WCI Communities, Inc. (NYSE: WCI), based in Bonita Springs, Fla., this morning reported a first-quarter loss of $84.1 million ($2.00 per diluted share) as revenues plunged 59.5% from last year's first quarter to $137.1 million. The company took $6.9 million of impairment charges during the quarter related to backlog orders that cancelled and as a result were marked down to the values of comparable units as they were returned to inventory.
The aggregate number of gross new Traditional and Tower home building orders increased by 6% to 335, but net new orders declined 22.8% to 183 as contract cancellations and defaults at closing continued at higher than long-term historical rates. The aggregate value of the net new orders for the quarter fell 49.8% over the same period a year ago to $78.3 million.
Revenue in the company's Traditional home building segment, including lot sales, fell 56.7% to $92.7 million from $214.2 million for the first quarter of 2007. The company closed 170 homes compared with 306 for the same period a year ago. Revenues in Tower home building decreased 95.6% to $3.3 million from $74.0 million for the same period a year ago. A total of 56 Tower units were closed during the quarter from our inventory of completed and unsold units representing $50.5 million of revenue. Only one tower was under construction and recognizing revenue in the quarter compared to 11 during last year's first quarter.
In the traditional division, the number of gross and net orders declined 22.7% and 41.4%, respectively. The company did not break out the raw numbers, but reported the value of Traditional home building gross orders declined 44.6% to $117.7 million while the value of net orders dropped 60.7% to $62.5 million. Cancellations during the quarter totaled 92 units, up from 60 units during the same period a year ago.
The average price for Traditional home building orders for the first quarter fell 28.3% to $501,000 due to mix changes, lower prices and a higher percentage of discounts averaging 20%. Traditional home building spec inventory at the end of the quarter, completed and in-process and including models was 460 versus 610 at the end of the fourth quarter of 2007. Backlog on March 31 was $165.9 million, down 73.7% from first quarter of 2007.
In the Tower segment, a total of 56 units were closed during the quarter representing $50.5 million of revenue. In addition, $4.4 million of revenue resulted from backlog units still under construction using the percentage of completion method, and $3.8 million resulted from retained deposits from defaults. 52 units previously accounted for under the percentage of completion method defaulted during the period resulting in revenue reversals of $55.4 million.
Tower gross and net orders totaled 100 and 40 respectively, versus 12 and negative seven in the first quarter of 2007. Tower home building backlog at March 31, 2008 totaled $36.9 million, a 76.9% decrease from the $159.4 million backlog at March 31, 2007.
In WCI's other businesses, revenues for the Real Estate Services Division for the quarter were $17.3 million, a 32.3% decrease from the same period a year ago, owing to the continued slow market for new and resale homes during the quarter. Transactions for Prudential Florida WCI Realty declined 15.8% over the same period a year ago. Revenues for the Amenities Division were $22.6 million, even with last year. Other income and expense in the first quarter included a $9.5 million non-cash mark-to-market charge 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.
WCI generated $66.4 million in net cash during the quarter, compared with $94.6 million in the same period a year ago. Its net debt-to-capitlization ratio increased to 83.3% from 65.5% at this time last year and 80.5% at the end of 2007. As of March 31, 2008, excluding $53.4 million in letters of credit, WCI had approximately $192.4 million available commitments under its senior secured credit facility which was further limited by borrowing base availability which was an estimated $115.0 million, plus $48.5 million of cash and cash equivalents.
The company amended its senior secured tower construction facility (the "Tower Loan") on March 17, 2008 to provide for consistencies with the governing provisions of, as well as cross collateralization on a subordinate basis with the Term Loan and Revolving Credit Facility. The amendment also restricts the company from requesting future advances from the Tower Loan, which WCI said is consistent with the Company's de-leveraging strategy and the upcoming maturity of the facility in December 2008.
"Due to our strategy 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 loan agreement, which is currently less than the available loan commitments," WCI stated in its earnings release. "In addition, our lenders are currently obtaining appraisals on our properties in the borrowing base, and should the appraisals reflect values less than expected, our borrowing base capacity would be further limited, potentially resulting in the loss of additional borrowing capacity and / or mandatory prepayment obligations."
"We experienced a sequential lift in traffic and new orders during the first quarter in Florida reflecting seasonal patterns, but saw a dramatic drop in traffic and new orders in the Northeast and Mid- Atlantic", said Jerry Starkey, president and CEO, in a statement. "In Florida we wrote 97 new orders for Tower units compared to only 11 during the same quarter last year, but in most instances the prices were significantly discounted. Even with the sequential increase, Traditional home building gross and net orders in Florida were down 5.6% and 21.0% year-over-year."
"Over ninety percent of our Florida Traditional home building new orders were spec sales, with very few purchasers paying the premium for "to-be-built" homes", Starkey continued. "Beyond the seasonal lift in Florida, there are no signs that demand has firmed--many potential purchasers continue to sit on the sidelines afraid of falling prices and the direction of the economy. Our primary focus continues to be on reducing costs and generating cash to pay down debt."