Late yesterday afternoon, after the market closed, the management team at bankrupt Florida-based TOUSA filed the company's 10-Q for 1Q2008 with the Securities and Exchange Commission. Operational results were ugly--the company saw its losses quadruple the previous year--and the expectation was set that the results through September were worse. However, the company doubled its cash position in the quarter from the previous year and was working on a plan that would address additional near-term liquidity concerns through a new agreement with secured lenders.
In the filing, management stated that it would present the new proposal to the bankruptcy court today, Dec. 4, for approval.
In June, the company struck a deal with its secured lenders to use cash collateral on hand--cash from operations, inventory sales, and federal tax refunds--to maintain capital access and keep operations going. In addition, the agreement provided for a pay down of $175.0 million on $358.0 million in loan facilities; as of Sept. 30, the company had paid $97.3 million of that required pay down. However, the agreement was set to expire on Dec. 17.
The new proposal would extend the cash collateral order until Jan. 9, 2009, on similar terms as the first agreement. However, it also would include a provision permitting additional 30-day extensions through March 30, 2009. Without the court's approval, the company will have insufficient cash to operate the business and restructure. According to yesterday's filing, the company had $123.5 million in unrestricted cash on its balance sheet at the end of 1Q2008.
That was a marked improvement from the previous year when the company had $67.2 million in its corporate coffers, but it still wasn't enough to take the sting out of its massive losses. In 1Q2008, the company encountered a loss of $282.7 million, net of taxes, from continuing operations compared to a loss of $62.2 million during the same period a year ago.
Home building revenues fell 47% from 1Q2007 to $295.3 million in the quarter. Management blamed the drop on the combination of a 35% decrease in new-home deliveries to 1,119 units and a 20% slide in average home selling price to $260,000 from the same period a year ago. Hefty incentives contributed to pricing pressures; the company's incentives averaged $62,100 per home, marking a 63% jump from what the company averaged in 1Q2007.
The revenue decline sent SG&A as a percentage of revenue up 200 basis points to 18% from the same period a year ago despite expenditure cuts. SG&A expenses decreased 41% to $54.2 million, mainly thanks to a decrease of $18.6 million in selling and marketing expenses, sales commissions, fees related to its Transeastern joint venture settlement in 2007, and overhead expenses.
New orders were down 43% to 987 compared to 1,730 during the same period last year. Texas led the company in new orders, inking 400 contracts in the quarter, followed by Florida operations, which counted 333 new orders.
The company said of its order decline: "The decrease in net sales orders is due to decreased demand for new homes and higher cancellation rates. These factors have continued to negatively impact our net sales orders through the fourth quarter of 2008."
Cancellation rates averaged 36%, up from 28% in 1Q2007. The highest cancellation levels were in the Florida and Western regions, which had can rates of 43% and 40%, respectively.
TOUSA had 2,247 homes in backlog at the end of the quarter, down 42% from the 3,881 it had in backlog during the same period a year earlier. However, the sales value of the homes in backlog was down more significantly--52%--to $667.7 million. However, by Sept. 30, 2008, that number had dwindled; the company reported having 1,258 homes in backlog at that time, representing $364.4 million in revenue.
If there was good news it was that, in April, the company received $207.3 million in refunds against taxes paid in 2005 and 2006, plus $33.4 million for overpayments of federal and state income taxes. However, because the company encountered a year-end loss in 2006, the company will be unable to recoup a two-year carry back tax benefit for 2008.
With no carry back refund dangling in front of the company, management appeared unmotivated to sell off large chunks of its owned land portfolio; revenues from land sales came in at $4.4 million in the first quarter. Moreover, most of the lightening of its land load came from walking away from options. Management slashed the number of option contracts by 45% since the end of 2007; at 1Q2008 end, the company had options on 5,400 lots. However, owned home sites were down less than 3% from the end of 2007. According to the filing, total consolidated home sites were 20,900 for the quarter.
The company also saw an uptick in land-related charges, which weighed heavily on the balance sheet. Inventory impairments and abandonment costs totaled $172.3 million in the quarter compared to $39.1 million in 1Q2007; the bulk--roughly $101.7 million--came from impairments on active communities. The company impaired a total of 246 projects, representing 57% of the company's total number of projects in inventory.