1340792--8/29/2008--Ashton_Woods_USA

related topics

{condition, economic, financial}

{debt, indebtedness, cash}

{cost, regulation, environmental}

{regulation, change, law}

{loan, real, estate}

{cost, operation, labor}

{loss, insurance, financial}

{customer, product, revenue}

{personnel, key, retain}

{financial, litigation, operation}

{stock, price, operating}

{acquisition, growth, future}

{gas, price, oil}

{tax, income, asset}

The occurrence of recent adverse developments in the housing and credit markets has adversely affected our operations resulting in our default under certain covenants of our senior credit facility and our not maintaining the tangible net worth level set forth in the indenture covering the $125 million aggregate principal amount of 9.5% Senior Subordinated Notes due 2015 (the Subordinated Notes ). The homebuilding industry is undergoing a significant downturn, the duration and ultimate severity of which are uncertain. Further deterioration in industry conditions or in broader economic conditions in the markets we serve could further decrease demand and pricing for new homes and have additional adverse affects on our operations and financial results. The reduction in availability of mortgage financing and the volatility and reduction in liquidity in the financial markets have adversely affected our business, and the duration and ultimate severity of the effects are uncertain. If the market value of our inventory drops significantly, we could be required to further write down the carrying value of our inventory to its estimated fair value, which would negatively impact our results of operations and financial condition. Our outstanding indebtedness could adversely affect our financial condition, limit our growth and make it more difficult for us to satisfy our debt obligations. Our credit facility and the Subordinated Notes impose significant restrictions and obligations on us. Restrictions on our ability to borrow could adversely affect our liquidity. We are currently in default under our senior credit facility and amounts outstanding under this facility could be accelerated and become immediately payable. Our ability to obtain additional borrowing and fund our operations in the future could be jeopardized if we do not obtain an amendment to our existing senior credit facility to address such defaults, if in the future we default under our senior credit facility or our Subordinated Notes or if we do not obtain a new credit facility to refinance our existing indebtedness. Further increases in our cancellation rate could have a significant negative impact on our operating results. Our operating results are variable, and as a result, our historical performance may not be a meaningful indicator of future results. An increase in mortgage interest rates may reduce consumer demand for our homes. As market conditions permit, we intend to continue to consider growth or expansion of our operations which could have a material adverse effect on our cash flows or profitability. Lack of greater geographic diversification could expose our business to increased risks based on economic conditions in our markets We could experience a reduction in home sales and revenues or reduced cash flows if we are unable to obtain reasonably priced financing to support our homebuilding and land development activities. Changes in government regulations applicable to homebuilders could restrict our business activities, increase our operating expenses and cause our revenues to decline We may incur additional operating expenses due to compliance requirements or fines, penalties and remediation costs pertaining to environmental regulations within our markets. We are subject to warranty claims arising in the ordinary course of our business that could adversely affect our results of operations Our operating expenses could increase if we are required to pay higher insurance premiums or incur substantial litigation costs for claims involving construction and product defect liability claims, including claims related to mold, which could adversely affect our net income/loss We are dependent on the services of certain key employees, and the loss of their services could hurt our business We are dependent on the continued availability and satisfactory performance of our subcontractors, which, if unavailable, could have a material adverse effect on our business Supply risks and shortages relating to labor and materials can harm our business by delaying construction and increasing costs

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1340792--8/29/2008--Ashton_Woods_USA_L.L.C.