Orleans Homebuilders reports reducing net debt by $72.7 million in fiscal second quarter

By Jennifer Lanning Drey

Portland, Ore., Feb. 1 - Orleans Homebuilders, Inc. decreased net debt by $72.7 million during the second quarter of fiscal 2008, Garry P. Herdler, the company's chief financial officer, reported Friday during the Orleans Homebuilders' earnings conference call for the quarter, which ended Dec. 31.

In late December, the company made a $75 million payment toward its credit facility using cash generated through the sale of weaker performing assets, operational cost reductions and a tax refund, he said.

Orleans Homebuilders had borrowing base availability of $19.5 million and cash and cash equivalents of $31.8 million at Dec. 31. The cash balance compares with $20.0 million at June 30, 2007.

"In this difficult environment, we have continued to significantly improve our balance sheet," Jeffrey P. Orleans, chief executive officer of Orleans Homebuilders, said during Friday's call.

The company expects to receive an additional $25 million of federal income tax refunds as a result of land sales made in December. Orleans Homebuilders expects to receive the refunds before its June 30 fiscal year end and plans to use the money for debt reduction, Orleans said.

Orleans Homebuilders reported a second-quarter net loss of $51.4 million, compared to a $7.5 million net loss for the same period in the prior year. The company reported inventory impairments of $22.9 million on a pre-tax basis for the second quarter.

"The homebuilding market has continued its downturn and we still believe economic conditions will remain difficult," Orleans said.

Orleans Homebuilders is responding to unfavorable housing market conditions by attempting to maintain absorption levels through the use of sales incentives, reevaluating land holdings, reducing land expenditures and emphasizing cost reductions to adjust for lower levels of production.

The company has also been repositioned so that 88% of its lots owned are in the Northeast and the Carolinas, markets it considers to be more stable and primary.

"We have worked through difficult times before and the progress we are making will ensure a brighter future," Orleans said.

Orleans Homebuilders is a Bensalem, Pa.-based residential homebuilder.

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