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To: pater tenebrarum who wrote (79084)	12/10/1999 11:22:00 PM
From: Dwight E. Karlsen	Read Replies (1) \| Respond to of 86076

heinz, re "Dwight, in what way is leveraging the balance sheet going to help with Y2K?" I can explain, but to do that I have to give you the background info. We are in a cyclical "big purchase" business, and we sell directly to consumers. We are a production home builder, with ASPs about 15% above the average ASP in our area. We offer ~15 plans to choose from. We build attractive homes with lots of options to choose from for each house plan. Essentially, we build highly customized homes, with the overall look of the subdivision in our control. There are rules we set, for example the same plan can't be built next to another of the same plan, or directly across the street. We either buy all the lots in a subdivision from a developer, or we develop the subdivision ourself. We currently have four neighborhoods to choose from. Do you get the picture? We (the company I work for) have ongoing overhead, i.e. operating expenses. At our current level of operations, we have to build and sell in the area of 70 to 95 homes per year just to break even. The average of the last 3 years was about 2.5 times that though. If sales should drop off a cliff and stay that way for 4-6 months, it would cause a big hiccup in the cash flow. We would no doubt find ways to cut expenses, perhaps layoff employees, slash the ad budget, etc. But in any event, a company doesn't just roll over and die if it doesn't have to. So we have to keep up some advertising, keep the model homes open (not to mention keep key employees; ahem), etc. If our industry hits a 6 month air-pocket, we want to survive it, and to do that you need cash.