Pacesetter Falls Further After Latest Bad Year : Debt: Home builder suffers $13-million loss from foreclosures and assorted other troubles. It last turned profit in 1989.

NEWPORT BEACH â€”  Coping with foreclosures, deepening debt, tax troubles, sinking stock prices and a dearth of construction loans, Pacesetter Homes Inc. Tuesday reported that it sank deeper into the red in 1991.

For the year ended Dec. 31, Pacesetter reported a net loss of $13.1 million, equal to $8.68 per share, compared to a net loss of $4.88 million, or $3.24 per share, for the year ended Dec. 29, 1990.

The company also posted sharply lower revenue--$33.4 million, down from $48.6 million in 1990. The company’s last profitable year was 1989, when it had earnings of $3.7 million.

More than half of the 1991 loss is attributed to a $7.4-million reduction in the book value of six of the company’s 10 real estate projects, including four projects currently in default in three Southern California counties.

The write-down became necessary when home prices dropped throughout the Southland.

“Last year we had a lot of bad news,� said Pacesetter Chairman John W. Klug, referring to the foreclosures and a dramatic fall in the company’s stock price. He added that he did not believe that the company was on the brink of bankruptcy, despite its myriad financial difficulties.

In fact, Klug said he hoped that the corporation would post profits within the next two quarters as it seeks partners on future projects.

“We hope the bad news is behind us,� Klug said.

Pacesetter’s problems have been exacerbated by the slowness of home sales. For 1991, Pacesetter sold only 125 homes, according to the company. That was down from 270 homes in 1990 and a high of more than 500 homes sold annually during the mid-1980s real estate boom.

When recession-weary consumers stopped buying houses, the company was forced to pay ever-rising interest payments tied to the unsold projects.

But the disappointing year-end report, which marked Pacesetter’s worst performance to date, is the latest indicator of the company’s ongoing problems in obtaining financing.

With construction loans almost nonexistent, smaller builders such as Pacesetter have found it almost impossible weathering the recession than larger publicly owned companies, such as Kaufman & Broad Home Corp. or Standard Pacific Corp., said Mark Matheson, a stock analyst for Cruttenden & Co. Inc., an investment banking company in Newport Beach.

“To get through this crunch, it takes a builder with a lot of resources and deeper pockets,� Matheson said. “The stronger companies stay in. The weaker ones are forced out.�

In addition, Pacesetter, which builds low- to mid-priced single family homes throughout Southern California, and a sister company, Pacesetter Business Properties, have agreed to pay $3 million in back taxes to the Internal Revenue Service for the 1983 and 1984 tax years.

The IRS is continuing its audit to tax year 1988, when the two companies split from parent company, American Pacesetter, Klug said. The subsidiaries were spun off to existing shareholders.

Four housing projects in San Diego, Riverside and Los Angeles counties and an apartment complex in Corona have been forced into foreclosures, Klug said.

The foreclosures occurred after the company was unable to continue interest payments on the unsold inventory, Klug said. The interest was being paid out of reserve accounts that were factored into the original loans, Klug said.

But those reserves were depleted as the company failed to sell off its inventory, even after dropping home prices. Further, Pacesetter was unable to persuade its lenders to agree to restructure its loans to defer interest payments.

With its combined financial problems, investors’ confidence in the company fell.

The price of Pacesetter Homes stock has plummeted from $8.50 per share at the end of 1989 to just $1.75 a share at Tuesday’s close on the Pacific Stock Exchange.

Analyst Matheson said it is not surprising the stock has fallen so dramatically because the company has little name recognition among investors outside of Southern California and its financial problems are well known to local investors.

Pacesetter’s Losses Mount . . .

For 1991, Pacesetter Homes reported a loss of $13.08 million as its revenue plunged 31% to $33.4 million from $48.6 million in 1990. The company attributed the loss to the recession and reduced home values.

Figures are in thousands, except per-share data

4th Qtr 4th Qtr 12 Months 12 Months 1991 1990 1991 1990 Revenue $3,114 $12,437 $33,427 $48,601 Net income (loss) ($6,257) ($2,720) ($13,085) ($4,838) Per share (loss) ($4.15) ($1.80) ($8.68) ($3.24)

Source: Pacesetter Homes Inc.

. . . And Its Stock Price Suffers

Pacesetter Homes’ stock has fallen from $5 per share a year ago to close as low as $1.25 in the past month. Tuesday’s closing price was $1.75, off $0.25.

1991 Mar. 29: $5.00 1992 Mar. 31*: $1.75 Source: Dow Jones News Retrieval