Tarragon Corporation (NASDAQ: TARR) today announced its financial
results for the third quarter ended September 30, 2008.
Third Quarter Financial Results
Consolidated revenue for the third quarter of 2008 was $48.5
million, compared with $70.2 million in the same period of
2007.
Homebuilding sales, including revenue from unconsolidated
properties, were $30.2 million in the third quarter of 2008,
compared with $67.9 million in the same period of 2007.
The loss from continuing operations was ($58.4 million) in the
third quarter of 2008, compared with a loss of ($178.5 million) in
the same period of 2007.
The net loss for the third quarter of 2008 was ($57.3 million),
or ($1.99) per diluted share, compared with a net loss of ($184.8
million), or ($6.40) per diluted share, in the third quarter of
2007.
The loss in the third quarter of 2007 included impairment
charges of $135.7 million, of which $35.7 million was presented in
cost of sales and $54.6 million was presented in discontinued
operations. Impairment charges of $49.9 million were recorded in
the third quarter of 2008. Of this amount, $13.1 million was
presented in cost of sales. Of the remaining impairment charges for
the three months ended September 30, 2008, $27.3 million were
presented in impairment charges, and $9.5 million were presented in
discontinued operations.
Nine-Months Financial Results
Consolidated revenue for the first nine months of 2008 was
$275.8 million, compared with $280.1 million for the same period of
2007. Homebuilding sales, including revenue from unconsolidated
properties, were approximately $232.5 million in the first nine
months of 2008 compared with $282.9 million in the same period of
2007.
The loss from continuing operations during the first nine months
of 2008 was approximately ($111.5 million) compared with a loss of
($254.5 million) for the same period of 2007.
The net loss for the first nine months of 2008 was ($105.4
million), or ($3.68) per diluted share, compared with a loss of
($370.1 million), or ($12.99) per diluted share, in the comparable
period of 2007.
The loss in the first nine months of 2007 included impairment
charges of $339.1 million, of which $79.2 million was presented in
cost of sales and $168 million was presented in discontinued
operations. Impairment charges of $82.8 million were recorded in
the first nine months of 2008. Of this amount, $14.8 million was
presented in cost of sales. Of the remaining impairment charges for
the three months ended September 30, 2008, $58.6 million were
presented in impairment charges, and $9.4 million were presented in
discontinued operations.
Sales, Orders and Backlog
In the third quarter of 2008, the Company recorded sales of 70
homes representing $30.2 million compared with 315 homes for $67.9
million in the third quarter of 2007.
In the third quarter of 2008 the Company wrote 29 net new orders
totaling $8.6 million at an average sale price of $296,000 compared
with 149 net new orders totaling $6.6 million for the same period
in 2007 at an average sale price of $44,000.
At the end of the third quarter of 2008, the Company's backlog,
excluding land development, was $10.9 million representing 38 homes
compared with $92.7 million at the end of the third quarter of 2007
representing 262 homes. The average contract price was $287,000 at
September 30, 2008 compared with $354,000 at September 30,
2007.
Active Projects
At September 30, 2008, Tarragon's active for-sale communities
(including backlog) totaled 919 homes in 11 communities,
representing about $288.3 million in projected revenue, compared
with 2,623 homes representing $801.3 million in projected revenue
at September 30, 2007. Also at September 30, 2008, Tarragon had
rental communities with 1,227 apartments under development or in
lease-up, compared with 2,553 apartments at September 30, 2007.
Development Pipeline
The Company's homebuilding pipeline at the end of the third
quarter of 2008, which is comprised of sites owned or controlled by
the Company not yet included in active developments, totaled nearly
1,700 homes in ten communities compared with 3,047 homes in 15
communities at the end of the third quarter last year.
Based on the number of units, 63 percent of the development
pipeline comes from rental developments, 21 percent from high- and
mid-rise developments, 4 percent from townhome communities and 12
percent from mixed residential and commercial communities. Tarragon
has a 72 percent, weighted-average ownership interest in the
development pipeline.
Investment Division
The Investment Division, comprising 7,392 apartments as of
September 30, 2008, had net operating income for the third quarter
of $9.4 million, compared with the previous year's net operating
income of $13.7 million from 14,660 apartments. Same store
apartment net operating income was $8.2 million for both the third
quarter of 2008 and the third quarter of 2007.
For the first nine months of 2008, the Investment Division had
net operating income of $28.3 million, compared with net operating
income of $40 million for the first nine months of 2007. Same store
net operating income was $24.8 million, compared with $25.3 million
in the prior year period. Average same store occupancy during the
first nine months of 2008 was 93.2 percent, compared with 92.3
percent a year ago.
Subsequent Events
On November 3, 2008, the Company announced that it had entered
into a restructuring support and forbearance agreement with the
holders of its $125 million of corporate-level unsecured
subordinated notes. The holders of the subordinated notes have
agreed to support a financial restructuring of Tarragon and to
refrain from exercising any of their rights and remedies under the
terms of the subordinated notes through June 30, 2009, subject to
the terms and conditions of the agreement. As part of the financial
restructuring, the subordinated notes and approximately $38 million
of indebtedness held by an affiliate of William S. Friedman,
Tarragon's Chairman and Chief Executive Officer, and Robert P.
Rothenberg, Tarragon's President, would be restructured and become
obligations of a reorganized Tarragon or an affiliated issuer. The
agreement also contemplates that Tarragon would enter into one or
more definitive agreements with a sponsor of an overall financial
restructuring plan. Under the overall plan, which may be
implemented through a voluntary petition for Chapter 11 bankruptcy
protection, the sponsor of the plan and certain Tarragon
debtholders would receive shares of reorganized Tarragon's equity
representing a controlling interest in the reorganized company in
exchange for the assumption of indebtedness discussed above.
Also during the quarter, the Company received a deficiency
notice from The NASDAQ Stock Market indicating that the Company is
not in compliance with Marketplace Rule 4450(a)(5) because the
minimum bid price of the Company's common stock has fallen below
$1.00 per share for 30 consecutive business days. As previously
disclosed, this notification has no immediate effect on the NASDAQ
listing or trading of the Company's common stock.
About Tarragon Corporation
Tarragon Corporation is a leading developer of multifamily
housing for rent and for sale. The Company's operations are
concentrated in the Northeast, Florida, Texas and Tennessee. To
learn more about Tarragon Corporation, visit:
www.tarragoncorp.com
Forward-looking Statements
Information in this press release includes "forward-looking
statements" made pursuant of the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995 that are based on
management's expectations, estimates, projections and assumptions.
Words such as "may," "expects," "anticipates," "intends,"
"estimates" and variations of these words and similar expressions
are intended to identify forward-looking statements, which include,
but are not limited to, statements regarding Tarragon's
expectations regarding the terms and conditions of a financial
restructuring of the Company. Actual results and the timing of
certain events could differ materially from those projected or
contemplated by these forward-looking statements due to a number of
factors, including but not limited to the Company's ability to
negotiate satisfactory definitive agreements to implement an
overall financial restructuring plan and the satisfaction of any
conditions thereunder and under the restructuring support and
forbearance agreement with the holders of our subordinated notes;
risks associated with the implementation of the financial
restructuring; conditions in the homebuilding industry and
residential real estate and mortgage markets; conditions in the
capital and financial markets generally; and general economic
conditions, interest rates and other risk factors outlined in
Tarragon's SEC reports, including its Annual Report on Form 10-K
for the year ended December 31, 2007 and any subsequently filed
Quarterly Reports on Form 10-Q. Tarragon assumes no responsibility
to update forward-looking information contained in this press
release.
TARR-E
TARRAGON CORPORATION
FINANCIAL HIGHLIGHTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007
(Dollars in thousands, except per share data)
(Unaudited)
For the Three For the Nine
Months Ended Months Ended
September 30, September 30,
---------------------- ----------------------
2008 2007 2008 2007
---------- ---------- ---------- ----------
Revenue $ 48,524 $ 70,209 $ 275,767 $ 280,057
Expenses 93,733 179,121 334,112 478,608
Other income and expenses:
Equity in loss of
partnerships and joint
ventures 137 (2,255) 552 (7,693)
Minority interests in
(income) loss of
consolidated
partnerships
and joint ventures 326 (162) (7,967) (1,608)
Interest income 157 239 595 641
Interest expense (14,624) (15,486) (44,217) (34,266)
Gain on sale of real
estate - 153 - 551
Net loss on
extinguishment of debt - (5) (17) (1,427)
Net loss on debt
restructuring - - (3,534) -
Gain on transfer of
assets - - 2,237 -
Exchange of interests in
joint ventures 394 - 394 -
Provision for litigation,
settlements and other
claims 1,288 198 (4,408) (1,666)
---------- ---------- ---------- ----------
Loss from continuing
operations before income
taxes (57,531) (126,230) (114,710) (244,019)
Income tax benefit
(expense) (880) (52,226) 3,211 (10,469)
---------- ---------- ---------- ----------
Loss from continuing
operations (58,411) (178,456) (111,499) (254,488)
Discontinued operations,
net of income tax
(expense) benefit
Loss from operations (6,570) (8,670) (9,686) (118,748)
Gain on sale of real
estate 7,728 2,323 15,762 3,178
---------- ---------- ---------- ----------
Net loss (57,253) (184,803) (105,423) (370,058)
Dividends on cumulative
preferred stock (391) (380) (1,172) (1,143)
---------- ---------- ---------- ----------
Net loss allocable to
common stockholders $ (57,644) $ (185,183) $ (106,595) $ (371,201)
========== ========== ========== ==========
Loss per common share -
basic and diluted
Loss from continuing
operations allocable
to common stockholders $ (2.03) $ (6.18) $ (3.89) $ (8.95)
Discontinued operations 0.04 (0.22) 0.21 (4.04)
---------- ---------- ---------- ----------
Net loss allocable to
common stockholders $ (1.99) $ (6.40) $ (3.68) $ (12.99)
========== ========== ========== ==========
Development
Operating Statements
For the Three Months Ended September 30,
-------------------------------------------
2008 2007
-------------------- --------------------
Sales revenue $ 30,235 100% $ 67,927 100%
Cost of sales (39,622) (131%) (121,005) (178%)
---------- ------- ---------- -------
Gross profit (loss) on sales (9,387) (31%) (53,078) (78%)
Minority interests in sales of
consolidated partnerships and
joint ventures 174 1% (162) -
Outside partners' interests in
sales of unconsolidated
partnerships and joint
ventures 160 1% 2,432 4%
Overhead costs associated with
investments in joint ventures - - (38) -
Performance-based compensation
related to projects of
unconsolidated partnerships
and joint ventures - - - -
---------- ------- ---------- -------
(9,053) (29%) (50,846) (74%)
---------- ------- ---------- -------
Other income and expenses:
Impairment charges (27,319) (90%) (44,201) (65%)
Interest expense (7,943) (26%) (4,930) (7%)
Depreciation expense (111) - - -
Net income (loss) from rental
operations (365) (1%) 99 -
Taxes, insurance, and other
carrying costs (1,329) (4%) (1,968) (3%)
General and administrative
expenses (8,743) (29%) (12,110) (18%)
Other corporate items 84 - 175 -
Provision for litigation,
settlements and other claims 1,300 4% (55) -
Provision for losses (886) (3%) (3,000) (4%)
Distributions from
unconsolidated partnerships
and joint ventures in
excess of investment 1 - 194 -
Loss on extinguishment of
debt - - - -
Loss on debt restructuring - - - -
Exchange of interests in
joint ventures 394 1% - -
---------- ------- ---------- -------
Loss before income taxes (53,970) (177%) (116,642) (171%)
Income tax benefit - - - -
---------- ------- ---------- -------
Net loss $ (53,970) (177%) $ (116,642) (171%)
========== ======= ========== =======
Reconciliation of segment
revenues to consolidated
revenue:
Total Development Division
revenue $ 30,235 $ 67,927
Less: sales revenue of
unconsolidated partnerships
and joint ventures (391) (16,839)
---------- ----------
Consolidated Development
Division sales revenue $ 29,844 $ 51,088
========== ==========
For the Nine Months Ended September 30,
-------------------------------------------
2008 2007
-------------------- --------------------
Sales revenue $ 232,526 100% $ 282,921 100%
Cost of sales (211,002) (91%) (363,988) (129%)
---------- ------- ---------- -------
Gross profit (loss) on sales 21,524 9% (81,067) (29%)
Minority interests in sales of
consolidated partnerships and
joint ventures (8,906) (4%) (1,608) (1%)
Outside partners' interests in
sales of unconsolidated
partnerships and joint
ventures 277 - (4,510) (2%)
Overhead costs associated with
investments in joint ventures - - (323) -
Performance-based compensation
related to projects of
unconsolidated partnerships
and joint ventures - - (7) -
---------- ------- ---------- -------
12,895 5% (87,515) (32%)
---------- ------- ---------- -------
Other income and expenses:
Impairment charges (58,871) (25%) (120,072) (42%)
Interest expense (21,096) (9%) (9,668) (3%)
Depreciation expense (238) - - -
Net income (loss) from rental
operations (979) - 558 -
Taxes, insurance, and other
carrying costs (4,165) (2%) (3,099) (1%)
General and administrative
expenses (24,299) (10%) (27,816) (10%)
Other corporate items 642 - 861 -
Provision for litigation,
settlements and other claims (4,268) (2%) (1,090) -
Provision for losses (886) - (3,000) (1%)
Distributions from
unconsolidated partnerships
and joint ventures in
excess of investment 110 - 194 -
Loss on extinguishment of
debt - - (1,414) -
Loss on debt restructuring (4,445) (2%) - -
Exchange of interests in
joint ventures 394 - - -
---------- ------- ---------- -------
Loss before income taxes (105,206) (45%) (252,061) (89%)
Income tax benefit - - 33,055 12%
---------- ------- ---------- -------
Net loss $ (105,206) (45%) $ (219,006) (77%)
========== ======= ========== =======
Reconciliation of segment
revenues to consolidated
revenue:
Total Development Division
revenue $ 232,526 $ 282,921
Less: sales revenue of
unconsolidated partnerships
and joint ventures (11,548) (59,316)
---------- ----------
Consolidated Development
Division sales revenue $ 220,978 $ 223,605
========== ==========
Investment
Operating Statements
For the Three Months Ended September 30,
-------------------------------------------
2008 2007
-------------------- --------------------
Rental revenue $ 19,246 100% $ 28,382 100%
Property operating expenses (9,832) (51%) (14,646) (52%)
---------- ------- ---------- -------
Net operating income 9,414 49% 13,736 48%
Net gain on sale of real
estate 12,325 3,859
Minority interests in loss of
consolidated partnerships
and joint ventures 152 -
Mortgage banking income
(loss) (2) 118
General and administrative
expenses (3,256) (4,085)
Other corporate items 661 369
Impairment charges (9,482) (56,049)
Net loss on extinguishment of
debt (788) (207)
Net gain on debt restructuring - -
Gain on transfer of assets - -
Provision for litigation,
settlements and other claims (11) 328
Provision for losses (332) -
Interest expense (9,036) (21,905)
Depreciation expense (2,911) (3,679)
---------- ----------
Income (loss) before income
taxes (3,266) (67,515)
Income tax (expense) benefit (17) (646)
---------- ----------
Net loss $ (3,283) $ (68,161)
========== ==========
Reconciliation of segment
revenues to consolidated
revenue:
Total Investment Division
revenue $ 19,246 $ 28,382
Less Investment Division
rental revenue presented
in discontinued operations (1,716) (11,052)
Add management fee and other
revenue included in
other corporate items 588 302
Add rental revenues from
development properties
presented in net loss from
property operations 562 1,489
---------- ----------
Consolidated Income Statement
rental and other revenue $ 18,680 $ 19,121
========== ==========
For the Nine Months Ended September 30,
-------------------------------------------
2008 2007
-------------------- --------------------
Rental revenue $ 58,339 100% $ 81,786 100%
Property operating expenses (30,022) (51%) (41,770) (51%)
---------- -------- ---------- -------
Net operating income 28,317 49% 40,016 49%
Net gain on sale of real
estate 25,138 5,619
Minority interests in loss of
consolidated partnerships
and joint ventures 939 -
Mortgage banking income
(loss) 32 416
General and administrative
expenses (7,366) (9,168)
Other corporate items 1,473 1,148
Impairment charges (9,398) (145,937)
Net loss on extinguishment of
debt (1,900) (214)
Net gain on debt restructuring 912 -
Gain on transfer of assets 2,237 -
Provision for litigation,
settlements and other claims (139) (627)
Provision for losses (332) -
Interest expense (29,653) (53,009)
Depreciation expense (10,073) (14,523)
---------- ----------
Income (loss) before income
taxes 187 (176,279)
Income tax (expense) benefit (404) 25,227
---------- ----------
Net loss $ (217) $ (151,052)
========== ==========
Reconciliation of segment
revenues to consolidated
revenue:
Total Investment Division
revenue $ 58,339 $ 81,786
Less Investment Division
rental revenue presented
in discontinued operations (6,176) (30,000)
Add management fee and other
revenue included in other
corporate items 1,521 1,369
Add rental revenues from
development properties
presented in net loss from
property operations 1,105 3,297
---------- ----------
Consolidated Income Statement
rental and other revenue $ 54,789 $ 56,452
========== ==========
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