WCI Communities, bogged down with the burdens of bankruptcy reorganization, finally filed its financial results for the third quarter ended Sept. 30--and the numbers don't offer much hope that the company will find its way out of its morass. It listed its assets on Sept. 30 at $1.9 billion and its liabilities at the exact same number.
WCI logged a net loss of $576.84 million for the quarter, compared to a $69.70 million loss in the same quarter of 2007. Its nine-month loss was $761.16 million, compared with $118.75 million during the same period of 2007.
WCI had only $66.56 million in home sales revenue for the third quarter and $271.4 million for the first nine months of the year. In the third quarter, WCI recorded 124 orders for traditional homes and 702 for town homes. The cost of those sales was $525.18 million for the quarter and $778.26 million for the first nine months.
That compares to 2007 numbers of $120.23 million in sales in the third quarter and $589.49 million for the first nine months of the year. Costs of sales were $164.36 million for 3Q2007 and $611.74 for the first nine months.
Last fall, the company warned the SEC that it would not be able to file its third quarter results on time due to the paperwork demands caused by its Aug. 4 Chapter 11 bankruptcy filing. At the time, it said it would file the required documents no later than Jan. 28 and, in the end, that's when they filed them.
"As a result of our Chpater 11 cases and other matters described herein, including uncertainties related to the fact that we have not yet had time to complete and obtain confirmation of a plan or plans of reorganization, there is substantial doubt about our ability to continue as a going concern," the company said.
While the company's management said it has been successful in cutting operating costs, it hasn't been able to pare them down fast enough to make up for the heavy costs of paying legal fees and other costs associated with Chapter 11.
"Much of our efforts to reduce general and administrative expenses are being offset by professional and consulting fees associated with our Chapter 11 cases," the company said.
To make matters worse, WCI said it may have installed some drywall manufactured in China in its homes. Chinese-made drywall has been making headlines in Florida recently as homeowners, who started out complaining that the drywall was emitting sulfuric smells, are now saying that, in some cases, it's corroding their homes' copper air handler pipes and copper wiring.
WCI said it hasn't decided whether the reports are valid and can't determine for sure how many homes that were purchased may have the drywall.
"Nevertheless, the company is currently addressing a handful of active claims that it belives are covered by the company's homeowner warranty program," the company said. "In addition, the company has established an $11 million reserve for homes with one or more air conditioning coil replacements, which may or may not be related to the Chinese drywall."
WCI isn't too worried that any drywall debacle could do much more to erode its already perilous condition.
"Based on information currently available to the company, we do not believe these claims will have a material adverse effect on our financial condition or resulting operations," the company stated.