Presley Cos. Reports 1992 Loss of $10.5 Million : Earnings: Figure contrasts with profit of $6.1 million for 1991. Company slashed value of properties last year.
Presley Cos. on Monday reported a 1992 loss of $10.5 million, contrasted with a profit of $6.1 million for 1991--the year the home-building group went public with high expectations.
Presley had hoped to use its public status as a means of raising cash and it did gross nearly $70 million from its initial stock offering in October, 1991. But like many other builders, it has been stung by the recession. During the second quarter of 1992, Presley shocked investors by slashing the value of certain of its properties by $26 million to account for property prices that have plummeted as Southern California home sales have fallen to the lowest levels in a decade.
The net result of the cut was a $15.6-million charge against earnings after corporate income taxes were adjusted for the hit. So the company’s annual loss had been anticipated, despite a sales increase of nearly 8% to $237.8 million from $220.4 million for 1991.
The annual loss amounted to 57 cents a share, contrasted with a profit of 45 cents a share for 1991.
Because of slow housing sales and its shrinking asset base, Presley, based in Newport Beach, has found itself starved for cash and unable to maintain the balance between debt and equity that its bankers require. Its plight is well known because, unlike most home-building companies across the nation, Presley is publicly owned, with its shares traded on the New York Stock Exchange. Federal securities laws require public companies to reveal financial information that could affect the value of their stock.
Presley reported last month, for example, that it had to secure a short-term extension of its $360-million credit line with two major banks while it renegotiates the finance agreement, apparently with an eye toward easing its repayment obligations and certainly in an effort to prop up its borrowing ability. The extension, which expires March 31, reduces Presley’s borrowing capacity--which is based on the appraised value of its land holdings and other assets.
Those limits held Presley to about $313.9 million in credit as of Dec. 31--at a time when the company’s actual borrowings totaled about $317.2 million. The banks have agreed as part of the loan extension not to require repayment of the $3.3 million in excess debt pending renegotiation of the entire credit agreement.
Presley continues to report in its financial statements that the uncertain nature of the Southern California economy and the real estate market here mean that the appraised value of its land holdings is likely to continue dropping, further reducing its borrowing capacity.
In its annual report, Presley said its operations in 1992 generated pretax income of $8.5 million after the $26-million reduction in asset value. That compared with $13.25 million in pretax income for 1991, after a $3-million reduction in the value of real estate assets.
At the same time, Presley reported a 35% increase in sales closings in 1992, to 1,144 units from 846 a year earlier, as well as a 35% rise in orders for new homes, to 1,173 units from 870 in 1991.
The sales boost didn’t come from an improving economy, however. The company attributed the increase to lower prices, increased incentives for buyers and the low mortgage interest rates that prevailed for much of the year.
For the fourth quarter, Presley reported a 44% increase in closings, to 419 from 290 for the same period a year earlier. New orders increased 69% to 235 from 169 for the fourth quarter of 1991.
But because of the price reductions and higher sales costs, profit for the final three months of the year was just $921,000, or 5 cents a share, down 74% from $3.6 million, or 21 cents a share, a year earlier. Quarterly revenue, including $8.1 million from the sale of land, dropped 3.5% to $84 million from $87.1 million in the final period of 1991, when Presley raised $33.7 million from land sales.
Presley officials have said they think new borrowing agreements can be negotiated with lenders, despite the company’s flagging finances and the falling value of some of its real estate holdings--principally property it bought in 1989 when land prices in Southern California hit historic highs of as much as $120,000 per lot.
Presley, one of the state’s largest home builders, has 39 projects in California, Arizona and New Mexico.
The company’s financial report was released after the markets closed Monday, so its stock was not affected. The closing price was $3.75 a share, down 12.5 cents.
Presley went public with the sale of 7 million shares of common stock at $10 apiece. During the past year the stock has traded for as much as $17.25 a share and as little as $1.75.
