M/I Homes - Sell of Land, Layoff People

"We're facing what may well be the most difficult time in the history of the building industry," Robert H. Schottenstein told financial analysts yesterday in addressing the company's third-quarter financials.

The Columbus homebuilder said it lost $58.7 million in the three-month period as it continued to struggle with low demand for new homes.

Included in the Columbus homebuilder's loss were pretax charges of $43.5 million for asset impairments, reflecting the housing downturn's effects on land and property values, and a loss from operations of $14.9 million. M/I's per-share loss for the quarter was $4.18, compared with a $1.73-a-share loss a year ago.

Yet as it continues to sell land and cut expenses, including layoffs, M/I has a few things going for it, Schottenstein said.

During the quarter, the company reduced its debt to zero. At the beginning of 2007, Schottenstein said, M/I owed $410 million on its homebuilding credit line. M/I reduced its debt-to-capital ratio over that period from 44 percent to 32 percent.

Meanwhile, it also is reducing the number of communities in which it builds homes. Schottenstein said the company had 9,530 lots at the end of the quarter, 43 percent fewer than a year earlier and down nearly a third from the beginning of 2008.
Schottenstein also said M/I has had positive cash flow for eight quarters in a row.

M/I's shares increased $1.45 yesterday to close at $11.95, nearly a 14 percent boost.
However, Schottenstein also warned of job cuts ahead in the face of lower demand. M/I delivered 555 homes in the third quarter, down 29 percent from the third quarter of 2007. It also booked 456 new contracts in the quarter, a 19 percent decline.
Through the first nine months of 2008, the company's new contracts are down 30 percent, to 1,540.

"Demand is weak, consumer confidence is at or near a historical low, unemployment is rising, and tightened mortgage lending standards, combined with the unprecedented turmoil in the financial markets, have further contributed to very difficult conditions for homebuilders," Schottenstein said.

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