of 16.9% projected for the 58 gross to-be-built orders for the quarter. As of September 30, 2007, unsold finished or under construction homes totaled 568 units, a reduction of 43 units from June 30, 2007, reflecting reductions from gross sales net of defaults and cancellations during the quarter.
Tower Homebuilding
For the three months ended September 30, 2007, Tower Homebuilding reported negative revenue of $36.8 million as compared to revenue of $172.3 million for the same period a year ago, primarily due to the reversal of revenue during the quarter related to defaulted tower contracts, as well as a decrease in the number of towers under construction this quarter and limited progression of building percentage of completion among the towers under construction. There were 5 towers with a total projected sell-out value of $1.15 billion under construction during the quarter compared with 18 towers, with a projected total sellout value of $2.1 billion under construction and recognizing revenue during the third quarter 2006. Tower Homebuilding also reported a negative gross margin of $56.6 million for the third quarter of 2007, due principally to $31.1 million in finished unit impairment charges, reversal of gross margin related to defaulted tower contracts, an increase in the reserve for potential future defaults, and certain adjustments of estimates. 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. For the third quarter of 2007, $36.6 million of unfavorable adjustments (including adding $23.7 million to the default reserve) were made related to towers recently completed or under construction. In addition to increasing the default reserve, these adjustments included additional construction costs as a result of design revisions, additional estimated interest costs associated with longer tower construction cycles, increases in building insurance costs, and discounts and incentives anticipated in future periods given the current selling environment.
For the nine months ended September 30, 2007, revenues in Tower Homebuilding fell 93.5% to $39.3 million as the decrease in the number and value of towers under construction and the decrease in gross new tower orders was magnified by the reversal of revenue associated with contract defaults. Gross margin as a percentage of revenue turned negative from 21.5% in the same period last year, due principally to the finished unit impairment charges, the reversal of revenue and gross margin on defaulted units and the cost adjustments referenced above.
Tower Homebuilding orders for the third quarter of 2007 were negative as the 89 defaults recorded during the quarter outnumbered 8 gross new orders. The average gross order price for Tower Homebuilding units sold in the third quarter of 2007 was $1.2 million compared with $1.1 million in the period a year ago, driven by changes in the mix of units sold. During the quarter, the Company completed and delivered two towers (Florencia and LeJardin), consisting of 142 units, and experienced 51 defaults out of 114 sold units in these towers through November 5, 2007. Another 30 sold units have yet to close in seven buildings completed during 2007, and the Company currently estimates 16 of those units may ultimately default. For the nine months ended September 30, 2007, 425 units were delivered in the seven completed buildings. Through nine months, the Company has recorded or reserved a total of 190 defaults related to completed buildings, which represents 29.6% of the number of sold units in the buildings completed this year. During the third quarter of 2007, 38 defaults were recorded in towers completed in the first and second quarters of 2007. Tower Homebuilding backlog at September 30, 2007 totaled $74.9 million, compared with $384.3 million at September 30, 2006. For the balance of the year, two towers, containing 506 units, of which 477 are sold, are expected to deliver units to buyers. One of these buildings, One Bal Harbour, received its temporary certificate of occupancy and began delivering units to buyers in late October 2007. The Watermark on Hudson is expected to be completed within the next month and to begin delivering units to residents in December.
Real Estate Services
Revenues for the Real Estate Services Division for the third quarter 2007 were $20.8 million, an 11.1% decrease from the $23.4 million recorded for the same period a year ago. The decline was primarily due to the slowing market for new and resale homes during the quarter. Gross margin as a percentage of revenue for the period was 0.9% compared with 0.5% in the third quarter 2006.
For the nine month period ended September 30, 2007, revenues in the Real Estate Services Division totaled $73.8 million, down 15.2% from the $87.1 million recorded for the nine months ended September 30, 2006. Gross margin as a percentage of revenue over the period decreased to 6.5% from 6.8% in the same period a year ago as the steps taken by these operations to reduce overhead and increase efficiency in the current market environment have not yet taken full effect.
Other Items
Revenues for the Amenities Division for the third quarter 2007 were $18.0 million, a 24.3% increase from the $14.5 million recorded in the same period a year ago. Gross margin totaled a loss of $1.4 million for the third quarter 2007 versus a loss of $4.4 million in the third quarter of 2006.
Land sale revenues for the third quarter 2007 totaled $5.3 million compared with $1.4 million for the third quarter of 2006. Gross margin as a percentage of land sales revenue equaled 87.3% for the third quarter of 2007.
Other income for the third quarter of 2007 totaled $1.7 million versus $9.5 million for the third quarter of 2006. The 2006 amount included a $6.4 million settlement of claims related to hurricanes in 2005 and 2004 and a $2.4 million gain related to the sale of a joint venture interest in our previously wholly-owned mortgage company.
Selling, general, and administrative expenses including real estate taxes (SG&A) totaled $46.5 million for the third quarter 2007, up $1.6 million or 3.6% from the third quarter of 2006. For the nine months ended September 30, 2007, SG&A of $143.2 million was 3.7% lower than the total for the same period last year. During the third quarter, WCI incurred professional fees of approximately $4.0 million related to the Company's recently settled proxy contest and preparations for a possible sale of the Company. WCI also incurred charges of approximately $1.1 million to cover severance costs associated with workforce reductions during the quarter. Similar charges were incurred during the prior two quarters of 2007. Real estate tax expense was $2.8 million higher for the quarter and $6.7 million higher for the nine month period than the same periods last year due to higher assessments on finished units and less capitalization of these payments. Each of these increased expenses have had the effect of offsetting savings from headcount reductions and other efficiency initiatives implemented during 2007.
Interest expense, net of $22.4 million for the quarter and $57.0 million for the nine month period, represents increases over comparable periods in 2006 and 2007 of $13.7 million and $37.9 million, respectively, primarily due to less interest capitalized as fewer projects are under development and, to a lesser degree, higher interest incurred as a result of greater debt balances in the first part of the year and increases in interest rates.
Cash Flow/Financial Position
For the nine months ended September 30, 2007, cash flow from operating activities and investing activities totaled $59.5 million ($33.3 million from operating activities and $26.2 million from investing activities), compared with cash used of $650.1 million ($605.0 million used in operations and $45.1 million used for investing activities) in the same period a year ago.
On August 17, 2007, WCI amended its Senior Secured Revolving Credit Agreement (Credit Facility), the Term Loan Agreement (Term Loan) and the $390 million Revolving Tower Construction Loan Agreement (Tower Facility) to permit certain changes in the composition of WCI's Board of Directors without triggering a change of control and to establish certain other modifications to the terms and financial covenants of the loans. For the quarter ended September 30, 2007, we were not able to comply with the modified Fixed Charge Coverage covenant under the Credit Facility and Term Loan. As a result, on November 7, 2007, we obtained a limited waiver of performance under this covenant of the Credit Facility and Term Loan which is effective through December 7, 2007. Following the filing of this quarterly report, we expect to finalize our discussions with the lead lenders under these facilities and submit a longer-term amendment that would provide financial flexibility, including suspension of the Fixed Charge Coverage covenant, for approval by the participating lenders in these facilities. As of September 30, 2007, the balance on the Credit Facility was $448.7 million, the balance on the Term Loan was $262.5 million, and the balance on the Tower Facility was $358.5 million.
At this time, it is not certain that we will reach agreement or obtain approval of the anticipated longer-term amendment. This amendment will be expensive and there can be no assurance that we will able to comply with the amended covenants and other requirements. If WCI is unable to obtain the amendment or comply with its terms, the lenders would have the right to exercise remedies specified in the loan agreements, including foreclosing on certain collateral and accelerating the maturity of the loans, which could result in the acceleration of substantially all of our other outstanding indebtedness. In such a situation, there can be no assurance that we would be able to obtain alternative financing. In addition, if the Company is determined to be in default of these loan agreements, it may be prohibited from drawing additional funds under the Credit Facility and the Tower Loan, which could impair our ability to maintain sufficient working capital. Either situation could have a material adverse affect on the solvency of the Company.
Assuming a favorable resolution of the matter discussed in the preceding paragraph, total liquidity, measured as the sum of cash plus available capacity under the Credit Facility, totaled approximately $258.5 million at September 30, 2007. In addition, letters of credit of $49.6 million were outstanding as of September 30, 2007.
Conference Call
WCI will conduct a conference call today at 10:00 a.m. EST in conjunction with this news 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) 205-0044 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 11100073. 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 title businesses, 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 over 18,500 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.primenewswire.com/newsroom/prs/?pkgid=3018
Forward-looking statements:
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; WCI's ability to pay principal and interest on its current and future debts; WCI's ability to amend its bank agreements and obtain waivers as needed from time to time to obtain covenant relief and to avoid bank defaults during the market downturn; WCI's ability to maintain or increase historical revenues and profit margins; WCI's ability to collect contract receivables from buyers purchasing homes as investments; the availability and cost of land in desirable areas in its geographic markets 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; availability of labor and materials and material increases in insurance, labor and material costs; increases in interest rates and availability of mortgage financing; the ability of prospective residential buyers to obtain mortgage financing due to tightening credit markets, appraisal problems or other factors; increases in construction and homeowner insurance and availability of insurance, the continuing negative buyer sentiment and erosion of consumer confidence; the negative impact of claims for contract rescission or increasing cancellation rates by contract purchasers; adverse legislation or regulations; adverse legal proceedings; the ability to retain employees; changes in generally accepted accounting principles; natural disasters; adverse weather conditions; and changes in general economic, real estate and business conditions and other factors over which the company has little or no control. 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)
September 30, December 31,
2007 2006
------------ ------------
Assets
Cash and cash equivalents $ 7,174 $ 41,876
Contracts receivable 787,208 1,269,549
Real estate inventories 1,995,953 1,955,793
Property and equipment 244,080 274,720
Other assets 344,801 289,921
------------ ------------
Total assets $ 3,379,216 $ 3,831,859
============ ============
Liabilities and Shareholders' Equity
Accounts payable, accruals and other
liabilities $ 601,480 $ 862,353
------------ ------------
Debt obligations:
Senior revolving credit facility 448,700 503,846
Senior term note 262,500 300,000
Mortgages and notes payable 376,602 363,261
Senior subordinated notes 525,000 525,000
Junior subordinated notes 165,000 165,000
Contingent convertible senior
subordinated notes 125,000 125,000
------------ ------------
Total debt obligations 1,902,802 1,982,107
------------ ------------
Total shareholders' equity 874,934 987,399
------------ ------------
Total liabilities and shareholders'
equity $ 3,379,216 $ 3,831,859
============ ============
Other Balance Sheet Data
Debt $ 1,902,802 $ 1,982,107
Shareholders' equity 874,934 987,399
------------ ------------
Capitalization $ 2,777,736 $ 2,969,506
============ ============
Ratio of debt to capitalization 68.5% 66.7%
Debt, net of cash and cash equivalents $ 1,895,628 $ 1,940,231
Shareholders' equity 874,934 987,399
------------ ------------
Capitalization, net of cash and cash
equivalents $ 2,770,562 $ 2,927,630
============ ============
Ratio of net debt to net capitalization 68.4% 66.3%
Shareholders' equity per share $ 20.79 $ 23.57
WCI Communities, Inc.
Selected Revenues and Earnings Information
(Dollars in thousands, except per share data)
For the three For the nine
months ended months ended
September 30, September 30,
-------------------- --------------------
2007 2006 2007 2006
--------- --------- --------- ---------
REVENUES
Homebuilding:
Homes $ 151,484 $ 203,477 $ 536,840 $ 737,538
Lots 5,533 8,420 13,328 19,473
--------- --------- --------- ---------
Total traditional 157,017 211,897 550,168 757,011
Towers (36,788) 172,324 39,326 606,153
--------- --------- --------- ---------
Total homebuilding 120,229 384,221 589,494 1,363,164
Real estate services 20,808 23,412 73,808 87,083
Amenity membership
and operations 18,006 14,489 60,163 58,305
Land sales 5,337 1,401 17,934 7,517
Other 1,599 2,035 5,072 6,126
--------- --------- --------- ---------
Total revenues 165,979 425,558 746,471 1,522,195
--------- --------- --------- ---------
GROSS MARGIN
Homebuilding:
Homes 10,436 46,184 45,749 161,708
Lots 2,077 1,704 4,543 5,132
--------- --------- --------- ---------
Total traditional 12,513 47,888 50,292 166,840
Towers (56,646) 31,077 (72,533) 130,105
--------- --------- --------- ---------
Total homebuilding (44,133) 78,965 (22,241) 296,945
Real estate services 194 114 4,768 5,926
Amenity membership
and operations (1,438) (4,410) (843) (4,546)
Land sales 4,661 1,278 10,528 4,728
Other 73 (13,380) 171 (13,336)
--------- --------- --------- ---------
Total gross margin (40,643) 62,567 (7,617) 289,717
--------- --------- --------- ---------
OTHER INCOME AND EXPENSES
Equity in losses
(earnings) from
joint ventures 52 865 (443) 814
Other income (1,668) (3,090) (2,520) (5,248)
Hurricane recoveries -- (6,437) (5,393) (6,435)
Selling, general and
administrative,
including real
estate taxes, net 46,461 44,832 143,201 148,711
Depreciation and
amortization 5,392 6,122 16,624 18,710
Interest expense,
net 22,365 8,693 57,000 19,103
Expenses related to
early repayment of
debt and related
amendments 3,583 -- 3,583 455
--------- --------- --------- ---------
(Loss) income from
continuing operations
before minority
interests and
income taxes (116,828) 11,582 (219,669) 113,607
Minority interests 1,666 1,525 2,488 259
Income tax (benefit)
expense (45,440) 3,119 (84,212) 42,194
--------- --------- --------- ---------
(Loss) income from
continuing
operations (69,722) 9,988 (132,969) 71,672
Income from
discontinued
operations, net of
tax -- 671 866 1,904
Gain on sale of
discontinued
operations, net of
tax -- -- 13,353 --
--------- --------- --------- ---------
Net (loss) income $ (69,722) $ 10,659 $(118,750) $ 73,576
========= ========= ========= =========
(LOSS) EARNINGS PER SHARE:
Basic:
From continuing
operations $ (1.66) $ 0.24 $ (3.17) $ 1.67
From discontinued
operations -- 0.02 0.34 0.04
--------- --------- --------- ---------
$ (1.66) $ 0.26 $ (2.83) $ 1.71
========= ========= ========= =========
Diluted:
From continuing
operations $ (1.66) $ 0.24 $ (3.17) $ 1.64
From discontinued
operations -- 0.01 0.34 0.04
--------- --------- --------- ---------
$ (1.66) $ 0.25 $ (2.83) $ 1.68
========= ========= ========= =========
WEIGHTED AVERAGE NUMBER
OF SHARES
Basic 42,030 41,730 41,980 42,919
Diluted 42,030 42,335 41,980 43,795
OPERATING DATA
Interest incurred $ 37,608 $ 34,594 $ 107,541 $ 90,343
Interest included in
cost of sales $ 6,296 $ 17,099 $ 28,630 $ 50,464
WCI Communities, Inc.
Condensed Consolidated Statements of Cash Flows
(Dollars in thousands)
For the nine
months ended
September 30,
----------------------
2007 2006
---------- ----------
Cash flows from operating activities:
Net (loss) income $ (118,750) $ 73,576
Asset impairment losses and land acquisition
termination costs 73,004 13,293
Increase in real estate inventories (109,289) (383,158)
Decrease (Increase) in contracts receivable 482,341 (319,594)
Decrease in customer deposits (139,558) (52,365)
Decrease in restricted cash 16,772 72,518
Decrease in accounts payable and
other liabilities (103,090) (67,024)
All other (68,120) 57,760
---------- ----------
Net cash provided by (used in)
operating activities 33,310 (604,994)
---------- ----------
Cash flows from investing activities:
Additions to property and equipment, net (21,296) (35,036)
Proceeds from sale of property and equipment 47,105 --
Other 398 (10,052)
---------- ----------
Net cash provided by (used in)
investing activities 26,207 (45,088)
---------- ----------
Cash flows from financing activities:
Net (repayments) borrowings under debt
obligations (80,227) 698,502
All other (13,992) (79,550)
---------- ----------
Net cash (used in) provided by
financing activities (94,219) 618,952
---------- ----------
Net decrease in cash and cash equivalents $ (34,702) $ (31,130)
========== ==========
WCI Communities, Inc.
Homebuilding Operational Data
(Dollars in thousands)
For the three
months ended
September 30,
----------------------
2007 2006
--------- ---------
Combined Traditional
and Tower Homebuilding
-----------------------
Homes Closed (Units)* 286 319 (33) -10.3%
Net New Orders (Units) 24 140 (116) -82.9%
Net Contract Values of
New Orders $ (14,270) $ 120,046 (134,316) -111.9%
Average Selling Price
Per New Order, Gross $ 706 $ 788 (82) -10.4%
Traditional
Homebuilding $ 686 $ 775 (89) -11.4%
Tower Homebuilding $ 1,177 $ 1,100 78 7.1%
Traditional Homebuilding
------------------------
Homes Closed (Units)
Florida 145 219 (74) -33.8%
Northeast U.S. 53 20 33 165.0%
Mid-Atlantic U.S. 14 40 (26) -65.0%
--------- ---------
Total 212 279 (67) -24.0%
--------- ---------
Revenues, excluding
lot revenues
Florida $ 103,515 $ 151,470 (47,955) -31.7%
Northeast U.S. 28,716 9,993 18,723 187.4%
Mid-Atlantic U.S. 19,253 42,014 (22,761) -54.2%
--------- ---------
Total $ 151,484 $ 203,477 (51,993) -25.6%
--------- ---------
Average Selling Price
Per Home Closed
Florida $ 714 $ 692 22 3.2%
Northeast U.S. 542 500 42 8.4%
Mid-Atlantic U.S. 1,375 1,050 325 30.9%
--------- ---------
Total $ 715 $ 729 (15) -2.0%
--------- ---------
Gross New Orders
(Units)
Florida 143 160 (17) -10.6%
Northeast U.S. 37 45 (8) -17.8%
Mid-Atlantic U.S. 9 14 (5) -35.7%
--------- ---------
Total 189 219 (30) -13.7%
--------- ---------
Cancellations (Units)
Florida (74) (60) (14) 23.3%
Northeast U.S. (7) (8) 1 -12.5%
Mid-Atlantic U.S. (3) (7) 4 -57.1%
--------- ---------
Total (84) (75) (9) 12.0%
--------- ---------
-44.4% -34.2%
Net New Orders (Units)
Florida 69 100 (31) -31.0%
Northeast U.S. 30 37 (7) -18.9%
Mid-Atlantic U.S. 6 7 (1) -14.3%
--------- ---------
Total 105 144 (39) -27.1%
--------- ---------
Gross Contract Values
of New Orders
Florida $ 102,244 $ 128,194 (25,950) -20.2%
Northeast U.S. 20,127 25,875 (5,748) -22.2%
Mid-Atlantic U.S. 7,312 15,618 (8,306) -53.2%
--------- ---------
Total $ 129,683 $ 169,687 (40,004) -23.6%
--------- ---------
Contract Values of
Cancellations
Florida $ (54,452) $ (37,472) (16,980) 45.3%
Northeast U.S. (3,758) (3,975) 217 -5.5%
Mid-Atlantic U.S. (6,249) (9,472) 3,223 -34.0%
--------- ---------
Total $ (64,459) $ (50,919) (13,540) 26.6%
--------- ---------
Net Contract Values of
New Orders
Florida $ 47,792 $ 90,722 (42,930) -47.3%
Northeast U.S. 16,369 21,900 (5,531) -25.3%
Mid-Atlantic U.S. 1,063 6,146 (5,083) -82.7%
--------- ---------
Total $ 65,224 $ 118,768 (53,544) -45.1%
--------- ---------
Gross Average Selling
Price Per New Order
Florida $ 715 $ 801 (86) -10.8%
Northeast U.S. 544 575 (31) -5.4%
Mid-Atlantic U.S. 812 1,116 (303) -27.2%
----------------------
Total $ 686 $ 775 (89) -11.4%
----------------------
Tower Homebuilding
------------------
Homes Closed (Units)
Florida 74 40 34 85.0%
--------- ---------
Total 74 40 34 85.0%
--------- ---------
Revenues
Florida $ (45,797) $ 159,223 (205,020) -128.8%
Northeast U.S. 9,009 13,101 (4,092) -31.2%
--------- ---------
Total $ (36,788) $ 172,324 (209,112) -121.3%
--------- ---------
Gross New Orders
(Units)
Florida 7 9 (2) -22.2%
Northeast U.S. 1 -- 1 --
--------- ---------
Total 8 9 (1) -11.1%
--------- ---------
Defaults (Units)
Florida (89) (13) (76) 584.6%
Northeast U.S. -- -- -- 0.0%
--------- ---------
Total (89) (13) (76) 584.6
--------- ---------
Net New Orders (Units)
Florida (82) (4) (78) 1950.0%
Northeast U.S. 1 -- 1 --
--------- ---------
Total (81) (4) (77) 1925.0%
--------- ---------
Gross Contract Values
of New Orders
Florida $ 8,136 $ 9,869 (1,733) -17.6%
Northeast U.S. 1,283 29 1,254 4324.1%
--------- ---------
Total $ 9,419 $ 9,898 (479) -4.8%
--------- ---------
Contract Values of
Defaults
Florida $ (88,913) $ (8,620) (80,293) 931.5%
Northeast U.S. -- -- -- --
--------- ---------
Total $ (88,913) $ (8,620) (80,293) 931.5
--------- ---------
Net Contract Values of
New Orders
Florida $ (80,777) $ 1,249 (82,026) -6567.3%
Northeast U.S. 1,283 29 1,254 4324.1%
--------- ---------
Total $ (79,494) $ 1,278 (80,772) -6320.2%
--------- ---------
Gross Average Selling
Price Per New Order
Florida $ 1,162 $ 1,097 66 6.0%
Northeast U.S. 1,283 -- -- --
--------- ---------
Total $ 1,177 $ 1,100 78 7.1%
--------- ---------
For the
nine months ended
September 30,
----------------------
2007 2006
--------- ---------
Combined Traditional and
Tower Homebuilding
------------------------
Homes Closed (Units)* 1,235 1,547 (312) -20.2%
Net New Orders (Units) 311 829 (518) -62.5%
Net Contract Values of
New Orders $ 150,891 $ 693,249 (542,358) -78.2%
Average Selling Price
Per New Order, Gross $ 725 $ 791 (65) -8.3%
Traditional
Homebuilding $ 695 $ 733 (38) -5.2%
Tower Homebuilding $ 1,409 $ 1,333 76 5.7%
Traditional Homebuilding
------------------------
Homes Closed (Units)
Florida 484 950 (466) -49.1%
Northeast U.S. 200 119 81 68.1%
Mid-Atlantic U.S. 51 74 (23) -31.1%
--------- ---------
Total 735 1,143 (408) -35.7%
--------- ---------
Revenues, excluding lot
revenues
Florida $ 363,320 $ 584,268 (220,948) -37.8%
Northeast U.S. 109,389 63,988 45,401 71.0%
Mid-Atlantic U.S. 64,131 89,282 (25,151) -28.2%
--------- ---------
Total $ 536,840 $ 737,538 (200,698) -27.2%
--------- ---------
Average Selling Price
Per Home Closed
Florida $ 751 $ 615 136 22.1%
Northeast U.S. 547 538 9 1.7%
Mid-Atlantic U.S. 1,257 1,207 51 4.2%
--------- ---------
Total $ 730 $ 645 85 13.2%
--------- ---------
Gross New Orders
(Units)
Florida 490 695 (205) -29.5%
Northeast U.S. 148 253 (105) -41.5%
Mid-Atlantic U.S. 60 55 5 9.1%
--------- ---------
Total 698 1,003 (305) -30.4%
--------- ---------
Cancellations (Units)
Florida (197) (205) 8 -3.9%
Northeast U.S. (32) (32) -- 0.0%
Mid-Atlantic U.S. (13) (24) 11 -45.8%
--------- ---------
Total (242) (261) 19 -7.3%
--------- ---------
Net New Orders (Units)
Florida 293 490 (197) -40.2%
Northeast U.S. 116 221 (105) -47.5%
Mid-Atlantic U.S. 47 31 16 51.6%
--------- ---------
Total 456 742 (286) -38.5%
--------- ---------
Gross Contract Values
of New Orders
Florida $ 335,766 $ 531,079 (195,313) -36.8%
Northeast U.S. 84,605 131,606 (47,001) -35.7%
Mid-Atlantic U.S. 64,738 72,889 (8,151) -11.2%
--------- ---------
Total $ 485,109 $ 735,574 (250,465) -34.1%
--------- ---------
Contract Values of
Cancellations
Florida $(162,634) $(122,542) (40,092) 32.7%
Northeast U.S. (17,184) (15,767) (1,417) 9.0%
Mid-Atlantic U.S. (17,564) (31,939) 14,375 -45.0%
--------- ---------
Total $(197,382) $(170,248) (27,134) 15.9%
--------- ---------
Net Contract Values of
New Orders
Florida $ 173,132 $ 408,537 (235,405) -57.6%
Northeast U.S. 67,421 115,839 (48,418) -41.8%
Mid-Atlantic U.S. 47,174 40,950 6,224 15.2%
--------- ---------
Total $ 287,727 $ 565,326 (277,599) -49.1%
--------- ---------
Gross Average Selling
Price Per New Order
Florida $ 685 $ 764 (79) -10.3%
Northeast U.S. 572 520 51 9.9%
Mid-Atlantic U.S. 1,079 1,325 (246) -18.6%
--------- ---------
Total $ 695 $ 733 (38) -5.2%
--------- ---------
Tower Homebuilding
------------------
Homes Closed (Units)
Florida 500 404 96 23.8%
--------- ---------
Total 500 404 96 23.8%
--------- ---------
Revenues
Florida $ (7,442) $ 572,317 (579,759) -101.3%
Northeast U.S. 46,768 33,836 12,932 38.2%
--------- ---------
Total $ 39,326 $ 606,153 (566,827) -93.5%
--------- ---------
Gross New Orders
(Units)
Florida 27 99 (72) -72.7%
Northeast U.S. 4 7 (3) -42.9%
--------- ---------
Total 31 106 (75) -70.8%
--------- ---------
Defaults (Units)
Florida (173) (19) (154) 810.5%
Northeast U.S. (3) -- (3) --
--------- ---------
Total (176) (19) (157) 826.3%
--------- ---------
Net New Orders (Units)
Florida (146) 80 (226) -282.5%
Northeast U.S. 1 7 (6) -85.7%
--------- ---------
Total (145) 87 (232) -266.7%
--------- ---------
Gross Contract Values
of New Orders
Florida $ 39,004 $ 129,266 (90,262) -69.8%
Northeast U.S. 4,668 11,994 (7,326) -61.1%
--------- ---------
Total $ 43,672 $ 141,260 (97,588) -69.1%
--------- ---------
Contract Values of
Defaults
Florida $(178,020) $ (13,337) (164,683) 1234.8%
Northeast U.S. (2,488) -- (2,488) --
--------- ---------
Total $(180,508) $ (13,337) (167,171) 1253.4%
--------- ---------
Net Contract Values of
New Orders
Florida $(139,016) $ 115,929 (254,945) -219.9%
Northeast U.S. 2,180 11,994 (9,814) -81.8%
--------- ---------
Total $(136,836) $ 127,923 (264,759) -207.0%
--------- ---------
Gross Average Selling
Price Per New Order
Florida $ 1,445 $ 1,306 139 10.6%
Northeast U.S. $ 1,167 $ 1,713 (546) -31.9%
--------- ---------
Total $ 1,409 $ 1,333 76 5.7%
--------- ---------
Towers under
construction
recognizing revenue
during the period 11 24
September 30,
------------------------
2007 2006
----------- -----------
Combined Traditional and
Tower Homebuilding
------------------------
Aggregate Backlog Contract
Values,
Traditional and Tower
Homebuilding $ 516,955 $ 1,407,092 (890,137) -63.3%
Traditional Homebuilding
------------------------
Backlog (Units) 591 1,296 (705) -54.4%
Backlog Contract Values $ 442,016 $ 1,022,829 (580,813) -56.8%
Tower Homebuilding
------------------
Cumulative Units in Backlog 652 1,558 (906) -58.2%
Cumulative Contract
Values $ 883,894 $ 1,834,572 (950,678) -51.8%
Less: Cumulative Revenues
Recognized (808,955) (1,450,309) 641,354 -44.2%
----------- -----------
Backlog Contract Values $ 74,939 $ 384,263 (309,324) -80.5%
=========== ===========
* 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.
For the three
months ended
September 30,
----------------------
2007 2006
--------- ---------
Combined Traditional and
Tower Homebuilding
-------------------------
Gross New Orders (Units) 197 228 (31) -13.6%
Gross Contract Values
of New Orders $ 139,102 $ 179,585 (40,483) -22.5%
Net New Orders (Units) 24 140 (116) -82.9%
Net Contract Values of
New Orders $ (14,270) $ 120,046 (134,316) -111.9%
For the
nine months ended
September 30,
----------------------
2007 2006
--------- ---------
Combined Traditional and
Tower Homebuilding
-------------------------
Gross New Orders (Units) 729 1,109 (380) -34.3%
Gross Contract Values
of New Orders $ 528,781 $ 876,834 (348,053) -39.7%
Net New Orders (Units) 311 829 (518) -62.5%
Net Contract Values of
New Orders $ 150,891 $ 693,249 (542,358) -78.2%
WCI Communities, Inc.
Reconciliation of Gross Margin
(Dollars in thousands)
For the For the
Three months ended Nine months ended
September 30, September 30,
------------------- ---------------------
2007 2006 2007 2006
-------- -------- -------- ----------
Company Gross Margin
--------------------
Revenue $165,979 $425,558 $746,471 $1,522,195
-------- -------- -------- ----------
Gross margin (40,643) 62,567 (7,617) 289,717
Add back Homebuilding
impairment 4,865 2,260 22,991 6,850
Add back Tower impairment 31,062 -- 49,560 --
-------- -------- -------- ----------
Gross margin excluding
impairment $ (4,716) $ 64,827 $ 64,934 $ 296,567
-------- -------- -------- ----------
Gross margin % as
reported -24.5% 14.7% -1.0% 19.0%
Gross margin % excluding
impairment -2.8% 15.2% 8.7% 19.5%
Traditional Homebuilding
------------------------
Revenue $157,017 $211,897 $550,168 $ 757,011
-------- -------- -------- ----------
Gross margin 12,513 47,888 50,292 166,840
Add back impairment 4,865 2,260 22,991 6,850
-------- -------- -------- ----------
Gross margin excluding
impairment $ 17,378 $ 50,148 $ 73,283 $ 173,690
-------- -------- -------- ----------
Gross margin % as
reported 8.0% 22.6% 9.1% 22.0%
Gross margin % excluding
impairment 11.1% 23.7% 13.3% 22.9%
Tower Homebuilding
------------------
Revenue $(36,788) $172,324 $ 39,326 $ 606,153
-------- -------- -------- ----------
Gross margin (56,646) 31,077 (72,533) 130,105
Add back impairment 31,062 -- 49,560 --
-------- -------- -------- ----------
Total Gross Margin
excluding impairment $(25,584) $ 31,077 $(22,973) $ 130,105
-------- -------- -------- ----------
Gross margin % as
reported NM 18.0% NM 21.5%
Gross margin % excluding
impairment NM 18.0% NM 21.5%
--------------------------
NM = Not meaningful
EBITDA Calculation For the nine
------------------ months ended
9/30/07
----------
Loss from continuing operations before income taxes $ (217,181)
Add back:
Pre-tax income from discontinued operations 21,469
Interest exp, net 57,000
Capitalized interest amortized 28,630
Depreciation and amortization 15,952
Stock-based compensation expense 5,398
Asset impairment and other non-cash expenses 78,561
----------
EBITDA $ (10,171)
==========
Supplemental Information
Reconciliation of EBITDA to cash flows from
operating activities:
EBITDA $ (10,171)
Decrease in contracts receivable 482,341
Increase in real estate inventories (109,289)
Decrease in accounts payable and other liabilities (103,090)
Decrease in customer deposits (139,558)
All other (86,923)
----------
Net cash provided by operating activities $ 33,310
==========
(1) Earning before interest, taxes, depreciation and amortization
(EBITDA) is not generally accepted accounting principal (GAAP)
financial statement measurement. EBITDA should not be considered
an alternative to cash flow 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. A reconciliation of cash from EBITDA to operating
activities, the most directly comparable GAAP measure, is
provided above.
(2) In connection with the Company's Revolving Credit Facility and
Term Loan Agreement, the ratio of EBITDA to Fixed Charges is
computed by dividing EBITDA, as defined in the loan agreements
and generally consistent with the above amount, by Fixed Charges,
which is also defined in the loan agreement and generally
represents total interest incurred each period less the amount of
interest that is charged on outstanding balances under the Tower
Facility. The interest charged on the Tower Facility over the
last four quarters has averaged about $6 million.
Summary of Land Controlled
September 30, 2007
Remaining Units in Value in Spec
Planned Backlog as Backlog as Units
Region Units of 9/30/07 of 9/30/07 in WIP
Traditional Homebuilding
(Including Lots)
Florida
Miami / Ft. Lauderdale 1,262 185 $ 158.5 41
Naples / Ft. Myers 4,555 100 59.2 77
Palm Beach / Indian River 169 4 9.1 1
Palm Coast / Jacksonville 24 -- -- 5
Perdido Key 94 -- -- --
Tampa / Sarasota 4,125 134 111.4 24
Mid-Atlantic 368 26 31.0 10
Northeast 2,061 148 77.7 27
-------------------------------------------------------------------
Traditional Homebuilding
Total 12,658 597 446.9 185
Tower Homebuilding
Florida
Miami / Ft. Lauderdale 1,150 418 33.4 69
Naples / Ft. Myers 1,169 14 -- --
Palm Beach / Indian River 429 7 -- --
Palm Coast / Jacksonville 288 22 19.9 --
Perdido Key 1,507 9 -- --
Tampa / Sarasota 825 4 -- --
Mid-Atlantic 284 -- -- --
Northeast 480 178 21.7 28
-------------------------------------------------------------------
Tower Homebuilding Total 6,132 652 74.9 97
Total Homebuilding
Florida
Miami / Ft. Lauderdale 2,412 603 191.9 110
Naples / Ft. Myers 5,724 114 59.2 77
Palm Beach / Indian River 598 11 9.1 1
Palm Coast / Jacksonville 312 22 19.9 5
Perdido Key 1,601 9 -- --
Tampa / Sarasota 4,950 138 111.4 24
Mid-Atlantic 652 26 31.0 10
Northeast 2,541 326 99.4 55
-------------------------------------------------------------------
Total Homebuilding Total 18,790 1,249 521.8 282
===================================================================
Finished
Spec and Total
Model Units %
Region Units Remaining Owned
Traditional Homebuilding (Including Lots)
Florida
Miami / Ft. Lauderdale 115 921 100%
Naples / Ft. Myers 85 4,293 100%
Palm Beach / Indian River 16 148 100%
Palm Coast / Jacksonville 19 -- 100%
Perdido Key 12 82 100%
Tampa / Sarasota 109 3,858 50%
Mid-Atlantic 15 317 78%
Northeast 13 1,873 76%
---------------------------------------------------------------------
Traditional Homebuilding Total 384 11,492 79%
Tower Homebuilding
Florida
Miami / Ft. Lauderdale 2 661 85%
Naples / Ft. Myers 181 974 100%
Palm Beach / Indian River 42 380 45%
Palm Coast / Jacksonville 23 243 100%
Perdido Key 82 1,416 100%
Tampa / Sarasota 32 789 81%
Mid-Atlantic -- 284 100%
Northeast -- 274 43%
---------------------------------------------------------------------
Tower Homebuilding Total 362 5,021 86%
Total Homebuilding
Florida
Miami / Ft. Lauderdale 117 1,582 93%
Naples / Ft. Myers 266 5,267 100%
Palm Beach / Indian River 58 528 61%
Palm Coast / Jacksonville 42 243 100%
Perdido Key 94 1,498 100%
Tampa / Sarasota 141 4,647 55%
Mid-Atlantic 15 601 88%
Northeast 13 2,147 70%
---------------------------------------------------------------------
Total Homebuilding Total 746 16,513 81%
=====================================================================
Remaining Planned Units
September 30, 2007
Total
Owned Optioned Controlled
Traditional Homebuilding 10,008 2,650 12,658
Tower Homebuilding 5,296 836 6,132
---------------------------------------------------------------
Total Homebuilding 15,304 3,486 18,790
===============================================================