wci communities florida

WCI Communities Inc (United States) CREDIT SNAPSHOT 10/24/08 01 DEBT DISTRIBUTION 02 BONDS 03 INCOME STATEMENT 04 CASH FLOW 05 BALANCE SHEET Capital Bank Leveraged Finance Research Tel. Fax. e-mail Bloomberg Blog (43-316) 8072-2356 (43-316) 8072-7120 highyield@cbank.at GRAZ www.highyieldblog.com 06 COVERAGE RATIOS 07 LEVERAGE RATIOS 08 ENTERPRISE VALUE 09 RETURN ON CAPITAL 10 RECOVERY & TANGIBLE NET WORTH 11 ACCOUNTING RED FLAGS 12 LATEST SEC FILINGS 13 LEGAL DISCLAIMER WCIMQ US Equity equity ticker: bond ticker: sector: subgroup: WCIMQ US WCI Consumer, Cyclical Bldg-Residential/Commer capitalisation (USD in millions): stock price shares outstanding (million) market capitalisation (USD mm) total debt cash + marketable securities other capital enterprise value (excl. cash) current EV / TTM EBITDA USD 0.11 42.17 5 1,575 61 26 1,544 N/M company description: WCI Communities, Inc. designs, constructs, and operates leisure-oriented, amenity-rich masterplanned communities targeting affluent homebuyers. The Company's communities are located in Florida. WCI's businesses include homebuilding, amenities operations, real estate services, and parcel and lot sales. The company's next report is expected for 11/7/2008 (type: Estimated). WCI Communities Inc has 2,300 employees. www.wcicommunities.com The distribution of this report is restricted. Important information concerning these restrictions and legal disclaimer is set forth at the end of this report. 01 WCI Communities Inc issuer l WCI COMMUNITIES INC l WCI COMMUNITIES INC bWCI COMMUNITIES INC bWCI COMMUNITIES INC bWCI COMMUNITIES INC Rtg debt type & details NA NA NR NR NR Loan, unsecured, dip-revolver, floater Loan, unsecured, dip-term, floater Bond, callable, company guarnt, defaulted Bond, callable, company guarnt, defaulted Bond, callable, company guarnt, defaulted 9.125% 7.875% 6.625% coupon mat 9/18/2009 9/18/2009 5/1/2012 10/1/2013 3/15/2015 crncy USD USD USD USD USD 200 125 200 amount out (mm) facility amount (mm) 150 150 issue date 9/18/2008 9/18/2008 6/3/2002 1/23/2004 6/27/2005 DEBT DISTRIBUTION Total amount out of instruments listed above (USD in MM) Total debt (MM) 525 Cash (MM) 1,575 Total Number of Debt Instruments (for the issuer and its subs) 61 5 Loans 250 Bonds 200 150 100 50 0 >2031 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 Moody's Ratings Outlook Issuer Senior Secured Debt LT Corp Family Bank Loan Debt Senior Unsecured Debt Subordinated Debt Short Term N/A WR N/A Ca N/A N/A N/A N/A 08/04/08 07/07/05 Standard & Poor's Ratings Outlook LT Foreign Currency Issuer LT Local Currency Issuer ST Foreign Currency Issuer ST Local Currency Issuer N/A D D N/A N/A 08/04/08 08/04/08 02 WCI Communities Inc id issuer coupon mat outstanding S&P MDY ask px yield spread* px date *interpol. swap spread 92923CAG 92923CAM 92923CAP BONDS WCI COMMUNITIES INC WCI COMMUNITIES INC WCI COMMUNITIES INC 9.125 7.875 6.625 05/01/12 10/01/13 03/15/15 USD USD USD 200,000,000 125,000,000 200,000,000 D D D WR WR WR 19.50 37.50 26.00 80.6 33.3 36.1 7739 2976 3235 10/22/08 10/22/08 10/22/08 Total Debt for the company currently stands at USD 1,574mm. bond price 120 100 80 60 40 20 0 02 /1 3/ 03 05 /1 3/ 03 08 /1 3/ 03 11 /1 3/ 03 02 /1 3/ 04 05 /1 3/ 04 08 /1 3/ 04 11 /1 3/ 04 02 /1 3/ 05 05 /1 3/ 05 08 /1 3/ 05 11 /1 3/ 05 02 /1 3/ 06 05 /1 3/ 06 08 /1 3/ 06 11 /1 3/ 06 02 /1 3/ 07 05 /1 3/ 07 08 /1 3/ 07 11 /1 3/ 07 02 /1 3/ 08 05 /1 3/ 08 08 /1 3/ 08 yield 90 80 70 WCI COMMUNITIES INC 9.125% 5/2012 USD WCI COMMUNITIES INC 7.875% 10/2013 USD WCI COMMUNITIES INC 6.625% 3/2015 USD 60 50 40 30 20 10 0 02 /1 2/ 03 05 /1 2/ 03 08 /1 2/ 03 11 /1 2/ 03 02 /1 2/ 04 05 /1 2/ 04 08 /1 2/ 04 11 /1 2/ 04 02 /1 2/ 05 05 /1 2/ 05 08 /1 2/ 05 11 /1 2/ 05 02 /1 2/ 06 05 /1 2/ 06 08 /1 2/ 06 11 /1 2/ 06 02 /1 2/ 07 05 /1 2/ 07 08 /1 2/ 07 11 /1 2/ 07 02 /1 2/ 08 05 /1 2/ 08 08 /1 2/ 08 interpolated swap spread 9000 8000 7000 6000 5000 4000 3000 2000 1000 0 02 /1 2/ 03 05 /1 2/ 03 08 /1 2/ 03 11 /1 2/ 03 02 /1 2/ 04 05 /1 2/ 04 08 /1 2/ 04 11 /1 2/ 04 02 /1 2/ 05 05 /1 2/ 05 08 /1 2/ 05 11 /1 2/ 05 02 /1 2/ 06 05 /1 2/ 06 08 /1 2/ 06 11 /1 2/ 06 02 /1 2/ 07 05 /1 2/ 07 08 /1 2/ 07 11 /1 2/ 07 02 /1 2/ 08 05 /1 2/ 08 08 /1 2/ 08 Prices & yields bid side to 28/7/08 and ask side thereafter. Spread is Govt Bid Sprd to 28/7/08 and Interpol. Swap Ask Sprd then. 03 WCI Communities Inc USD in millions Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 06/30/08 Revenues COGS COGS % of Revenues SG&A SG&A % of Revenues 241 248 102.9% 55 23.0% -55 166 207 124.5% 52 31.2% -86 192 489 255.4% 51 26.6% -341 137 138 100.8% 44 32.4% -38 230 266 115.7% 41 17.6% -71 1,806 1,391 77.0% 184 10.2% 247 43 187 -33 -23.0% -25.9% -70 -51.8% -55.7% -460 -178.1% -182.0% -84 -27.8% -33.2% -100 -30.8% -33.3% 120 13.7% 12.8% 2,602 1,990 76.5% 214 8.2% 418 36 362 186 16.1% 15.3% 9 2.8% 1.4% -579 -49.3% -52.3% 2,045 1,799 88.0% 218 10.7% 58 04 05 06 07 12/31/07 936 1,242 132.7% 184 19.7% -462 INCOME STATEMENT EBITDA Interest Expense EBT Net Income EBITDA Margin EBIT Margin 21.4% EBITDA Margin 13.6% 12.3% 9.4% 7.9% 4.5% 2.7% EBIT Margin 20.3% 17.5% 16.6% 16.1% 14.6% 13.7% 13.7% 12.8% 15.3% 2.8% -1.6% -13.5% -14.9% -23.0% -25.9% Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 -3.8% Q2 07 Q3 07 -51.8% -55.7% Q4 07 Q1 08 -27.8% -33.2% Q2 08 -30.8% -33.3% 01 02 03 04 05 06 1.4% 07 -49.3% -52.3% 07 12/31/07 936 -462 28 -490 -579 -462 -178.1% -182.0% USD in millions TTM INCOME STATEMENT Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 06/30/08 04 05 06 TTM Revenues TTM EBITDA TTM D&A TTM EBIT TTM Interest Expense TTM EBT TTM Net Income TTM Revenues TTM Revenues 1,529 -112 30 -142 1,269 -217 28 -246 937 -488 28 -516 736 -521 28 -549 725 -536 27 -563 1,806 247 17 231 43 187 2,602 418 20 398 36 362 186 2,045 58 30 28 -103 -183 -579 -647 -714 TTM EBITDA EBITDA 120 9 247 418 2,602 -112 1,806 2,045 -217 -488 1,529 -521 1,269 937 736 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 725 04 05 06 07 936 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 -536 04 05 06 58 07 TTM EBT TTM Interest Expense TTM D&A 20 36 17 43 362 187 30 0 Q2 07 28 0 Q3 07 28 0 Q4 07 28 0 Q1 08 27 0 Q2 08 04 05 30 0 06 28 0 07 04 WCI Communities Inc USD in millions Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 06/30/08 04 05 06 07 12/31/07 -120 -91 -210 217 -9 -164 -173 163 -490 -47 -537 526 198 31 229 -82 CASH FLOW Cash from Operations (CFO) Cash from Investing (CFI) Free Cash Flow (CFO + CFI) Cash from Financing Activities -16 41 25 -39 Cash from Operations (CFO) -53 -7 -60 45 165 5 169 12 67 -1 66 -207 169 -1 169 -156 Free Cash Flow (CFO + CFI) 300 200 100 0 -100 -200 -300 -400 -500 -600 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 01 02 03 04 05 06 07 USD in millions Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 06/30/08 04 05 06 07 12/31/07 TTM Cash from Operations (CFO) TTM Cash from Invest. (CFI) TTM Capex TTM D&A TTM Free Cash Flow (CFO + CFI) TTM Cash from Financing Activities TTM CFO - Capital Expenditures TTM CASH FLOW TTM EBITDA - Capital Expenditures TTM EBITDA - Capex - Change in WC TTM EBITDA-Capex-WC-CshIntEx-CshTax-CshDiv TTM CFO/Total Debt TTM FCF/Total Debt TTM Capex TTM D&A TTM Cash from Invest. (CFI) -62 27 -27 -30 -35 55 -89 -140 -140 149 24 -27 -28 173 -187 121 -245 -245 198 31 -24 -28 229 -82 173 -513 -513 163 38 -18 -28 201 -188 145 -538 -539 348 -4 -12 -27 344 -305 336 -548 -548 -120 -91 -42 -17 -210 217 -162 205 205 105 -9 -164 -50 -20 -173 163 -59 368 368 244 -0.7% -12.8% -490 -47 -41 -30 -537 526 -531 17 17 -95 -23.3% -25.6% 198 31 -24 -28 229 -82 173 -486 -486 -578 9.8% 11.4% -3.2% -1.8% 7.5% 8.7% 9.8% 11.4% 9.4% 11.6% 22.1% 21.8% -10.5% -18.4% TTM EBITDA - Capital Expenditures 38 31 27 -27 -30 -27 -28 24 -24 -28 -18 -28 -12 -27 -4 -42 -17 -50 -20 -41 -30 -47 -24 -28 31 368 205 17 -91 -164 -140 -245 -513 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 04 05 06 07 Q2 07 Q3 07 Q4 07 -538 Q1 08 -486 -548 Q2 08 04 05 06 07 TTM EBITDA - Capex - Change in WC TTM EBITDA-Capex-WC-CshIntEx-CshTax-CshDiv 600 400 200 0 -200 -400 -600 -800 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 04 05 06 07 05 WCI Communities Inc USD in millions Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 06/30/08 Cash Marketable Securities / ST Investments Accounts & Notes Receivable Inventories & Unbilled Receivables Net Fixed Assets 75% of Accounts Receivable 30% of Inventories & Unbill. Rec. 10% of Net Fixed Assets Collateral (Liquidation) Asset Value 945 1,981 242 709 594 24 1,349 2,325 -10 1,947 1,925 69.3% 806 1,996 244 605 599 24 1,235 2,356 300 1,993 1,986 62.0% 377 1,848 236 283 554 24 1,050 2,005 220 2,011 1,823 52.2% 221 1,839 232 166 552 23 789 1,640 217 1,724 1,676 45.8% 75 1,655 228 56 497 23 636 1,472 138 1,575 1,514 40.4% 852 1,478 177 639 443 18 1,202 1,712 166 1,144 1,042 105.0% 1,175 1,688 208 881 506 21 1,461 1,957 250 1,353 1,300 108.0% 1,298 1,956 275 974 587 27 1,630 2,611 219 2,097 2,055 77.7% 377 1,848 236 283 554 24 1,050 2,005 220 2,011 1,823 52.2% 22 7 189 49 61 102 53 42 04 05 06 07 12/31/07 189 BALANCE SHEET Working Capital Net Other Long Term Assets & Liabs. Total Borrowings (includes ST Borrowings) Net Debt Collateral Asset Value / Total Borrowings explanations and definitions: The approximation we use to calculate a company's total Collateral (Liquidation) Asset Value (for an asset based liquidation scenario) is calculated as the sum of Cash plus Marketable Securities / Short-Term Investments plus assets with the following valuation rates applied: 75% of stated Accounts Receivable 30% of stated Inventory 10% of stated Net Fixed Assets. Although we acknowledge that some industries and individual situations demand clearly different assumptions we nevertheless think this is a useful approximation across all industries covered, if only as a starting point for further individual in-depth analysis. 75% of Accounts Receivable 10% of Net Fixed Assets 2,611 27 24 594 599 24 23 554 709 552 605 283 Q2 07 Q3 07 Q4 07 166 Q1 08 497 56 Q2 08 04 05 06 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 04 05 06 07 639 283 23 881 974 554 21 24 18 443 587 506 24 2,325 2,356 2,005 1,640 1,472 1,712 1,957 2,005 30% of Inventories & Unbill. Rec. Working Capital Net Other Long Term Assets & Liabs. 300 250 220 217 166 219 220 Total Borrowings (includes ST Borrowings) Net Debt 2,011 1,823 2,097 2,055 1,144 1,042 04 1,353 1,300 05 06 138 1,947 1,925 1,993 1,986 1,724 1,676 1,575 1,514 -10 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 04 05 06 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 07 Collateral Asset Value / Total Borrowings 105.0% 108.0% 77.7% 69.3% 62.0% 52.2% 45.8% 40.4% 52.2% Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 04 05 06 07 2,011 1,823 06 COVERAGE RATIOS WCI Communities Inc USD in millions Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 06/30/08 TTM EBITDA / TOTAL INTEREST TTM EBITDAR / TOTAL INTEREST+RENT TTM EBITDA-CAPEX / TOTAL INTEREST TTM EBITDAR-CAPEX / TOTAL INTEREST+RENT 2.9x 2.6x 2.4x 2.2x 3.8x 3.3x 3.3x 2.9x 04 05 06 07 12/31/07 - explanations and definitions: TTM TOTAL INTEREST: For all coverage ratio calculations we use the Total Interest figure which in addition to Interest Expense also includes Capitalized Interest Expenses. We think this gives a better view of the economic reality than the simple Interest Expense figure. TTM EBITDA / TOTAL INTEREST 3.8x TTM EBITDAR / TOTAL INTEREST+RENT 3.3x 2.9x 2.6x 0.0x 0.0x 0.0x 0.0x 0.0x 04 05 0.0x 06 0.0x 07 0.0x Q2 07 0.0x Q3 07 0.0x Q4 07 0.0x Q1 08 0.0x Q2 08 04 05 0.0x 06 0.0x 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 TTM EBITDA-CAPEX / TOTAL INTEREST 3.3x TTM EBITDAR-CAPEX / TOTAL INTEREST+RENT 2.9x 2.4x 2.2x 0.0x 0.0x 0.0x 0.0x 0.0x 04 05 0.0x 06 0.0x 07 0.0x Q2 07 0.0x Q3 07 0.0x Q4 07 0.0x Q1 08 0.0x Q2 08 04 05 0.0x 06 0.0x 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 07 WCI Communities Inc USD in millions Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 06/30/08 NET DEBT / TTM EBITDA NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM NM 4.2x 4.6x 5.6x 4.9x 5.8x 68.1% 5.0x 3.1x 3.2x 3.7x 3.5x 3.9x 97.4% 3.4x 35.4x 36.1x 123.9x 27.0x 52.0x 8.7% 75.3x 04 05 06 07 12/31/07 NM NM NM NM NM NM NM LEVERAGE RATIOS TOTAL DEBT / TTM EBITDA TOTAL DEBT / TTM EBITDA-CAPEX Rentadj. TOT DEBT / TTM EBITDAR Rentadj. TOT DEBT / TTM EBITDAR-CAPEX HAIRCUT EBITDA MULTIPLE / TOTAL DEBT TOTAL DEBT / TTM EBIT explanations and definitions: Rent adj. Total Debt/TTM EBITDAR: This ratio is calculated by dividing the Rent Adjusted Total Debt figure (Total Debt plus 8 times TTM Rental Expenses) by EBITDAR (TTM EBITDA plus TTM Rental Expenses). HAIRCUT EBITDA MULTIPLE / TOTAL DEBT: We adjust TTM EBITDA to 70% of its stated value, multiply the result with 4.5 as an assumed exit multiple and relate the resulting figure (the haircut EBITDA multiple) to the TOTAL DEBT number. This ratio should reflect the situation of an issuer's liquidation, whereby the assets can be sold at a reduced EBITDA multiple. NET DEBT / TTM EBITDA 35.4x TOTAL DEBT / TTM EBITDA TOTAL DEBT / TTM EBITDA-CAPEX 123.9x 36.1x 4.2x 0.0x Q2 07 0.0x Q3 07 0.0x Q4 07 0.0x Q1 08 0.0x Q2 08 04 05 06 3.1x 0.0x 07 0.0x 0.0x 0.0x 0.0x 0.0x 0.0x 0.0x 0.0x 0.0x 0.0x Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 5.6x 3.2x 4.6x 3.7x 04 05 06 0.0x 0.0x 07 HAIRCUT EBITDA MULTIPLE / TOTAL DEBT Rentadj. TOT DEBT / TTM EBITDAR Rentadj. TOT DEBT / TTM EBITDAR-CAPEX 97.4% 52.0x 68.1% 27.0x 8.7% 0.0% Q2 07 0.0% Q3 07 0.0% Q4 07 0.0% Q1 08 0.0% Q2 08 04 05 06 0.0% 07 0.0x 0.0x 0.0x 0.0x 0.0x 0.0x 0.0x 0.0x 0.0x 0.0x Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 5.8x 4.9x 3.9x 3.5x 0.0x 0.0x 04 05 06 07 TOTAL DEBT / TTM EBIT 75.3x 5.0x 0.0x Q2 07 0.0x Q3 07 0.0x Q4 07 0.0x Q1 08 0.0x Q2 08 04 3.4x 0.0x 05 06 07 08 WCI Communities Inc USD in millions Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 06/30/08 EV / TTM EBITDA EV / TTM EBIT Enterprise Value TOTAL DEBT Equity Market Cap EV / TTM EBITDA NM 2,660 1,947 701 NM 2,271 1,993 252 NM 2,012 2,011 159 NM 1,845 1,724 141 NM 1,600 1,575 61 9.6x 10.3x 2,370 1,144 1,311 6.1x 6.4x 2,554 1,353 1,191 49.8x 104.0x 2,895 2,097 803 NM 2,012 2,011 159 04 05 06 07 12/31/07 ENTERPRISE VALUE EV / TTM EBIT 49.8x 104.0x 9.6x 6.1x 0.0x Q2 07 0.0x Q3 07 0.0x Q4 07 0.0x Q1 08 0.0x Q2 08 04 05 06 0.0x 0.0x 07 Q2 07 TOTAL DEBT EV - TOTAL DEBT Q3 07 Q4 07 Q1 08 Q2 08 04 05 06 07 0.0x 0.0x 0.0x 0.0x 10.3x 6.4x 0.0x Equity Market Cap 1,311 1,191 713 798 277 803 701 0 26 1,226 121 1,201 0 2,011 2,097 1,947 1,993 1,724 1,575 1,353 2,011 1,144 252 159 141 61 159 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 04 05 06 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 04 05 06 07 WCIMQ US stock closing price 40 35 30 25 20 15 10 5 0 Mär/02 Mär/03 Mär/04 Mär/05 Mär/06 Mär/07 Sep/02 Sep/03 Sep/04 Sep/05 Sep/06 Sep/07 Mär/08 Sep/08 Dez/02 Dez/03 Dez/04 Dez/05 Dez/06 Dez/07 Jun/02 Jun/03 Jun/04 Jun/05 Jun/06 Jun/07 Jun/08 09 WCI Communities Inc USD in millions Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 06/30/08 Adjusted Cap Rate -3.91% 2,834 71 -5.0% -7.56% 2,823 70 -8.7% 0 2,262 11 -22.8% -23.0% -3.3% -5.7% -14.8% -19.99% 2,030 11 -27.1% -27.1% -17.6% -23.62% 1,766 11 -31.9% -32.0% -20.7% 5.68% 1,894 59 12.2% 7.5% 7.9% 7.4% 9.52% 2,303 73 17.3% 10.1% 11.2% 8.2% 0.6% -14.1% 0.09% 3,002 77 0.9% 04 05 06 07 12/31/07 -16.60% 2,262 11 -21.7% RETURN ON CAPITAL Tangible Capital Total Intangibles Pre-tax ROIC After-tax ROIC (effective tax rate) After-tax ROIC (assumed tax rate) WACD (Pre-tax) explanations and definitions: Adjusted Cap Rate: This ratio shows EBIT reduced by an assumed tax rate of 35% and adjusted for Net Non-Operating and Extraordinary Losses (Gains) - averaged over the last 5 years - divided by the Enterprise Value. Tangible Capital: Starting with the Total Book Capital the Tangible Capital figure is calculated by subtracting Intangibles, Cash and Marketable Securities as well as Short Term Investments. We calculate three different ROIC (Return on Invested Capital) figures: Pre-Tax ROIC: this ratio relates the trailing twelve months (TTM) EBIT to Tangible Capital as defined above. After-tax ROIC (effective tax rate): here EBIT is corrected by the company's effective tax rate as stated in it's latest financials, giving an after-tax ROIC rate. After-tax ROIC (assumed tax rate): here EBIT is corrected by an assumed tax rate of 35%, giving a modified after-tax ROIC rate. WACD (Pre-Tax): This rate is defined as trailing twelve months (TTM) TOTAL INTEREST EXPENSE divided by Total Borrowings. Adjusted Cap Rate After-tax ROIC (assumed tax rate) 11.2% 7.9% 9.5% 5.7% 0.1% 0.6% -3.9% -7.6% -3.3% -5.7% -17.3% -20.0% -23.6% Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 WACD (Pre-tax) 8.2% 7.4% 04 05 06 -16.6% -14.8% -17.6% -20.7% -14.1% 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 04 05 06 07 0.0% 0.0% 0.0% 0.0% 0.0% 04 05 0.0% 06 0.0% 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 10 DEFAULT ESTIMATE WCI Communities Inc Average Bond Spread (in BPoints (1)) Estimated Bond Recovery Rate (2) Resulting Tolerable Default Rate (3) 4889 0.0% NM explanations and definitions: We calculate estimated default and recovery rates to be used in other credit models (f.i. for the valuation of CDOs or similar structures) as follows: (1) Average Bond Spread: Average Spread of all bonds listed on page 2 of this report. (2) Estimated Bond Recovery Rate: To calculate this rate we first divide the total debt amount into bond debt and loan debt that is senior to bond debt. As an approximation for the total amount of bond debt we use the sum of the amounts outstanding of all bonds listed on page 1 of this report. The total debt figure is reduced by this sum, giving us an approximate figure for debt that is senior to bond debt. We then calculate a collateral asset coverage figure for the bond debt by starting with the Collateral Asset Value (as defined on page 5 of this report) which we reduce by the amount of senior debt ahead of the bonds. The remaining Collateral Asset Value is then divided by the approximate bond debt amount as defined above, giving an estimated recovery value on a collateral asset basis. We apply the same logic to an EBITDA multiple ratio (as on page 7 of this report) and get a second recovery estimate based on the EBITDA multiple. The higher of the 2 estimates is used as the "Estimated Bond Recovery Rate". (3) Resulting Tolerable Default Rate: The implied default rate calculated using the Market Spread (1) and the Estimated Recovery Rate (2). With the given Market Spread and Estimated Recovery Rate it defines the maximum tolerable default probability for the risk premium paid in the form of Spread. Please note: This rate will only be displayed when it is greater than 0% and lower than 30% as we believe it is not meaningful ('NM') out of this range. Although we acknowledge that the calculated results are by no means exact, we think they make for a good estimate in the valuation of credit structures when individual default and recovery rates for single issuers are to be used. USD in millions Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 06/30/08 04 05 06 07 12/31/07 TANGIBLE NET WORTH Total Assets Total Liabilites Total Intangibles Tangible Net Worth ESTIMATE Rent Debt (8x Annual Rental Expense) Underfunded Pension & Post Ret. Liab. Discount on Hard Assets Adjusted Tangible Net Worth 3,469 2,488 71 910 249 3,379 2,472 70 837 249 2,891 2,442 11 439 249 2,581 2,216 11 354 249 2,178 1,915 11 252 249 2,932 2,022 59 851 149 3,481 2,406 73 1,002 173 3,832 2,808 77 947 221 2,891 2,442 11 439 249 1,841 -1,180 1,818 -1,231 1,601 -1,411 1,552 -1,447 1,383 -1,379 1,406 -704 1,663 -833 1,941 -1,215 1,601 -1,411 11 WCI Communities Inc USD in millions Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 06/30/08 (CFO-Net Income)/Revenues yoy Revenue Growth Gross Margin Days Sales Outstanding Days Sales of Inventory Soft Assets 7.1% -54.3% -2.9% 226 473 278 0 0 0 48 Gross Margin 400.0% 10.1% -61.0% -24.5% 232 574 326 0 0 0 0 325.9% -63.4% -155.4% 147 721 240 0 0 0 8 110.6% -59.5% -0.8% 110 913 240 0 0 0 0 117.1% -4.6% -15.7% 38 834 159 0 0 0 0 -13.3% 24.3% 23.0% 172 299 324 0 0 4 -48 -7.5% 44.1% 23.5% 165 237 358 0 0 -25 -114 -24.4% -21.4% 12.0% 232 349 261 0 0 -64 -6 04 05 06 07 12/31/07 82.9% -54.2% -32.7% 147 721 240 0 0 2 56 ACCOUNTING RED FLAGS Unbilled Receivables Deferred / Unearned Revenue Allowance for Doubtful Accounts TTM Dividends Paid TTM Preferred Dividends Net Change in Capital Stock Non-Capex CFI (CFI less Capex) yoy Revenue Growth (CFO-Net Income)/Revenues 300.0% 326% 200.0% 100.0% 25% 19.8% 23% 24.3% 28% 9.1% 22% 19% 15% 12% 31% 12% 111% 24% 44.1% 117% 83% -33% -54.2% 0 07 721 295 266 278 299 0 0 0 0 0 0 0 237 Q1 08 Q2 08 01 02 03 04 05 0 06 349 -21.4% -8% -3% -54.3% -24% -61.0% -1% -59.5% -40.8% 7% 10% -155% -63.4% -16% -4.6% 0.0% -32% -100.0% 34% 35% -42% -64% -21% -18% -8% -13% -7% -24% -200.0% Days Sales Outstanding 913 Days Sales of Inventory 834 0 239 0 282 0 328 0 349 0 395 0 473 0 574 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Auditor Information: Current auditor Auditor's opinion Auditor's opinion - Definitions Not Audited / Unaudited Partially audited Unqualified Qualified: Limited Scope Qualified: Inconsistent Standards Qualified: not GAAP Qualified: uncertainty No tests were performed to verify amounts in financial statements. Typically applied to interim statement. Not all statements were audited. Auditor may specifically give opinion on one or two statements. Auditor declares, without reservation, that the financial statements fairly represent the company's financial position at a point in time and that the statements conform in all material respects to GAAP. An aspect of the company's financial statements could not be verified, such as a portion of inventory not counted. Accounting standards were not applied consistently between periods. Standard accounting principles for the country were not followed. Typically related to a unique line item and uses the phrase 'except for.' Doubt exists related to a material balance sheet item, such as value of investment or collectability of major receivable; or auditor doubts going concern ability of company. This opinion usually employs the phrase 'subject to.' Auditor refuses to state opinion on financial statements, typically due to lack of sufficient documentation provided by company and/or subsidiaries. ERNST & YOUNG LLP (as of 17.3.2008) Unqualified Disclaimer 0 721 12 WCI Communities Inc Quarterly Report (Form Type 10-Q) end of period LATEST SEC FILINGS Annual Report (Form Type 10-K) end of period Special Events & Material News (Form Type 8-K) filing date Prospectus (Form Type 42..) filing date This research report was prepared by Capital Bank - GRAWE Gruppe AG (Capital Bank). The information herein has been obtained from, and any opinions herein are based upon, sources believed to be reliable, but we do not represent that it is accurate or complete and it should not be relied upon as such. All opinions, forecasts and estimates herein reflect our judgement on the date of this report and are subject to change without notice. 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