Fitch projects cash flow generation of$400-500 million, excluding refunds, in fiscal 2009. Future ratings and Outlooks will be influenced by broad housing market trends aswell as company specific activity, such as land and development spending,general inventory levels, speculative inventory activity (including the impactof high cancellation rates on such activity), gross and net new order activity,debt levels and free cash flow trends and uses. DHI's ratings are based on the company's execution of its business model in thecurrent housing correction, steady capital structure, geographic and productline diversity, and the company's above average growth during the past housingexpansion. DHI had been an active consolidator in the homebuilding industry,which had kept debt levels a bit higher than its peers. But management alsoexhibited an ability to quickly and successfully integrate its manyacquisitions. During fiscal 2002 DHI completed its largest acquisition inabsolute size (Schuler Homes).
However, DHI made no acquisitions in fiscal 2003through the first quarter of fiscal 2009. It also appears that DHI may be lessacquisitive of companies in the future as it primarily focuses on harvesting theopportunities within its current and adjacent markets. DHI maintains a 5.7-year supply of lots (based on last 12 months deliveries),80.5% of which are owned and the balance controlled through options. (Theoptions share of total lots controlled is down sharply over the past three yearsas the company has written off substantial numbers of options.) The companymaintains a 4.6-year supply of owned lots. The ratings also manifest DHI's historic aggressive, yet controlled growthstrategy and its relatively heavy speculative building activity (which hadlessened late in the last up-cycle). The company has historically built asignificant number of its homes on a speculative basis (i.e begun constructionbefore an order was in hand) DHI successfully executed this strategy in thepast. Nevertheless, Fitch was more comfortable with the more modest 'spec'targets of 2004 and 2005.
At present 'spec' counts are somewhat high for DHI aswith certain other builders because of higher than normal cancellation rates andmarket conditions that favor 'spec' building. DHI ended the March 2009 quarter with $1.48 billion of cash on the balance sheetand $275 million of availability under its $1.65 billion unsecured revolvingcredit facility. As noted earlier, the company expects to receive a tax refundof $55 million in its fiscal 2009 fourth quarter. As of March 31, 2009, DHI wasin compliance with all the covenants under its revolving credit facility, whichmatures in December 2011. However, with its substantial cash balance andexpected future cash position, the company does not anticipate a need to borrowfrom the facility for the remainder of its term Therefore, DHI has chosen toterminate the facility. The company has provided notice to its lendersparticipating in the facility and expects the termination to be effective May11, 2009.
DHI expects to save over $3 million annually in non-use fees as aresult of terminating its revolving credit facility. Perhaps, more importantly,this strategy provides more flexibility for DHI in its efforts, as needed, toaccess meaningful capital. During the fiscal 2009 second quarter, DHI repaid the outstanding principal of$460 million of its 5% and 8% senior notes, which became due on Jan 15, 2009and Feb 1, 2009, respectively. Also during the quarter, the company repurchased$77.8 million principal amount of its outstanding notes with maturities beyond2009 for a total purchase price of $75.3 million, plus accrued interest.Subsequent to March 31, 2009, DHI repurchased a total of $25.2 million principalamount of its outstanding notes for a total purchase price of $23.7 million,plus accrued interest.
Fitch's rating definitions and the terms of use of such ratings are available onthe agency's public site, Published ratings, criteria andmethodologies are available from this site, at all times. Fitch's code ofconduct, confidentiality, conflicts of interest, affiliate firewall, complianceand other relevant policies and procedures are also available from the 'Code ofConduct' section of this site. Fitch RatingsRobert Curran, +1-212-908-0515 (New York)Robert Rulla, +1-312-606-2311 (Chicago)Cindy Stoller, +1-212-908-0526(Media Relations, New York)Copyright Business Wire 2009. Emerging Leaderin $118 Billion Carbon Equity Market Enters into Letter of Intentwith GEOSUMMIT, LLCfor Up to 40 Percent InterestZEPHYR COVE, Nev.--(Business Wire)--Equinox Carbon Equities ( http://) announced thatGEOSUMMIT, LLC has signed a Letter of Intent to purchase up to 40 percentinterest in the company at the price of $20 million dollars. Equinox authorized200,000 shares of special convertible preferred stock to be designated as $100each. "Equinox is positioned to lead environmental commodities efforts through a soundinvestment strategy that utilizes new technology, encourages conservation, anddemands financial responsibility," said GEOSUMMIT signator, Lou Khem.