Meritage Homes Reports Profitable Second Quarter 2011 and Increased Sales Orders
SCOTTSDALE, Ariz., July 29, 2011 (GLOBE NEWSWIRE) -- Meritage Homes Corporation (NYSE:MTH), a leading U.S. homebuilder, today announced second quarter results for the period ended June 30, 2011.
Summary Operating Results (unaudited)
(Dollars in thousands, except per share amounts)
Three Months Ended June 30, Six Months Ended June 30,
2011 2010 %Chg 2011 2010 %Chg
Homes closed (units) 856 1,207 -29% 1,534 2,015 -24%
Home closing revenue $220,131 $291,405 -24% $397,620 $491,987 -19%
Sales orders (units) 910 900 1% 1,750 1,964 -11%
Sales order value $236,014 $228,627 3% $456,626 $497,095 -8%
Ending backlog (units) 994 1,044 -5%
Ending backlog value $260,822 $292,643 -11%
Net income/(loss) – incl. impairments $562 $4,166 -87% $ (6,097) $6,826 n/a
Adjusted pre-tax income/(loss)* -- excl. impairments and loss on early extinguishment of debt $1,337 $8,149 -84% $ (4,443) $11,472 n/a
Diluted EPS (including impairments) $0.02 $0.13 -85% $ (0.19) $0.21 n/a
* See non-GAAP reconciliations of net income/(loss) to adjusted pre-tax income/(loss) on "Operating Results" statement.
ADDITIONAL SECOND QUARTER SELECTED RESULTS:
Home closing gross margin of 18.0% in 2011 compared to 18.2% in 2010 and 17.1% in the first quarter of 2011; adjusted gross margin excluding impairments was 18.3% in both years Highest sales orders since the first quarter of 2010, when the federal homebuyer tax credit was still in place Average sales prices increased 7% on closings over 2010, and 2% on orders over 2010 G&A expenses decreased 10% to $15M from $17M in 2010 Total cash and securities of $377M at June 30, 2011 Net debt to capital ratio of 31.5% at June 30, 2011
MANAGEMENT COMMENTS
"We were pleased to achieve a small profit in the second quarter despite lower closings and revenue this year compared to last year, with nearly identical margins," said Steven J. Hilton, chairman and chief executive officer of Meritage Homes. "Successful execution of our strategies -- to acquire well-located communities, design and build more energy efficient homes, and offer unmatched value to our customers -- have helped offset the impact of weak market conditions.
"Year over year sales comparisons turned positive in May and June as anticipated, ending the difficult comparisons caused by the federal home buyer tax credit that expired in April last year. We believe this trend will continue and our second half results in 2011 should compare favorably to last year."
Mr. Hilton continued, "Our goal is to be profitable in 2011 for the second consecutive year coming out of this recession, and we believe that we are well positioned to accomplish that goal, based on the performance we're achieving in our newer communities, combined with diligent cost control. However, the market is still challenging and we have to work hard for every sale. I commend our people for achieving the results we reported this quarter and continually striving for further improvements."
NET EARNINGS
Meritage reported net income of $562,000 or $0.02 per diluted share for the second quarter of 2011, compared to $4.2 million or $0.13 per diluted share for the second quarter of 2010, which included a $3.5 million loss on early extinguishment of debt. Total asset impairment charges were $590,000 and $304,000 in the second quarters of 2011 and 2010, respectively. Excluding those items, adjusted pre-tax income for the second quarter was $1.3 million in 2011 compared to $8.1 million in 2010.
Homebuilding gross margin was 18.0% in the second quarter of 2011, compared to 18.2% a year earlier. Second quarter adjusted gross margin excluding impairments was 18.3% in both the 2011 and 2010 quarters.
Home closing revenue was 24% lower than the prior year, resulting from a 29% decline in closings, partially offset by a 7% increase in average closing prices. The decline in closings was consistent with the 30% lower orders in beginning backlog compared to the prior year, when the federal home buyer tax credit was in place through April 2010. Meritage closed 91% of homes in beginning backlog during the second quarter of 2011, compared to 89% in the second quarter of 2010.
General and administrative expenses decreased 10% to $15.0 million in the second quarter of 2011 from $16.7 million in the prior year. Commissions and selling expenses decreased 13% year over year. Total SG&A expenses represented 15.4% of total revenue in the second quarter of 2011, compared to 13.2% in the prior year. The increase was primarily due to additional marketing programs and lower revenue in 2011.
SALES ORDERS
Net sales orders increased 1% over the prior year and 8% sequentially over the first quarter of 2011. Year over year comparisons were difficult for the first month this quarter, considering the pull-forward of demand into April of 2010 to capture the federal home buyer tax credit. May and June comparisons were easier. Second quarter orders totaled 910 in 2011, compared to 900 in 2010 and 840 in the first quarter this year. Cancellations in the second quarter 2011 were at their lowest rate in two years – 15% of gross orders, compared to 20% in 2010.
Average sales per community improved to 6.4 in the second quarter of 2011, over 6.1 in the prior year and 5.8 in the first quarter this year. The strongest gains were in Colorado and Florida, which achieved absorption rates of 8.2 and 10.7 sales per community in the second quarter of 2011, respectively.
The company's average sales price on orders for the second quarter was 2% higher in 2011 than 2010, yielding a 3% increase in the total value of orders when combined with the 1% increase in sales volume.
Total actively selling communities increased slightly during the quarter, ending at 145 on June 30, 2011 compared to 141 at the beginning of the quarter, as Meritage opened 28 new communities while selling out of 24 communities. At June 30, 2010, Meritage had 148 actively selling communities.
Backlog increased 6% during the second quarter to 994 homes with a total value of $261 million at June 30, 2011, compared to $245 million at March 31, 2011 and $293 million in the prior year on June 30, 2010.
YEAR TO DATE RESULTS
Meritage reported a net loss of $6.1 million or ($0.19) per diluted share for the first six months of 2011, compared to net income of $6.8 million or $0.21 per diluted share for the first half of 2010, due to the loss reported in the first quarter of 2011. Home closings and closing revenue declined 24% and 19% respectively, compared to the first six months of 2010. Gross margins were 17.6% in 2011 compared to 18.5% in 2010, or 17.9% compared to 18.6% excluding impairment charges.
Year-to-date orders were 11% lower in 2011 than 2010, with total order value 8% lower year over year, after a 3% increase in average sales prices for the first half of 2011 over 2010.
BALANCE SHEET
Meritage ended the quarter with $377 million in cash and cash equivalents, restricted cash and securities. Net debt to total capital ratio was 31.5% at June 30, 2011, compared to of 24.8% at June 30, 2010.
After contracting for approximately 1,200 lots during the second quarter of 2011, Meritage controls approximately 15,800 total lots, equivalent to a 4.9 year supply based on trailing twelve months closings.
CONFERENCE CALL
Management will host a conference call to discuss these results on Friday, July 29, 2011 at 10:00 a.m. Eastern Time (7:00 a.m. Pacific Time.) The call will be webcast by Business-to-Investor, Inc. (B2i), with an accompanying slideshow on the "Investor Relations" page of the Company's web site at http://investors.meritagehomes.com. For telephone participants, the dial-in number is 877-317-6789 with a passcode of "Meritage". Participants are encouraged to dial in five minutes before the call begins. A replay of the call will be available after 12:00 p.m. ET, July 29, 2011 on the website noted above, or by dialing 877-344-7529, and referencing Encore passcode 451964. For more information, visit meritagehomes.com.
Meritage Homes Corporation and Subsidiaries
Operating Results
(Unaudited)
(In thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
2011 2010 2011 2010
Operating results
Home closing revenue $220,131 $291,405 $397,620 $491,987
Land closing revenue -- -- 100 1,222
Total closing revenue 220,131 291,405 397,720 493,209
Home closing gross profit 39,587 52,896 69,967 90,894
Land closing gross profit -- -- 9 258
Total closing gross profit 39,587 52,896 69,976 91,152
Commissions and other sales costs (18,853) (21,606) (34,168) (38,828)
General and administrative expenses (14,990) (16,729) (30,116) (31,422)
Interest expense (7,496) (8,553) (15,519) (16,848)
Loss on extinguishment of debt -- (3,454) -- (3,454)
Other income, net 2,499 1,837 4,130 6,572
Income/(loss) before income taxes 747 4,391 (5,697) 7,172
Provision for income taxes (185) (225) (400) (346)
Net income/(loss) $562 $4,166 $ (6,097) $6,826
Income/(loss) per share
Basic:
Income/(loss) per share $0.02 $0.13 $ (0.19) $0.21
Weighted average shares outstanding 32,395 32,077 32,328 32,009
Diluted:
Income/(loss) per share $0.02 $0.13 $ (0.19) $0.21
Weighted average shares outstanding 32,638 32,287 32,328 32,258
Non-GAAP Reconciliations:
Home closing gross profit $39,587 $52,896 $69,967 $90,894
Add: Real estate-related impairments 590 304 1,254 846
Adjusted home closing gross profit $40,177 $53,200 $71,221 $91,740
Income/(loss) before income taxes $747 $4,391 $ (5,697) $7,172
Add: Real estate-related and joint venture (JV) impairments 590 304 1,254 846
Loss on early extinguishment of debt -- 3,454 -- 3,454
Adjusted pre-tax income/(loss) $1,337 $8,149 $ (4,443) $11,472
Meritage Homes Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands)
(unaudited)
June 30, 2011 December 31, 2010
Assets:
Cash and cash equivalents $167,568 $103,953
Investments and securities 199,215 299,345
Restricted cash 10,270 9,344
Other receivables 16,080 20,835
Real estate (1) 776,228 738,928
Investments in unconsolidated entities 10,939 10,987
Deposits on real estate under option or contract 11,810 10,359
Other assets 33,659 31,187
Total assets $1,225,769 $1,224,938
Liabilities and Equity:
Accounts payable, accrued liabilities,
Home sale deposits and other
liabilities $120,877 $119,163
Senior notes 480,220 479,905
Senior subordinated notes 125,875 125,875
Total liabilities 726,972 724,943
Total stockholders' equity 498,797 499,995
Total liabilities and equity $1,225,769 $1,224,938
(1) Real estate – Allocated costs:
Homes under contract under construction $109,836 $96,844
Unsold homes, completed and under construction 82,790 86,869
Model homes 43,999 36,966
Finished home sites and home sites under development 474,007 454,718
Land held for development or sale 65,596 63,531
Total allocated costs $776,228 $738,928
Supplemental Information and Non-GAAP Financial Disclosures (In thousands – unaudited):
Three Months Ended June 30, Six Months Ended June 30,
2011 2010 2011 2010
Interest amortized to cost of sales and interest expense $9,952 $11,983 $20,171 $23,496
Depreciation and amortization 1,817 2,081 3,573 4,028
June 30, 2011 December 31, 2010 June 30, 2010
Notes payable and other borrowings $606,095 $605,780 $605,466
Less: cash and cash equivalents, restricted cash, and investments and securities (377,053) (412,642) (442,101)
Net debt 229,042 1,931,388 163,365
Stockholders' equity 498,797 4,999,956 496,256
Total capital $727,839 $693,133 $659,621
Net debt-to-capital 31.5% 27.9% 24.8%
Meritage Homes Corporation and Subsidiaries
Condensed Consolidated Statement of Cash Flows
(In thousands)
(unaudited)
Three Months Ended June 30, Six Months Ended June 30,
2011 2010 2011 2010
Operating results
Net income/(loss) $562 $4,166 $ (6,097) $6,826
Loss on early extinguishment of debt -- 3,454 -- 3,454
Real-estate related impairments 590 304 1,254 846
Equity in earnings from JVs and distributions of JV earnings - net 240 230 520 767
Decrease/(increase) in real estate and deposits, net (20,432) 8,362 (39,693) (42,620)
Other operating activities 10,868 (1,608) 11,281 89,572
Net cash (used in)/ provided by operating activities (8,172) 14,908 (32,735) 58,845
Cash provided by/(used in) investing activities 71,952 (95,715) 94,552 (147,638)
Proceeds from issuance of new debt -- 195,134 -- 195,134
Debt issuance costs -- (2,969) -- (2,969)
Repayments of senior notes -- (197,543) -- (197,543)
Proceeds from issuance of common stock, net 280 174 1,798 1,509
Net cash provided by /(used in) financing activities 280 (5,204) 1,798 (3,869)
Net increase/(decrease) in cash 64,060 (86,011) 63,615 (92,662)
Beginning cash and cash equivalents 103,508 242,680 103,953 249,331
Ending cash and cash equivalents (1) $167,568 $156,669 $167,568 $156,669
(1) Ending cash and cash equivalents as of June 30, 2011 and June 30, 2010 excludes investments and securities and restricted cash totaling $209.5 million and $285.4 million, respectively.
Meritage Homes Corporation and Subsidiaries
Operating Data
(Dollars in thousands)
(unaudited)
For the Three Months Ended June 30,
2011 2010
Homes Value Homes Value
Homes Closed:
California 83 $28,051 106 $33,610
Nevada 15 3,159 26 4,905
West Region 98 31,210 132 38,515
Arizona 154 34,949 213 43,808
Texas 475 115,605 725 173,570
Colorado 58 18,628 41 11,492
Central Region 687 169,182 979 228,870
Florida 71 19,739 96 24,020
East Region 71 19,739 96 24,020
Total 856 $220,131 1,207 $291,405
Homes Ordered:
California 94 $30,564 111 $37,413
Nevada 22 4,868 23 4,627
West Region 116 35,432 134 42,040
Arizona 161 41,566 171 39,521
Texas 445 104,447 455 108,090
Colorado 70 22,448 38 11,757
Central Region 676 168,461 664 159,368
Florida 118 32,121 102 27,219
East Region 118 32,121 102 27,219
Total 910 $236,014 900 $228,627
Meritage Homes Corporation and Subsidiaries
Operating Data
(Dollars in thousands)
(unaudited)
For the Six Months Ended June 30,
2011 2010
Homes Value Homes Value
Homes Closed:
California 145 $49,222 211 $70,695
Nevada 30 6,138 48 9,224
West Region 175 55,360 259 79,919
Arizona 281 66,916 381 77,760
Texas 829 200,415 1,153 274,929
Colorado 107 34,257 71 20,113
Central Region 1,217 301,588 1,605 372,802
Florida 142 40,672 151 39,266
East Region 142 40,672 151 39,266
Total 1,534 $397,620 2,015 $491,987
Homes Ordered:
California 172 $57,713 226 $78,542
Nevada 41 8,890 48 9,372
West Region 213 66,603 274 87,914
Arizona 310 75,908 404 87,529
Texas 891 214,128 1,028 247,998
Colorado 141 44,630 79 24,300
Central Region 1,342 334,666 1,511 359,827
Florida 195 55,357 179 49,354
East Region 195 55,357 179 49,354
Total 1,750 $456,626 1,964 $497,095
Order Backlog:
California 72 $23,786 104 $42,169
Nevada 23 5,121 14 2,819
West Region 95 28,907 118 44,988
Arizona 154 40,972 170 41,879
Texas 525 125,320 590 154,633
Colorado 86 27,337 47 15,643
Central Region 765 193,629 807 212,155
Florida 134 38,286 119 35,500
East Region 134 38,286 119 35,500
Total 994 $260,822 1,044 $292,643
Meritage Homes Corporation and Subsidiaries
Operating Data
(unaudited)
Second Quarter 2011Second Quarter 2010
Beg. End Beg. End
Active Communities:
California 14 18 9 12
Nevada 4 3 5 5
West Region 18 21 14 17
Arizona 32 35 32 33
Texas 73 68 83 78
Colorado 9 8 7 7
Central Region 114 111 122 118
Florida 9 13 13 13
East Region 9 13 13 13
Total 141 145 149 148
First Half 2011 First Half 2010
Beg. End Beg. End
Active Communities:
California 14 18 7 12
Nevada 4 3 6 5
West Region 18 21 13 17
Arizona 32 35 26 33
Texas 82 68 98 78
Colorado 9 8 6 7
Central Region 123 111 130 118
Florida 10 13 10 13
East Region 10 13 10 13
Total 151 145 153 148
ABOUT MERITAGE HOMES CORPORATION
Meritage Homes is the 9th-largest homebuilder in the United States based on homes closed. Meritage builds a variety of homes across the Southern and Western states to appeal to a wide range of buyers, including first-time, move-up, luxury and active adults. As of June 30, 2011, the company had 145 actively selling communities in 12 metropolitan areas, including Houston, Dallas/Ft. Worth, Austin, San Antonio, Phoenix/Scottsdale, Tucson, Las Vegas, Denver, Orlando and the East Bay/Central Valley and Southern California. Meritage recently announced its entry into the Raleigh-Durham market.
In 2010, Meritage celebrated its 25th anniversary and launched a new Simply Smart Series™ of homes and a 99-day guaranteed completion program in certain communities, and is the first large national homebuilder to be 100 percent ENERGY STAR® qualified in every home started since January 1, 2010. Meritage has designed and built nearly 70,000 homes in its 25-year history, and has a reputation for its distinctive style, quality construction, and positive customer experience.
Meritage Homes is listed on the NYSE under the symbol MTH.
For more information about the Company, visit http://investors.meritagehomes.com
Click here to join our email alert list: http://www.b2i.us/irpass.asp?BzID=1474&to=ea&s=0
The Meritage Homes Corporation logo is available at https://www.globenewswire.com/newsroom/prs/?pkgid=2624
FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include management's expectation that second half sales in 2011 should compare favorably to last year, and that the Company is well positioned to achieve its goal of being profitable in 2011.
Such statements are based upon preliminary financial and operating data which are subject to finalization by management and review by Meritage's independent registered public accounting firm, as well as the current beliefs and expectations of Company management, and current market conditions, which are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. The Company makes no commitment, and disclaims any duty, to update or revise any forward-looking statements to reflect future events or changes in these expectations.
Meritage's business is subject to a number of risks and uncertainties. As a result of those risks and uncertainties, the Company's stock and note prices may fluctuate dramatically. The risks and uncertainties include but are not limited to the following: weakness in the homebuilding market resulting from the current economic downturn; interest rates and changes in the availability and pricing of residential mortgages; adverse changes in tax laws that benefit our homebuyers; the ability of our potential buyers to sell their existing homes; cancellation rates and home prices in our markets; inflation in the cost of materials used to construct homes; the adverse effect of slower sales absorption rates; potential write-downs or write-offs of assets, including pre-acquisition costs and deposits; our potential exposure to natural disasters; the liquidity of our joint ventures and the ability of our joint venture partners to meet their obligations to us and the joint venture; competition; the success of our strategies in the current homebuilding market and economic environment; the adverse impacts of cancellations resulting from small deposits relating to our sales contracts; construction defect and home warranty claims; our success in prevailing on contested tax positions; the impact of deferred tax valuation allowances and our ability to preserve our operating loss carryforwards; our ability to obtain performance bonds in connection with our development work; the loss of key personnel; our failure to comply with laws and regulations; the availability and cost of materials and labor; our lack of geographic diversification; inflation in the cost of materials used to construct homes; fluctuations in quarterly operating results; the Company's financial leverage and level of indebtedness; our ability to take certain actions because of restrictions contained in the indentures for the Company's senior and senior subordinated notes and our ability to raise additional capital when and if needed; our credit ratings; successful integration of future acquisitions; government regulations and legislative or other initiatives that seek to restrain growth or new housing construction or similar measures; acts of war; the replication of our "Green" technologies by our competitors; and other factors identified in documents filed by the Company with the Securities and Exchange Commission, including those set forth in our Form 10-K for the year ended December 31, 2010 under the caption "Risk Factors," and updated in our most recent Quarterly Report on Form 10-Q, all of which can be found on our website.
CONTACT: Brent Anderson
(972) 580-6360 (office)
Brent.Anderson@meritagehomes.com
Nancy Newton
(602) 417-0684 (office)
(602) 697-7785 (mobile)
NNewton@c-k.com
Image: Meritage Homes Corporation Logo
Source: Meritage Homes CorporationReleased July 29, 2011