UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
| (Mark One) | |
| [ X ] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF |
| THE SECURITIES EXCHANGE ACT OF 1934 | |
For the quarterly period ended March 31, 2003
OR
| [ ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF |
| THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 1-9186
WCI COMMUNITIES, INC.
(Exact name of registrant as specified in its charter)
| Delaware (State or other jurisdiction of incorporation or organization) |
59-2857021 (I.R.S. Employer Identification No.) |
24301 Walden Center Drive
Bonita Springs, Florida 34134
(Address of principal executive offices) (Zip Code)
| (Registrant’s telephone number, including area code) | (239) 947-2600 |
Not applicable
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant is an accelerated filer (as defined by Rule 12b-2 of the Exchange Act).
The number of shares outstanding of the issuer’s common stock, as of April 28, 2003 was 44,444,485.
WCI COMMUNITIES, INC.
Form 10-Q
For the Quarter Ended March 31, 2003
INDEX
Part I. Financial Information
| Page No. | |||||
| Item 1. | Financial Statements | ||||
| Condensed Consolidated Balance Sheets March 31, 2003 (Unaudited) and December 31, 2002 | 3 | ||||
| Condensed Consolidated Statements of Income (Unaudited) For the Three Months Ended March 31, 2003 and 2002 | 4 | ||||
| Condensed Consolidated Statements of Changes in Shareholders’ Equity (Unaudited) For the Three Months Ended March 31, 2003 and 2002 | 5 | ||||
| Condensed Consolidated Statements of Cash Flows (Unaudited) For the Three Months Ended March 31, 2003 and 2002 | 6 | ||||
| Notes to Condensed Consolidated Financial Statements (Unaudited) | 7 | ||||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 16 | |||
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 23 | |||
| Item 4. | Controls and Procedures | 23 | |||
| Part II | Other Information | ||||
| Item 1. | Legal Proceedings | 24 | |||
| Item 6. | Exhibits and Reports on Form 8-K | 24 | |||
| SIGNATURE | |||||
| Certifications | |||||
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WCI COMMUNITIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
| March 31, | December 31, | |||||||||
| 2003 | 2002 | |||||||||
| (Unaudited) | ||||||||||
Assets |
||||||||||
Cash and cash equivalents |
$ | 23,853 | $ | 49,789 | ||||||
Restricted cash |
22,161 | 20,577 | ||||||||
Contracts receivable |
569,421 | 515,021 | ||||||||
Mortgage notes and accounts receivable |
60,595 | 84,598 | ||||||||
Real estate inventories |
1,050,773 | 977,524 | ||||||||
Property and equipment |
139,627 | 127,152 | ||||||||
Other assets |
87,817 | 92,779 | ||||||||
Goodwill |
28,401 | 28,388 | ||||||||
Other intangible assets |
7,948 | 8,064 | ||||||||
Total assets |
$ | 1,990,596 | $ | 1,903,892 | ||||||
Liabilities and Shareholders’ Equity |
||||||||||
Accounts payable and other liabilities |
$ | 246,891 | $ | 297,224 | ||||||
Customer deposits |
218,241 | 183,540 | ||||||||
Community development district obligations |
49,764 | 29,684 | ||||||||
Senior unsecured credit facility |
92,750 | 44,935 | ||||||||
Mortgages and notes payable |
152,742 | 130,624 | ||||||||
Senior subordinated notes |
554,263 | 554,397 | ||||||||
| 1,314,651 | 1,240,404 | |||||||||
Commitments and contingencies |
||||||||||
Shareholders’ equity: |
||||||||||
Common stock, $.01 par value; 100,000 shares
authorized, 44,576 and 44,548 shares issued, respectively |
445 | 445 | ||||||||
Additional paid-in capital |
278,128 | 277,912 | ||||||||
Retained earnings |
399,392 | 387,555 | ||||||||
Treasury stock, at cost, 132 shares, respectively |
(795 | ) | (795 | ) | ||||||
Accumulated other comprehensive loss |
(1,225 | ) | (1,629 | ) | ||||||
Total shareholders’ equity |
675,945 | 663,488 | ||||||||
Total liabilities and shareholders’ equity |
$ | 1,990,596 | $ | 1,903,892 | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
WCI COMMUNITIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(unaudited)
| For the three months ended | |||||||||||
| March 31, | |||||||||||
| 2003 | 2002 | ||||||||||
Revenues |
|||||||||||
Homebuilding |
$ | 187,588 | $ | 188,121 | |||||||
Amenity membership and operations |
15,961 | 20,096 | |||||||||
Real estate services, land sales and other |
35,107 | 23,226 | |||||||||
Total revenues |
238,656 | 231,443 | |||||||||
Cost of Sales |
|||||||||||
Homebuilding |
129,033 | 121,748 | |||||||||
Amenity membership and operations |
13,540 | 14,811 | |||||||||
Real estate services, land sales and other |
23,731 | 16,782 | |||||||||
Total costs of sales |
166,304 | 153,341 | |||||||||
Contribution margin |
72,352 | 78,102 | |||||||||
Other Expenses |
|||||||||||
Selling, general, administrative and other |
34,699 | 31,880 | |||||||||
Interest expense, net |
12,881 | 10,861 | |||||||||
Real estate taxes, net |
2,881 | 2,396 | |||||||||
Depreciation |
2,431 | 1,913 | |||||||||
Amortization of intangible assets |
116 | 117 | |||||||||
Total other expenses |
53,008 | 47,167 | |||||||||
Income before income taxes |
19,344 | 30,935 | |||||||||
Income tax expense |
(7,507 | ) | (12,075 | ) | |||||||
Net income |
$ | 11,837 | $ | 18,860 | |||||||
Earnings per share: |
|||||||||||
Basic |
$ | .27 | $ | .49 | |||||||
Diluted |
$ | .26 | $ | .48 | |||||||
Weighted average number of shares
|
|||||||||||
Basic |
44,433 | 38,145 | |||||||||
Diluted |
45,111 | 39,608 | |||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
WCI COMMUNITIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(In thousands)
(unaudited)
| Accumulated | |||||||||||||||||||||||||||||
| Common Stock | Additional | Other | |||||||||||||||||||||||||||
| Paid-in | Retained | Comprehensive | Treasury | ||||||||||||||||||||||||||
| Shares | Amount | Capital | Earnings | Loss | Stock | Total | |||||||||||||||||||||||
Balance at December 31, 2002 |
44,416 | $ | 445 | $ | 277,912 | $ | 387,555 | $ | (1,629 | ) | $ | (795 | ) | $ | 663,488 | ||||||||||||||
Exercise of stock options |
28 | — | 169 | — | — | — | 169 | ||||||||||||||||||||||
Stock-based compensation |
— | — | 47 | — | — | — | 47 | ||||||||||||||||||||||
Comprehensive income: |
|||||||||||||||||||||||||||||
Net income |
— | — | — | 11,837 | — | — | 11,837 | ||||||||||||||||||||||
Change in fair value of derivatives,
net of tax |
— | — | — | — | 404 | — | 404 | ||||||||||||||||||||||
Total comprehensive income
|
12,241 | ||||||||||||||||||||||||||||
Balance at March 31, 2003 |
44,444 | $ | 445 | $ | 278,128 | $ | 399,392 | $ | (1,225 | ) | $ | (795 | ) | $ | 675,945 | ||||||||||||||
| Accumulated | |||||||||||||||||||||||||||||
| Common Stock | Additional | Other | |||||||||||||||||||||||||||
| Paid-in | Retained | Comprehensive | Treasury | ||||||||||||||||||||||||||
| Shares | Amount | Capital | Earnings | Loss | Stock | Total | |||||||||||||||||||||||
Balance at December 31, 2001 |
36,382 | $ | 365 | $ | 139,193 | $ | 282,739 | $ | (2,457 | ) | $ | (795 | ) | $ | 419,045 | ||||||||||||||
Issuance of common stock, net |
7,935 | 79 | 138,452 | — | — | — | 138,531 | ||||||||||||||||||||||
Comprehensive income: |
|||||||||||||||||||||||||||||
Net income |
— | — | — | 18,860 | — | — | 18,860 | ||||||||||||||||||||||
Change in fair value of derivatives,
net of tax |
— | — | — | — | 705 | — | 705 | ||||||||||||||||||||||
Total comprehensive income |
19,565 | ||||||||||||||||||||||||||||
Balance at March 31, 2002 |
44,317 | $ | 444 | $ | 277,645 | $ | 301,599 | $ | (1,752 | ) | $ | (795 | ) | $ | 577,141 | ||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
WCI COMMUNITIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
| For the three months ended | ||||||||||||
| March 31, | ||||||||||||
| 2003 | 2002 | |||||||||||
Cash flows from operating activities: |
||||||||||||
Net income |
$ | 11,837 | $ | 18,860 | ||||||||
Adjustments to reconcile net income to net cash
used in operating activities: |
||||||||||||
Deferred income taxes |
4,547 | (776 | ) | |||||||||
Depreciation and amortization |
3,124 | 2,903 | ||||||||||
Earnings from investments in joint ventures |
(1,544 | ) | (1,693 | ) | ||||||||
Stock-based compensation |
47 | — | ||||||||||
Changes in assets and liabilities: |
||||||||||||
Restricted cash |
(1,584 | ) | 749 | |||||||||
Contracts receivable |
(54,400 | ) | (77,865 | ) | ||||||||
Accounts receivable |
25,842 | 4,348 | ||||||||||
Real estate inventories |
(72,929 | ) | (78,208 | ) | ||||||||
Other assets |
6,996 | (408 | ) | |||||||||
Accounts payable and other liabilities |
(54,476 | ) | (24,442 | ) | ||||||||
Customer deposits |
34,701 | 24,413 | ||||||||||
Net cash used in operating activities |
(97,839 | ) | (132,119 | ) | ||||||||
Cash flows from investing activities: |
||||||||||||
Additions to mortgage notes receivable |
(4,204 | ) | (41 | ) | ||||||||
Proceeds from repayment of mortgage notes receivable |
2,365 | 1,594 | ||||||||||
Additions to property and equipment, net |
(15,048 | ) | (7,711 | ) | ||||||||
Contributions to investments in joint ventures, net |
(1,392 | ) | (126 | ) | ||||||||
Net cash used in investing activities |
(18,279 | ) | (6,284 | ) | ||||||||
Cash flows from financing activities: |
||||||||||||
Repayments on senior secured credit facility term loan |
— | (5,000 | ) | |||||||||
Net borrowings on senior unsecured credit facility |
47,815 | — | ||||||||||
Proceeds from borrowings on mortgages and
notes payable |
54,453 | 30,673 | ||||||||||
Repayment of mortgages and notes payable |
(32,335 | ) | (51,276 | ) | ||||||||
Debt issue costs |
— | (207 | ) | |||||||||
Net advances (payments) on community development
district obligations |
20,080 | (1,288 | ) | |||||||||
Net proceeds from issuance of common stock |
— | 138,531 | ||||||||||
Proceeds from exercise of stock options |
169 | — | ||||||||||
Net cash provided by financing activities |
90,182 | 111,433 | ||||||||||
Net decrease in cash and cash equivalents |
(25,936 | ) | (26,970 | ) | ||||||||
Cash and cash equivalents at beginning of year |
49,789 | 57,993 | ||||||||||
Cash and cash equivalents at end of period |
$ | 23,853 | $ | 31,023 | ||||||||
Non-cash financing activity: |
||||||||||||