Warrington College of Business The University of Florida February 10, 2006 1 WCI COMMUNITIES, INC.
Todd Powell VP of Acquisitions Vice President of Land Acquisitions Responsible for business development on the West Coast of Florida MBA from the University of Florida (2004) Certified Public Accountant 10 years of experience with Ernst & Young LLP prior to business school Ernst & Young experience includes National M&A Practice in Chicago and Technology IPO Practice in Palo Alto, CA during the dot com boom 2 WCI COMMUNITIES, INC.
WCI Overview Leading homebuilder, community developer, and real estate services company Listed on the NYSE Corporate HQ s Bonita Springs, FL 2005 estimated revenue of $2.5 to $2.8 billion 2005 estimated EPS of $3.90 - $4.20 up 49% - 60% over 2004 YTD* new order value up 16.5% Market capitalization - $1.15 Billion 2005(E) Revenue Breakdown $2.5 - $2.8 Billion Parcel Sales Amenities & Other R/E Services 7% 3% 4% Tower HB 34% Traditional HB 52% * For the nine months ended September 30, 2005 3 WCI COMMUNITIES, INC.
WCI Is Distinctive Affluent customer base Large mix of cash buyers Generally less interest rate sensitive Significant demand from second home and active adult buyers Tower business is a significant part of WCI s product mix Represented 45% of WCI s 2004 revenues and 59% of its gross margin Unrivaled expertise 88 towers either completed or in process Over 16.8 million square feet of residential space $7.3 billion legacy sell-out value Significant land positions in highly-desired, land-constrained markets Control over 17,000 acres, the vast majority of which is entitled, with plans to build 21,500 units Large inventory of undeveloped land in coastal Florida the state with the most building permits issued, the highest rate of net in-migration and largest number of second home buyers 4 WCI COMMUNITIES, INC.
Demographics drive demand 135 130 125 120 115 110 105 100 U.S. population over 45 ( in millions) 2005 2007 2009 2011 2013 2015 Source: US Census Bureau Population Division Second home sales grew to 2.8 million in 2004, a 16% increase over 2003 Median age of second homeowner has trended downward, currently around 50 U.S. 45+ population projected to grow 1.8% per annum over next 10 years vs. 0.9% for the overall population 45 & over segment expected to make up 41.0% of total population in 2015 vs. 35.3% in 2000 Intergenerational transfer of wealth projected to average over $1 trillion annually over the next 30 years Baby boomers entering peak income and earning years with record wealth 2004 U.S. home sales breakdown (Units, in thousands ) Secondary 2,800 35% 65% Primary 5,200 Source: Wachovia Securities, NAR and NAHB 5 WCI COMMUNITIES, INC.
WCI s s Homebuilding Segments YTD avg. combined homebuilding new order price up 30% to $795K Pricing up significantly across many FL communities Shift in mix reflects broader product offerings Addition of NE and Mid-Atlantic orders, averaging $794K and $1.3 million respectively Demand for products remains strong Tower product continues to enjoy high reservation and conversion rates Sales slowed intentionally at certain traditional communities to better match permitting and delivery pace Limited product releases Frequent price increases Sales Mix By Segment Order Value up 31 % YTD By Order Units 2,427 Units 35% 2% 5% 32% 4% 22% YTD Active Adult - FL Primary/Move-up - FL Traditional - 2nd Home/Luxury - FL By Order Dollars $1,928.7 Mil. 46% 4% 7% 30% 3% 10% Active Adult - Other Primary/Move-up - Other Tower - 2nd Home/Luxury 6 WCI COMMUNITIES, INC.
Cash Sales 60% 56% 50% 40% 41% 37% 49% 41% 38% 48% 49% 43% 35% 41% 30% 20% 27% 20% 19% 25% 10% 0% Active Adult Second Home/Luxury Primary/ Move-up Tower Total HB 2002 2003 2004 Figures are as a percent of revenue in dollars for the particular homebuilding segment Excludes sales not utilizing WCI s title company High percentage of cash buyers insulates WCI s sales from the dampening effect of rising mortgage rates 7 WCI COMMUNITIES, INC.
Attractive and Strategic Land Position Other FL 2% Perdido Key 7% Land Holdings as of September 30, 2005 NE US 13% Mid-Atlantic U.S. 4% Naples/Ft Myers 25% Tampa/ Sarasota 24% Palm Beach 8% Miami/Ft Lauderdale 17% Land holdings of over 17,000 acres Most in attractive coastal Florida locations Approx. 80% directly owned Current projected density level of approximately 21,500 units 5 7 year supply Market value well above book value The vast majority is entitled Trad'l HB 70% 15,225 Units Based on 21,750 planned units 6,525 Units Tower 30% 8 WCI COMMUNITIES, INC.
Growth in Communities 10 traditional communities 7 towers under construction 30 traditional communities 20 towers under construction 9 WCI COMMUNITIES, INC.
Traditional and Tower Homebuilding Four segments: active adult, primary/move-up, second-home/luxury, and tower Traditional Homebuilding Division typically controls the development of the entire community Single family homes, villas, attached homes up to 5 stories, priced from $189K - $6 million Large design centers provide customer flexibility and add profits Tower Homebuilding Division is a unique business with few large competitors Mid- and high-rise towers ranging from 6 to 30+ stories priced from $500K-$10 million Expertise due to long tower homebuilding history minimizes risk level Bonded general contractors provide guaranteed construction cost Strong pre-sales with very low default rate Combined homebuilding new order price up significantly YTD average order price of $795K is up 30% and is the highest of any major public homebuilder Expanded geographic footprint and favorable pricing environment Expansion into the Northeast and Mid-Atlantic U.S. markets expected to fuel growth $ Millions 2,500.0 2,000.0 1,500.0 1,000.0 500.0 0.0 $ Millions $2,800.0 $2,400.0 $2,000.0 $1,600.0 $1,200.0 $800.0 $400.0 $0.0 Combined Homebuilding Revenues $1,243.8 $1,014.3 2002 2003 2004 2005(E) Florida NE U.S. Mid-Atlantic U.S. $912.1 $989.8 $1,874.4 $2,508.1 3Q 2002 3Q 2003 3Q 2004 3Q 2005 Traditional HB $1,591.7 Tower HB $2,300 - $2,400 Combined Homebuilding Backlog 10 WCI COMMUNITIES, INC.
Solid Growth $3,000 $2,000 $1,000 Revenue (in Millions) $2,500 - $2,800 CAGR 23% - 26% $882 $200 $150 $100 Net Income ( in Millions) $180 - $195 CAGR 17% - 19% $82 $0 $500 $400 $300 $200 $100 $0 12/31/2000 12/31/2005 (E) (in Millions) EBITDA CAGR 17% - 19% $400 - $450 $185 12/31/2000 12/31/2005 (E) $50 $0 12/31/2000 12/31/2005 (E) Backlog Value $3,000 (in Millions) $2,000 $1,000 $526 $0 12/31/2000 12/31/2005 (E) 11 WCI COMMUNITIES, INC. CAGR 39% - 42% $2,750 - $3,000
WCI s s Asset Profile as of 9/30/05 Total assets of over $3.55 billion Goodwill & Other Intangibles 2% Property & Equipment 6% Cash & Equiv (incl. restricted cash) 2% Other 9% Land & land improvements 41% WIP 47% Real Estate Inventories 50% Contracts Receivable 31% Completed inventory 7% Inve stm e nts in Amenities 5% The strength of WCI s balance sheet is highlighted by high quality assets and minimal intangibles 12 WCI COMMUNITIES, INC.
Capitalization Overview Quarter-end net debt to capitalization ratio of 58.4% Company expects continued decline of leverage throughout the rest of the year Amount of building activity has increased substantially Project Debt $153.7M 6% Sr. Credit Facility $273.7M 11% Shareholders' Equity $1,004.4M 40% Issued $100 million of junior subordinated debt in September 2005 Increased senior credit facility to $875 million on September 27, 2005 Strong second half cash flows and lower level of investments Expect 12/31/05 in mid 50% area 2006 in 50% area at year end; mid-fifties mid-year Long-term Debt $929.1M 38% Convertible Debt $125.0M 5% 13 WCI COMMUNITIES, INC.
2005 Projected Outlook Company revenue growth of 50% to 60% Northeast and Mid-Atlantic divisions projected to make up approximately 15% of 2005 revenue and 20% of orders Traditional home closings expected to grow 32% to 50% to 2,200 to 2,500 homes Expect to start construction on 12 towers WCI s first tower outside of FL, in N. Bergen, NJ, was released in May with over 75% currently sold EPS growth of 45% to 56% in 2005 Projected EPS of $3.90 to $4.20 2006 EPS of over $5.00 excluding any effects from bond refunding SG&A expenses of approximately 9.0% for the year, down from 10.1% in 2004 Revenue 14 WCI COMMUNITIES, INC.
Industry Dynamics & Valuation Implications 15 WCI COMMUNITIES, INC.
An Industry with Strong Historical Growth 40.0% 39.4% Cumulative Average Annualized EPS Growth 1996 2005(E)* 37.1% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 15.2% 12.3% 11.9% 11.8% 8.6% 5.0% 0.0% Homebuilding Software Home Improvement Retailers Industrial Conglomerates Household Products Building Products Home Furnishings * 2005 EPS based on analysts consensus estimates SOURCE: Bloomberg 16 WCI COMMUNITIES, INC.
Yet Valuation Is Among the Lowest Average PEG Ratios* 2.00 1.50 1.50 1.37 1.10 1.07 1.07 1.03 1.00 0.50 0.39 0.00 Software Household Products Industrial Conglomerates Building Products Home Improvement Retailers Home Furnishings Homebuilding *Based on analysts consensus estimates for 2006 P/E and long-term growth SOURCE: Bloomberg 17 WCI COMMUNITIES, INC.
Homebuilding Industry Price to Earnings Ratio 17.0 15.4 15.0 13.0 11.0 9.0 7.9 7.6 7.5 7.0 6.8 6.8 6.8 6.7 6.7 6.5 6.5 6.5 6.3 6.1 5.9 5.8 Peer Group Average 6.7 5.0 S&P 500 TOL NVR RYL BZH KBH PHM LEN MTH CTX DHI MHO MDC HOV SPF WCI Based on analysts 2005 consensus earnings estimates SOURCE: Bloomberg as of 10/2705 18 WCI COMMUNITIES, INC.
Homebuilding Industry Price to Book Ratio 5.0 4.7 4.5 4.0 3.5 3.0 2.5 2.0 2.7 2.5 2.4 2.4 2.2 1.9 1.8 1.8 1.8 1.8 1.7 1.6 1.6 Peer Group Average 2.0 1.5 1.2 1.1 1.0 0.5 0.0 % of Land Owned NVR S&P 500 RYL MTH KBH TOL DHI MDC PHM LEN BZH CTX HOV SPF MHO WCI 0% 40% 10% 48% 40% 46% 53% 46% 32% 48% 37% 26% 58% 60% 80% SOURCE: Bloomberg and CSFB As of 10/27/05 19 WCI COMMUNITIES, INC.
Land Acquisitions How did I get here? What do I do on a daily basis? Highlights thus far! 20 WCI COMMUNITIES, INC.