WCI's Loss Widens
On Write-Downs
by Andrew Edwards and John Flowers
From The Wall Street Journal Online
March 19, 2008
Luxury home and condo builder WCI Communities Inc.'s fourth-quarter loss widened drastically on $339.2 million in write-downs due to the "continued deterioration" in the company's primary Florida market.
The builder, which has been hit hard by the real estate crash in Florida, posted a net loss of $459.8 million, or $10.93 a share, compared to a year-earlier net loss of $64.6 million, or $1.55 a share. The company said the write-downs reflect lower prices and "slower absorption in some product lines."
The mean estimate of analysts polled by Thomson Financial, which typically excludes items, was for a loss of 69 cents.
Revenue dropped 63% to $191.6 million.
On a net basis the company lost 52 orders for homes in the fourth-quarter, while gross orders fell 59%. The company's backlog as of Dec. 31 was worth $211.9 million, compared with $911.2 million at the end of 2006.
The company's gross margin, excluding write-downs fell to 3.1% from 19% a year earlier.
WCI spent much of last year struggling over control of its board with one of its largest shareholders, activist investor Carl Icahn. The back-and-forth resulted in a deal that ended with Mr. Icahn's election as chairman in September.
Most recently, the company averted bankruptcy, at least in the short term, in January when it convinced its backers to relax certain debt covenants. The amendments, which last until the end of June 2009, modify, suspend or waive certain covenants and give the company greater operating and financial flexibility, the company explained at the time.
In return, WCI said it would reduce the total commitment available under its revolving credit agreement and lower the outstanding amount on its term loan. It also agreed to increase pricing on the loans and converted a portion of the revolver to nonrevolving status.
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