UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

                                      (Mark One)

For the quarterly period ended March 31, 2004

OR

For the transition period from                to               

Commission file number 1-9186

WCI COMMUNITIES, INC.

(Exact name of registrant as specified in its charter)

24301 Walden Center Drive
Bonita Springs, Florida 34134
(Address of principal executive offices) (Zip Code)
(239) 947-2600
(Registrant’s telephone number, including area code)

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. Yes [ X ] No [   ]

Indicate by check mark whether the registrant is an accelerated filer (as defined by Rule 12b-2 of the Exchange Act). Yes [ X ] No [   ]

The number of shares outstanding of the issuer’s common stock, as of April 26, 2004, was 43,892,802.

WCI COMMUNITIES, INC.

Form 10-Q

For the Quarter Ended March 31, 2004

INDEX

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

WCI COMMUNITIES, INC.

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

WCI COMMUNITIES, INC.

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

WCI COMMUNITIES, INC.

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

WCI COMMUNITIES, INC.

The accompanying notes are an integral part of these condensed consolidated financial statements

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WCI COMMUNITIES, INC.

1.

Basis of Presentation

The condensed consolidated financial statements and notes of WCI Communities, Inc. (the Company) as of March 31, 2004 and for the three months ended March 31, 2004 and 2003 have been prepared by management without audit, pursuant to rules and regulations of the Securities and Exchange Commission and should be read in conjunction with the December 31, 2003 audited financial statements contained in the Company’s Annual Report on Form 10-K for the year then ended. In the opinion of management, all normal, recurring adjustments necessary for the fair presentation of such financial information have been included. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted.

Certain amounts in the prior year’s financial statements have been reclassified to conform to the current year’s presentation. In the three months ended March 31, 2003, amortization of previously capitalized interest and real estate taxes has been reclassified from interest expense and real estate tax expense to homebuilding, real estate services and other cost of sales. Equity in earnings from joint ventures and other income have been reclassified from real estate services and other revenues to other income and expenses. Interest income and expense related to mortgage banking has been reclassified from other income and interest expense, respectively, to real estate services net revenue, which is included in real estate services. These reclassifications have no impact on net income.

The Company historically has experienced and expects to continue to experience variability in quarterly results. The consolidated statement of income for the three months ended March 31, 2004 is not necessarily indicative of the results to be expected for the full year.

2.

Stock-Based Compensation

The Company has elected to use APB 25 and related interpretations in accounting for its stock option plans. No compensation costs are recorded upon issuance or exercise of stock options as the options were issued at the current market price of the stock on the date of grant. Had the Company elected to recognize compensation expense under the fair value method under Statement of Financial Accounting Standards (SFAS) 123, Accounting for Stock Based Compensation, pro forma net income would be as follows:

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WCI COMMUNITIES, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
March 31, 2004
(In thousands, except per share data)

These pro forma amounts may not be representative of the effect on pro forma net income in future years, since the estimated fair value of stock options is amortized over the vesting period and additional options may be granted in future years.

3.

Segment Information

The Company operates in four principal business segments: Tower Homebuilding; Traditional Homebuilding, which includes sales of lots; Amenity Membership and Operations; and Real Estate Services, which includes real estate brokerage, mortgage banking, title and property management operations. Land sales have been disclosed for purposes of additional analysis. The amount of previously capitalized interest included in cost of sales of each segment, thereby reducing segment gross margin, is also presented for purposes of additional analysis. Asset information by business segment is not presented, since the Company does not prepare such information.

     Three months ended March 31, 2004

     Three months ended March 31, 2003

See the condensed consolidated statements of income for a reconciliation of total gross margin to income before income taxes for the three months ended March 31, 2004 and 2003.

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WCI COMMUNITIES, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
March 31, 2004
(In thousands, except per share data)

4.

Real Estate Inventories

Real estate inventories are summarized as follows:

Work in progress includes tower units and homes that are finished, sold and ready for delivery and tower units and homes in various stages of construction. Completed inventories consist of model homes used to facilitate sales and tower units and homes that were not subject to a sales contract. Excluding model homes, we had approximately 71 and 112 completed single- and multi-family homes at March 31, 2004 and December 31, 2003, respectively. We had 107 and 139 completed tower residences at March 31, 2004 and December 31, 2003, respectively.

5.

Warranty

The Company provides its single- and multi-family home buyers with a one to three year limited warranty for all material and labor and a ten year warranty for certain structural defects. The Company provides its tower home buyers a one year warranty for the unit and three year warranty for common elements of the tower.

Since the Company subcontracts its traditional and tower homebuilding work to subcontractors who provide it with an indemnity, claims relating to workmanship and materials are generally the primary responsibility of the subcontractors. Warranty reserves have been established by charging cost of sales and crediting a warranty liability. The amounts charged are estimated by management to be adequate to cover expected warranty-related costs under all unexpired warranty obligation periods. The Company’s warranty cost accruals are based upon historical warranty cost experience and are adjusted as appropriate to reflect qualitative risks associated with the types of towers and homes built. The following table presents the activity in the Company’s warranty for the quarter ended March 31, 2004:

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WCI COMMUNITIES, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
March 31, 2004
(In thousands, except per share data)

6.

Interest Expense, net

The following table is a summary of interest expense, net:

7.

Variable Interest Entities

In December 2003, the Financial Accounting Standards Board issued Interpretation 46-R (FIN 46-R), Consolidation of Variable Interest Entities (VIEs), an interpretation of ARB 51. A VIE is created when (i) the equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support from other parties or (ii) equity holders either (a) lack direct or indirect ability to make decisions about the entity, (b) are not obligated to absorb expected losses of the entity or (c) do not have the right to receive expected residual returns of the entity if they occur. The Interpretation requires the consolidation of entities in which an enterprise absorbs a majority of the entity’s expected losses, receives a majority of the entity’s expected residual returns, or both, as a result of ownership, contractual or other financial interests in the entity.