Jeffrey P. Orleans, chairman and CEO of Orleans Homebuilders, didn't sugarcoat the state of the housing market during a press conference with analysts this morning:
"December was terrible; things don't get worse than that," Orleans said. "During that period, we were wondering what we would have to do to make a sale," he explained.
"While we still believe economic conditions will remain difficult, the Fed's recent aggressive actions will certainly help," he said, adding that traffic at Orleans communities has improved since the first of the year and the company's salespeople remain optimistic.
The big builder's CEO may be cautiously hopeful for the rest of 2008, but it couldn't erase the sobering financial news that Orleans, along with most other big builders, have been reporting.
New orders for the second quarter of fiscal 2008 ending Dec. 31, 2007 decreased 25 percent to $114.7 million on 284 homes, compared to $152.4 million on 367 homes for the prior year's period.
Loss from continuing operations for the second quarter of fiscal 2008 was $38.6 million, compared to $7.0 million for the prior year's period. The loss was due primarily to inventory impairments, land sales impairments, and write-offs of abandoned projects.
During fiscal second quarter 2008, Orleans closed nine land sales with nine different buyers, unloading about 1,400 lots within five states. About 94 percent of the lots disposed of were in Arizona, Florida, and Illinois. The sale of the lots in Arizona represented just about all of the company's assets in that region.
"Leaving Arizona was difficult, but it's 3,000 miles across the country and we thought it was more important to reduce risk," said Orleans.
According to Orleans, the land sales generated cash proceeds of $32.9 million. The company anticipates receiving roughly a $25 million federal income tax refund by the end of its fiscal year on June 30 as a result of the transaction.