BONITA SPRINGS, Fla., Oct. 3, 2006 (PRIMEZONE) -- WCI Communities, Inc. (NYSE:WCI), a leading builder of traditional and tower residences in highly amenitized lifestyle communities, today announced its earnings per share (EPS) for the third quarter of 2006 is expected to be significantly below its prior guidance of approximately $0.52, although the Company still expects to report positive net income.
"The Company's write-off of approximately $13 million of costs associated with land options which were terminated during the quarter is the largest factor behind our expected shortfall, costing the company about 18 cents per share," said Jerry Starkey, President and CEO of WCI Communities, Inc. "With the current slowdown in demand, we believe we own sufficient land to support our operations through the foreseeable future. We have concluded that it is more prudent at this juncture to apply our cash flow from operations primarily towards debt reduction and stock repurchases."
Greater than expected Traditional Homebuilding and Tower Homebuilding defaults will also negatively affect the company's earnings for the third quarter. Approximately 80 traditional homes valued around $48.0 million had been scheduled for delivery during the quarter but failed to close. In addition, in light of increased tower defaults primarily related to a single tower located in Northwest Florida, the Company has increased its tower default reserve to anticipate that the actual year-to-date default rate of approximately 4% will continue through completion and delivery of existing towers. "While this default rate is approximately double our historical average, it remains relatively low and substantially below the rate of defaults experienced by many builders," said Starkey. "The lower level of defaults may be attributed to the relatively large deposits collected from tower purchasers and the significant price appreciation that has generally occurred during the two to three years since commitments to purchase the tower units were initially made."
Additionally, the Company expects that combined tower and traditional new orders for the third quarter are expected to fall approximately 80% below the total reported in the third quarter of 2005. The decline in the value and number of traditional home new orders of approximately 60% to 65% reflects additional deterioration in sales levels during the historically slower summer sales season, as compared to the 40.5% to 43.5% year-over-year new order shortfall experienced in the second quarter. The third quarter decline in new orders for Tower Homebuilding was more significant because the Company has only converted one tower from reservation to firm contract in 2006 and very few new tower orders were received in the third quarter. By comparison, nine towers converted to contract through the third quarter of 2005 and 333 new orders were reported in the third quarter alone.
More details will be forthcoming when the company issues its earnings release in early November.
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 low-$200,000s 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, its mortgage 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 21,500 traditional and tower homes.
For more information about WCI and its residential communities visit www.wcicommunities.com
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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 elsewhere 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 maintain or increase historical revenues and profit margins; availability of labor and materials and material increases in labor and material costs; increases in interest rates and availability of mortgage financing; the level of consumer confidence; customer cancellations or defaults; adverse legislation or regulations; unanticipated litigation or legal proceedings; changes in accounting rules, including changes in percentage of completion accounting; 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.