The bad news for WCI Communities seemed unrelenting during Monday, March 17th's year-end conference call.
--Instead of the $410 million to $460 million loss it had expected to record for 2007 less than two weeks ago, the builder racked up a net loss of $578.5 million, a $13.77 loss per share. More than $412 million of that loss was related to asset impairments on land and goodwill.
--CEO Jerry Starkey raised flags that WCI might not be able to pay off $125 million in convertible notes with an Aug. 5 put date. "We are in discussion with convert holders about extending put date...given the fact that our cash position is not likely to allow the payment of those converts when they, and if they, are put to us in August," he said.
That lead the company's accountant Ernst and Young to put a going concern qualifying note in the company's 10-K, which triggers default under the company's three senior bank loans. "We have received waivers from all three creditors as of now," said CFO Ernest Scheidermann.
--Sales actually went backward during the fourth quarter of '07. The company had 188 cancellations on 171 gross orders in its traditional home building division. Its tower division had no new orders and 35 defaults in the fourth quarter.
--It reversed $38.4 million worth of previously recognized gross margin because its Oceanside tower project in Pompano Beach, Fla., no longer qualified for percentage of completion accounting because of the deteriorating market.
--The company wrote down all the goodwill remaining in the company's balance sheet from its Florida, Northeast, and Mid-Atlantic operations--$59.5 million worth. "The only goodwill remaining on the company's balance sheet is the goodwill related to our real estate services unit," said Starkey.
--Gross margins were a negative 32.7% or 3.1% before asset impairments and land acquisition termination costs.
--The builder recorded a $150.1 million deferred tax asset valuation reserve.
--The builder reduced its workforce from a peak of 3,900 employees in May 2006 by 47% to 2,065 by the first quarter of this year. Not surprisingly, the biggest cut--72%--was taken in its traditional and tower home building divisions.
--Its net debt to capital grew to 80.5% in 2007 compared to 66.3% in 2006.
There was one sales bright spot. The company has closed 157 of its 185 luxury condominiums at One Bal Harbour at Miami Beach and expects to reach 90% closings. The condo hotel portion of the project has closed 48 of its 115 units in backlog. "We are probably 60 days from knowing the hotel proportion of that One Bal Harbour project," said Starkey.