Exhibit 99.1

 

 

Contacts:

 

Investor Relations:

 

Corporate Communications:

 

 

Brent Anderson

 

Jane Hays

 

 

Vice President-Investor Relations

 

Vice President-Corporate Communications

 

 

(972) 543-8207

 

(972) 543-8123

 

MERITAGE HOMES REPORTS FIRST QUARTER 2008 RESULTS

 

FIRST QUARTER 2008 HIGHLIGHTS:

 

·      Generated approximately $80M positive cash flow from operations

·      Paid down debt by $80M, nearly eliminating outstanding bank debt

·      47% net debt-to-capital ratio; $377M available borrowing capacity at quarter-end

·      Reduced inventory of unsold homes by 31% to 768 at quarter-end

·      Reduced total lot supply to 24,591 lots, or 3.4 years supply, with 60% optioned

·      Backlog increased 13% to 2,594 contracts, from 2,288 at year-end 2007

 

Scottsdale, Ariz. (April 28, 2008) – Meritage Homes Corporation (NYSE: MTH), a leading U.S. homebuilder, today announced first quarter results for the period ended March 31, 2008.

 

Summary Operating Results (Unaudited)

(Dollars in thousands, except per share amounts)

 

 

 

As of and for the Three Months Ended
March 31,

 

 

 

2008

 

2007

 

%Chg

 

Homes closed (units)

 

1,328

 

1,796

 

-26

%

Home closing revenue

 

$

371,656

 

$

576,115

 

-35

%

Sales orders (units)

 

1,634

 

2,073

 

-21

%

Sales order value

 

$

420,209

 

$

640,616

 

-34

%

Ending backlog (units)

 

2,594

 

3,962

 

-35

%

Ending backlog value

 

$

718,538

 

$

1,264,562

 

-43

%

Net (loss)/earnings

 

$

(45,305

)

$

15,116

 

n/m

 

Adjusted net (loss)/earnings*

 

$

(6,796

)

$

25,722

 

n/m

 

Diluted (LPS)/EPS

 

$

(1.72

)

$

0.57

 

n/m

 

 


        n/m = not meaningful

 

*      see non-GAAP reconciliation between net (loss)/earnings and adjusted net earnings on “Operating Results” table, page 5.

 



 

Significant progress on plans to strengthen balance sheet and liquidity

 

“We made significant progress on our objectives again this quarter, strengthening our balance sheet and improving our liquidity,” said Steven J. Hilton, chairman and CEO of Meritage Homes. “We generated significant positive cash flow, paid off nearly all of our bank debt, reduced our inventory of unsold homes, kept lot purchases below home starts and further reduced our total lot supply. We maintained compliance with all of our debt covenants, and believe we’ve demonstrated disciplined financial management with the tremendous strides we’ve made over the last nine months.”

 

Cash flow from operations was approximately $80 million for the first quarter 2008, driven mainly by net reductions in inventory, and tax refunds collected in the quarter. This was more than a $160 million improvement from the same quarter in the previous year, when the Company reported negative cash flow from operations of $83 million.

 

“We used the cash we generated to pay down the balance of outstanding debt under our credit facility to just two million dollars at quarter-end – a net reduction of $80 million from December 31, 2007,” said Mr. Hilton. “The first quarter 2008 culminated a nine-month period in which we repaid more than a quarter-billion dollars of debt.”

 

The Company had 768 unsold homes in inventory at the end of the first quarter 2008, after net sales of 339 homes from unsold inventory during the quarter, a reduction of 31%. Half of the total ending spec inventory consisted of completed homes, an average of less than two per community. At the end of the first quarter 2007, Meritage had 1,213 unsold homes in inventory. The Company operated 215 actively selling communities at March 31, 2008, down from 220 at December 31, 2007 and 217 active communities at March 31, 2007.

 

Mr. Hilton said, “We’re now within our desired range of three to four spec homes per community, and I commend our sales teams for achieving this during very difficult market conditions.”

 

 “We purchased just 889 lots under option contracts during the quarter, while starting 1,135 new homes. That’s 60% fewer lot purchases than a year ago, with 65% of those lot purchases in Texas,” he continued. “Our objective is to limit our investment and supply of owned lots by selling and starting more homes than we’re purchasing under option contracts. We brought our total lot supply down to 24,591 at March 31, 2008, or about 3.4 years supply based on trailing twelve months deliveries, with 40% of these owned and 60% optioned. A year ago, our total lot supply was 41,936, so we’ve reduced that by 41% in just the last year.”

 

Meritage was in compliance with all its debt covenants as of March 31, 2008, and had available borrowing capacity of $377 million under its $800 million revolving credit facility, after considering the facility’s borrowing base availability and most restrictive covenants. Interest coverage ratio was 1.6 times interest incurred, based on trailing four quarters’ adjusted EBITDA. Net debt-to-capital was 47% as of March 31, 2008, compared to 49% at December 31, 2007.

 

2



 

First quarter operating results

 

First quarter 2008 home closing revenue declined 35% year over year on 26% fewer homes closed and a 13% reduction in average closing price, reflecting weak demand. Meritage’s central region experienced the greatest declines in the first quarter, primarily in Arizona, where closings and closing revenue were lower than the prior year’s first quarter by 58% and 66%, respectively.

 

Meritage reported a net loss for the first quarter 2008 of $45 million, or ($1.72) per share, compared to net earnings of $15 million, or $0.57 per diluted share, in the first quarter 2007. The first quarter net loss included $60 million of pre-tax charges for real estate-related and joint venture valuation adjustments. Before these charges, the pre-tax loss from operations was $11 million in the first quarter 2008, compared to pre-tax earnings of $40 million in the first quarter 2007, before $17 million of similar charges.

 

Two-thirds of the total 2008 charges were in Arizona and California, and included a charge of $14 million to write off and fully reserve any further obligations related to a joint venture in the northwest Phoenix area. The total charges consisted of $30 million for write-downs of inventory on continuing projects, $14 million of walk-away costs on terminated projects, and $16 million from joint venture impairments. First quarter 2007 pre-tax charges included $16 million due to terminated projects, with the remainder due to write-downs of inventory.

 

Mr. Hilton stated, “Our impairment charges were the result of both lower home prices in some markets and greater incentives we offered on unsold homes in order to recapture our investment in that inventory. While those price concessions were very effective in reducing our inventory and generating cash, they also resulted in further valuation reductions on our remaining inventory in these communities. Considering that we’ve now greatly reduced our spec homes in most active communities to our targeted levels, we expect less aggressive pricing on both specs and new homes built to order, which should help to reduce our future impairments.”

 

First quarter homebuilding gross margins contracted primarily due to real estate-related charges of $44 million in 2008. Excluding these non-cash charges, homebuilding gross margins for the first quarter were 12.2% in 2008 compared to 18.6% in 2007, reflecting weak demand and lower average sales prices.

 

Mr. Hilton commented, “Based on the first quarter results we’ve seen reported so far, we believe that our strong Texas franchise is becoming a clear differentiating factor for Meritage, relative to other homebuilders.  Texas has continued to outperform other areas of the country.”

 

Net sales were off 21% from the prior year’s first quarter, after a cancellation rate of 27% in both periods. Ending backlog of homes under contract at March 31, 2008, increased 13% from year-end 2007, and was 35% lower than March 31, 2007.

 

 “While total inventories of homes remain high relative to the recent pace of sales, we believe we’re beginning to see less significant declines in new home prices,” said Mr. Hilton. “Most large homebuilders have been successful in reducing spec inventories closer to their desired levels, and now

 

3



 

appear to have an emphasis on holding prices. Stabilizing prices should help improve buyer confidence over the next several quarters, and lead to improving demand in 2009 and beyond.”

 

Stock Offering

 

The Company completed an offering of common stock on April 25, 2008, issuing approximately 4.3 million shares and raising approximately $83 million of additional cash capital, net of commissions. Adjusting for these proceeds, Meritage’s pro forma net debt to capital ratio would have been 41% at March 31. “The additional liquidity we obtained through this equity offering further strengthens our balance sheet, and provides additional flexibility to take advantage of lower cost lots if and when we determine there are opportunities to generate attractive returns,” said Mr. Hilton.

 

Summary

 

“Our primary objectives in managing through this downturn have been to strengthen our balance sheet by reducing inventory and debt, and to build liquidity to take advantage of future opportunities,” said Mr. Hilton. “I’m pleased with the significant progress we made in the first quarter this year.

 

“We are hopeful that government-led actions to assist current homeowners and prospective home buyers will help bring about a recovery in homebuilding sooner than would otherwise be realized. Until then, we will continue to focus on responsible balance sheet management, while prudently seeking attractive opportunities to generate superior returns in the coming years.”

 

The Company will host a conference call and webcast on April 29, 2008, at 8:00 a.m. Pacific Time (11:00 a.m. Eastern Time) to discuss first quarter 2008 results. The conference call will be webcast by B2i and available through the “Investor Relations” page of the Company’s web site at http://www.meritagehomes.com. For telephone participants, the dial-in number is 800-374-0113 with a passcode of “Meritage.” Participants are encouraged to dial in five minutes before the call begins. A replay of the call will be available after 1:00 p.m. EDT April 29, 2008 on the website noted above, or by dialing 800-642-1687, and referencing passcode 42077092.

 

4



 

Meritage Homes Corporation and Subsidiaries

Operating Results

(Unaudited)

(In thousands, except per share data)

 

 

 

Three Months Ended
March 31,

 

 

 

2008

 

2007

 

Operating results

 

 

 

 

 

Home closing revenue

 

$

371,656

 

$

576,115

 

Land closing revenue

 

1,773

 

1,335

 

Total closing revenue

 

373,429

 

577,450

 

 

 

 

 

 

 

Home closing gross profit

 

1,081

 

90,151

 

Land closing gross profit/(loss)

 

86

 

189

 

Total closing gross profit

 

1,167

 

90,340

 

 

 

 

 

 

 

Commissions and other sales costs

 

(33,765

)

(47,338

)

General and administrative expenses

 

(21,293

)

(26,663

)

Interest expense

 

(5,661

)

 

Other income, net (1)

 

(11,232

)

6,279

 

(Loss)/earnings before benefit/(provision) for income taxes

 

(70,784

)

22,618

 

Benefit/(provision) for income taxes

 

25,479

 

(7,502

)

Net (loss)/earnings

 

$

(45,305

)

$

15,116

 

 

 

 

 

 

 

(Loss)/earnings per share

 

 

 

 

 

Basic:

 

 

 

 

 

(Loss)/earnings per share

 

$

(1.72

)

$

0.58

 

Weighted average shares outstanding

 

26,313

 

26,165

 

 

 

 

 

 

 

Assuming dilution:

 

 

 

 

 

(Loss)/earnings per share

 

$

(1.72

)

$

0.57

 

Weighted average shares outstanding

 

26,313

 

26,543

 

 

 

 

 

 

 

Non-GAAP Reconciliations:

 

 

 

 

 

Total closing gross profit

 

$

1,167

 

$

90,340

 

Add: Real estate-related impairments:

 

 

 

 

 

Terminated lot options & land sales

 

14,629

 

15,957

 

Impaired projects

 

29,720

 

1,080

 

Adjusted closing gross profit

 

$

45,516

 

$

107,377

 

 

 

 

 

 

 

(Loss)/earnings before benefit/(provision) for income taxes

 

$

(70,784

)

$

22,618

 

Add:

 

 

 

 

 

Real estate-related & JV impairments:

 

 

 

 

 

Terminated lot options & land sales

 

14,629

 

15,957

 

Impaired projects

 

29,720

 

1,080

 

Joint venture (JV) impairments

 

15,816

 

 

Adjusted (loss)/earnings before provision for income taxes

 

(10,619

)

39,655

 

Adjusted benefit/(provision) for income taxes

 

3,823

 

(13,933

)

Adjusted net (loss)/earnings

 

$

(6,796

)

$

25,722

 

 


(1)  Other income includes joint venture impairments of $15,816 in the first quarter 2008.

 

5



 

Meritage Homes Corporation and Subsidiaries

Non-GAAP Financial Disclosures

(Unaudited)

(Dollars in thousands)

 

 

 

Three Months Ended
March 31,

 

As of and for the Four
Quarters Ended March 31,

 

 

 

2008

 

2007

 

2008

 

2007

 

EBITDA reconciliation: (1)

 

 

 

 

 

 

 

 

 

Net (loss)/earnings

 

$

(45,305

)

$

15,116

 

$

(349,272

)

$

160,734

 

Benefit/(provision) for income taxes

 

(25,479

)

7,502

 

(200,612

)

95,102

 

Interest amortized to cost of sales

 

14,761

 

7,972

 

55,783

 

40,197

 

Depreciation and amortization

 

3,348

 

4,269

 

16,897

 

23,125

 

EBITDA

 

(52,675

)

34,859

 

(477,204

)

319,158

 

 

 

 

 

 

 

 

 

 

 

Add back:

 

 

 

 

 

 

 

 

 

Real estate-related impairments

 

60,165

 

17,037

 

441,426

 

95,305

 

Fixed asset impairments

 

 

 

3,124

 

 

Goodwill-related impairments

 

 

 

130,490

 

 

Adjusted EBITDA

 

$

7,490

 

$

51,896

 

$

97,836

 

$

414,463

 

 

 

 

 

 

 

 

 

 

 

Interest coverage ratio: (2)

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

 

 

 

 

$

97,836

 

$

414,463

 

Interest incurred

 

 

 

 

 

61,262

 

54,373

 

Interest coverage ratio

 

 

 

 

 

1.6

 

7.6

 

 

 

 

 

 

 

 

 

 

 

Net debt-to-capital: (3)

 

 

 

 

 

 

 

 

 

Notes payable and other borrowings

 

 

 

 

 

$

645,781

 

$

810,364

 

Less: cash and cash equivalents

 

 

 

 

 

(26,140

(38,919

Net debt

 

 

 

 

 

619,641

 

771,445

 

Stockholders’ equity

 

 

 

 

 

686,834

 

1,023,061

 

Capital

 

 

 

 

 

1,306,475

 

1,794,506

 

Net debt-to-capital

 

 

 

 

 

47.4

%

43.0

%

 

6



 


(1)  EBITDA and adjusted EBITDA are non-GAAP financial measures representing net earnings before interest expense amortized to cost of sales, income taxes, depreciation and amortization, with write-offs and impairment charges also excluded from adjusted EBITDA. A non-GAAP financial measure is a numerical measure of a company’s historical or future financial performance, financial position or cash flows that excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the statement of earnings, balance sheet, or statement of cash flows (or equivalent statements) of the Company; or includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented. In this regard, GAAP refers to generally accepted accounting principles in the United States. We have provided a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measure. EBITDA is presented here because it is used by management to analyze and compare Meritage with other homebuilding companies on the basis of operating performance and we believe it is a financial measure widely used by investors and analysts in the homebuilding industry. EBITDA as presented may not be comparable to similarly titled measures reported by other companies because not all companies calculate EBITDA in an identical manner and, therefore, it is not necessarily an accurate means of comparison between companies. EBITDA is not intended to represent cash flows for the period or funds available for management’s discretionary use nor has it been presented as an alternative to operating income or as an indicator of operating performance and it should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. Adjusted EBITDA is presented because it more closely, although not exactly, resembles the comparable covenant calculations under our revolving credit facility and senior and senior subordinated note indentures.

 

(2)  Interest coverage ratio is calculated as the trailing four quarters’ adjusted EBITDA divided by the trailing four quarters’ interest incurred. This calculation may differ from our interest coverage ratio as computed for our credit facility covenant due to additional non-cash reconciling items, such as stock compensation and tender offer expense.

 

(3) Net debt-to-capital is calculated as notes payable and other borrowings less cash and cash equivalents, divided by the sum of notes payable and other borrowings, less cash and cash equivalents, plus stockholders’ equity.

 

7



 

Meritage Homes Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands)

 

 

 

03/31/08

 

12/31/07

 

 

 

(unaudited)

 

 

 

Assets:

 

 

 

 

 

Cash and cash equivalents

 

$

26,140

 

$

27,677

 

Receivables

 

71,960

 

123,503

 

Real estate (1)

 

1,163,872

 

1,267,879

 

Investment in unconsolidated entities

 

21,881

 

26,563

 

Deferred tax assets

 

147,618

 

139,057

 

Option deposits

 

76,757

 

87,191

 

Other assets

 

73,455

 

76,511

 

Total Assets

 

$

1,581,683

 

$

1,748,381

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

Senior notes

 

628,843

 

628,802

 

Revolving facility

 

1,800

 

82,000

 

Other borrowings

 

15,138

 

19,073

 

Accounts payable, accrued liabilities, homebuyer deposits, and other liabilities

 

249,068

 

288,342

 

Total Liabilities

 

894,849

 

1,018,217

 

Total Equity

 

686,834

 

730,164

 

Total Liabilities & Equity

 

$

1,581,683

 

$

1,748,381

 

 

 

 

 

 

 

(1) Real estate - Allocated costs:

 

 

 

 

 

Homes under contract under construction

 

$

339,559

 

$

327,416

 

Finished lots / land under development

 

570,004

 

596,752

 

Unsold homes, completed and under construction

 

162,343

 

236,099

 

Model homes

 

55,548

 

61,172

 

Model home lease program

 

15,138

 

19,073

 

Land held for development

 

21,280

 

27,367

 

Total allocated costs:

 

$

1,163,872

 

$

1,267,879

 

 

8



 

Meritage Homes Corporation and Subsidiaries

Condensed Consolidated Statement of Cash Flows

(Unaudited)

(In thousands)

 

 

 

Three Months Ended March 31,

 

 

 

2008

 

2007

 

 

 

 

 

 

 

Net (loss)/earnings

 

$

(45,305

)

$

15,116

 

 

 

 

 

 

 

Real estate-related impairments

 

44,349

 

17,037

 

Increase in deferred taxes

 

(8,561

)

 

Equity in (losses)/earnings from JVs and distributions of JV earnings, net

 

16,796

 

1,807

 

Decrease in real estate and deposits, net

 

66,145

 

(32,443

)

Other operating activities

 

7,907

 

(84,187

)

Net cash provided by/(used in) operating activities

 

81,331

 

(82,670

)

 

 

 

 

 

 

Cash used in investing activities

 

(3,224

)

(12,208

)

 

 

 

 

 

 

Payment under Credit Facility

 

(80,200

)

(71,000

)

Proceeds from issuance of senior subordinated notes

 

 

150,000

 

 

 

 

 

 

 

Other financing activities

 

556

 

(1,913

)

Net cash (used in)/provided by financing activities

 

(79,644

)

77,087

 

 

 

 

 

 

 

Net decrease in cash

 

(1,537

)

(17,791

)

Beginning cash and cash equivalents

 

27,677

 

56,710

 

Ending cash and cash equivalents

 

$

26,140

 

$

38,919

 

 

9



 

Meritage Homes Corporation and Subsidiaries

Operating Data

(Dollars in thousands)

 

 

 

For the Three Months Ended March 31,

 

 

 

2008

 

2007

 

 

 

Homes

 

Value

 

Homes

 

Value

 

 

 

 

 

 

 

 

 

 

 

Homes Closed:

 

 

 

 

 

 

 

 

 

California

 

173

 

$

70,279

 

194

 

$

102,135

 

Nevada

 

73

 

19,875

 

45

 

15,277

 

West Region

 

246

 

90,154

 

239

 

117,412

 

 

 

 

 

 

 

 

 

 

 

Arizona

 

209

 

61,436

 

498

 

182,289

 

Texas

 

739

 

182,772

 

912

 

222,888

 

Colorado

 

38

 

12,784

 

33

 

13,663

 

Central Region

 

986

 

256,992

 

1,443

 

418,840

 

 

 

 

 

 

 

 

 

 

 

Florida

 

96

 

24,510

 

114

 

39,863

 

East Region

 

96

 

24,510

 

114

 

39,863

 

 

 

 

 

 

 

 

 

 

 

Total

 

1,328

 

$

371,656

 

1,796

 

$

576,115

 

 

 

 

 

 

 

 

 

 

 

Homes Ordered:

 

 

 

 

 

 

 

 

 

California

 

201

 

$

80,008

 

291

 

$

139,984

 

Nevada

 

85

 

21,544

 

84

 

30,866

 

West Region

 

286

 

101,552

 

375

 

170,850

 

 

 

 

 

 

 

 

 

 

 

Arizona

 

260

 

60,079

 

478

 

152,342

 

Texas

 

925

 

217,363

 

1,096

 

278,544

 

Colorado

 

48

 

17,268

 

48

 

18,520

 

Central Region

 

1,233

 

294,710

 

1,622

 

449,406

 

 

 

 

 

 

 

 

 

 

 

Florida

 

115

 

23,947

 

76

 

20,360

 

East Region

 

115

 

23,947

 

76

 

20,360

 

 

 

 

 

 

 

 

 

 

 

Total

 

1,634

 

$

420,209

 

2,073

 

$

640,616

 

 

 

 

 

 

 

 

 

 

 

Order Backlog:

 

 

 

 

 

 

 

 

 

California

 

192

 

$

91,261

 

323

 

$

167,665

 

Nevada

 

76

 

20,329

 

96

 

37,314

 

West Region

 

268

 

111,590

 

419

 

204,979

 

 

 

 

 

 

 

 

 

 

 

Arizona

 

441

 

119,201

 

885

 

317,359

 

Texas

 

1,658

 

418,942

 

2,393

 

637,819

 

Colorado

 

63

 

22,621

 

60

 

23,640

 

Central Region

 

2,162

 

560,764

 

3,338

 

978,818

 

 

 

 

 

 

 

 

 

 

 

Florida

 

164

 

46,184

 

205

 

80,765

 

East Region

 

164

 

46,184

 

205

 

80,765

 

 

 

 

 

 

 

 

 

 

 

Total

 

2,594

 

$

718,538

 

3,962

 

$

1,264,562

 

 

10



 

Meritage Homes Corporation and Subsidiaries

Operating Data (Unaudited)

 

 

 

1st Quarter 2008

 

1st Quarter 2007

 

 

 

Beg.

 

End

 

Beg.

 

End

 

Active Communities:

 

 

 

 

 

 

 

 

 

California

 

27

 

23

 

26

 

25

 

Nevada

 

11

 

10

 

5

 

9

 

West Region

 

38

 

33

 

31

 

34

 

 

 

 

 

 

 

 

 

 

 

Arizona

 

36

 

31

 

42

 

39

 

Texas

 

127

 

133

 

121

 

124

 

Colorado

 

6

 

6

 

6

 

7

 

Central Region

 

169

 

170

 

169

 

170

 

 

 

 

 

 

 

 

 

 

 

Florida

 

13

 

12

 

13

 

13

 

East Region

 

13

 

12

 

13

 

13

 

 

 

 

 

 

 

 

 

 

 

Total

 

220

 

215

 

213

 

217

 

 

About Meritage Homes Corporation

 

Meritage Homes Corporation (NYSE:MTH) builds primarily single-family homes across the southern and western United States under the Meritage, Monterey and Legacy brands. Meritage has active communities in Houston, Dallas/Ft. Worth, Austin, San Antonio, Phoenix/Scottsdale, Tucson, Las Vegas, the California East Bay/Central Valley and Inland Empire, Denver and Orlando.  The Company was ranked by Builder magazine in 2007 as the 12th largest homebuilder in the U.S. and ranked #803 on the 2008 Fortune 1000 list. For more information about the Company, visit www.meritagehomes.com.

 

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This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  Such statements include those regarding the Company’s preliminary results for closings, revenue, sales, backlog, potential charges related to real estate valuation adjustments and write-offs for the first quarter and full year 2008, expectations of less aggressive pricing, continued compliance with debt covenants and expectations for additional progress on the Company’s operating and financial objectives. Such statements are based upon preliminary financial and operating data which are subject to finalization by management and review by our independent public accountants, as well as the current beliefs and expectations of Company management, and current market conditions, which are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. The Company intends to report final results later this month, but makes no commitment, and disclaims any duty, to update or revise any forward-looking statements to reflect future events or changes in these expectations.

 

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Meritage’s business is subject to a number of risks and uncertainties, including: fluctuations in demand, competition, sales orders, cancellation rates and home prices in our markets; potential write-downs or write-offs of assets or deposits; interest rates and changes in the availability and pricing of residential mortgages; housing affordability;  success in locating and negotiating potential acquisitions; successful integration of acquired operations with existing operations; investments in land and development joint ventures; dependence on key personnel and the availability of satisfactory subcontractors; materials and labor costs; the ability to take certain actions because of restrictions contained in the indentures for the Company’s senior and senior subordinated notes and the agreement for the unsecured credit facility; the Company’s lack of geographic diversification; the cost and availability of insurance, including the unavailability of insurance for the presence of mold; potential exposure to natural disasters; the impact of construction defect and home warranty claims; demand for and acceptance of the Company’s homes; changes in the availability and pricing of real estate in the markets in which the Company operates; the ability to acquire additional land or options to acquire additional land on acceptable terms; the exposure to obligations under performance and surety bonds, performance guarantees and letters of credit; general economic slow downs; consumer confidence, which can be impacted by economic and other factors such as terrorism, war, or threats thereof and changes in energy prices or stock markets; inflation in the cost of materials used to construct homes; the Company’s level of indebtedness and the ability to raise additional capital when and if needed; legislative or other initiatives that seek to restrain growth or new housing construction or similar measures and other factors identified in documents filed by the Company with the Securities and Exchange Commission, including those set forth in our Form 10-K for the year ended December 31, 2007, under the caption “Risk Factors.” As a result of these and other factors, the Company’s stock and note prices may fluctuate dramatically.

 

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