WCI Dodges Heat With Writedown Strategy
With the heat on from its creditors, troubled Florida condo developer WCI Communities (WCI) is scrambling to look as healthy as possible.
While the company can't hide its weak cash flows, it may be employing unusual accounting assumptions to delay large land impairment charges that would reduce book value further.
WCI's shares have plunged 75% in 2007, as the company recorded $119 million in losses for the first nine months of the year. Not even an equity investment and a board shake-up by billionaire Carl Icahn could help the stock.
At around $4 per share, WCI trades at just 20% of book value, reflecting investors' liquidity concerns and skepticism over the value of the company's assets. It has a market capitalization of about $191 million.Last week, Moody's cut WCI's credit rating to junk, citing the builder's weaker-than-expected cash flow generation and continued violations of bank covenants in its third quarter. Most of WCI's single-family homes and condos are located in Florida, where the housing market went from red-hot to over-cooked in recent years, sending housing prices and land prices plummeting. As prices drop in Florida and other formerly hot markets, homebuilders have been forced to record billions of dollars in inventory impairment charges to reflect the deteriorating value of housing communities and land investments.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV