California Coastal Communities, Inc. Reports Second Quarter Results
- Second quarter revenues of $10.4 million, up $6.2 million year-over-year, reflects delivery of 15 homes compared with nine homes in second quarter 2007.
IRVINE, Calif., Aug. 8 /PRNewswire-FirstCall/ -- California Coastal
Communities, Inc. (Nasdaq: CALC) reported $2.2 million of gross operating
profit before impairment charges for the quarter ended June 30, 2008 compared
with $300,000 of gross operating profit in the comparable period of 2007
during which there were no impairment charges. The net loss for the quarter
was $3.1 million, or $.28 per diluted share compared with a net loss of
$400,000 or $.04 per diluted share for the second quarter of 2007. Results
for the second quarter of 2008 reflect the delivery of 15 homes at the
Company's homebuilding projects in Southern California (including seven homes
at its Brightwater coastal development project) compared to delivery of only
nine homes in the second quarter of 2007.
Homebuilding gross operating profit was offset by impairment charges of
$5.0 million in the second quarter of 2008 and net operating expenses of $2.4
million, compared with $1.0 million of net operating expenses and no
impairment charges in the second quarter of 2007. This resulted in a pretax
loss of $5.2 million and $700,000 for the quarters ended June 30, 2008 and
2007, respectively.
The $1.4 million increase in net operating expenses for the second quarter
of 2008 compared with the second quarter of 2007 reflects a $500,000 increase
in selling expenses primarily related to Brightwater, a $300,000 decrease in
income from the Company's unconsolidated mortgage joint venture, $200,000 of
additional real estate holding costs, a $100,000 decrease in investment income
and a $100,000 increase in other expenses incurred under an interest rate swap
agreement.
Raymond J. Pacini, CEO of the Company commented: "While the housing market
remained sluggish during the second quarter, we are encouraged by the pace of
sales at Brightwater. Since February 2008, when we began offering our larger
homes for sale at The Cliffs and The Breakers neighborhoods at Brightwater, we
have seen an increased level of interest and sales throughout this coastal
community. We are looking forward to our first deliveries at The Cliffs and
The Breakers during the third quarter."
The Company's 105-acre Brightwater project is located in Huntington Beach,
California near the corner of Pacific Coast Highway and Warner Avenue, and
overlooks the Pacific Ocean and the recently restored 1,200-acre Bolsa Chica
Wetlands. It is the largest asset in the Company's portfolio, representing
approximately 80% of real estate inventories as of June 30, 2008. Due to the
Company's low carrying value in Brightwater, the project is currently expected
to generate gross margins of approximately 28-40%, depending on the size of
the homes sold and other factors; however, there can be no assurance that such
margins will be realized.
Second quarter homebuilding revenues of $10.4 million reflect a $6.2
million increase compared with the second quarter of 2007. This increase is
primarily due to seven deliveries at Brightwater. The average sales price of
homes delivered in the second quarter of 2008 increased to $693,300 from
$466,700 in 2007, primarily reflecting deliveries of the smaller homes (The
Trails and The Sands) at Brightwater in the current year, compared with only
deliveries at inland communities in 2007.
Homebuilding gross margin before impairment charges for the second quarter
of 2008 was 21.2%, compared with 7.1% in the second quarter of 2007. The
Company generated $1.9 million more in homebuilding gross operating profit
before impairment charges during the second quarter of 2008 compared with the
comparable period in 2007, primarily as a result of seven deliveries at
Brightwater which generated a 28.2% gross margin and gross operating profit of
$2.0 million. This was partially offset by reduced margins for eight
deliveries at our inland projects due to the prolonged real estate downturn
which has resulted in lower selling prices and greater incentives at the
Inland Empire and Lancaster projects. Impairment charges of $5.0 million
recorded during the second quarter of 2008 reflect the Company's expectations
about sales prices and sales pace at its Las Colinas project in Lancaster and
its Alisal project in Ontario.
During the second quarter of 2008, net new orders increased 136% to 26
homes compared with 11 homes during the comparable period of 2007, primarily
due to 11 sales orders generated at Brightwater during the quarter.
Cancellations as a percentage of new orders were 19% (15% at Brightwater and
21% at our inland projects) during the second quarter of 2008, compared with
the 35% cancellation rate during the comparable period of 2007.
Backlog as of June 30, 2008 increased to 23 homes compared with 17 homes
as of June 30, 2007. The total value of our backlog increased 233% from $9.7
million a year ago to $32.3 million as of June 30, 2008 due to 13 Brightwater
homes in backlog. The average sales price of homes in backlog increased from
$568,700 to $1.4 million, primarily reflecting the Brightwater homes in escrow
as of June 30, 2008 at an average sales price of $2.2 million. The Company's
standing inventory at its inland projects was reduced from 33 homes as of
December 31, 2007 to 14 homes as of June 30, 2008. Total standing inventory
as of June 30, 2008 was 19 homes, including five completed and unsold homes at
Brightwater.
The Company also reported a net loss of $3.8 million or $.35 per diluted
share for the first six months of 2008. Results for the first six months of
2008 reflect $3.3 million of homebuilding gross operating profit before
impairment charges from the delivery of 23 homes, reduced by impairment
charges of $5.0 million and net operating expenses of $4.6 million, which were
partially offset by an income tax benefit of $2.5 million.
The results for the second quarter of 2008 continue to reflect the
continued weakness in the housing market, particularly in the Company's inland
markets, which has been compounded by difficulties in the mortgage lending
industry prompted by the collapse of the subprime lending market that have
resulted in more stringent lending standards, higher interest rates on jumbo
mortgages and tightening of credit available to many homebuyers. Further,
potential homebuyers continue to be cautious about purchasing a home due to
uncertainty about the future direction of home prices, their ability to sell
existing homes, increased foreclosures and the appearance of an economic
recession. In addition, rising fuel costs appear to have further reduced
demand for homes in our Lancaster market as prospective homebuyers seek to
live closer to employment centers. In view of present circumstances, the
Company expects the real estate market downturn to continue throughout the
remainder of 2008 and into 2009 or beyond.
The Company also announced that it is engaged in ongoing negotiations with
its lenders regarding amendments to its $95.7 million revolving loan and
$118.5 million term loan that would extend borrowing availability, extend the
current maturity for the revolving loan, and modify certain covenants in both
loans. The Company is striving to obtain final approval of these amendments
from the bank syndicates by September 30, 2008.
Mr. Pacini commented further: "We appreciate the continuing support of our
lenders as we work closely with KeyBank and the other members of our bank
syndicates to complete these loan amendments on a timely basis."
The Company currently has active homebuilding projects in Huntington Beach
in Orange County, the Inland Empire areas of Riverside and San Bernardino
Counties, and Lancaster in northern Los Angeles County. As of June 30, 2008,
the Company has an inventory of 697 owned lots, reduced by 9.8% compared with
the 773 lots owned and controlled a year ago. This decrease reflects
deliveries and the absence of acquisitions since 2005.
The nature of the Company's business is such that the number, location and
specific market conditions of active selling communities over any given time
period may cause significant fluctuations in operating results from
quarter-to-quarter and from year-to-year.
The Company is a residential land development and homebuilding company
operating in Southern California. The Company's principal subsidiaries are
Hearthside Homes which is a homebuilding company, and Signal Landmark which
owns 110 acres on the Bolsa Chica mesa where sales commenced in August 2007 at
the 356-home Brightwater community. Hearthside Homes is building all of the
homes at Brightwater and has delivered over 2,100 homes to families throughout
Southern California since its formation in 1994.
Safe Harbor Statement under the Private Securities Litigation Reform Act of
1995
Certain of the foregoing information contains forward-looking statements
that relate to future events or the Company's future financial performance.
These statements involve known and unknown risks, uncertainties and other
factors which may cause the Company's actual results, performance or
achievements to be materially different from any future results, performances
or achievements expressed or implied by the forward-looking statements. In
some cases, you can identify forward-looking statements by terminology such as
"may," "will," "should," "expects," "plans," "anticipates," "believes,"
"estimates," "predicts," "potential," "continue," or the negative of such
terms or other comparable terminology. These forward-looking statements
include, but are not limited to, statements about the Company's plans,
objectives, goals, expectations and intentions, the number and types of homes
and number of acres of land that the Company may develop and sell, the timing
and outcomes of any such development, the timing and outcomes of regulatory
approval processes or administrative proceedings, cash flows or sales, and
other statements contained herein that are not historical facts.
These statements also include but are not limited to statements regarding:
the Company's platform for continued growth; demographic trends driving long-
term demand; the outlook for the housing sector, including the relative impact
of interest rates, jobs, land constraints, demographic trends, and the
availability of mortgage financing; the Company's ability to obtain final
approval for amendments to its revolving loan and term loan; the employment
outlook; housing market conditions in the markets in which the Company
operates; orders and backlog; the Company's lot supply; the Company's expected
earnings, home deliveries and revenues; expected average home prices; the
Company's expected homebuilding gross margin percentage; anticipated buyer
demand; and expected home deliveries.
Forward-looking statements are based on current expectations or beliefs
regarding future events or circumstances, and you should not place undue
reliance on these statements. Such statements involve known and unknown
risks, uncertainties, assumptions and other factors -- many of which are out
of the Company's control and difficult to forecast -- that may cause actual
results to differ materially from those that may be described or implied.
Such factors include but are not limited to: local and general economic and
market conditions, including consumer confidence, employment rates, interest
rates, the cost and availability of mortgage financing, and stock market, home
and land valuations; the impact on economic conditions of oil prices,
recession and inflation, terrorist attacks or the outbreak or escalation of
armed conflict involving the United States; the cost and availability of
suitable undeveloped land, building materials and labor; the cost and
availability of construction financing and corporate debt and equity capital;
the demand for residential real estate; cancellations of purchase contracts by
homebuyers; the cyclical and competitive nature of the Company's business;
governmental regulation; including the impact of "slow growth" or similar
initiatives; delays in the land entitlement process, development,
construction, or the opening of new home communities; the significant amount
of the Company's debt and the impact of restrictive covenants in its loan
agreements; adverse weather conditions and natural disasters such as
earthquakes and wildfires; environmental matters; future business decisions
and the Company's ability to successfully implement its operational, growth
and other strategies; litigation and warranty claims; and other risks. For a
further discussion of these and other risks and uncertainties applicable to
the Company's business, see the Company's Annual Report on Form 10-K for the
year ended December 31, 2007 and its other future and past public filings with
the Securities and Exchange Commission ("SEC"), all of which may be obtained
free of charge through the website maintained by the SEC at http://www.sec.gov
or at the Company's website at http://www.californiacoastalcommunities.com.
The Company assumes no, and hereby disclaims any, obligation to update any
of the foregoing or any other forward-looking statements. The Company
nonetheless reserves the right to make such updates from time to time by press
release, periodic report or other method of public disclosure without the need
for specific reference to this press release. No such update shall be deemed
to indicate that other statements not addressed by such update remain correct
or create an obligation to provide any other updates.
***TABLES FOLLOW***
CALIFORNIA COASTAL COMMUNITIES, INC.
SELECTED FINANCIAL AND OPERATING INFORMATION
($ in millions, except per home data)
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
Homes delivered 15 9 23 24
Home sales revenue $10.4 $4.2 $15.4 $16.4
Cost of sales 8.2 3.9 12.1 15.3
Loss on impairment of real
estate inventories 5.0 -- 5.0 4.0
13.2 3.9 17.1 19.3
Gross operating (loss)
profit $(2.8) $.3 $(1.7) $(2.9)
Gross margin percentage
before loss on impairment 21.2% 7.1% 21.4% 6.7%
PER HOME DATA
Average sales price (a) $693,300 $466,700 $669,600 $683,300
Average gross margin before
loss on impairment (b) $146,700 $33,300 $143,500 $45,800
NUMBER OF ACTIVE COMMUNITIES 4 6 4 6
NET NEW ORDERS 26 11 41 24
LOT INVENTORY AND BACKLOG
Backlog of homes sold, but not
completed at end of period 15 12
Completed homes in inventory,
and in escrow 8 5
Total backlog 23 17
Completed homes in inventory,
unsold 19 33
Entitled lots owned at end
of period (c) 655 723
Total homes and lots 697 773
ESTIMATED VALUE OF BACKLOG
Backlog of homes sold, but not
completed at end of period $29.0 $6.9
Completed homes in inventory, and
in escrow 3.3 2.8
Total value of backlog $32.3 $9.7
(a) Changes are primarily due to changes in product mix and location, as
well as inland home sales price reductions that were necessary to be
competitive under current market conditions.
(b) Changes are primarily due to higher margins at Brightwater in 2008,
partially offset by the effects of the industry-wide slowdown in our
inland markets.
(c) Includes 338 and 356 homes and lots, respectively, at the Brightwater
project in Huntington Beach.
CALIFORNIA COASTAL COMMUNITIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share amounts)
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
Revenues
Homebuilding $10.4 $4.2 $15.4 $16.4
Costs of sales
Homebuilding 8.2 3.9 12.1 15.3
Loss on impairment of real estate
inventories 5.0 -- 5.0 4.0
13.2 3.9 17.1 19.3
Gross operating (loss) profit (2.8) .3 (1.7) (2.9)
Selling, general and administrative
expenses 1.9 1.4 3.5 3.1
Income from unconsolidated joint
ventures (.1) (.4) (.1) (.4)
Other expense, net .6 -- 1.2 .1
Loss before income taxes (5.2) (.7) (6.3) (5.7)
Benefit from income taxes (2.1) (.3) (2.5) (2.3)
Net loss $(3.1) $(.4) $(3.8) $(3.4)
Net loss per common share:
Basic $(.28) $(.04) $(.35) $(.32)
Diluted $(.28) $(.04) $(.35) $(.32)
Common equivalent shares:
Basic 10.9 10.9 10.9 10.9
Diluted 10.9 10.9 10.9 10.9
CALIFORNIA COASTAL COMMUNITIES, INC.
BALANCE SHEETS
(in millions, except per share amounts)
(unaudited)
June 30, December 31,
2008 2007
ASSETS
Cash and cash equivalents $10.4 $24.3
Restricted cash 5.9 6.0
Real estate inventories 291.5 286.4
Deferred tax assets 46.9 44.4
Other assets, net 6.8 6.5
Total assets $361.5 $367.6
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued liabilities $6.1 $12.5
Senior secured project revolver 88.0 76.0
Senior secured term loan 118.5 121.8
Other project debt 43.5 48.8
Other liabilities 7.6 7.0
Total liabilities 263.7 266.1
Stockholders' equity 97.8 101.5
$361.5 $367.6
Shares outstanding (a) 10.9 10.9
Stockholders' equity per common share (b) $8.97 $9.31
(a) Includes outstanding options for 17,500 shares.
(b) The Company believes that stockholders' equity per common share,
which is computed by dividing stockholders' equity by common shares
outstanding at the end of each period, is a useful supplemental
measure of the strength of the Company's balance sheet and an
indicator of the historical carrying value of the Company's net
assets.
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