Comstock Holding Companies, Inc.

For fiscal 2007, Comstock reported revenue of $266.2 million, up $20.3 million or 8% from $245.9 million in 2006. The company reported a net loss of $87.5 million, or $5.42 per share, and impairment charges of $78.3 million pretax, or $4.85 per share pretax and $2.96 per share on a pro forma after-tax basis. Homebuilding revenue was $232.8 million, down $7.3 million or 3%, while bulk sales, land sales, and other revenue rose to $33.4 million from a much smaller base. Gross margin on homebuilding, excluding impairments and write-offs, was 9.3%, down 260 basis points from 2006. SG&A was $34.7 million, or 15.3% of revenue, and on a non-cash-adjusted basis was $30.2 million, down nearly 19%. The company said it received about $13.9 million of federal and state tax refunds, had $4.3 million of NOLs coming into 2008, and ended 2007 with $6.8 million of unrestricted cash; it said cash was about $12 million at the time of the call. Guidance was limited, but management said it expects to reduce SG&A by at least $10 million in 2008 versus 2007 and continues to work through roughly $60 million of remaining 2008 debt obligations. Management also said the new three-year KeyBanc loan is a $40 million revolving facility at LIBOR plus 400 basis points, and that the unsecured note restructuring created a likely Q1 gain estimate of between $7 million and $10 million, with $15 million of reportable income expected to be recognized in Q1 2008 from the notes transaction.

Chris Clemente framed 2007 as a survival-and-reset year, emphasizing debt reduction, inventory liquidation, covenant management, and cost cutting over growth. He said the company took aggressive steps to preserve liquidity, reduce carrying costs, and reposition projects, while also acknowledging that market conditions remain difficult and consumer confidence is weak. His tone was cautious but more optimistic than a year earlier, saying Comstock is in a far better position today on debt, cash burn, and overhead and is focused on positioning for an eventual recovery.

Bruce Labovitz focused on the financial cleanup: 2007 revenue of $266.2 million, a $87.5 million loss, $78.3 million of impairments, and 9.3% homebuilding gross margin excluding impairments and write-offs. He highlighted strong cash generation of $116.5 million from operations, which helped reduce debt from more than $295 million to just over $171 million by year-end, and then further to about $161 million after the notes restructuring. He also detailed liquidity of $6.8 million unrestricted cash at year-end and about $12 million today, plus a $40 million KeyBanc facility, and said SG&A should fall by at least $10 million in 2008 with virtually no stock comp expense.

Analysts pressed management on market health, Eclipse performance, debt maturities, the status of the Atlanta foreclosure issue, and whether the company might consider a sale. Management said Raleigh has generally been the strongest of its three markets, but the Eclipse in Washington has been performing well, and they provided detailed Eclipse settlement and inventory figures, including $135.7 million of cumulative unit revenue and 117 unsold units remaining. On the foreclosure, management said the $4.8 million Gates at Liberon loan is at risk but not material in the context of total debt, and they are considering bankruptcy-law protections for the single-purpose entity if needed. On strategic options, Chris Clemente said they would explore every option for increasing shareholder value, including selling the company if that were the best path.