WCI Communities had "another very tough and disappointing quarter" CEO Jerry Starkey said during the company's Thursday afternoon quarterly conference call. And there are no signs that things are getting better for the foreseeable future.

In fact, the news may get worse rapidly for the Bonita Springs, Fla.-based builder of expensive high-rises and single-family homes. It had a net loss of $84.1 million in its first quarter, $2 a share, compared to a $15.8 million loss last year in the same quarter.

The company's cash reserve is down to $48.5 million, well below its $188.8 million year-end figure. And, for the second quarter in a row, Starkey expressed doubt that the company will be able to come up with the $125 million it needs to pay off convertible debt with an Aug. 5 put date.

"I just would mention that liquidity continues to be tight and will continue to be tight in the future absent changes in the market which we certainly aren't expecting in the near term," Starkey said. "We will be looking at alternatives in dealing with these convertibles." Indeed, the company has hired Lazard Asset Management to help negotiate a restructuring of the debt.

In the wake of slow sales and high cancellation rates, the company's debt also grew to 83.3% debt-to-capitalization in the first quarter, compared to 65.5% in March of '07 and 80.5% at the end of '08.

Other potentially bad news could occur after appraisers from the company's lenders finish assessing the value of all the company's assets, a requirement since the company's lenders required it to securitize its debt last year. "If the final appraisal is less...then the asset would be marked down to the lower of appraised or book," Starkey said. Mark downs could result in a smaller borrowing base, further squeezing liquidity.

The company's cancellation rate continued to be high in its first quarter. Its traditional and tower building operations increased orders by 6% to 335, but the net new orders declined by 22.8% to 183 because of cancellations and defaults at closings. The aggregate value of new orders fell 49.8% for the quarter compared to the same period a year ago.

The only improved sign was in the sales of speculative homes, which were up in Florida where traffic was up. But, it appears the buyers were looking for bargain-basement prices on deeply discounted existing homes since more than 90% of the sales in that state were of specs, as opposed to the sale of to-be-built homes.

There was a dramatic drop in traffic in the Northeast and Mid-Atlantic regions, 17% and 68% respectively, Starkey said, leading the company to decide to mothball seven out of the nine communities it has open in the Mid-Atlantic region. The company's workforce in that region is down to the "single digits," Starkey said.

For now, the company retains some confidence in the viability of its Northeastern communities. "At this time we believe that...region is sustainable," Starkey said.