WCI Wci Communities

WCI Communities, Inc. (NYSE:WCI): -0- *T Second Quarter Financial Highlights: ------------------------------------ *T -- Net income: $22.7 million - down 69.9% -- Diluted EPS: $0.52 - down 67.7% -- Revenues: $529.4 million - down 21.1% -- New orders: $238.4 million - down 62.4% -- Backlog at June 30, 2006: $1.65 billion -- Repurchased two million shares - approximately 4.5% of total outstanding shares -- Reduced projected 2006 diluted EPS to $2.75 to $3.25 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 2006. For the three months ended June 30, 2006, net income fell 69.9% to $22.7 million, compared with $75.3 million in the second quarter of 2005, while diluted earnings per share (EPS) fell 67.7% to $0.52 from $1.61. Revenues for the second quarter of 2006 were $529.4 million, compared with $670.7 million for the second quarter of 2005, a 21.1% decrease. Results for the second quarter of 2005 included land sale revenue of $100.0 million, which contributed $1.00 to EPS. Overall company gross margin for the second quarter of 2006 was 19.1% versus 27.4% for the second quarter 2005. For the six month period ended June 30, 2006, net income totaled $62.9 million compared with $91.9 million earned during the first half of 2005 while EPS declined 27.7% to $1.41 from $1.95 for the same period a year ago. Revenues decreased 3.5% to $1.10 billion from $1.14 billion in the year earlier period. For the three months ended June 30, 2006, the aggregate value of Traditional and Tower Homebuilding orders fell 62.4% over the same period a year ago to $238.4 million, while the number of unit orders declined 62.4% to 287. The average price of Traditional and Tower Homebuilding orders combined for the period increased 0.2% to $831,000. "As indicated in our mid-quarter press release in June, traffic and new order activity for the quarter are down significantly in Florida. While traffic in the Mid-Atlantic region has been favorable, few visitors are converting to purchasers," said Jerry Starkey, President and CEO of WCI Communities. "Because interest in new tower locations is low, we have delayed pre-marketing activity on over a dozen towers until consumer sentiment improves. It appears that it will take several quarters for the increased new and resale real estate inventories affecting most of our markets to absorb. As a result, we have taken steps to moderate capital spending on land and land improvements, decreased the size of our workforce, are lowering other operating costs and continue to reduce and contain direct construction costs through increased focus on the supply chain. Our relative bright spot is our Northeast Division, where traffic and new orders are up year-over-year." -0- *T Traditional Homebuilding ------------------------ *T Second quarter 2006 revenues for Traditional Homebuilding, including lot sales, fell 5.3% to $257.9 million from $272.2 million for the second quarter 2005. The company closed 372 homes compared with 524 for the same period a year ago. Florida revenues totaled $204.7 million or 79.4% of total Traditional Homebuilding revenues versus $207.8 million or 76.3% for the second quarter of 2005. Revenues from WCI's Northeast Division accounted for 10.2% of Traditional Homebuilding revenues during the second quarter of 2006 vs. 13.2% during the same period a year ago while the company's Mid-Atlantic Division accounted for 10.4% and 10.5% for the second quarters of 2006 and 2005, respectively. Gross margin as a percentage of revenue for Traditional Homebuilding increased 530 basis points to 20.8% for the second quarter of 2006, despite a $4.6 million write-down of finished inventory in one community that is being repositioned by increasing density by approximately 80% and introducing new product at half the average selling price as previously offered in the community. Absent the charge, traditional homebuilding margins were 22.6%. For the six month period ended June 30, 2006, Traditional Homebuilding revenues increased 18.7% to $545.1 million. The company closed 864 homes compared with 905 for the same period a year ago. Gross margin as a percentage of revenue rose to 21.8% vs. 15.6% for the first six months of 2005. For the second quarter of 2006, the value of Traditional Homebuilding orders declined 40.5% to $181.4 million. Gross demand was down 30.9%, however rising cancellations, at a rate of 30.7% versus 15.3% in the same period a year ago, pushed net new orders down 43.5%. During the period, there were 111 cancellations compared with 80 a year ago. The average price for Traditional Homebuilding orders for the second quarter of 2006 rose 5.2% to $723,000 compared with $687,000 for the second quarter 2005, as the current quarter's orders contained a smaller percentage of active adult homes, which carry a lower price. Incentives and discounts on new orders for the quarter averaged 5.5% vs. 2.0% in the second quarter of 2005. Traditional Homebuilding backlog at June 30, 2006 was $1.10 billion, down 25.2% over the second quarter 2005's $1.47 billion. The company currently expects its gross margin as a percentage of Traditional Homebuilding revenue to range from 20% to 22% for the full year 2006. -0- *T Tower Homebuilding ------------------ *T For the three months ended June 30, 2006, revenues in the Tower Homebuilding Division decreased 6.3% to $214.4 million from $228.9 million for the same period a year ago. Less progression of building percentage of completion among the 21 towers under construction and recognizing revenue during the second quarter of 2006, which have a total sell-out value of $2.32 billion, contributed to the decline in revenues. In comparison, there were 18 towers, with a total sellout value of $2.04 billion, under construction and recognizing revenue during the second quarter 2005. No new towers began recognizing revenue during the second quarter of 2006 while one began revenue recognition in the second quarter of 2005. Tower Homebuilding gross margin as a percentage of revenue declined to 20.8% from 25.3% for the three months ended June 30, 2006. 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 2006, $12.6 million of unfavorable adjustments were made related to towers under construction. These adjustments included additional structural costs as a result of design revisions, additional estimated interest costs anticipated associated with longer tower construction cycles, increases in building insurance costs, and discounts and incentives anticipated in future periods given the current selling environment. In addition, the write-off of $500,000 related to a downtown redevelopment project the company elected not to pursue reduced gross margin. Absent these adjustments, which impacted the gross margin percentage for the current period by approximately 610 basis points, gross margin would have been 26.9%. For the first half of 2006, revenues in the Tower Homebuilding Division fell 1.9% to $433.8 million. Gross margin as a percentage of revenue declined to 22.8% from 25.9% the same period last year, due principally to the cost adjustments referenced above. Gross margin as a percentage of revenue for the Tower Homebuilding Division is expected to range from 23% to 25% for 2006. Tower Homebuilding orders for the second quarter 2006 decreased 82.6% in value to $57.0 million and 88.8% in units to 36. One new tower was converted to contract during the quarter, versus five towers that initially converted to contract in the prior year period. The company currently expects to release and book orders on three to five towers for all of 2006. The average order price for Tower Homebuilding units sold in the second quarter of 2006 was $1.6 million compared with $1.0 million in the period a year ago. During the quarter, the company completed and delivered three towers, consisting of 261 units, and experienced six defaults. For the six months ended June 30, 2006, six towers with 360 units were completed and delivered with a total of six defaults. Tower Homebuilding backlog at June 30, 2006 totaled $550.8 million, a 40.3% decrease over the $922.2 million backlog at June 30, 2005. For the balance of the year, nine towers, containing 618 units, are expected to close, with two towers expected to close in the third quarter and seven towers expected to close in the fourth quarter. One Bal Harbour, originally expected to close by year-end 2006, is now likely to close in the first quarter of 2007 due to construction delays. -0- *T Real Estate Services -------------------- *T Revenues for the Real Estate Services Division for the second quarter 2006 were $33.2 million, a 33.2% decrease from the $49.7 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 9.1% compared with 19.0% in the second quarter 2006. In July, WCI Mortgage announced a joint venture with Wells Fargo Mortgage. Under the agreement, Wells Fargo owns the majority of the new company and will be responsible for day-to-day operations and regulatory compliance. The new entity will originate, process, and fund mortgage loans for WCI's customers and others and will also service Prudential Florida WCI Realty. Any gain from the agreement will be reported in the company's third quarter. For the six month period revenues in the Real Estate Services Division totaled $63.7 million, down 27.3% from the $87.6 million recorded for the six months ended June 30, 2005. Gross margin as a percentage of revenue over the period decreased to 9.1% from 17.7% in the same period a year ago on weaker results from the company's real estate brokerage and mortgage banking businesses. -0- *T Other Items ----------- *T Revenues for the Amenities Division for the second quarter 2006 were $20.8 million, a 14.9% increase from $18.1 million for the same period a year ago. Gross margin totaled $128,000 for the second quarter 2006 versus a loss of $2.0 million in the second quarter of 2005. The company's consolidation of two existing golf course joint ventures into the Amenities Division revenue and gross margin, which were not reflected in the segment a year ago, was the primary reason for the difference. Land sale revenues for the second quarter 2006 totaled $965,000 compared with $100.0 million for the second quarter of 2005. Other income, including hurricane costs and recoveries, for the three months ended June 30, 2006 totaled $701,000 compared with $2.1 million in the second quarter of 2005. Selling, general, and administrative expenses including real estate taxes (SG&A) as a percentage of revenue for the second quarter 2006 totaled 9.8%, up from 8.4% in the second quarter of the previous year. During the second quarter, WCI expensed a $2 million charge for severance costs resulting from a workforce reduction. Going forward, the company expects the workforce reduction to produce a savings of approximately $23.0 million per year. -0- *T Cash Flow/Financial Position/Balance Sheet ------------------------------------------ *T For the six months ended June 30, 2006, net cash used in operating activities, including the purchase and development of real estate inventories, totaled $341.7 million compared with cash used of $178.9 million in the same period a year ago. Excluding land purchases of approximately $53.6 million, operating activities used net cash flow of approximately $288.1 million. During the quarter, WCI repurchased two million shares of the company's common stock at an average price of $21.79 per share. In October 2005, the company's Board of Directors approved the repurchase of five million shares of WCI's common stock, from time to time, based on certain parameters. Year-to-date, WCI has repurchased three million shares and is authorized to repurchase an additional two million shares based on the current Board approval. Total liquidity, measured as the sum of cash plus available capacity under the unsecured revolving facility, totaled approximately $598.7 million at June 30, 2006. The maximum amount available to borrow under the company's senior unsecured revolving credit facility was increased in June 2006 to $930 million. The facility matures in June of 2010. The ratio of net debt to net capitalization increased to 62.1% compared with 58.7% at June 30, 2005. -0- *T Current Guidance ---------------- *T For 2006, the company currently projects the following: -- EPS of $2.75 to $3.25, depending on new tower starts and land sales -- Release three to five new towers -- EPS for the third quarter of 2006 expected to approximate the level recorded in the second quarter of 2006 -- Revenue of $2.3 billion to $2.5 billion -- Traditional Homebuilding Division gross margins between 20% and 22% -- Tower Homebuilding Division gross margins between 23% and 25% -0- *T Conference Call --------------- *T WCI will conduct a conference call today at 1:00 PM EDT in conjunction with this release. The call will be broadcast live at http://www.wcicommunities.com in the Investor Relations area or can be accessed by telephone at (706) 679-5866 and asking for the WCI Communities conference call. A replay will be available after the call for a period of 36 hours by dialing (706) 645-9291 and entering conference code 3921048. 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. -0- *T About WCI --------- *T 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 23,500 traditional and tower homes. For more information about WCI and its residential communities visit http://www.wcicommunities.com. 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; increases in construction and homeowner insurance and limitations on the availability of insurance, the level of consumer confidence; adverse legislation or regulations; unanticipated litigation or adverse legal proceedings; 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. -0- *T WCI Communities, Inc. Condensed Consolidated Balance Sheets (Dollars in thousands) June 30, December 31, 2006 2005 ------------ ------------ Assets Cash and cash equivalents $ 2,040 $ 52,584 Contracts receivable 1,299,659 1,123,509 Real estate inventories 1,977,473 1,687,852 Property and equipment 288,320 208,205 Other assets 325,432 409,256 ------------ ------------ Total assets $ 3,892,924 $ 3,481,406 ============ ============ Liabilities and Shareholders' Equity Accounts payable, accruals and other liabilities $ 1,067,447 $ 1,070,047 ------------ ------------ Debt obligations: Senior unsecured credit facility 333,306 94,050 Senior unsecured term note 300,000 300,000 Mortgages and notes payable 307,669 203,214 Senior subordinated notes 525,000 530,473 Junior subordinated notes 165,000 100,000 Contingent convertible senior subordinated notes 125,000 125,000 ------------ ------------ Total debt obligations 1,755,975 1,352,737 ------------ ------------ Total shareholders' equity 1,069,502 1,058,622 ------------ ------------ Total liabilities and shareholders' equity $ 3,892,924 $ 3,481,406 ============ ============ Other Balance Sheet Data Debt $ 1,755,975 $ 1,352,737 Shareholders' equity 1,069,502 1,058,622 ------------ ------------ Capitalization $ 2,825,477 $ 2,411,359 ============ ============ Ratio of debt to capitalization 62.1% 56.1% Debt, net of cash and cash equivalents $ 1,753,935 $ 1,300,153 Shareholders' equity 1,069,502 1,058,622 ------------ ------------ Capitalization, net of cash and cash equivalents $ 2,823,437 $ 2,358,775 ============ ============ Ratio of net debt to net capitalization 62.1% 55.1% Shareholders' equity per share $ 25.58 $ 23.86 *T -0- *T WCI Communities, Inc. Selected Revenues and Earnings Information (Dollars in thousands, except per share data) For the three months For the six months ended ended June 30, June 30, --------------------- --------------------- 2006 2005 2006 2005 ---------- ---------- ---------- ---------- REVENUES Homebuilding: Homes $ 253,799 $ 259,523 $ 534,061 $ 440,287 Lots 4,139 12,674 11,053 18,932 ---------- ---------- ---------- ---------- Total traditional 257,938 272,197 545,114 459,219 Towers 214,434 228,889 433,829 442,413 ---------- ---------- ---------- ---------- Total homebuilding 472,372 501,086 978,943 901,632 Real estate services 33,233 49,688 63,671 87,608 Amenity membership and operations 20,822 18,103 47,361 43,776 Land sales 965 100,000 6,117 100,000 Other 2,044 1,778 4,091 3,503 ---------- ---------- ---------- ---------- Total revenues 529,436 670,655 1,100,183 1,136,519 ---------- ---------- ---------- ---------- GROSS MARGIN Homebuilding: Homes 52,373 39,451 115,524 66,524 Lots 1,237 2,740 3,430 4,928 ---------- ---------- ---------- ---------- Total traditional 53,610 42,191 118,954 71,452 Towers 44,520 57,901 99,028 114,633 ---------- ---------- ---------- ---------- Total homebuilding 98,130 100,092 217,982 186,085 Real estate services 3,035 9,445 5,812 15,532 Amenity membership and operations 128 (2,047) 1,857 (2,277) Land sales (54) 76,617 3,451 76,586 Other (71) (67) 44 (46) ---------- ---------- ---------- ---------- Total gross margin 101,168 184,040 229,146 275,880 ---------- ---------- ---------- ---------- OTHER INCOME AND EXPENSES Equity in (earnings) losses from joint ventures (251) 39 (51) (1,096) Other income (701) (1,031) (2,156) (3,954) Hurricane recoveries, net of $0 and $1,201 in costs, respectively - (1,055) - (1,861) Selling, general and administrative, including real estate taxes, net 52,108 56,341 103,881 108,891 Depreciation and amortization 6,352 3,896 12,588 7,573 Interest expense, net 7,206 1,606 10,410 15,760 Expenses related to early repayment of debt - 1,519 455 1,519 ---------- ---------- ---------- ---------- Income before minority interests and income taxes 36,454 122,725 104,019 149,048 Minority interests (74) 653 1,266 (126) Income tax expense 13,853 46,770 39,837 57,293 ---------- ---------- ---------- ---------- Net income $ 22,675 $ 75,302 $ 62,916 $ 91,881 ========== ========== ========== ========== EARNINGS PER SHARE Basic $0.53 $1.67 $1.45 $2.04 Diluted $0.52 $1.61 $1.41 $1.95 WEIGHTED AVERAGE NUMBER OF SHARES Basic 42,925 45,199 43,523 45,027 Diluted 43,886 46,915 44,534 47,037 OPERATING DATA Interest incurred, excluding warehouse credit facility $ 30,321 $ 26,745 $ 55,750 $ 49,760 Interest included in cost of sales $ 17,410 $ 22,137 $ 33,364 $ 30,104 *T -0- *T WCI Communities, Inc. Condensed Consolidated Statements of Cash Flows (Dollars in thousands) For the six months ended June 30, --------------------- 2006 2005 ---------- ---------- Cash flows from operating activities: Net income $ 62,916 $ 91,881 Increase in real estate inventories (230,537) (111,695) Increase in contracts receivable (176,150) (334,506) (Decrease) increase in customer deposits (39,374) 144,142 Decrease (increase) in restricted cash 68,703 (13,368) (Decrease) increase in accounts payable and other liabilities (66,196) 11,429 All other 38,968 33,256 ---------- ---------- Net cash used in operating activities (341,670) (178,861) ---------- ---------- Cash flows from investing activities: Net cash paid for acquisition - (136,372) Other (40,335) (18,263) ---------- ---------- Net cash used in investing activities (40,335) (154,635) ---------- ---------- Cash flows from financing activities: Net borrowings under debt obligations 405,168 306,068 All other (73,707) (4,131) ---------- ---------- Net cash provided by financing activities 331,461 301,937 ---------- ---------- Net decrease in cash and cash equivalents $ (50,544) $ (31,559) ========== ========== SUPPLEMENTAL INFORMATION Reconciliation of cash flows from operating activities to EBITDA (1) Net cash used in operating activities $(341,670) $(178,861) Interest expense, net 10,410 15,760 Interest included in cost of sales 33,364 30,104 Expenses related to early repayment of debt 455 1,519 Income tax expense 39,837 57,293 Depreciation and amortization 12,588 7,573 Increase in real estate inventories 230,537 111,695 Increase in contracts receivable 176,150 334,506 Decrease (increase) in customer deposits 39,374 (144,142) (Decrease) increase in restricted cash (68,703) 13,368 (Decrease) increase in accounts payable and other liabilities 66,196 (11,429) All other (38,968) (33,256) ---------- ---------- Total EBITDA $ 159,570 $ 204,130 ========== ========== (1) Earnings before interest, taxes, depreciation and amortization (EBITDA) is not a generally accepted accounting principle (GAAP) financial statement measurement. EBITDA should not be considered an alternative to cash flows from operations determined in accordance with GAAP as a measure of liquidity. The Company's management believes that EBITDA is an indication of the Company's ability to generate funds from operations that are available to pay principal and interest on debt obligations and to meet other cash needs. A reconciliation of cash from operating activities to EBITDA, the most directly comparable GAAP measure, is provided above. *T -0- *T WCI Communities, Inc. Homebuilding Operational Data (Dollars in thousands) For the three months For the six months ended ended June 30, June 30, ----------------------- ----------------------- 2006 2005 2006 2005 ----------- ----------- ----------- ----------- Combined Traditional and Tower Homebuilding ---------------------- Homes Closed (Units)(a) 627 656 1,228 1,056 Net New Orders (Units) 287 764 689 1,671 Contract Values of New Orders $ 238,438 $ 633,520 $ 573,203 $1,261,672 Average Selling Price Per New Order $ 831 $ 829 $ 832 $ 755 Traditional Homebuilding ---------------------- Homes Closed (Units) Florida 304 441 731 761 Northeast U.S. 48 56 99 105 Mid-Atlantic U.S. 20 27 34 39 ----------- ----------- ----------- ----------- Total 372 524 864 905 ----------- ----------- ----------- ----------- Revenues, excluding lot revenues Florida $ 200,606 $ 195,088 $ 432,797 $ 338,345 Northeast U.S. 26,247 35,974 53,996 61,911 Mid-Atlantic U.S. 26,946 28,461 47,268 40,031 ----------- ----------- ----------- ----------- Total $ 253,799 $ 259,523 $ 534,061 $ 440,287 ----------- ----------- ----------- ----------- Average Selling Price Per Home Closed Florida $ 660 $ 442 $ 592 $ 445 Northeast U.S. 547 642 545 590 Mid-Atlantic U.S. 1,347 1,054 1,390 1,026 ----------- ----------- ----------- ----------- Total $ 682 $ 495 $ 618 $ 487 ----------- ----------- ----------- ----------- Net New Orders (Units) Florida 138 385 390 1,003 Northeast U.S. 95 22 184 91 Mid-Atlantic U.S. 18 37 24 66 ----------- ----------- ----------- ----------- Total 251 444 598 1,160 ----------- ----------- ----------- ----------- Contract Values of New Orders Florida $ 109,571 $ 235,182 $ 317,814 $ 609,129 Northeast U.S. 48,951 14,776 93,940 54,625 Mid-Atlantic U.S. 22,926 55,060 34,804 87,787 ----------- ----------- ----------- ----------- Total $ 181,448 $ 305,018 $ 446,558 $ 751,541 ----------- ----------- ----------- ----------- Average Selling Price Per New Order Florida $ 794 $ 611 $ 815 $ 607 Northeast U.S. 515 672 511 600 Mid-Atlantic U.S. 1,274 1,488 1,450 1,330 ----------- ----------- ----------- ----------- Total $ 723 $ 687 $ 747 $ 648 ----------- ----------- ----------- ----------- Tower Homebuilding ---------------------- Homes Closed (Units) Florida 255 132 364 151 ----------- ----------- ----------- ----------- Total 255 132 364 151 ----------- ----------- ----------- ----------- Revenues Florida $ 200,586 $ 228,889 $ 413,094 $ 442,413 Northeast U.S. 13,848 - 20,735 - ----------- ----------- ----------- ----------- Total $ 214,434 $ 228,889 $ 433,829 $ 442,413 ----------- ----------- ----------- ----------- Net New Orders (Units) Florida 35 274 84 465 Northeast U.S. 1 46 7 46 ----------- ----------- ----------- ----------- Total 36 320 91 511 ----------- ----------- ----------- ----------- Contract Values of New Orders Florida 53,095 285,047 114,681 466,676 Northeast U.S. 3,895 43,455 11,964 43,455 ----------- ----------- ----------- ----------- Total $ 56,990 $ 328,502 $ 126,645 $ 510,131 ----------- ----------- ----------- ----------- Average Selling Price Per New Order Florida $ 1,517 $ 1,040 $ 1,365 $ 1,004 Northeast U.S. 3,895 945 1,709 945 ----------- ----------- ----------- ----------- Total $ 1,583 $ 1,027 $ 1,392 $ 998 June 30, ------------------------ 2006 2005 ----------- ------------ Combined Traditional and Tower Homebuilding ---------------------- Aggregate Backlog Contract Values, Traditional and Tower Homebuilding $1,654,696 $2,395,087 Traditional Homebuilding ---------------------- Backlog (Units) 1,431 2,503 Backlog Contract Values $1,103,944 $1,472,851 Tower Homebuilding ---------------------- Cumulative Units in Backlog 1,597 1,827 Cumulative Contract Values $1,855,924 $2,020,973 Less: Cumulative Revenues Recognized (1,305,172) (1,098,737) ----------- ----------- Backlog Contract Values $ 550,752 $ 922,236 =========== =========== Towers under construction during the period recognizing revenue 24 18 (a) 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. *T