| | |
| | Exhibit 99.1 |
| | |
| Investor and Media Contact: | | Ernest Scheidemann |
| | (239) 498-8318 |
| | ernestscheidemann@wcicommunities.com |
FOR IMMEDIATE RELEASE
WCI Reports Second Quarter 2008 Results
Second Quarter Financial Highlights:
| • | | Net loss: $100.2 million |
| • | | Basic and diluted EPS: loss of $2.38 |
| • | | Recorded pre-tax impairments and write-offs of $33.1 million |
| • | | Revenues: $230.1 million – down 4.6% |
| • | | Gross new orders: $145.9 million – down 6.3% |
| • | | Backlog at June 30, 2008: $120.0 million |
| • | | Year-to-Date Cash Flow from Operations $236.7 million |
Bonita Springs, FL (July 29, 2008) – WCI Communities, Inc. (NYSE: WCI), a leading builder of traditional and tower residences in highly amenitized lifestyle communities, today reported its results for the second quarter of 2008. For the three months ended June 30, 2008, WCI reported a net loss of $100.2 million, compared with net loss of $33.2 million in the second quarter of 2007. Basic and diluted earnings per share (EPS) from continuing operations was a loss of $2.38 compared to a loss of $1.12 for the same period a year ago. Revenues for the second quarter of 2008 were $230.1 million, compared with $241.2 million for the second quarter of 2007, a 4.6% decrease. Overall company gross margin for the second quarter of 2008 was negative 15.7% versus negative 2.9% for the second quarter of 2007.
For the six month period ended June 30, 2008, the net loss totaled $184.3 million compared with a loss of $49.0 million during the first half of 2007. Diluted EPS from continuing operations declined to a loss of $4.37 versus a loss of $1.51 for the same period a year ago. Revenues decreased 36.6% to $367.1 million from $579.4 million in the year earlier period. Gross margin as a percent of revenue was negative 10.2% for the six months ended June 30, 2008 compared to 5.6% for the first six months of 2007. Excluding impairments of $25.9 and option abandonments of $7.1 million, for the six month period gross margin as a percent of revenue was negative 7.3% versus 12.1% in the year earlier period.
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For the three and six months ended June 30, 2008, combined Traditional and Tower Homebuilding gross new orders increased by 12.5% and 8.7% to 243 units and 578 units, while the aggregate value of gross new orders declined by 6.3% and 10.0% compared to the three and six months ended June 30, 2007, respectively. Cancellations, defaults and rescissions increased for the three and six month periods when compared to these same period in 2007, resulting in a decline in the overall number of net new unit orders. This decline in net new orders included Tower Homebuilding contract defaults for the Oceanside tower in Florida as well as Traditional homebuilding cancellations that were initiated by the company, each discussed further below, which on a combined basis contributed 160 and 190 cancellations for the three and six months ended June 30, 2008, respectively. Absent the Oceanside defaults and developer cancellations, aggregate net new orders increased for the six months ended June 30, 2008 by 19.9% compared to the same period in 2007.
Traditional Homebuilding
Second quarter 2008 revenues for Traditional Homebuilding, including lot sales, fell 45.4% to $97.7 million from $178.9 million for the second quarter of 2007. The company closed 186 homes compared with 217 for the same period a year ago. Florida revenues totaled $74.8 million or 76.6% of total Traditional Homebuilding revenues versus $130.2 million or 72.8% for the second quarter of 2007. Revenues from WCI’s Northeast Division accounted for 10.9% of Traditional Homebuilding revenues during the second quarter of 2008 vs. 12.0% during the same period a year ago and the company’s Mid-Atlantic Division accounted for 12.4% and 15.2% for the second quarter of 2008 and 2007, respectively. Gross margin as a percentage of revenue for Traditional Homebuilding was a negative 15.8% for the second quarter of 2008, down from 1.3% in the same period a year ago, due in large part to significant discounts and incentives to sell finished spec inventory as well as impairment charges of $11.1 million recorded this quarter, primarily as a result of mothballing two communities and to reflect lower anticipated selling prices on traditional homes that were returned to inventory following customer contract cancellations.
For the six month period ended June 30, 2008, Traditional Homebuilding revenues decreased 51.6% to $190.4 million. The company closed 356 homes compared with 523 for the same period a year ago. Gross margin as a percentage of revenue declined to negative 7.9% compared to 9.6% for the first six months of 2007. Excluding impairments of $18.0 million for the first six months of 2008, gross margin as a percent of revenue would have been 1.6%.
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For the second quarter and first half of 2008, the number of gross orders decreased 22.4% and 22.6% respectively. The value of Traditional Homebuilding gross orders declined 46.1% to $77.1 million in the second quarter and declined 45.2% to $194.8 million on a year to date basis. The cancellation rate for the second quarter of 2008 was 61.6%, up from 39.1% in the first quarter of the year. Cancellations during the quarter totaled 98, which was equal to the cancellations during the same period a year ago. Cancellation rates for the three and six month periods ended June 30, 2008, were negatively impacted by our decision to voluntarily cancel 60 and 84 contracts, respectively, in certain communities and/or subdivisions in which we decided to postpone the construction of new homes, in order to avoid large investments in new development infrastructure. Excluding these developer cancellations, our cancellation rates were approximately 23.9% and 26.9% for the three and six month periods ended June 30, 2008, respectively. The average price for Traditional Homebuilding gross orders for the second quarter of 2008 fell 30.5% to $485,000 compared with $698,000 for the second quarter of 2007, due to a combination of price reductions, and mix changes. Discounts during the quarter were approximately 18.1% of sales office list pricing, compared to approximately 16.8% on orders in the same period a year ago. In total, 143 gross spec homes were sold during the quarter, with an average projected gross margin as a percent of revenues of 0%, compared to a 20% average gross margin projected for the 16 gross to-be-built orders for the quarter.
Tower Homebuilding
For the three months ended June 30, 2008, revenues in the Tower Homebuilding Division were $11.3 million, up from $2.1 million for the same period a year ago. There was one tower completing construction during the quarter compared with 7 towers under construction and recognizing revenue during the second quarter 2007. Tower Homebuilding gross margin dollars for the second quarter of 2008 totaled a negative $27.5 million. During the quarter, 71 finished spec units closed and generated $56.9 million of revenue and a 20.9% gross margin. The normal relationship between Tower Homebuilding revenue and gross margin was not evident once again this quarter as the reversal of $28.0 million of revenue because of 28 Tower defaults and other charges resulted in variances that obscured typical trends. In addition to the impacts from the defaulted units, a total of $21.9 million of impairment charges and write-offs were recorded, including $10.8 million for certain completed tower units, $4.0 million related to one undeveloped tower site, and $7.1 million of pre-development costs related to the termination of an option agreement. 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 second quarter of 2008, $7.7 million of unfavorable adjustments (including a $938,000 increase to the default reserve) were made related to
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towers completed or under construction. These adjustments included additional construction costs as a result of contractor costs to complete projects, and estimated increased interest costs associated with longer tower construction cycles. In addition, gross margin was negatively impacted by $5.5 million in costs associated with the start-up of the hotel operations of our tower segment.
For the first half of 2008, revenues in the Tower Homebuilding Division fell 80.9% to $14.6 million. Gross margin was negative $32.1 million for the first half of 2008 compared to negative $15.9 million in the same period last year,due principally to the impairment charges, the reversal of revenue and gross margin on defaulted units and the cost adjustments referenced above.
Tower Homebuilding gross new orders for the three and six month periods ended June 30, 2008 increased from 11 units to 84 units and from 23 units to 184 units, respectively. Cancellations, rescissions and defaults recorded were 174 units and 234 units for the same periods, resulting in net new orders of negative 90 and negative 50, respectively. However, these defaults included 100 and 106 defaulted contracts that were recorded during the three and six months ended June 30, 2008, respectively, related to the Oceanside tower project in Florida. These defaults did not impact our tower revenue or gross margin since we had previously reversed the gross margin with respect to this project upon ceasing the application of percentage-of-completion accounting on this tower during the fourth quarter of 2007. Excluding these defaulted Oceanside contracts, net new orders totaled 10 and 56 for the three and six months ended June 30, 2008, respectively, resulting in a default rate year-to-date of 23.9%. The average gross order price for Tower Homebuilding units sold in the second quarter of 2008 was $819,000 compared with $1.1 million in the period a year ago, driven by a combination of price reductions and mix changes for units sold. Tower Homebuilding backlog at June 30, 2008 totaled $23.5 million, compared with $36.9 million at March 31, 2008.
Real Estate Services
Revenues for the Real Estate Services Division for the second quarter 2008 were $22.2 million, a 19.1% decrease from the $27.4 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 6.1% compared with 9.0% in the second quarter 2007.
For the six month period, revenues in the Real Estate Services Division totaled $39.5 million, down 25.5% from the $53.0 million recorded for the six months ended June 30, 2007. Gross margin as a percentage of revenue over the period decreased to 4.0% from 8.6% in the same period a year ago primarily due to lower average selling prices of homes combined with lower sales volumes.
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Other Items
Revenues for the Amenities Division for the second quarter 2008 were $18.5 million, almost even with the $18.4 million recorded in the same period a year ago. Gross margin totaled a negative $0.7 million for the second quarter 2008 versus a negative $0.9 million in the second quarter of 2007. Year to date, revenues were $41.1 million and $41.0 million for 2008 and 2007, respectively. Gross margin for the six month period ended June 30, 2008 was 5.0% compared to 0.6% for the year-ago period.
Land sale revenues for the second quarter 2008 included the sale of the Tuscany Reserve community in Naples Florida and totaled $79.4 million compared with $12.6 million for the second quarter of 2007. Gross margin as a percentage of land sales revenue equaled 7.7% for the second quarter of 2008 compared to 47.1% in the second quarter of 2007.
Other income and expense in the second quarter included a $9.0 million non-cash mark-to-market gain on the interest rate swap agreement that the company entered into in December 2005 to hedge against interest rate fluctuations on its senior variable rate bank debt. This second quarter non-cash gain directly offset a comparable non-cash loss on the same hedging instrument in the first quarter of 2008, resulting in other income of $1.1 million on a year-to-date basis in 2008 compared to $1.3 million for the first six months of 2007.
Selling, general, and administrative expenses including real estate taxes (SG&A) declined $14.1 million or 28.3% to $35.7 million for the second quarter 2008 versus $49.8 million in the second quarter of 2007. On a year to date basis, SG&A declined $21.5 million or 22.2% to $75.2 million. The lower SG&A expenses in 2008 were primarily due to reductions in salaries and benefits, as well as reductions in sales and marketing expenses. The company continues to evaluate and adjust the size of its workforce given the continued weak market environment. The company continued reducing its workforce during the second quarter and now expects its annualized salary and wage expense to be less than $66.0 million, compared to its peak run rate of about $180.0 million.
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Cash Flow/Financial Position/Balance Sheet
For the three and six months ended June 30, 2008, cash flow from operating activities totaled $169.3 million and $236.7 million respectively, compared to $(16.1) million and $86.3 million, respectively in the same periods a year ago. The company continues to expect cash flow from operations to exceed $300 million for the full year.
The ratio of net debt to net capitalization increased to 86.4% at June 30, 2008 compared to 80.5% at December 31, 2007. As a result of the mandatory prepayment terms in our senior secured revolving credit agreement (Revolver), the total commitments under that facility were reduced by $44.4 million to $605.6 million through a prepayment with the net cash proceeds from the closing of the Tuscany Reserve asset sale on May 15, 2008. Subsequently, as required under the Revolver loan agreement, the total commitments were further reduced to $600.0 million on July 1, 2008. In addition, the sale of Tuscany Reserve resulted in an $18.9 million mandatory prepayment of the senior secured term loan (Term Loan) which completely satisfied the July 1, 2008 scheduled amortization requirement under the facility. As of June 30, 2008, net of $46.3 million in letters of credit, we had approximately $101.6 million available commitments under our senior secured credit facility which was further limited by borrowing base availability which was an estimated $30.0 million at June 30, 2008, plus $61.1 million of cash and cash equivalents. Due to our focus and success of selling unsold completed inventory, the impact of impairments to our inventory, and the impact of significant reductions in inventory additions, our borrowing capacity may be limited by the availability determined through our borrowing base as calculated under the Revolver and Term Loan agreements, which is currently less than the available loan commitments. In addition, our lenders are currently obtaining appraisals on our properties in the borrowing base, and while only a portion of those appraisals are complete, in some cases the appraisals reflect values that are lower than book value, having the effect of further limiting our borrowing base capacity and resulting in the loss of additional borrowing capacity. These lower than expected appraisal values could potentially trigger a mandatory repayment obligation in future periods. Thus far, we have received appraisals on assets totaling approximately $700 million of which aggregate appraisal values exceed 95% of book value, however, the ratio of appraised value to book value received to date may or may not represent the ratio of appraised value of remaining inventory.
Because the company was unable to provide notice on July 22, 2008 to its senior lenders that the company had the minimum required liquidity in cash and available commitments of $150.0 million on a proforma basis giving consideration the impact of satisfying the repayment of the notes due on
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August 5, 2008 for cash, the company is now in default under its Revolver, Term Loan and tower construction loan agreements. As a result, the company’s access to additional liquidity from the Revolver has been suspended pending the resolution of this repayment obligation and completion of the proposed bank facility amendments as further described in the Tender Offer documents discussed below.
Recent Developments
As previously announced, the company amended the exchange offer it commenced on July 8, 2008 for all of its outstanding $125.0 million 4.0% Contingent Convertible Senior Subordinated Notes due 2023. Pursuant to the terms of the amended exchange offer, the company is offering to exchange a unit, consisting of $1,000 principal amount of new 17.5% senior secured notes due 2012 plus a warrant to purchase 33.7392 shares of our common stock, for each $1,000 principal amount of the outstanding convertible notes. The exchange offer is subject to customary conditions as well as a 90% minimum tender condition, and the consummation of an amendment and restatement of the company’s existing credit facilities and the issuance of new secured lien notes. The company can give no assurance that it will be able to successfully consummate the exchange offer.
Conference Call
As a result of the proposed transactions further described in the Tender Offer as filed on July 8, 2008 and as amended on July 22, 2008, WCI does not plan to conduct a conference call to discuss second quarter results in conjunction with this news release.
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 15,000 traditional and tower homes.
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# # #
For more information about WCI and its residential communities visit
www.wcicommunities.com
Forward-Looking Statement
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 as a going concern 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 maintain sufficient working capital; 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 amend its bank agreements or obtain waivers to cure any existing bank defaults; the insolvency of WCI; the instiution of proceedings under the Bankruptcy Code of the United States relating to WCI and/or its subsidiaries; 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; the negative impact if certain Watermark purchasers elect to rescind their contracts to the extent they are entitled to any rescission rights; 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.
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WCI Communities, Inc.
Condensed Consolidated Balance Sheets
(Dollars in thousands)
| | | | | | | | |
| | | June 30, | | | December 31, | |
| | | 2008 | | | 2007 | |
Assets | | | | | | | | |
| | |
Cash and cash equivalents | | $ | 61,130 | | | $ | 188,821 | |
Contracts receivable | | | 58,841 | | | | 358,327 | |
Real estate inventories | | | 1,655,434 | | | | 1,848,309 | |
Property and equipment | | | 227,983 | | | | 236,429 | |
Other assets | | | 174,791 | | | | 259,345 | |
| | | | | | | | |
Total assets | | $ | 2,178,179 | | | $ | 2,891,231 | |
| | | | | | | | |
Liabilities and Shareholders’ Equity | | | | | | | | |
| | |
Accounts payable, accruals and other liabilities | | $ | 365,650 | | | $ | 547,597 | |
Debt obligations: | | | | | | | | |
Senior revolving credit facility | | | 457,762 | | | | 545,975 | |
Senior term note | | | 224,829 | | | | 262,500 | |
Mortgages and notes payable | | | 77,332 | | | | 300,125 | |
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 | | | 1,574,923 | | | | 1,923,600 | |
| | | | | | | | |
Total shareholders’ equity | | | 237,606 | | | | 420,034 | |
| | | | | | | | |
Total liabilities and shareholders’ equity | | $ | 2,178,179 | | | $ | 2,891,231 | |
| | | | | | | | |
Other Balance Sheet Data | | | | | | | | |
Debt | | $ | 1,574,923 | | | $ | 1,923,600 | |
Shareholders’ equity | | | 237,606 | | | | 420,034 | |
| | | | | | | | |
Capitalization | | $ | 1,812,529 | | | $ | 2,343,634 | |
| | | | | | | | |
Ratio of debt to capitalization | | | 86.9 | % | | | 82.1 | % |
| | |
Debt, net of cash and cash equivalents | | $ | 1,513,793 | | | $ | 1,734,779 | |
Shareholders’ equity | | | 237,606 | | | | 420,034 | |
| | | | | | | | |
Capitalization, net of cash and cash equivalents | | $ | 1,751,399 | | | $ | 2,154,813 | |
| | | | | | | | |
Ratio of net debt to net capitalization | | | 86.4 | % | | | 80.5 | % |
| | |
Shareholders’ equity per share | | $ | 5.64 | | | $ | 9.97 | |
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WCI Communities, Inc.
Selected Revenues and Earnings Information
(Dollars in thousands, except per share data)
| | | | | | | | | | | | | | | | |
| | | For the three months ended | | | For the six months ended | |
| | | June 30, | | | June 30, | |
| | | 2008 | | | 2007 | | | 2008 | | | 2007 | |
REVENUES | | | | | | | | | | | | | | | | |
| | | | |
Homebuilding: | | | | | | | | | | | | | | | | |
Homes | | $ | 94,197 | | | $ | 171,283 | | | $ | 185,295 | | | $ | 385,356 | |
Lots | | | 3,455 | | | | 7,659 | | | | 5,075 | | | | 7,796 | |
| | | | | | | | | | | | | | | | |
Total traditional | | | 97,652 | | | | 178,942 | | | | 190,370 | | | | 393,152 | |
Towers | | | 11,314 | | | | 2,130 | | | | 14,577 | | | | 76,114 | |
| | | | | | | | | | | | | | | | |
Total homebuilding | | | 108,966 | | | | 181,072 | | | | 204,947 | | | | 469,266 | |
| | | | |
Real estate services | | | 22,162 | | | | 27,379 | | | | 39,503 | | | | 53,000 | |
Amenity membership and operations | | | 18,499 | | | | 18,434 | | | | 41,063 | | | | 41,018 | |
Land sales | | | 79,420 | | | | 12,598 | | | | 79,420 | | | | 12,598 | |
Other | | | 1,036 | | | | 1,705 | | | | 2,201 | | | | 3,472 | |
| | | | | | | | | | | | | | | | |
Total revenues | | | 230,083 | | | | 241,188 | | | | 367,134 | | | | 579,354 | |
| | | | | | | | | | | | | | | | |
GROSS MARGIN | | | | | | | | | | | | | | | | |
| | | | |
Homebuilding: | | | | | | | | | | | | | | | | |
Homes | | | (16,259 | ) | | | (224 | ) | | | (16,591 | ) | | | 35,313 | |
Lots | | | 866 | | | | 2,479 | | | | 1,601 | | | | 2,467 | |
| | | | | | | | | | | | | | | | |
Total traditional | | | (15,393 | ) | | | 2,255 | | | | (14,990 | ) | | | 37,780 | |
Towers | | | (27,450 | ) | | | (16,723 | ) | | | (32,144 | ) | | | (15,888 | ) |
| | | | | | | | | | | | | | | | |
Total homebuilding | | | (42,843 | ) | | | (14,468 | ) | | | (47,134 | ) | | | 21,892 | |
| | | | |
Real estate services | | | 1,341 | | | | 2,472 | | | | 1,569 | | | | 4,574 | |
Amenity membership and operations | | | (737 | ) | | | (924 | ) | | | 2,053 | | | | 266 | |
Land sales | | | 6,124 | | | | 5,937 | | | | 6,023 | | | | 5,867 | |
Other | | | (61 | ) | | | 28 | | | | 205 | | | | 99 | |
| | | | | | | | | | | | | | | | |
Total gross margin | | | (36,176 | ) | | | (6,955 | ) | | | (37,284 | ) | | | 32,698 | |
| | | | | | | | | | | | | | | | |
OTHER INCOME AND EXPENSES | | | | | | | | | | | | | | | | |
Equity in losses (earnings) from joint ventures | | | (155 | ) | | | 291 | | | | (101 | ) | | | (495 | ) |
Other income | | | 429 | | | | (363 | ) | | | (1,576 | ) | | | (852 | ) |
Market valuation on interest rate swap | | | (8,915 | ) | | | — | | | | 590 | | | | | |
Hurricane recoveries | | | — | | | | (3,881 | ) | | | — | | | | (5,393 | ) |
Selling, general and administrative, including real estate taxes, net | | | 35,735 | | | | 49,836 | | | | 75,239 | | | | 96,739 | |
Depreciation and amortization | | | 4,787 | | | | 5,577 | | | | 9,742 | | | | 11,232 | |
Interest expense, net | | | 31,670 | | | | 18,271 | | | | 62,165 | | | | 34,635 | |
Expenses related to debt amendments and early repayment of debt | | | 1,343 | | | | — | | | | 1,343 | | | | — | |
| | | | | | | | | | | | | | | | |
Loss from continuing operations before minority interests and income taxes | | | (101,070 | ) | | | (76,686 | ) | | | (184,686 | ) | | | (103,168 | ) |
Minority interests | | | 1,119 | | | | 1,415 | | | | 874 | | | | 822 | |
Income tax expense (benefit) | | | 267 | | | | (28,428 | ) | | | 504 | | | | (38,899 | ) |
| | | | | | | | | | | | | | | | |
Loss from continuing operations | | | (100,218 | ) | | | (46,843 | ) | | | (184,316 | ) | | | (63,447 | ) |
Income from discontinued operations, net of tax | | | — | | | | 273 | | | | — | | | | 1,066 | |
Gain on sale of discontinued operations, net of tax | | | — | | | | 13,353 | | | | — | | | | 13,353 | |
| | | | | | | | | | | | | | | | |
Net loss | | $ | (100,218 | ) | | $ | (33,217 | ) | | $ | (184,316 | ) | | $ | (49,028 | ) |
| | | | | | | | | | | | | | | | |
(LOSS) EARNINGS PER SHARE: | | | | | | | | | | | | | | | | |
Basic: | | | | | | | | | | | | | | | | |
From continuing operations | | $ | (2.38 | ) | | $ | (1.12 | ) | | $ | (4.37 | ) | | $ | (1.51 | ) |
From discontinued operations | | | 0.00 | | | | 0.33 | | | | 0.00 | | | | 0.34 | |
| | | | | | | | | | | | | | | | |
| | $ | (2.38 | ) | | $ | (0.79 | ) | | $ | (4.37 | ) | | $ | (1.17 | ) |
| | | | | | | | | | | | | | | | |
Diluted: | | | | | | | | | | | | | | | | |
From continuing operations | | $ | (2.38 | ) | | $ | (1.12 | ) | | $ | (4.37 | ) | | $ | (1.51 | ) |
From discontinued operations | | | 0.00 | | | | 0.33 | | | | 0.00 | | | | 0.34 | |
| | | | | | | | | | | | | | | | |
| | $ | (2.38 | ) | | $ | (0.79 | ) | | $ | (4.37 | ) | | $ | (1.17 | ) |
| | | | | | | | | | | | | | | | |
WEIGHTED AVERAGE NUMBER OF SHARES | | | | | | | | | | | | | | | | |
Basic | | | 42,169 | | | | 41,988 | | | | 42,159 | | | | 41,954 | |
Diluted | | | 42,169 | | | | 41,988 | | | | 42,159 | | | | 41,954 | |
| | | | |
OPERATING DATA | | | | | | | | | | | | | | | | |
Interest incurred | | $ | 33,551 | | | $ | 34,544 | | | $ | 69,441 | | | $ | 69,933 | |
Interest included in cost of sales | | $ | 24,922 | | | $ | 8,560 | | | $ | 30,751 | | | $ | 22,336 | |
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WCI Communities, Inc.
Homebuilding Operational Data
(Dollars in thousands)
| | | | | | | | | | | | | | | | |
| | | For the three months ended | | | For the six months ended | |
| | | June 30, | | | June 30, | |
| | | 2008 | | | 2007 | | | 2008 | | | 2007 | |
Combined Traditional and Tower Homebuilding | | | | | | | | | | | | | | | | |
Homes Closed (Units)* | | | 363 | | | | 389 | | | | 672 | | | | 949 | |
| | | | |
Gross New Orders (Units) | | | 243 | | | | 216 | | | | 578 | | | | 532 | |
Gross Contract Values of New Orders | | $ | 145,869 | | | $ | 155,688 | | | $ | 350,899 | | | $ | 389,677 | |
| | | | |
Net New Orders (Units) | | | (29 | ) | | | 50 | | | | 154 | | | | 287 | |
Net Contract Values of New Orders | | $ | (109,753 | ) | | $ | 9,057 | | | $ | (31,188 | ) | | $ | 165,160 | |
| | | | |
Average Selling Price Per New Order, Gross | | $ | 600 | | | $ | 721 | | | $ | 607 | | | $ | 732 | |
| | | | |
Traditional Homebuilding | | | | | | | | | | | | | | | | |
Homes Closed (Units) | | | | | | | | | | | | | | | | |
Florida | | | 155 | | | | 156 | | | | 295 | | | | 339 | |
Northeast U.S. | | | 21 | | | | 37 | | | | 46 | | | | 147 | |
Mid-Atlantic U.S. | | | 10 | | | | 24 | | | | 15 | | | | 37 | |
| | | | | | | | | | | | | | | | |
Total | | | 186 | | | | 217 | | | | 356 | | | | 523 | |
| | | | | | | | | | | | | | | | |
Revenues, excluding lot revenues | | | | | | | | | | | | | | | | |
Florida | | $ | 71,350 | | | $ | 122,590 | | | $ | 143,592 | | | $ | 259,805 | |
Northeast U.S. | | | 10,691 | | | | 21,405 | | | | 22,553 | | | | 80,673 | |
Mid-Atlantic U.S. | | | 12,156 | | | | 27,288 | | | | 19,150 | | | | 44,878 | |
| | | | | | | | | | | | | | | | |
Total | | $ | 94,197 | | | $ | 171,283 | | | $ | 185,295 | | | $ | 385,356 | |
| | | | | | | | | | | | | | | | |
Average Selling Price Per Home Closed | | | | | | | | | | | | | | | | |
Florida | | $ | 460 | | | $ | 786 | | | $ | 487 | | | $ | 766 | |
Northeast U.S. | | | 509 | | | | 579 | | | | 490 | | | | 549 | |
Mid-Atlantic U.S. | | | 1,216 | | | | 1,137 | | | | 1,277 | | | | 1,213 | |
| | | | | | | | | | | | | | | | |
Total | | $ | 506 | | | $ | 789 | | | $ | 520 | | | $ | 737 | |
| | | | | | | | | | | | | | | | |
Gross New Orders (Units) | | | | | | | | | | | | | | | | |
Florida | | | 135 | | | | 132 | | | | 338 | | | | 347 | |
Northeast U.S. | | | 17 | | | | 51 | | | | 42 | | | | 111 | |
Mid-Atlantic U.S. | | | 7 | | | | 22 | | | | 14 | | | | 51 | |
| | | | | | | | | | | | | | | | |
Total | | | 159 | | | | 205 | | | | 394 | | | | 509 | |
| | | | | | | | | | | | | | | | |
Cancellations (Units) | | | | | | | | | | | | | | | | |
Florida | | | (50 | ) | | | (75 | ) | | | (121 | ) | | | (123 | ) |
Northeast U.S. | | | (48 | ) | | | (16 | ) | | | (68 | ) | | | (25 | ) |
Mid-Atlantic U.S. | | | — | | | | (7 | ) | | | (1 | ) | | | (10 | ) |
| | | | | | | | | | | | | | | | |
Total | | | (98 | ) | | | (98 | ) | | | (190 | ) | | | (158 | ) |
| | | | | | | | | | | | | | | | |
Net New Orders (Units) | | | | | | | | | | | | | | | | |
Florida | | | 85 | | | | 57 | | | | 217 | | | | 224 | |
Northeast U.S. | | | (31 | ) | | | 35 | | | | (26 | ) | | | 86 | |
Mid-Atlantic U.S. | | | 7 | | | | 15 | | | | 13 | | | | 41 | |
| | | | | | | | | | | | | | | | |
Total | | | 61 | | | | 107 | | | | 204 | | | | 351 | |
| | | | | | | | | | | | | | | | |
Gross Contract Values of New Orders | | | | | | | | | | | | | | | | |
Florida | | $ | 59,093 | | | $ | 90,455 | | | $ | 154,189 | | | $ | 233,522 | |
Northeast U.S. | | | 9,509 | | | | 28,686 | | | | 22,926 | | | | 64,478 | |
Mid-Atlantic U.S. | | | 8,496 | | | | 23,919 | | | | 17,700 | | | | 57,426 | |
| | | | | | | | | | | | | | | | |
Total | | $ | 77,098 | | | $ | 143,060 | | | $ | 194,815 | | | $ | 355,426 | |
| | | | | | | | | | | | | | | | |
Contract Values of Cancellations | | | | | | | | | | | | | | | | |
Florida | | $ | (30,879 | ) | | $ | (64,317 | ) | | $ | (74,529 | ) | | $ | (108,181 | ) |
Northeast U.S. | | | (22,750 | ) | | | (8,380 | ) | | | (33,492 | ) | | | (13,426 | ) |
Mid-Atlantic U.S. | | | — | | | | (6,792 | ) | | | (830 | ) | | | (11,315 | ) |
| | | | | | | | | | | | | | | | |
Total | | $ | (53,629 | ) | | $ | (79,489 | ) | | $ | (108,851 | ) | | $ | (132,922 | ) |
| | | | | | | | | | | | | | | | |
Net Contract Values of New Orders | | | | | | | | | | | | | | | | |
Florida | | $ | 28,214 | | | $ | 26,138 | | | $ | 79,660 | | | $ | 125,341 | |
Northeast U.S. | | | (13,241 | ) | | | 20,306 | | | | (10,566 | ) | | | 51,052 | |
Mid-Atlantic U.S. | | | 8,496 | | | | 17,127 | | | | 16,870 | | | | 46,111 | |
| | | | | | | | | | | | | | | | |
Total | | $ | 23,469 | | | $ | 63,571 | | | $ | 85,964 | | | $ | 222,504 | |
| | | | | | | | | | | | | | | | |
Gross Average Selling Price Per New Order | | | | | | | | | | | | | | | | |
Florida | | $ | 438 | | | $ | 685 | | | $ | 456 | | | $ | 673 | |
Northeast U.S. | | | 559 | | | | 562 | | | | 546 | | | | 581 | |
Mid-Atlantic U.S. | | | 1,214 | | | | 1,087 | | | | 1,264 | | | | 1,126 | |
| | | | | | | | | | | | | | | | |
Total | | $ | 485 | | | $ | 698 | | | $ | 494 | | | $ | 698 | |
| | | | | | | | | | | | | | | | |
11
| | | | | | | | | | | | | | | | |
Tower Homebuilding | | | | | | | | | | | | | | | | |
Homes Closed (Units) | | | | | | | | | | | | | | | | |
Florida | | | 97 | | | | 172 | | | | 227 | | | | 426 | |
Northeast U.S | | | 80 | | | | — | | | | 89 | | | | — | |
| | | | | | | | | | | | | | | | |
Total | | | 177 | | | | 172 | | | | 316 | | | | 426 | |
| | | | | | | | | | | | | | | | |
Revenues | | | | | | | | | | | | | | | | |
Florida | | $ | 47,604 | | | $ | (17,078 | ) | | $ | 48,554 | | | $ | 38,355 | |
Northeast U.S. | | | (36,290 | ) | | | 19,208 | | | | (33,977 | ) | | | 37,759 | |
| | | | | | | | | | | | | | | | |
Total | | $ | 11,314 | | | $ | 2,130 | | | $ | 14,577 | | | $ | 76,114 | |
| | | | | | | | | | | | | | | | |
Gross New Orders (Units) | | | | | | | | | | | | | | | | |
Florida | | | 73 | | | | 9 | | | | 170 | | | | 20 | |
Northeast U.S. | | | 11 | | | | 2 | | | | 14 | | | | 3 | |
| | | | | | | | | | | | | | | | |
Total | | | 84 | | | | 11 | | | | 184 | | | | 23 | |
| | | | | | | | | | | | | | | | |
Cancellations/Defaults (Units) | | | | | | | | | | | | | | | | |
Florida | | | (123 | ) | | | (67 | ) | | | (179 | ) | | | (84 | ) |
Northeast U.S. | | | (51 | ) | | | (1 | ) | | | (55 | ) | | | (3 | ) |
| | | | | | | | | | | | | | | | |
Total | | | (174 | ) | | | (68 | ) | | | (234 | ) | | | (87 | ) |
| | | | | | | | | | | | | | | | |
Net New Orders (Units) | | | | | | | | | | | | | | | | |
Florida | | | (50 | ) | | | (58 | ) | | | (9 | ) | | | (64 | ) |
Northeast U.S. | | | (40 | ) | | | 1 | | | | (41 | ) | | | — | |
| | | | | | | | | | | | | | | | |
Total | | | (90 | ) | | | (57 | ) | | | (50 | ) | | | (64 | ) |
| | | | | | | | | | | | | | | | |
Gross Contract Values of New Orders | | | | | | | | | | | | | | | | |
Florida | | $ | 58,574 | | | $ | 10,356 | | | $ | 142,140 | | | $ | 30,866 | |
Northeast U.S. | | | 10,197 | | | | 2,272 | | | | 13,944 | | | | 3,385 | |
| | | | | | | | | | | | | | | | |
Total | | $ | 68,771 | | | $ | 12,628 | | | $ | 156,084 | | | $ | 34,251 | |
| | | | | | | | | | | | | | | | |
Contract Values of Cancellations/Defaults | | | | | | | | | | | | | | | | |
Florida | | $ | (150,331 | ) | | $ | (66,261 | ) | | $ | (218,099 | ) | | $ | (89,107 | ) |
Northeast U.S. | | | (51,662 | ) | | | (881 | ) | | | (55,137 | ) | | | (2,488 | ) |
| | | | | | | | | | | | | | | | |
Total | | $ | (201,993 | ) | | $ | (67,142 | ) | | $ | (273,236 | ) | | $ | (91,595 | ) |
| | | | | | | | | | | | | | | | |
Net Contract Values of New Orders | | | | | | | | | | | | | | | | |
Florida | | $ | (91,757 | ) | | $ | (55,905 | ) | | $ | (75,959 | ) | | $ | (58,241 | ) |
Northeast U.S. | | | (41,465 | ) | | | 1,391 | | | | (41,193 | ) | | | 897 | |
| | | | | | | | | | | | | | | | |
Total | | $ | (133,222 | ) | | $ | (54,514 | ) | | $ | (117,152 | ) | | $ | (57,344 | ) |
| | | | | | | | | | | | | | | | |
Gross Average Selling Price Per New Order | | | | | | | | | | | | | | | | |
Florida | | $ | 802 | | | $ | 1,151 | | | $ | 836 | | | $ | 1,543 | |
Northeast U.S. | | | 927 | | | | 1,136 | | | $ | 996 | | | $ | 1,128 | |
| | | | | | | | | | | | | | | | |
Total | | $ | 819 | | | $ | 1,148 | | | $ | 848 | | | $ | 1,489 | |
| | | | | | | | | | | | | | | | |
Towers under construction recognizing revenue during the period | | | 1 | | | | 7 | | | | 1 | | | | 11 | |
| | | | | | | | |
| | | June 30, | |
| | | 2008 | | | 2007 | |
Combined Traditional and Tower Homebuilding | | | | | | | | |
Aggregate Backlog Contract Values, Traditional and Tower Homebuilding | | $ | 119,976 | | | $ | 635,595 | |
| | |
Traditional Homebuilding | | | | | | | | |
Backlog (Units) | | | 165 | | | | 698 | |
| | |
Backlog Contract Values | | $ | 96,521 | | | $ | 525,360 | |
| | |
Tower Homebuilding | | | | | | | | |
| | |
Cumulative Units in Backlog | | | 86 | | | | 807 | |
| | |
Cumulative Contract Values | | $ | 82,949 | | | $ | 1,053,672 | |
| | |
Less: Cumulative Revenues Recognized | | | (59,494 | ) | | | (943,437 | ) |
| | | | | | | | |
Backlog Contract Values | | $ | 23,455 | | | $ | 110,235 | |
| | | | | | | | |
| * | 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. |
12
WCI Communities, Inc.
Condensed Consolidated Statements of Cash Flows
(Dollars in thousands)
| | | | | | | | |
| | | For the six months ended
June 30, | |
| | | 2008 | | | 2007 | |
Cash flows from operating activities: | | | | | | | | |
Net loss | | $ | (184,316 | ) | | $ | (49,028 | ) |
Asset impairment losses and land acquisition termination costs | | | 39,833 | | | | 37,061 | |
Decrease (increase) in real estate inventories | | | 141,809 | | | | (52,826 | ) |
Decrease in contracts receivable | | | 299,486 | | | | 344,019 | |
Decrease in customer deposits | | | (108,025 | ) | | | (101,301 | ) |
(Increase) decrease in restricted cash | | | (196 | ) | | | 14,266 | |
Decrease in accounts payable and other liabilities | | | (45,804 | ) | | | (75,248 | ) |
All other | | | 93,950 | | | | (30,614 | ) |
| | | | | | | | |
Net cash provided by operating activities | | | 236,737 | | | | 86,329 | |
| | | | | | | | |
Cash flows from investing activities: | | | | | | | | |
Additions to property and equipment, net | | | (1,668 | ) | | | (14,044 | ) |
Proceeds from sale of property and equipment | | | — | | | | 47,105 | |
Other | | | (102 | ) | | | 427 | |
| | | | | | | | |
Net cash used in investing activities | | | (1,770 | ) | | | 33,488 | |
| | | | | | | | |
Cash flows from financing activities: | | | | | | | | |
Net repayments under debt obligations | | | (348,691 | ) | | | (135,681 | ) |
All other | | | (13,967 | ) | | | (3,844 | ) |
| | | | | | | | |
Net cash used in financing activities | | | (362,658 | ) | | | (139,525 | ) |
| | | | | | | | |
Net decrease in cash and cash equivalents | | $ | (127,691 | ) | | $ | (19,708 | ) |
| | | | | | | | |
13
Summary of Land Controlled
June 30, 2008
| | | | | | | | | | | | | | | | | |
Region | | Remaining
Planned
Units | | Units in
Backlog as
of 6/30/08 | | Value in
Backlog as
of 6/30/08 | | | Spec
Units
in WIP | | Finished
Spec and
Model
Units | | Total
Units
Remaining | | %
Owned | |
Traditional Homebuilding (Including Lots) | | | | | | | | | | | | | | | | | |
Florida | | | | | | | | | | | | | | | | | |
Miami / Ft. Lauderdale | | 956 | | 31 | | $ | 21.6 | | | 9 | | 123 | | 793 | | 100 | % |
Naples / Ft. Myers | | 3,891 | | 59 | | | 28.2 | | | 37 | | 8 | | 3,787 | | 100 | % |
Palm Beach / Indian River | | 834 | | 1 | | | 2.5 | | | — | | 11 | | 822 | | 100 | % |
Palm Coast / Jacksonville | | 13 | | 3 | | | 1.7 | | | 2 | | 8 | | — | | 100 | % |
Perdido Key | | 83 | | — | | | — | | | — | | 12 | | 71 | | 100 | % |
Tampa / Sarasota | | 2,613 | | 29 | | | 13.5 | | | 8 | | 93 | | 2,483 | | 70 | % |
Mid-Atlantic | | 350 | | 6 | | | 8.5 | | | 1 | | 17 | | 326 | | 85 | % |
Northeast | | 1,498 | | 36 | | | 20.6 | | | 5 | | 29 | | 1,428 | | 100 | % |
| | | | | | | | | | | | | | | | | |
Traditional Homebuilding Total | | 10,238 | | 165 | | | 96.5 | | | 62 | | 301 | | 9,710 | | 92 | % |
| | | | | | | |
Tower Homebuilding | | | | | | | | | | | | | | | | | |
Florida | | | | | | | | | | | | | | | | | |
Miami / Ft. Lauderdale | | 741 | | 16 | | | 9.6 | | | — | | 228 | | 497 | | 100 | % |
Naples / Ft. Myers | | 1,068 | | 13 | | | 9.1 | | | — | | 83 | | 972 | | 100 | % |
Palm Beach / Indian River | | 202 | | 3 | | | 0.9 | | | — | | 35 | | 164 | | 100 | % |
Palm Coast / Jacksonville | | 277 | | 2 | | | (1.9 | ) | | — | | 17 | | 258 | | 100 | % |
Perdido Key | | 1,495 | | 5 | | | 2.7 | | | — | | 74 | | 1,416 | | 100 | % |
Tampa / Sarasota | | 660 | | — | | | — | | | — | | 31 | | 629 | | 100 | % |
Mid-Atlantic | | 284 | | — | | | — | | | — | | — | | 284 | | 100 | % |
Northeast | | 171 | | 47 | | | 3.1 | | | — | | 70 | | 54 | | 68 | % |
| | | | | | | | | | | | | | | | | |
Tower Homebuilding Total | | 4,898 | | 86 | | | 23.5 | | | — | | 538 | | 4,274 | | 99 | % |
| | | | | | | |
Total Homebuilding | | | | | | | | | | | | | | | | | |
Florida | | | | | | | | | | | | | | | | | |
Miami / Ft. Lauderdale | | 1,697 | | 47 | | | 31.2 | | | 9 | | 351 | | 1,290 | | 100 | % |
Naples / Ft. Myers | | 4,959 | | 72 | | | 37.3 | | | 37 | | 91 | | 4,759 | | 100 | % |
Palm Beach / Indian River | | 1,036 | | 4 | | | 3.4 | | | — | | 46 | | 986 | | 100 | % |
Palm Coast / Jacksonville | | 290 | | 5 | | | (0.2 | ) | | 2 | | 25 | | 258 | | 100 | % |
Perdido Key | | 1,578 | | 5 | | | 2.7 | | | — | | 86 | | 1,487 | | 100 | % |
Tampa / Sarasota | | 3,273 | �� | 29 | | | 13.5 | | | 8 | | 124 | | 3,112 | | 76 | % |
Mid-Atlantic | | 634 | | 6 | | | 8.5 | | | 1 | | 17 | | 610 | | 92 | % |
Northeast | | 1,669 | | 83 | | | 23.6 | | | 5 | | 99 | | 1,482 | | 97 | % |
| | | | | | | | | | | | | | | | | |
Total Homebuilding Total | | 15,136 | | 251 | | | 120.0 | | | 62 | | 839 | | 13,984 | | 94 | % |
| | | | | | | | | | | | | | | | | |
Remaining Planned Units
June 30, 2008
| | | | | | |
| | | | | | | Total |
| | | Owned | | Optioned | | Controlled |
Traditional Homebuilding | | 9,390 | | 848 | | 10,238 |
Tower Homebuilding | | 4,844 | | 54 | | 4,898 |
| | | | | | |
Total Homebuilding | | 14,234 | | 902 | | 15,136 |
| | | | | | |
14
