All year long, WCI Communities has pointed at its soon-to-be-finished towers and told shareholders that therein lies $1 billion worth of revenue that would be flowing in by the end of this year, ready to be used to pay down the company's debt.

As each quarter slipped by and tower buyers, not to mention buyers of single-family homes, walked away from deals at record levels, that billion-dollars-by-year-end promise started to erode.

On Thursday Nov. 8, the company reported that its total year-end cash flow will be somewhere between $210 million and $460 million. Why the wide range? Even with only seven weeks left in 2007, the company still doesn't know for sure just how many more buyers are likely to walk away from their contracts.

After all, the company's third quarter was worse than expected, even though it was expected to be bad since the Bonita Springs, Fla.-based company sells most of its homes during the winter.

In total, the company reported a net loss of $69.7 million last quarter, translating to a loss of $1.66 per share. Pre-tax impairments and write-offs totaled $35.9 million. Revenues were $166 million, down 61% from last year. Gross new orders were $139.1 million, down 22.5%. Backlog was $517 million.

While its traditional single-family revenue is down 25.9% from the same quarter last year, its tower business crashed in the third quarter as more buyers defaulted, failing to show up at the closing table. Orders for the third quarter were negative as 89 defaults were recorded, dramatically outnumbering the eight gross new orders.

The defaults forced WCI to increase its default reserve for towers under construction by $23.7 million. In total, the company recorded $36.6 million in unfavorable adjustments, anticipating higher construction costs because of design revisions, additional interest costs because the construction cycles are longer, increased building insurance costs, and discounts and incentives that it expects to have to provide to sell the units.

WCI CEO Jerry Starkey said that the company's towers in the Mid-Atlantic region as well as South Florida have been selling okay, while its Southwest Florida and Florida Panhandle developments have tanked.

Still, those towers will eventually sell, according to Starkey. They are being discounted and advertised in advance of the coming Florida selling season to a level that he thinks will get them moving.

"They [wealthy baby-boomer buyers] are able, they are just not ready and willing to buy," Starkey said. "There is pent up demand out there."

And when those units sell, they will bring in cash that can be used to pay down the company's debt.

In the meantime, WCI is faced with some uncertainty about the state of its loans and lines of credit. The company is violating the covenants on two of its loans, and company executives are not sure its creditors will grant yet another waiver. If negotiations fail, the company's solvency will be in question. The seriousness of its credit situation is outlined at the bottom of its third-quarter earnings report released Thursday Nov. 8 in advance of its quarterly conference call.

At the end of September, the company was in violation of its covenants on its revolving credit agreement as well as its term loan agreement. Lenders granted it a waiver on Nov. 7, good until Dec 7.

"At this time, it is not certain that we will reach agreement or obtain approval of the anticipated longer-term amendment," the company said in its earnings release. "The amendment will be expensive, and there can be no assurance that we will be able to comply with the amended covenants and other requirements."

If no agreement is reached, the lenders will be able to foreclose on collateral and demand payment of the loans in full. That could unleash a cascade of similar moves by the company's other lenders, leaving the company looking for other sources of cash that might not appear, "which could impair our ability to maintain sufficient working capital," the release warned. "Either situation could have a material adverse affect on the solvency of the company."

WCI has little cash on hand to make up for loss of credit. At the end of September, it had $7.1 million on hand, compared to $41.9 million at the end of September 2006.

During the conference call, CFO Jim Dietz said he is hopeful that the negotiations will be successful. "We are not that far apart with the banks," Dietz said. "We think we can wrap up the negotiations quickly...If that doesn't turn out to be the case, there are alternatives. Certainly, our new board of directors includes groups that have substantial free cash flow that might become available to us."

Dietz was referring to billionaire financier Carl Icahn who owns a large share of the company and was, along with some of his representatives, recently elected to the company's board.

On Wednesday Nov. 7, the company announced that most of its board, including Icahn, has agreed to zero compensation through 2008, while others have agreed to accept reduced compensation.

That will help the company in its efforts to conserve and raise cash. Starkey said the company is also concentrating on raising cash from selling some of its community amenities, such as golf courses.

He made a point, however, of saying that the company's prime land assets aren't for sale and that the company will hold onto those until the market improves. When that will be, Starkey was unwilling to guess.

"When this will turn, obviously, we have no idea," Starkey said. "We are going to run this business as though this is going to continue through 2008 and into 2009."

Another focus is to preserve cash by continuing to downsize the operation until it matches the market. It has announced a corporate restructuring that cuts 575 jobs, bringing the company's workforce to about 2,100 employees, a 46% reduction from its peak of 3,889 in mid-2006.

Under the new reorganization, David Fry, who is now in charge of the company's traditional home building, real estate services, and amenities business lines will also take over the tower building operation, a position being vacated by Christopher J. Hanlon, a senior vice president and COO who recently announced his resignation.

Under the new structure, the Northeast and Mid-Atlantic traditional home building regions will be combined, also reporting to Fry, while the Northeast and Mid-Atlantic Tower building divisions will be combined and report to Starkey.

The company expects the job cuts will save $46 million a year, but have costs estimated at $5.4 million, with $1 million spent in the third quarter and the rest in the fourth quarter of this year.