WCI Communities, which caters to retirement and second-home buyers, is another in a long list of public builders reporting earnings losses. Wednesday, the Florida-based home builder reported a $33.2 million net loss for the second quarter ending June 30.
"It continues to be a tough environment," CEO Jerry Starkey said during the company's Wednesday morning teleconference. "Our focus now is maximizing cash flow to build through this downturn."
"Year-to-date, WCI has generated $119.8 million in cash flow from operating and investing activities and expects to end 2007 having generated a combined $530 million to $730 million in large part as a result of closing ten towers, including our two largest towers ever constructed," Starkey said. "Land sales and recreational amenity conversions are an important part of WCI's business model and we are actively marketing numerous land parcels, including commercial, mixed/use, and residential land, as well as recreational assets. We estimate that the aggregate value of these assets range from about $200 million to $300 million. Many of these assets were acquired or developed more than five years ago and are expected to generate significant profits in addition to cash flow. The upper range of our projected cash flow for this year includes approximately $60 million or so from this pool of assets."
Starkey says he anticipates the current housing market conditions will continue for four to five quarters more.
Addressing the recent appointment of three directors from The Icahn Group to WCI Communities' board, Starkey said it will create a "very balanced board." The addition of the new directors, who will officially join the board on August 30, ends a proxy contest. "Everyone at WCI is happy to have this behind us," Starkey said.
Earlier this year, Icahn had offered to buy the company for $22 a share, but the board said the price was too low.
The earnings report also included the following statements:
- Recorded pre-tax impairments and write-offs: $36 million;
- Revenues: $241.8 million - down 54.2 percent;
- Gross new orders: $155.7 million - down 50.1 percent;
- Backlog at June 30, 2007: $635.6 million;
- Generated cash flow from operating activities and investing activities of $119.8 million year-to-date as of June 30: $86.3 million from operating and $33.5 million from investing activities.
Defaults for the home builder were up slightly according to Starkey but not dramatically. He added that WCI Communities home buyers have an average FICO score of 758, a pool of buyers he says possesses good credit standing.
Learn more about markets featured in this article: Orlando, FL.