Late Tuesday, M/I Homes announced preliminary results for its fourth quarter and that on Jan. 15 its board approved a poison pill plan to be put before shareholders that would insulate the company from IRS change of ownership rules that could cost it tax assets.
New contracts for 4Q2008 were up 5% to 339; for fiscal 2008, new contracts were down 25% to 1,879. Homes delivered plunged 47% to 554 from 2007's 1,042. For the year ended Dec. 31, 2008, homes delivered were 2,061, down 37% from 3,288 in 2007. The company's cancellation rate was 31% in 4Q08, compared to 49% in 4Q07.
The sales value of homes in backlog at Dec. 31, 2008, was $139 million, with backlog units of 566 and an average sales price of $247,000. The backlog of homes at Dec. 31, 2007, had a sales value of $233 million, with backlog units of 748 and an average sales price of $312,000.
M/I Homes had 128 active communities at Dec. 31, 2008, compared to 146 at Dec. 31, 2007.
The poison pill provision, which would restrict certain transfers of the company's common shares in order to protect certain tax benefits, will be put to a vote at a special meeting of shareholders on March 13. M/I joins several other builders, including Standard Pacific Corp., Meritage Homes, and Hovnanian Enterprises, which have taken steps to protect tax assets. IRS Code section 382 states that if a company's ownership has changed--with 50% of its owners of 5% or more of its stock having turned over during a specified period of time--the company could lose some or all of its anticipated tax refunds related to claiming current losses against past years' gains.
Beazer Homes USA was recently caught in the IRS trap; it was forced to report an ownership change Dec. 31, 2007, causing the company to take a $396.8 million charge to deferred tax assets.
M/I also announced it has completed an amendment to its credit facility--reducing it to $150 million, adding requirements for collateral and loosening certain covenants, with the maturity date of October 2010 remaining. It said it had no borrowings against the facility at year end and that it had $33 million in cash on hand.
The company will report earnings for the quarter and the year on Feb. 5.
Lynn Norusis is a senior editor at BIG BUILDER magazine.