Second Quarter Financial Highlights: * Net loss: $33.2 million * Basic and diluted EPS: loss of $0.79 * Recorded pre-tax impairments and write-offs of $36.0 million * Revenues: $241.8 million -- down 54.2% * Gross new orders: $155.7 million -- down 50.1% * Backlog at June 30, 2007: $635.6 million * Generated cash flow from operating activities and investing activities of $119.8 million YTD as of June 30, 2007 -- $86.3 million from operating and $33.5 million from investing activities
BONITA SPRINGS, Fla., Aug. 22, 2007 (PRIME NEWSWIRE) -- WCI Communities, Inc. (NYSE:WCI), a leading builder of traditional and tower residences in highly amenitized lifestyle communities, today reported its results for the second quarter of 2007. For the three months ended June 30, 2007, WCI reported a net loss of $33.2 million, compared with a gain of $22.7 million in the second quarter of 2006. Diluted earnings per share (EPS) was a loss of $0.79 compared to a gain of $0.52 for the same period a year ago. During the quarter, the company completed the sale of a non-golf recreation facility for $47.5 million, which generated an after-tax gain of $11.5 million, or $0.27 per share. Earnings from this recreation facility are characterized as earnings from discontinued operations and the related cash flows are classified in as investing activities. Earnings from continuing operations declined to a loss of $1.07 versus a gain of $0.50 from continuing operations in the same period a year ago. Revenues for the second quarter of 2007 were $241.8 million, compared with $527.7 million for the second quarter of 2006, a 54.2% decrease. Overall company gross margin for the second quarter of 2007 was negative versus 19.0% for the second quarter of 2006.
"WCI continued to focus on reducing costs and generating cash flow in the second quarter," said Jerry Starkey, President and CEO of WCI Communities. "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 ($520 million to $720 million from operating activities and $10 million from investing activities), in large part as a result of closing ten towers, including our two largest towers ever constructed." Starkey continued, "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." The Company's expected cash flow from operations assume that about 500 to 600 traditional homes close in the second half of the year. The backlog of almost 700 traditional homes as of June 30, 2007 includes about 500 homes scheduled to close by year end.
For the six month period ended June 30, 2007, the net loss totaled $49.0 million compared with a gain of $62.9 million during the first half of 2006. Diluted EPS from continuing operations declined to a loss of $1.46 versus a gain of $1.38 for the same period a year ago. Revenues decreased 47.2% to $580.5 million from $1.10 billion in the year earlier period. Excluding impairments of $37.1 million, gross margin as a percent of revenue totaled 12.1% versus 21.1% in the year earlier period.
For the three months ended June 30, 2007, the aggregate value of Traditional and Tower Homebuilding net orders fell 96.2% over the same period a year ago to $9.1 million, while the number of unit orders declined 82.6% to 50. Absent Tower defaults and Traditional Homebuilding cancellations, gross new orders for the period versus a year ago declined 46.5% to 216 with a value of $155.7 million, down 50.1%.
Traditional Homebuilding
Second quarter 2007 revenues for Traditional Homebuilding, including lot sales, fell 30.6% to $178.9 million from $257.9 million for the second quarter of 2006. The company closed 217 homes compared with 372 for the same period a year ago. Florida revenues totaled $130.2 million or 72.8% of total Traditional Homebuilding revenues versus $204.7 million or 79.4% for the second quarter of 2006. Revenues from WCI's Northeast Division accounted for 12.0% of Traditional Homebuilding revenues during the second quarter of 2007 vs. 10.2% during the same period a year ago and the company's Mid-Atlantic Division accounted for 15.2% and 10.4% for the second quarters of 2007 and 2006, respectively. Gross margin as a percentage of revenue for Traditional Homebuilding totaled 1.3% for the second quarter of 2007, down from 20.8% in the same period a year ago, due in large part to impairment charges and write-offs of $17.5 million recorded this quarter to reflect lower anticipated selling prices on traditional home inventories and the utilization of significant discounts and incentives to sell finished spec inventory. Excluding impairments, gross margin as a percent of revenues would have been 11.0%.
For the six month period ended June 30, 2007, Traditional Homebuilding revenues decreased 27.9% to $393.2 million. The company closed 523 homes compared with 864 for the same period a year ago. Gross margin as a percentage of revenue declined to 9.6% vs. 21.8% for the first six months of 2006. Excluding impairments, gross margin as a percent of revenue would have been 14.2%.
For the second quarter of 2007, the number of gross and net orders declined 43.4% and 57.4%, respectively. The value of Traditional Homebuilding gross orders declined 42.8% to $143.1 million and the value of net orders dropped 64.9% to $63.6 million. The cancellation rate for the second quarter of 2007 was 47.8%, up from 19.7% in the first quarter of the year. Cancellations during the quarter totaled 98, down from 111 during the same period a year ago. The average price for Traditional Homebuilding gross orders for the second quarter of 2007 rose 1.0% to $698,000 compared with $691,000 for the second quarter of 2006, due to mix changes and despite a higher percentage of discounts during the quarter -- approximately 16.8% compared to approximately 6.5% on orders in the same period a year ago. In total, 120 gross spec homes were sold during the quarter, with an average projected gross margin as a percent of revenues of 7.4%, approximately 620 basis points below the average gross margin percentage of 13.6% projected for the 85 gross to-be-built orders for the quarter.
Tower Homebuilding
For the three months ended June 30, 2007, revenues in the Tower Homebuilding Division decreased 99.0% to $2.1 million from $214.4 million for the same period a year ago, primarily due to the reversal of revenue during the quarter related to reserved tower defaults as well as less progression of building percentage of completion among the towers under construction. There were 7 towers with a total projected sell-out value of $1.3 billion under construction during the quarter compared with 21 towers, with a projected total sellout value of $2.3 billion under construction and recognizing revenue during the second quarter 2006. Tower Homebuilding gross margin dollars for the second quarter of 2007 totaled a negative $16.7 million. Excluding impairment charges related to finished units located at two towers, one in SW Florida and one in Lost Key, that totaled $18.5 million, the division would have reported $1.8 million of gross margin. The normal relationship between Tower Homebuilding revenue and gross margin was not evident this quarter as the reversal of revenue and gross margin related to Tower defaults and the increase in the tower default reserve resulted in variances that obscured typical trends. During each quarter, the company reviews the cost estimates for each tower under construction and makes adjustments to reflect actual increases or decreases in current and expected future costs. For the second quarter of 2007, $13.3 million of unfavorable adjustments (including adding $5.6 million to the default reserve) were made related to towers completed or under construction. In addition to increasing the default reserve, these adjustments included additional construction costs as a result of design revisions, additional estimated interest costs associated with longer tower construction cycles, increases in building insurance costs, and discounts and incentives anticipated in future periods given the current selling environment.
For the first half of 2007, revenues in the Tower Homebuilding Division fell 82.5% to $76.1 million. Gross margin as a percentage of revenue turned negative from 22.8% in the same period last year, due principally to the finished unit impairment charges, the reversal of revenue and gross margin on reserved defaulted units and the cost adjustments referenced above.
Tower Homebuilding orders for the second quarter of 2007 were negative as the 68 defaults recorded during the quarter outnumbered 11 gross new orders. Finished units sold during the quarter totaled six. The average gross order price for Tower Homebuilding units sold in the second quarter of 2007 was $1.1 million compared with $1.5 million in the period a year ago, driven by changes in the mix of units sold. During the quarter, the company completed and delivered two towers, consisting of 134 units, and experienced 16 defaults through August 17 2007. Another 62 sold units have yet to close, and the company currently estimates 31 of those units will ultimately default. For the six months ended June 30, 2007, six towers with 625 units were completed and delivered with a total of 79 defaults. In total, the default rate year-to-date is 17%. Tower Homebuilding backlog at June 30, 2007 totaled $110.2 million, compared with $550.8 million at June 30, 2006. For the balance of the year, four towers, containing 657 units, of which 587 are sold, are expected to close, with three towers expected to begin delivering tower residences in the third quarter and one tower expected to begin closings in the fourth quarter.
Real Estate Services
Revenues for the Real Estate Services Division for the second quarter 2007 were $27.4 million, a 17.5% decrease from the $33.2 million recorded for the same period a year ago. The decline was primarily due to the slowing market for new and resale homes during the quarter. Gross margin as a percentage of revenue for the period was 9.0% compared with 9.1% in the second quarter 2006.
For the six month period, revenues in the Real Estate Services Division totaled $53.0 million, down 16.8% from the $63.7 million recorded for the six months ended June 30, 2006. Gross margin as a percentage of revenue over the period decreased to 8.6% from 9.1% in the same period a year ago primarily due to less operating leverage in the company's real estate brokerage businesses during the first quarter of 2007.
Other Items
Revenues for the Amenities Division for the second quarter 2007 were $19.0 million, almost even with the $19.1 million recorded in the same period a year ago. Gross margin totaled a loss of $732,000 for the second quarter 2007 versus a loss of $878,000 in the second quarter of 2006.
Land sale revenues for the second quarter 2007 totaled $12.6 million compared with $965,000 for the second quarter of 2006. Gross margin as a percentage of land sales revenue equaled 47.1% for the second quarter of 2007.
Other income for the second quarter of 2007 totaled $363,000 versus $701,000 for the second quarter of 2006. The company also recorded a second quarter gain of $3.9 million from insurance recoveries related to damage incurred in 2005 from Hurricane Wilma.
Selling, general, and administrative expenses including real estate taxes (SG&A) as a percentage of revenue for the second quarter 2007 totaled 20.6%, up from 9.9% in the second quarter of the previous year due to lower revenues in 2007. For the six months ended June 30, 2007, SG&A of $96.7 million was 6.9% lower than for the same period last year. During the second quarter, WCI incurred professional fees of approximately $3.5 million related to the company's recently settled proxy contest and preparations for a possible sale of the company. It also incurred charges of approximately $750,000 to cover severance costs associated with workforce reductions during the quarter and a charge of approximately $950,000 for unoccupied lease space. Over the last 16 months, the company has reduced its workforce by over 33% or 1,300 employees, which is expected to produce a savings of over $60 million per year, and continues to evaluate and adjust the size of the workforce.
Cash Flow/Financial Position/Balance Sheet
For the six months ended June 30, 2007, cash flow from operating activities and investing activities totaled $119.8 million -- $86.3 million from operating activities and $33.5 million from investing activities, compared with cash used of $382.0 million in the same period a year ago.
As previously announced, on August 17, 2007, WCI amended its Credit Facility, the Term Loan Agreement and the revolving credit $390 million construction loan (Tower Facility) The amendments are intended to provide for, among other things, greater operational flexibility in the current market environment. The amendments permit certain changes in the composition of WCI's Board of Directors without triggering a change of control, adjust the pricing of the loans under the facilities, provide for certain commitment reductions, provide collateral for the loans, adjust certain financial coverage ratios (effective 6/30/07), and make certain other modifications. The Company's borrowing capacity under the Revolving Credit Facility has been reduced from $850 million to $700 million, with subsequent reductions to $600 million on July 1, 2008, and to $550 million on July 1, 2009. The Term Loan Agreement has been reduced from $300.0 million to $262.5 million, with a subsequent reduction to $225.0 million on July 1, 2008. As of June 30, 2007, the balance on the Revolving Credit Facility was $360.6 million, the balance on the Term Loan Agreement was $300.0 million, and the balance on the Tower Facility was $353.7 million.
Total liquidity, measured as the sum of cash plus available capacity under the revolving facility, totaled approximately $315.0 million at August 17, 2007. In addition, letters of credit of $43.6 million were outstanding as of August 17, 2007.
Recent Developments
As previously announced, WCI entered into a settlement agreement with the Icahn Group. In connection with the settlement agreement, the WCI Board of Directors approved a slate of nominees which will be submitted for shareholder approval on August 30, 2007. As part of this agreement, the Icahn Group agreed to withdraw its slate of nominees for the Board, effectively ending its proxy contest. Pursuant to the agreement, the Company agreed to raise the trigger under its limited duration Shareholder Rights Plan from 15% to 25%. The complete agreement between WCI and the Icahn Group can be viewed under the SEC heading in the Investor Relations section of the Company's website.
Information on Website
In connection with the Icahn Parties' participation in the WCI sale process, WCI provided the Icahn Parties certain non-public information pursuant to a confidentiality agreement. In connection with the settlement discussed above, WCI agreed to post certain information provided to the Icahn Parties that may be deemed material on its website at www.wcicommunities.com under the Other Information tab in the Investor Relations section. That information posted to this website is outdated, has not been updated, and does not reflect management's current intentions or expectations. As a result, the information should not be relied upon.
Conference Call
WCI will conduct a conference call today at 10:00 AM EDT in conjunction with this news release. The call will be broadcast live at http://www.wcicommunities.com in the Investor Relations area or can be accessed by telephone at (303) 205-0055 and asking for the WCI Communities conference call. A replay will be available after the call for a period of 36 hours by dialing (303) 590-3000 and entering conference code 11094554. The replay will also be available on the company's website. A slide presentation will accompany the call and can be accessed on the company's website in the Investor Relations section.
About WCI
WCI Communities, Inc., named America's Best Builder in 2004 by the National Association of Home Builders and Builder Magazine, has been creating amenity-rich, master-planned lifestyle communities since 1946. Florida-based WCI caters to primary, retirement, and second-home buyers in Florida, New York, New Jersey, Connecticut, Maryland and Virginia. The company offers traditional and tower home choices with prices from the high-$100,000s to more than $10 million and features a wide array of recreational amenities in its communities. In addition to homebuilding, WCI generates revenues from its Prudential Florida WCI Realty Division, and title businesses, and its recreational amenities, as well as through land sales and joint ventures. The company currently owns and controls developable land on which the company plans to build over 19,000 traditional and tower homes.
For more information about WCI and its residential communities visit www.wcicommunities.com
The WCI Communities, Inc. logo is available at http://www.primenewswire.com/newsroom/prs/?pkgid=3018
Forward-looking statements:
Certain information included herein and in other company reports, Securities and Exchange Commission filings, statements and presentations is forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements about the company's anticipated operating results, financial resources, ability to acquire land, ability to sell homes and properties, ability to deliver homes from backlog, and ability to secure materials and subcontractors. Such forward-looking information involves important risks and uncertainties that could significantly affect actual results and cause them to differ materially from expectations expressed herein and in other company reports, filings, statements and presentations. These risks and uncertainties include WCI's ability to compete in real estate markets where we conduct business; the availability and cost of land in desirable areas in its geographic markets and our ability to expand successfully into those areas; WCI's ability to obtain necessary permits and approvals for the development of its lands; the availability of capital to WCI and our ability to effect growth strategies successfully; WCI's ability to pay principal and interest on its current and future debts; WCI's ability to amend its bank agreements as needed from time to time to obtain covenant relief during the market downturn; WCI's ability to maintain or increase historical revenues and profit margins; WCI's ability to collect contract receivables from buyers purchasing homes as investments; availability of labor and materials and material increases in insurance, labor and material costs; increases in interest rates and availability of mortgage financing; the ability of prospective residential buyers to obtain mortgage financing due to tightening credit markets, appraisal problems or other factors; increases in construction and homeowner insurance and availability of insurance, the level of consumer confidence; the negative impact of claims for contract rescission or cancellation by contract purchasers due to various factors including the increase in the cost of condominium insurance; adverse legislation or regulations; unanticipated litigation or adverse legal proceedings; ability to retain employees; changes in generally accepted accounting principles; natural disasters; and changes in general economic, real estate and business conditions. If one or more of the assumptions underlying our forward-looking statements proves incorrect, then the company's actual results, performance or achievements could differ materially from those expressed in, or implied by the forward-looking statements contained in this report. Therefore, we caution you not to place undue reliance on our forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. This statement is provided as permitted by the Private Securities Litigation Reform Act of 1995.
WCI Communities, Inc. Condensed Consolidated Balance Sheets (Dollars in thousands) June 30, December 31, 2007 2006 ---------- ---------- Assets Cash and cash equivalents $ 22,168 $ 41,876 Contracts receivable 925,530 1,269,549 Real estate inventories 1,980,901 1,955,793 Property and equipment 242,120 274,720 Other assets 297,813 289,921 ---------- ---------- Total assets $3,468,532 $3,831,859 ========== ========== Liabilities and Shareholders' Equity Accounts payable, accruals and other liabilities $ 675,244 $ 862,353 ---------- ---------- Debt obligations: Senior revolving credit facility 360,600 503,846 Senior term note 300,000 300,000 Mortgages and notes payable 371,456 363,261 Senior subordinated notes 525,000 525,000 Junior subordinated notes 165,000 165,000 Contingent convertible senior subordinated notes 125,000 125,000 ---------- ---------- Total debt obligations 1,847,056 1,982,107 ---------- ---------- Total shareholders' equity 946,232 987,399 ---------- ---------- Total liabilities and shareholders' equity $3,468,532 $3,831,859 ========== ========== Other Balance Sheet Data Debt $1,847,056 $1,982,107 Shareholders' equity 946,232 987,399 ---------- ---------- Capitalization $2,793,288 $2,969,506 ========== ========== Ratio of debt to capitalization 66.1% 66.7% Debt, net of cash and cash equivalents $1,824,888 $1,940,231 Shareholders' equity 946,232 987,399 ---------- ---------- Capitalization, net of cash and cash equivalents $2,771,120 $2,927,630 ========== ========== Ratio of net debt to net capitalization 65.9% 66.3% Shareholders' equity per share $ 22.50 $ 23.57 WCI Communities, Inc. Selected Revenues and Earnings Information (Dollars in thousands, except per share data) For the three months For the six months ended June 30, ended June 30, ---------------------- ---------------------- 2007 2006 2007 2006 ---------- ---------- ---------- ---------- REVENUES Homebuilding: Homes $ 171,283 $ 253,799 $ 385,356 $ 534,061 Lots 7,659 4,139 7,796 11,053 ---------- ---------- ---------- ---------- Total traditional 178,942 257,938 393,152 545,114 Towers 2,130 214,434 76,114 433,829 ---------- ---------- ---------- ---------- Total homebuilding 181,072 472,372 469,266 978,943 Real estate services 27,379 33,233 53,000 63,671 Amenity membership and operations 19,007 19,120 42,156 43,815 Land sales 12,598 965 12,598 6,117 Other 1,705 2,044 3,472 4,091 ---------- ---------- ---------- ---------- Total revenues 241,761 527,734 580,492 1,096,637 ---------- ---------- ---------- ---------- GROSS MARGIN Homebuilding: Homes (224) 52,373 35,313 115,524 Lots 2,479 1,237 2,467 3,430 ---------- ---------- ---------- ---------- Total traditional 2,255 53,610 37,780 118,954 Towers (16,723) 44,520 (15,888) 99,028 ---------- ---------- ---------- ---------- Total homebuilding (14,468) 98,130 21,892 217,982 Real estate services 2,472 3,035 4,574 5,812 Amenity membership and operations (732) (878) 594 (137) Land sales 5,937 (54) 5,867 3,451 Other 28 (71) 99 44 ---------- ---------- ---------- ---------- Total gross margin (6,763) 100,162 33,026 227,152 ---------- ---------- ---------- ---------- OTHER INCOME AND EXPENSES Equity in losses (earnings) from joint ventures 291 (251) (495) (51) Other income (363) (701) (852) (2,156) Hurricane recoveries (3,881) -- (5,393) -- Selling, general and administrative, including real estate taxes, net 49,836 52,108 96,739 103,881 Depreciation and amortization 5,577 6,352 11,232 12,588 Interest expense, net 18,271 7,206 34,635 10,410 Expenses related to early repayment of debt -- -- -- 455 ---------- ---------- ---------- ---------- (Loss) income from continuing operations before minority interests and income taxes (76,494) 35,448 (102,840) 102,025 Minority interests 1,415 74 822 (1,266) Income tax (benefit) expense (30,215) 13,469 (40,634) 39,075 ---------- ---------- ---------- ---------- (Loss) income from continuing operations (44,864) 22,053 (61,384) 61,684 Income from discontinued operations, net of tax 157 622 866 1,232 Gain on sale of discontinued operations, net of tax 11,490 -- 11,490 -- ---------- ---------- ---------- ---------- Net (loss) income $ (33,217) $ 22,675 $ (49,028) $ 62,916 ========== ========== ========== ========== (LOSS) EARNINGS PER SHARE: Basic: From continuing operations $ (1.07) $ 0.51 $ (1.46) $ 1.42 From discontinued operations 0.28 0.02 0.29 0.03 ---------- ---------- ---------- ---------- $ (0.79) $ 0.53 $ (1.17) $ 1.45 ========== ========== ========== ========== Diluted: From continuing operations $ (1.07) $ 0.50 $ (1.46) $ 1.38 From discontinued operations 0.28 0.02 0.29 0.03 ---------- ---------- ---------- ---------- $ (0.79) $ 0.52 $ (1.17) $ 1.41 ========== ========== ========== ========== WEIGHTED AVERAGE NUMBER OF SHARES Basic 41,988 42,925 41,954 43,523 Diluted 41,988 43,886 41,954 44,534 OPERATING DATA Interest incurred $ 34,544 $ 30,321 $ 69,933 $ 55,750 Interest included in cost of sales $ 8,560 $ 17,410 $ 22,336 $ 33,364 WCI Communities, Inc. Condensed Consolidated Statements of Cash Flows (Dollars in thousands) For the six months ended June 30, ---------------------- 2007 2006 --------- --------- Cash flows from operating activities: Net (loss) income $ (49,028) $ 62,916 Asset impairment losses and land acquisition termination costs 37,061 4,586 Increase in real estate inventories (52,826) (230,537) Decrease (Increase) in contracts receivable 344,019 (176,150) Decrease in customer deposits (101,301) (39,374) Decrease in restricted cash 14,266 68,703 Decrease in accounts payable and other liabilities (75,248) (66,196) All other (30,614) 34,382 --------- --------- Net cash provided by (used in) operating activities 86,329 (341,670) --------- --------- Cash flows from investing activities: Additions to property and equipment, net (14,044) (27,761) Proceeds from sale of property and equipment 47,105 -- Other 427 (12,574) --------- --------- Net cash provided by (used in) investing activities 33,488 (40,335) --------- --------- Cash flows from financing activities: Net (repayments) borrowings under debt obligations (135,681) 405,168 All other (3,844) (73,707) --------- --------- Net cash (used in) provided by financing activities (139,525) 331,461 --------- --------- Net decrease in cash and cash equivalents $ (19,708) $ (50,544) ========= ========= WCI Communities, Inc. Homebuilding Operational Data (Dollars in thousands) For the three months For the six months ended June 30, ended June 30, -------------------- -------------------- 2007 2006 2007 2006 --------- --------- --------- --------- Combined Traditional and Tower Homebuilding ------------------------ Homes Closed (Units)* 389 627 949 1,228 Net New Orders (Units) 50 287 287 689 Net Contract Values of New Orders $ 9,057 $ 238,438 $ 165,160 $ 573,203 Average Selling Price Per New Order, Net $ 181 $ 831 $ 575 $ 832 Average Selling Price Per New Order, Gross $ 721 $ 772 $ 732 $ 791 Traditional Homebuilding $ 698 $ 691 $ 698 $ 722 Tower Homebuilding $ 1,148 $ 1,470 $ 1,489 $ 1,355 Traditional Homebuilding ------------------------ Homes Closed (Units) Florida 156 304 339 731 Northeast U.S. 37 48 147 99 Mid-Atlantic U.S. 24 20 37 34 --------- --------- --------- --------- Total 217 372 523 864 --------- --------- --------- --------- Revenues, excluding lot revenues Florida $ 122,590 $ 200,606 $ 259,805 $ 432,797 Northeast U.S. 21,405 26,247 80,673 53,996 Mid-Atlantic U.S. 27,288 26,946 44,878 47,268 --------- --------- --------- --------- Total $ 171,283 $ 253,799 $ 385,356 $ 534,061 --------- --------- --------- --------- Average Selling Price Per Home Closed Florida $ 786 $ 660 $ 766 $ 592 Northeast U.S. 579 547 549 545 Mid-Atlantic U.S. 1,137 1,347 1,213 1,390 --------- --------- --------- --------- Total $ 789 $ 682 $ 737 $ 618 --------- --------- --------- --------- Gross New Orders (Units) Florida 132 228 347 535 Northeast U.S. 51 110 111 208 Mid-Atlantic U.S. 22 24 51 41 --------- --------- --------- --------- Total 205 362 509 784 --------- --------- --------- --------- Cancellations (Units) Florida (75) (90) (123) (145) Northeast U.S. (16) (15) (25) (24) Mid-Atlantic U.S. (7) (6) (10) (17) --------- --------- --------- --------- Total (98) (111) (158) (186) --------- --------- --------- --------- Net New Orders (Units) Florida 57 138 224 390 Northeast U.S. 35 95 86 184 Mid-Atlantic U.S. 15 18 41 24 --------- --------- --------- --------- Total 107 251 351 598 --------- --------- --------- --------- Gross Contract Values of New Orders Florida $ 90,455 $ 161,766 $ 233,522 $ 402,884 Northeast U.S. 28,686 56,173 64,478 105,731 Mid-Atlantic U.S. 23,919 32,325 57,426 57,271 --------- --------- --------- --------- Total $ 143,060 $ 250,264 $ 355,426 $ 565,886 --------- --------- --------- --------- Contract Values of Cancellations Florida $ (64,317) $ (52,195) $(108,181) $ (85,070) Northeast U.S. (8,380) (7,222) (13,426) (11,791) Mid-Atlantic U.S. (6,792) (9,399) (11,315) (22,467) --------- --------- --------- --------- Total $ (79,489) $ (68,816) $(132,922) $(119,328) --------- --------- --------- --------- Net Contract Values of New Orders Florida $ 26,138 $ 109,571 $ 125,341 $ 317,814 Northeast U.S. 20,306 48,951 51,052 93,940 Mid-Atlantic U.S. 17,127 22,926 46,111 34,804 --------- --------- --------- --------- Total $ 63,571 $ 181,448 $ 222,504 $ 446,558 --------- --------- --------- --------- Gross Average Selling Price Per New Order Florida $ 685 $ 710 $ 673 $ 753 Northeast U.S. 562 511 581 508 Mid-Atlantic U.S. 1,087 1,347 1,126 1,397 --------- --------- --------- --------- Total $ 698 $ 691 $ 698 $ 722 --------- --------- --------- --------- For the three months For the six months ended June 30, ended June 30, -------------------- -------------------- 2007 2006 2007 2006 --------- --------- --------- --------- Tower Homebuilding ------------------ Homes Closed (Units) Florida 172 255 426 364 --------- --------- --------- --------- Total 172 255 426 364 --------- --------- --------- --------- Revenues Florida $ (17,078) $ 200,586 $ 38,355 $ 413,094 Northeast U.S. 19,208 13,848 37,759 20,735 --------- --------- --------- --------- Total $ 2,130 $ 214,434 $ 76,114 $ 433,829 --------- --------- --------- --------- Gross New Orders (Units) Florida 9 41 20 90 Northeast U.S. 2 1 3 7 --------- --------- --------- --------- Total 11 42 23 97 --------- --------- --------- --------- Defaults (Units) Florida (67) (6) (84) (6) Northeast U.S. (1) -- (3) -- --------- --------- --------- --------- Total (68) (6) (87) (6) --------- --------- --------- --------- Net New Orders (Units) Florida (58) 35 (64) 84 Northeast U.S. 1 1 -- 7 --------- --------- --------- --------- Total (57) 36 (64) 91 --------- --------- --------- --------- Gross Contract Values of New Orders Florida $ 10,356 $ 57,852 $ 30,866 $ 119,438 Northeast U.S. 2,272 3,895 3,385 11,964 --------- --------- --------- --------- Total $ 12,628 $ 61,747 $ 34,251 $ 131,402 --------- --------- --------- --------- Contract Values of Defaults Florida $ (66,261) $ (4,757) $ (89,107) $ (4,757) Northeast U.S. (881) -- (2,488) -- --------- --------- --------- --------- Total $ (67,142) $ (4,757) $ (91,595) $ (4,757) --------- --------- --------- --------- Net Contract Values of New Orders Florida $ (55,905) $ 53,095 $ (58,241) $ 114,681 Northeast U.S. 1,391 3,895 897 11,964 --------- --------- --------- --------- Total $ (54,514) $ 56,990 $ (57,344) $ 126,645 --------- --------- --------- --------- Gross Average Selling Price Per New Order Florida $ 1,151 $ 1,411 $ 1,543 $ 1,327 Northeast U.S. 1,136 3,895 $ 1,128 $ 1,709 --------- --------- --------- --------- Total $ 1,148 $ 1,470 $ 1,489 $ 1,355 --------- --------- --------- --------- Towers under construction recognizing revenue during the period 11 24 June 30, ---------------------- 2007 2006 ---------- ---------- Combined Traditional and Tower Homebuilding ------------------------ Aggregate Backlog Contract Values, Traditional and Tower Homebuilding $ 635,595 $1,654,696 Traditional Homebuilding ------------------------ Backlog (Units) 698 1,431 Backlog Contract Values $ 525,360 $1,103,944 Tower Homebuilding ------------------ Cumulative Units in Backlog 807 1,597 Cumulative Contract Values $1,053,672 $1,855,924 Less: Cumulative Revenues Recognized (943,437) (1,305,172) ---------- ---------- Backlog Contract Values $ 110,235 $ 550,752 ========== ========== * The Company uses the percentage of completion method to recognize revenue on sold tower units. Accordingly, the closing of tower homes corresponds with the collection of contracts receivable. WCI Communities, Inc. Reconciliation of Gross Margin (Dollars in thousands) For the three months For the six months ended June 30, ended June 30, ---------------------- ---------------------- 2007 2006 2007 2006 ---------- ---------- ---------- ---------- Company Gross Margin -------------------- Revenue $ 241,761 $ 527,734 $ 580,492 $1,096,637 ---------- ---------- ---------- ---------- Gross margin (6,763) 100,162 33,026 227,152 Add back Homebuilding impairment 17,481 4,586 18,126 4,586 Add back Tower impairment 18,498 -- 18,948 -- ---------- ---------- ---------- ---------- Gross margin excluding impairment $ 29,216 $ 104,748 $ 70,100 $ 231,738 ---------- ---------- ---------- ---------- Gross margin % as reported -2.8% 19.0% 5.7% 20.7% Gross margin % excluding impairment 12.1% 19.8% 12.1% 21.1% Traditional Homebuilding ------------- Revenue $ 178,942 $ 257,938 $ 393,152 $ 545,114 ---------- ---------- ---------- ---------- Gross margin 2,255 53,610 37,780 118,954 Add back impairment 17,481 4,586 18,126 4,586 ---------- ---------- ---------- ---------- Gross margin excluding impairment $ 19,736 $ 58,196 $ 55,906 $ 123,540 ---------- ---------- ---------- ---------- Gross margin % as reported 1.3% 20.8% 9.6% 21.8% Gross margin % excluding impairment 11.0% 22.6% 14.2% 22.7% Tower Homebuilding ------------------ Revenue $ 2,130 $ 214,434 $ 76,114 $ 433,829 ---------- ---------- ---------- ---------- Gross margin (16,723) 44,520 (15,888) 99,028 Add back impairment 18,498 -- 18,948 -- ---------- ---------- ---------- ---------- Total Gross Margin excluding impairment $ 1,775 $ 44,520 $ 3,060 $ 99,028 ---------- ---------- ---------- ---------- Gross margin % as reported NM 20.8% NM 22.8% Gross margin % excluding impairment 83.3% 20.8% 4.0% 22.8% --------------------- NM = Not meaningful 2006/2007 Tower Profile (as of 6/30/07) of 6/30/07) # of Units Projected in Sell-out % % Average HUD Bldg Value Sold Complete Deposit Bldg@ ---------------------------------------------------------------------- Closed to Date Anchorage at Jupiter Yacht Club 34 $32M 100% 100% 20% No Commodore at Jupiter Yacht Club 22 $21M 100% 100% 20% No San Andres at Lost Key 45 $28M 100% 100% 18% No Serano at Hammock Bay 116 $68M 100% 100% 20% No Navona at The Colony 100 $61M 100% 100% 20% Yes Santo Amaro at Lost Key 45 $27M 96% 100% 18% No LaSalbadora at Lost Key 45 $25M 82% 100% 17% No One Singer Island 15 $47M 80% 100% 20% No Casa at Castella (The Colony) 24 $24M 38% 100% 16% Yes Mansion at Castella (The Colony) 24 $25M 63% 100% 15% Yes Villa at Castella (The Colony) 24 $27M 42% 100% 17% Yes Costa Verano at Jacksonville Beach 100 $95M 95% 100% 20% No Tuscany at Hammock Dunes 64 $80M 88% 100% 20% No Mosaic at Miami Beach 91 $124M 97% 100% 20% No Resort at Singer Island Condo 66 $106M 95% 100% 20% Yes Resort at Singer Island Condo/Hotel* 229 $151M 100% 100% 20% Yes Lesina at Hammock Bay 116 $125M 56% 100% 19% Yes The Galia at Lost Key Marina 70 $50M 56% 100% 19% No San Anton at Lost Key 54 $38M 72% 97% 19% No Castillo at Westshore 80 $81M 90% 95% 18% Yes ---------------------------------------------------------------------- Totals 1,364 $1,244M 79% 100% 19% ====================================================================== Under Construction Le Jardin at Hammock Dunes 26 $67M 73% 94% 18% No One Bal Harbour Condo 185 $377M 99% 95% 19% Yes One Bal Harbour Condo/ Hotel* 115 $111M 100% 95% 20% Yes The Watermark 206 $233M 86% 83% 20% Yes Florencia at The Colony 116 $123M 79% 96% 19% Yes Oceanside B 186 $238M 63% 81% 18% Yes ---------------------------------------------------------------------- Totals 834 $1,150M 83% 91% 19% ====================================================================== Initial Tower Expected Expected Contract Construction Tower Tower Conversion Start Closing Completion Date Date Date(t) Date(t) ---------------------------------------------------------------------- Closed to Date Anchorage at Jupiter Yacht Club 2Q 2004 2Q 2004 Jan-06 1Q 2006 Commodore at Jupiter Yacht Club 2Q 2004 2Q 2004 Jan-06 1Q 2006 San Andres at Lost Key 4Q 2004 4Q 2004 Feb-06 1Q 2006 Serano at Hammock Bay 4Q 2004 3Q 2004 Apr-06 2Q 2006 Navona at The Colony 2Q 2004 2Q 2004 May-06 2Q 2006 Santo Amaro at Lost Key 4Q 2004 4Q 2004 Jun-06 2Q 2006 LaSalbadora at Lost Key 4Q 2004 4Q 2004 Aug-06 3Q 2006 One Singer Island 2Q 2004 3Q 2004 Nov-06 4Q 2006 Casa at Castella (The Colony) 3Q 2004 1Q 2005 Nov-06 4Q 2006 Mansion at Castella (The Colony) 1Q 2005 1Q 2005 Nov-06 4Q 2006 Villa at Castella (The Colony) 2Q 2005 1Q 2005 Nov-06 4Q 2006 Costa Verano at Jacksonville Beach 4Q 2004 3Q 2004 Dec-06 4Q 2006 Tuscany at Hammock Dunes 4Q 2004 2Q 2005 Dec-06 4Q 2006 Mosaic at Miami Beach 3Q 2004 4Q 2004 Dec-06 4Q 2006 Resort at Singer Island Condo 3Q 2004 3Q 2004 Mar-07 Resort at Singer Island Condo/Hotel* 3Q 2004 3Q 2004 Mar-07 Lesina at Hammock Bay 2Q 2005 3Q 2005 Mar-07 The Galia at Lost Key Marina 4Q 2005 4Q 2005 Mar-07 San Anton at Lost Key 2Q 2005 3Q 2005 Jun-07 Castillo at Westshore 3Q 2005 4Q 2005 Jun-07 ---------------------------------------------------------------------- Totals ====================================================================== Under Construction Le Jardin at Hammock Dunes 4Q 2005 4Q 2005 Jul-07 2Q 2007 Sept - Oct One Bal Harbour Condo 4Q 2003 2Q 2004 07 1Q 2007 One Bal Harbour Condo/ Sept - Oct Hotel* 4Q 2004 2Q 2004 07 1Q 2007 Oct - Nov The Watermark 2Q 2005 3Q 2005 07 3Q 2007 Sept - Oct Florencia at The Colony 3Q 2005 3Q 2005 07 4Q 2007 Feb - Mar Oceanside B 3Q 2005 4Q 2005 08 1Q 2008 ---------------------------------------------------------------------- Totals ====================================================================== * Does not count as a separate tower @ In the event of a default in a HUD building, the company may retain no more than 15% of the total purchase price of the unit. Any additional deposit must be returned to the buyer. NJ limits deposit retention to 10% of total sales price plus options and upgrades costs, not to exceed a total of 15%. (t) Expected closing date based on current construction schedule. Summary of Land Controlled June 30, 2007 Remaining Units in Value in Spec Planned Backlog as Backlog as Units Region Units of 6/30/07 of 6/30/07 in WIP Traditional Homebuilding (Including Lots) Florida Miami / Ft. Lauderdale 1,323 230 $ 186.7 63 Naples / Ft. Myers 4,589 109 67.5 75 Palm Beach / Indian River 178 6 14.3 4 Palm Coast / Jacksonville 24 -- -- 5 Perdido Key 94 -- -- 11 Tampa / Sarasota 4,173 148 118.1 42 Mid-Atlantic 381 34 49.0 9 Northeast 2,114 171 89.9 21 --------------------------------------------------------------------- Traditional Homebuilding Total 12,876 698 525.4 230 Tower Homebuilding Florida Miami / Ft. Lauderdale 1,153 420 53.3 69 Naples / Ft. Myers 1,205 94 3.7 24 Palm Beach / Indian River 423 15 -- -- Palm Coast / Jacksonville 290 32 23.8 7 Perdido Key 1,510 20 -- -- Tampa / Sarasota 846 49 0.0 -- Mid-Atlantic 284 -- -- -- Northeast 480 177 29.4 29 --------------------------------------------------------------------- Tower Homebuilding Total 6,191 807 110.2 129 Total Homebuilding Florida Miami / Ft. Lauderdale 2,476 650 240.0 132 Naples / Ft. Myers 5,794 203 71.2 99 Palm Beach / Indian River 601 21 14.3 4 Palm Coast / Jacksonville 314 32 23.8 12 Perdido Key 1,604 20 -- 11 Tampa / Sarasota 5,019 197 118.1 42 Mid-Atlantic 665 34 49.0 9 Northeast 2,594 348 119.3 50 --------------------------------------------------------------------- Total Homebuilding Total 19,067 1,505 635.6 359 ===================================================================== Finished Spec and Total Model Units % Region Units Remaining Owned Traditional Homebuilding (Including Lots) Florida Miami / Ft. Lauderdale 94 936 100% Naples / Ft. Myers 114 4,291 100% Palm Beach / Indian River 17 151 100% Palm Coast / Jacksonville 19 -- 100% Perdido Key 1 82 100% Tampa / Sarasota 106 3,877 50% Mid-Atlantic 19 319 79% Northeast 11 1,911 76% --------------------------------------------------------------------- Traditional Homebuilding Total 381 11,567 79% Tower Homebuilding Florida Miami / Ft. Lauderdale 3 661 85% Naples / Ft. Myers 113 974 100% Palm Beach / Indian River 28 380 45% Palm Coast / Jacksonville 11 240 100% Perdido Key 74 1,416 100% Tampa / Sarasota 8 789 81% Mid-Atlantic -- 284 100% Northeast -- 274 43% --------------------------------------------------------------------- Tower Homebuilding Total 237 5,018 86% Total Homebuilding Florida Miami / Ft. Lauderdale 97 1,597 93% Naples / Ft. Myers 227 5,265 100% Palm Beach / Indian River 45 531 61% Palm Coast / Jacksonville 30 240 100% Perdido Key 75 1,498 100% Tampa / Sarasota 114 4,666 55% Mid-Atlantic 19 603 88% Northeast 11 2,185 70% --------------------------------------------------------------------- Total Homebuilding Total 618 16,585 82% ===================================================================== Remaining Planned Units June 30, 2007 Total Owned Optioned Controlled Traditional Homebuilding 10,207 2,669 12,876 Tower Homebuilding 5,355 836 6,191 -------------------------------------------------------------------- Total Homebuilding 15,562 3,505 19,067 ====================================================================