The management of Columbus, Ohio-based M/I Homes late on Feb. 7 discussed its latest quarterly results in an earnings call with investors. As has been the case with most companies in the sector, the results contained a mix of good news and areas of concern.

Regarding cash flow, the company generated roughly $180 million during 2007 boosted by $87 million in land sales, and CFO Phil Creek reported an addition $50 million is expected next month in the form of a tax rebate on those sales.

Of concern, the company's land supply still remains a bit heavy, and executives spoke of their ongoing efforts to lighten the load, particularly in Florida. Though the company sold off all its holdings in West Palm Beach just before year's end, Florida remains its most cumbersome region with a nearly 15-year land supply.

One stated objective for the coming year is that cash generated from anticipated land sales, in addition to housing, has been earmarked to pay off the $115 million in debt outstanding on the company's revolver.

"We're working on land sales, as well as housing sales, in order to have that line down to zero by the end of the year," said Creek. As it stands, the company already has an impressive debt-to-cap ratio at 35%. By achieving this goal, that ratio levers down to roughly 25%.

The company, which is active in three operating regions including the Midwest, Mid-Atlantic, and Florida, reported 146 active communities at year's end. Of those, Creek disclosed that 7,000 lots have been impaired in 85 communities. The company said it anticipates managing 144 active communities in 2008, decreasing the number in Florida from 34 to 29 and opening "a couple" in the Chicago area, which is new territory for the builder.

New contracts for the quarter fell 8.7% from the same period in 2006 to 322, deliveries fell 24% to 1,042, and active communities fell from 163 at yearend 2006 to 146 at the end of 2007. Homes in backlog fell 50.2% to 748 at yearend 2007 compared to a year earlier. The value of the homes in backlog fell by 56.3% to $233 million as the average sales price fell 10.8% to $312,000.

It's no surprise that the company reported its gross margins also continue to be depressed, with the average running at roughly 15%. Considering the increased pricing pressure in Florida and the Midwest, it's likely that the margins may continue to erode.

Creek noted that the company is conducting one of its bi-annual meetings with lenders in March. He said that, of its covenants, the tangible net worth requirement is M/I's most restrictive. Among other issues, a renegotiation of that will likely be discussed during the meetings next month.