The economy hit WCI Communities like a hurricane last quarter, battering revenues and margins at the Bonita Springs, Fla.-based builder. It resulted in "another very tough and very disappointing quarter for WCI in what continues to be a very tough market," CEO Jerry Starkey told analysts during today's earnings conference call.
Revenues plummeted 59.5 percent year-over-year to $137.1 million, translating into an $84.1 million loss ($2 per share) for the quarter.
WCI's high-rise tower revenues were particularly affected, with a 95.6 percent year-over-year freefall to $3.3 million.
WCI's traditional home building division suffered, too. Thanks to impairments and spec sales, traditional home building gross margins nearly evaporated in the second quarter to 0.4 percent, compared to 16.16 percent one year ago. Like many builders, WCI is trying to unload unsold inventory. It closed 170 traditional homes, 82 percent of which were specs, with average spec closing margins of 4.7 percent.
Selling homes continues to be challenging, both for WCI tower units and traditional homes. "Some smart and courageous buyers are snapping up bargains, particularly in Florida," Starkey said. "But most shoppers that we see in our sales centers are concerned about the direction of prices and, more and more, the direction of the overall economy." Many of those who did agree to buy from WCI during the quarter either choose not or cannot afford to close the deal; while WCI's gross orders inched up 6 percent, its net orders for the quarter fell 22.8 percent.
Unfortunately for WCI, its average sales price also declined in the quarter. That figure slid 28.3 percent for its traditional homes, to $501,000. The average sales price for a tower unit tumbled 51.7 percent, to $871,000.
People are still interested in WCI homes, though, especially in Florida, where the builder's sales traffic increased 23 percent overall. The Mid-Atlantic showed no such robustness. Faced with sagging traffic and sales, WCI has decided to "mothball" all but two of its Mid-Atlantic developments and cut its workforce to a "handful of folks" in that region, Starkey said today.
Cash is a concern for WCI, which has $125 million in convertible notes due in August. "Liquidity continues to be tight. ... At this point, we don't have visibility into the liquidity that would enable us to satisfy those $125 million in converts for cash," Starkey said, adding that WCI had hired financial advisors to help the company restructure that debt.
In terms of impairments, the company wrote off $9.5 million for homes that were returned to its inventory after the sale was cancelled.
Alison Rice is senior editor, online, at BUILDER magazine.
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