In anticipation of full financial results for the 2007 fourth quarter and year-end, Meritage Homes released a preliminary peek late Thursday.

For the quarter, the company anticipates reporting $616 million of revenue on 2,139 homes closed and $272 million in net sales on 1,048 homes ordered. This compares to revenues of $819 million on 2,601 homes closed and $355 million in net sales on 1,202 homes ordered in the fourth quarter of 2006. For the year, home building revenues were down 25%, and closings fell by 18% compared to 2006.

In addition, the company expects to report approximately $127 million of primarily non-cash pre-tax charges in the fourth quarter 2007 for real estate and joint venture valuation adjustments, and roughly $58 million of goodwill write-offs. While the Texas market offered some stability to Meritage in 2006, weakening conditions prevailed in 2007. Meritage has more than 50% of its operations in the state.

Still, it appears that the company's lot-option model for controlling land continues to offer some financial flexibility over other builders more heavily entrenched in land assets.

Throughout the year, the company has stated a primary focus on strengthening the balance sheet through debt and asset reduction. Making good on the promise, Meritage used positive cash flow from operations to pay down $152 million of its $800 million revolver to a balance of $82 million during the quarter.

"We were very pleased with the progress we made this quarter on our plans to strengthen our balance sheet and generate positive cash flow," said the company's chairman and CEO Steven J. Hilton. "We also made good progress on our objectives to reduce spec inventory, lot supply and overhead expenses, and were in compliance with all of our debt covenants at year-end."

Despite the company's confidence that it will continue to achieve progress on financial and operating goals in the coming year, on Thursday, Moody's Investors Service cut the credit ratings on Meritage to "B1" from "Ba3" and left the outlook at negative on concerns that the company will likely report an operating loss in the current fiscal year and leave creditors more exposed.

The ratings agency also dropped Hovnanian Enterprises Inc., M/I Homes Inc., and Standard Pacific Corp. further into non-investment grade, or "junk," status. A credit rating indicates the ability of a company to repay its debt.

The company plans to release full earnings on January 28 after the market closes, and has scheduled a conference call and webcast on January 29, 2007, at 8:00 a.m. Pacific Time.