M/I Homes planning to pay off homebuilding debt by year-end

By Jennifer Lanning Drey

Portland, Ore., Feb. 7 - M/I Homes, Inc. expects to bring the balance on its homebuilding credit facility to zero by the end of 2008, Robert H. Schottenstein, the company's chief executive officer, said Thursday during M/I Homes' fourth-quarter earnings conference call.

M/I will use cash flow generated in 2008 to pay off the $500 million facility, which had $115 million outstanding plus $45 million of letters of credit at Dec. 31. Excess borrowing capacity was $170 million at year end, according to M/I's chief financial officer, Phillip Creek.

The company expects to generate positive free cash flow through a tax refund and cash from land sales, reduced owned lot inventories and reductions in speculative homes.

"With our net worth in excess of $580 million and minimal off-balance sheet exposure, we believe that M/I is very well positioned to manage through this current difficult cycle," Schottenstein said.

In 2007, M/I generated more than $200 million of cash from operations and reduced homebuilding debt by $295 million over the course of the year. Additionally, the company lowered its net-debt-to-capital ratio to 33% from 44% during 2007.

Currently, the company's most restrictive debt covenant is a minimum net worth requirement under which M/I has a $40 million cushion. The company has a semi-annual meeting with its bank group in March and will be proactive in seeking amendments to the covenant, if necessary, Schottenstein said.

M/I's net loss grew to $68.5 million in the fourth quarter from a net loss of $11.0 million in the same period of 2006. The most recent quarter's results included $112.3 million of pre-tax charges, which consisted of land-related impairment and abandonment charges of $104.9 million, joint venture investment write-offs of $4.3 million and $3.1 million of severance costs.

In 2008, M/I intends to continue to take steps toward reducing inventory, expense levels and debt levels, Creek said.

"We continue to see challenging market conditions and anticipate this environment to continue this year," he said.

M/I Homes is a Columbus, Ohio-based homebuilder.

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