M/I Homes drops debt to $42 million in first quarter, expects zero balance by year end

By Jennifer Lanning Drey

Portland, Ore., April 30 - M/I Homes Inc. generated $99 million of cash and reduced homebuilding debt by $73 million during the first quarter, Phillip G. Creek, chief financial officer of M/I, said Wednesday during the company's first-quarter earnings conference call.

M/I's homebuilding bank borrowings dropped to $42 million during the quarter from $115 million at Dec. 31. The company expects to have zero borrowings outstanding on the facility by the end of 2008, Creek said.

"We continue to see challenging market conditions and are very focused on reducing our inventory, expense and debt levels," Creek said.

The company expects to generate cash flow from continued land sales, primarily in Florida, and by reducing lot inventories and spec levels, he said.

M/I ended the quarter with a debt-to-capital ratio of 31%.

As previously reported, M/I amended its credit facility during the first quarter, reducing the size to $250 million from $500 million, revising covenants and increasing pricing. Chief executive officer Robert Schottenstein said during the call that the company is pleased with the amendments, which provide greater financial flexibility.

The company's excess borrowing base at the end of the quarter was $136 million, and the company had $37 million in letters of credit outstanding, Creek reported.

Dropping lot count, costs

During the first quarter, M/I reduced its owned lot count by 10% from the 2007 year-end total, as well as reduced overhead expenditures by 17% as compared to the 2007 first quarter. Additionally, the company has reduced its workforce by 45% from peak levels.

"We continue to make progress in aligning our overhead structure with current demand," Schottenstein said.

M/I reported a first-quarter net loss of $22.2 million, which included pre-tax charges of $22.3 million for impairments and write-offs recorded in connection with the company's land inventory. The loss compares with net income of $2.2 million in the first quarter of 2007, which included $2.2 million of similar pre-tax charges.

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

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