Exhibit
99.1
|
Contacts:
|
|
Arizona:
|
|
Texas:
|
|
New
York:
|
|
|
|
Larry Seay
|
|
Jane Hays
|
|
Chris Tofalli
|
|
|
|
CFO & Vice
President-Finance
|
|
Vice President-Corp.
Develop.
|
|
Broadgate Consultants
|
|
|
|
(480) 609-3330
|
|
(972) 543-8123
|
|
(212) 232-2222
|
Meritage Homes Reports Record Third Quarter 2004
Full Year Earnings
Guidance raised by $0.50
to $9.05 - $9.30 per
diluted share
All-Time Quarterly Records:
• Diluted Earnings Per
Share reached $2.61, up 40% over 3rd Qtr 2003
• Net Earnings advanced
38% above 3rd Qtr 2003 to $35.6 Million
• Order Backlog
Increased 61% over 3rd Qtr 2003 to $1.3 Billion
Third Quarter Records:
• New Home Orders rose
55% above 3rd Qtr 2003 to $643 Million
• Home Closing Revenue
22% ahead of 3rd Qtr 2003 to $463 Million
Dallas
and Scottsdale, Arizona (October 25, 2004) – Meritage
Homes Corporation (NYSE: MTH) today announced net earnings of $35.6 million, or
$2.61 per diluted share, for the third quarter 2004, representing
year-over-year increases of 38% and 40%, respectively. Net earnings for the first nine months of
2004 were $87.2 million, or $6.28 per diluted share, for year-over-year
increases of 39% and 37%, respectively.
Summary Operating Results ($ In Thousands, Except Per Share
Data)
(Unaudited)
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
|
|
|
2004
|
|
2003
|
|
%
Increase
|
|
2004
|
|
2003
|
|
%
Increase
|
|
|
Home closing revenue
|
|
$
|
462,711
|
|
$
|
380,752
|
|
22
|
%
|
$
|
1,317,488
|
|
$
|
989,895
|
|
33
|
%
|
|
Net earnings
|
|
$
|
35,600
|
|
$
|
25,755
|
|
38
|
%
|
$
|
87,156
|
|
$
|
62,840
|
|
39
|
%
|
|
Diluted EPS
|
|
$
|
2.61
|
|
$
|
1.86
|
|
40
|
%
|
$
|
6.28
|
|
$
|
4.57
|
|
37
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
“We are pleased to
announce that for the third quarter 2004, we achieved all-time quarterly
records for both net earnings and diluted earnings per share,” said John R.
Landon, Meritage Co-Chairman and CEO. “Included
in our third quarter 2004 net earnings is a $4.4 million gain from land sales,
net of income taxes, or $0.32 per diluted share. Even without the profit from land sales,
diluted earnings per share would still have reached an all-time quarterly
record of $2.29, 23% higher than last year, and above our guidance of $2.10 -
$2.20 issued in our second quarter earnings release. As we anticipated, our pre-tax margin
excluding land sales for the third quarter was 10.9%, up 19 basis points over
last year’s third quarter and a significant increase over the 9.0% during the
second quarter of this year.”
“Our home closing gross
margin increased by 47 basis points to 20.6% in the third quarter of 2004, as
compared to the same quarter last year,” said Steven J. Hilton, Meritage
Co-Chairman and CEO. “For the first nine
months of 2004, our home closing gross margin was 19.6% as compared to 20.1%
during the same period a year ago.
However, due to our ability to leverage SG&A expenses and our land
sales, our year-to-date pre-tax margin advanced 45 basis points to 10.5% this
year from 10.1% last year. For the first
nine months of 2004, excluding land sales, our pre-tax margin was relatively
stable as compared to the same period a year ago at 10.1%. We anticipate that our full-year 2004 pre-tax
margin, excluding land sales, will be in line with or slightly better than last
year’s pre-tax margin of 10.3%.”
Meritage received 2,203
orders for new homes valued at $643 million during the third quarter 2004, a
55% increase over $416 million in the year-ago quarter. “Orders in our Arizona and California
divisions were particularly strong, having increased 90% and 79%, respectively,”
added Mr. Landon. For the first nine
months of 2004, the Company generated 6,952 new home orders with a dollar value
of $1.9 billion, 50% higher than the same period last year.
Meritage closed 1,671
homes valued at $463 million during the third quarter 2004, a 22% increase over
the $381 million in closings for the third quarter 2003. “Closings in Arizona and California were very
robust, generating increases of 72% and 78%, respectively,” added Mr.
Landon. During the first nine months of
this year, the Company closed 4,860 homes with a dollar value of $1.3 billion,
33% above the $990 million recorded for the first nine months of 2003.
“As a result of completing another excellent
quarter, we anticipate that 2004 will mark our 17th consecutive year
of record revenue and earnings,” said Mr. Hilton. “With our backlog at September 30, 2004 of
4,747 homes valued at $1.3 billion, a 61% increase in dollar value from the
same time last year, we anticipate closing approximately 7,100 homes and
generating approximately $1.9 billion in revenue for the full-year 2004,
increases of 26% and 29%, respectively, over 2003. For 2005, we expect to close roughly 8,700
homes valued at approximately $2.3 billion, increases of 23% and 21%,
respectively, over our 2004 guidance.
Due to the strength of demand for our homes, our solid margins and the
land gain in the third quarter, we anticipate full-year 2004 diluted earnings
per share to approximate $9.05 to $9.30, a $0.50 increase from our most recent
guidance and 32% to 36% higher than 2003.”
2
Meritage remains
successful in meeting its goal of maintaining a four to five year supply of
lots with approximately 85% controlled through option contracts. The Company had approximately 38,000 lots
under control at September 30, 2004, an increase of 32% from 28,798 at the same
time last year, and of which approximately 89% are controlled through options
as compared to 85% at the end of the third quarter 2003. The number of actively selling communities at
September 30, 2004 increased 9% from September 30, 2003 to 135, while orders per
community increased 28% during the first nine months of 2004 as compared to the
same period last year.
Meritage’s balance sheet
remains moderately leveraged with a net debt to capital ratio of 49% at
September 30, 2004, a slight reduction as compared to 50% at the same point
last year. The Company generated EBITDA
of $67.8 million in the third quarter and $170.4 million during the first nine
months of this year, increases of 40% and 41%, respectively, over the same
periods in 2003. Meritage’s interest
coverage and debt to EBITDA ratios were approximately 6.7 times and 2.0 times,
respectively, for the four quarters ending September 30, 2004, as compared to
7.0 times and 2.3 times for the four quarters ending September 30, 2003. Meritage generated after-tax returns on
average assets and equity of 11.4% and 27.7%, respectively, for the four
quarters ended September 30, 2004, as compared to 11.0% and 25.8% for the same
period ended September 30, 2003. Please
refer to the non-GAAP calculations included with the financial statements in
this press release for information about EBITDA and the other measures and
ratios used in this press release. At
the end of the third quarter 2004, the Company had approximately $55 million
outstanding under its revolving credit facility and $44 million in letters of
credit and guarantees, leaving an unused commitment of $301 million, of which
approximately $196 million was available to borrow.
During the third
quarter, Meritage completed its second common stock repurchase program in which
the Company repurchased 1,214,300 shares of its common stock. The Company’s Board of Directors approved a
third program by authorizing the buyback of up to $50 million of additional
shares. The Company plans to purchase
shares on the open market or in privately negotiated transactions at times and
in amounts deemed appropriate by management, subject to applicable security
laws.
Meritage will hold its
third quarter earnings call on Tuesday, October 26, 2004 at 11:00 a.m. EST
(10:00 a.m. CT, 9:00 a.m. MT, 8:00 a.m. PT).
To participate in the call, please dial in at least five minutes before
the start time. The toll-free domestic
dial-in number is 1-800-291-3314; the international toll-free number is
1-706-634-0844. A replay will be available
from 1:00 p.m. EST Tuesday, October 26, 2004 through midnight EST Tuesday,
November 2, 2004, by dialing 1-800-642-1687 (domestic) and 1-706-645-9291
(international). Confirmation code for
the replay is 1340253. The call and
slide show presentation can be accessed on the Company’s website at
www.meritagehomes.com and through CCBN for two weeks at www.fulldisclosure.com.
3
About
Meritage Homes Corporation
Meritage Homes
Corporation is one of the nation’s largest single-family homebuilders, and is
traded on the NYSE, symbol: MTH. Fortune
recently named Meritage to its “Fortune 1000” list of America’s largest
corporations and included the Company as a “top pick from 50 great investors”
in its Investor’s Guide 2004.
Additionally, Meritage is ranked as one of Fortune’s Fastest Growing
Companies in America, its fourth appearance on this list in six years. The Company is included in the S&P
SmallCap 600 Index and appears on Forbes’ “Platinum 400” list, and is part of
an elite group of only five companies on this list that have exceeded 50% in
five-year annualized total return. In
its 18-year history the Company has built approximately 32,000 homes, ranging
from entry-level to semi-custom luxury.
Meritage operates in fast-growing states of the Southern and Western
U.S., including five of the top ten single-family housing markets in the
country. For more information about the
Company, please visit the Meritage website, located at www.meritagehomes.com.
Meritage Homes Corporation and Subsidiaries
Operating Results
(Unaudited - in thousands, except per share data)
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
|
|
|
2004
|
|
2003
|
|
2004
|
|
2003
|
|
|
Operating Results
|
|
|
|
|
|
|
|
|
|
|
Home closing revenue
|
|
$
|
462,711
|
|
$
|
380,752
|
|
$
|
1,317,488
|
|
$
|
989,895
|
|
|
Land closing revenue
|
|
20,037
|
|
—
|
|
22,697
|
|
8,100
|
|
|
|
|
482,748
|
|
380,752
|
|
1,340,185
|
|
997,995
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home closing gross profit
|
|
95,409
|
|
76,739
|
|
257,639
|
|
198,457
|
|
|
Land closing gross profit
|
|
7,160
|
|
—
|
|
8,089
|
|
1,241
|
|
|
|
|
102,569
|
|
76,739
|
|
265,728
|
|
199,698
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commissions and other sales costs
|
|
(28,601
|
)
|
(23,461
|
)
|
(80,790
|
)
|
(64,534
|
)
|
|
General and administrative expenses
|
|
(19,822
|
)
|
(14,403
|
)
|
(52,672
|
)
|
(38,691
|
)
|
|
Other income, net
|
|
3,366
|
|
1,839
|
|
8,535
|
|
3,911
|
|
|
Earnings before income taxes
|
|
57,512
|
|
40,714
|
|
140,801
|
|
100,384
|
|
|
Income taxes
|
|
(21,912
|
)
|
(14,959
|
)
|
(53,645
|
)
|
(37,544
|
)
|
|
Net earnings
|
|
$
|
35,600
|
|
$
|
25,755
|
|
$
|
87,156
|
|
$
|
62,840
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
Basic:
|
|
|
|
|
|
|
|
|
|
|
Earnings per share
|
|
$
|
2.76
|
|
$
|
1.98
|
|
$
|
6.66
|
|
$
|
4.83
|
|
|
Weighted average shares outstanding
|
|
12,894
|
|
13,033
|
|
13,091
|
|
13,020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted:
|
|
|
|
|
|
|
|
|
|
|
Earnings per share
|
|
$
|
2.61
|
|
$
|
1.86
|
|
$
|
6.28
|
|
$
|
4.57
|
|
|
Weighted average shares outstanding
|
|
13,644
|
|
13,837
|
|
13,870
|
|
13,756
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
Meritage Homes Corporation and Subsidiaries
Balance Sheets
(Unaudited - in thousands)
|
|
|
September 30, 2004
|
|
December 31, 2003
|
|
|
Total assets
|
|
$
|
1,202,470
|
|
$
|
954,539
|
|
|
Real estate
|
|
854,317
|
|
678,011
|
|
|
Cash and cash equivalents
|
|
19,340
|
|
4,799
|
|
|
Consolidated real estate not owned
|
|
24,038
|
|
18,572
|
|
|
Total liabilities and minority interest
|
|
734,149
|
|
542,644
|
|
|
Notes and loans payable
|
|
472,668
|
|
351,491
|
|
|
Stockholders’ equity
|
|
468,321
|
|
411,895
|
|
|
|
|
|
|
|
|
|
Non-GAAP Calculations
(Unaudited - $ In Thousands)
|
|
|
Quarter Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
Trailing Four Quarters
Ended September 30,
|
|
|
|
|
2004
|
|
2003
|
|
2004
|
|
2003
|
|
2004
|
|
2003
|
|
|
EBITDA Reconciliation:(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
35,600
|
|
$
|
25,755
|
|
$
|
87,156
|
|
$
|
62,840
|
|
$
|
118,722
|
|
$
|
86,836
|
|
|
Income taxes
|
|
21,912
|
|
14,959
|
|
53,645
|
|
37,544
|
|
73,155
|
|
51,497
|
|
|
Interest
|
|
6,958
|
|
5,653
|
|
20,497
|
|
14,513
|
|
28,272
|
|
19,855
|
|
|
Depreciation and amortization
|
|
3,356
|
|
1,985
|
|
9,120
|
|
5,731
|
|
11,924
|
|
7,780
|
|
|
EBITDA
|
|
$
|
67,826
|
|
$
|
48,352
|
|
$
|
170,418
|
|
$
|
120,628
|
|
$
|
232,073
|
|
$
|
165,968
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest coverage ratio:(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
|
|
|
|
|
|
|
|
$
|
232,073
|
|
$
|
165,968
|
|
|
Interest incurred
|
|
|
|
|
|
|
|
|
|
$
|
34,876
|
|
$
|
23,879
|
|
|
Interest coverage ratio
|
|
|
|
|
|
|
|
|
|
6.7 times
|
|
7.0 times
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt to EBITDAratio:(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes and loans payable
|
|
|
|
|
|
|
|
|
|
$
|
472,668
|
|
$
|
383,810
|
|
|
EBITDA
|
|
|
|
|
|
|
|
|
|
$
|
232,073
|
|
$
|
165,968
|
|
|
Debt to EBITDA ratio
|
|
|
|
|
|
|
|
|
|
2.0 times
|
|
2.3 times
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
After-tax stockholder returns: (4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
|
|
|
|
|
|
|
$
|
118,722
|
|
$
|
86,836
|
|
|
Average assets
|
|
|
|
|
|
|
|
|
|
$
|
1,042,805
|
|
$
|
787,705
|
|
|
Average equity
|
|
|
|
|
|
|
|
|
|
$
|
428,689
|
|
$
|
336,085
|
|
|
After-tax return on assets
|
|
|
|
|
|
|
|
|
|
11.4
|
%
|
11.0
|
%
|
|
After-tax return on equity
|
|
|
|
|
|
|
|
|
|
27.7
|
%
|
25.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5
Net Debt to Capital Calculation
(Unaudited - $ In Thousands)
|
|
|
September 30, 2004
|
|
September 30, 2003
|
|
|
Notes and loans payable
|
|
$
|
472,668
|
|
383,810
|
|
|
Less: cash and cash equivalents
|
|
(19,340
|
)
|
(6,910
|
)
|
|
Net debt
|
|
453,328
|
|
376,900
|
|
|
Stockholders’ equity
|
|
468,321
|
|
376,246
|
|
|
Capital
|
|
$
|
921,649
|
|
$
|
753,146
|
|
|
|
|
|
|
|
|
|
Net debt to capital
|
|
49
|
%
|
50
|
%
|
|
|
|
|
|
|
|
|
(1) EBITDA represents earnings before
interest expense, interest amortized to cost of sales, income taxes,
depreciation and amortization. EBITDA is
a non-GAAP financial measure. For
purposes of Regulation G, a non-GAAP financial measure is a numerical measure
of a registrant’s historical or future financial performance, financial
position or cash flows that excludes amounts, or is subject to adjustments that
have the effect of excluding amounts, that are included in the most directly
comparable measure calculated and presented in accordance with GAAP in the
statement of earnings, balance sheet, or statement of cash flows (or equivalent
statements) of the issuer; or includes amounts, or is subject to adjustments
that have the effect of including amounts, that are excluded from the most
directly comparable measure so calculated and presented. In this regard, GAAP refers to generally
accepted accounting principles in the United States. Pursuant to the requirements of Regulation G,
we have provided a reconciliation of this non-GAAP financial measure to the
most directly comparable GAAP financial measure.
EBITDA is presented here because it is a widely
accepted financial indicator used by investors and analysts to analyze and
compare homebuilding companies on the basis of operating performance and we
believe is a financial measure widely used by the homebuilding industry. EBITDA as presented may not be comparable to
similarly titled measures reported by other companies because not all companies
calculate EBITDA in an identical manner and, therefore, is not necessarily an
accurate means of comparison between companies.
EBITDA is not intended to represent cash flows for the period or funds
available for management’s discretionary use nor has it been presented as an
alternative to operating income or as an indicator of operating performance and
it should not be considered in isolation or as a substitute for measures of
performance prepared in accordance with generally accepted accounting
principles in the United States of America.
(2) Interest
coverage ratio is calculated as the trailing four quarters EBITDA divided by
the trailing four quarters interest incurred.
(3) Debt
to EBITDA ratio is calculated as notes and loans payable divided by the
trailing four quarters EBITDA.
(4) After-tax return on assets and equity
are calculated as the trailing four quarters net earnings divided by the
trailing four quarters average assets and equity, respectively.
6
Meritage Homes Corporation and Subsidiaries
Operating Data
(Unaudited - $ in thousands)
|
|
|
For The
Three Months Ended September 30
|
|
As Of And For The
Nine Months Ended September 30
|
|
|
|
|
2004
|
|
2003
|
|
2004
|
|
2003
|
|
|
|
|
Homes
|
|
$
|
|
Homes
|
|
$
|
|
Homes
|
|
$
|
|
Homes
|
|
$
|
|
|
Homes Ordered:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Texas
|
|
805
|
|
173,816
|
|
730
|
|
156,182
|
|
2,774
|
|
593,729
|
|
2,404
|
|
498,919
|
|
|
Arizona
|
|
914
|
|
219,349
|
|
481
|
|
126,921
|
|
2,777
|
|
689,741
|
|
1,533
|
|
403,826
|
|
|
California
|
|
391
|
|
215,685
|
|
219
|
|
100,548
|
|
1,143
|
|
561,241
|
|
568
|
|
265,418
|
|
|
Nevada
|
|
93
|
|
34,073
|
|
116
|
|
32,036
|
|
258
|
|
90,353
|
|
500
|
|
123,577
|
|
|
Total
|
|
2,203
|
|
642,923
|
|
1,546
|
|
415,687
|
|
6,952
|
|
1,935,064
|
|
5,005
|
|
1,291,740
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homes Closed:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Texas
|
|
700
|
|
152,060
|
|
741
|
|
153,495
|
|
2,171
|
|
469,709
|
|
1,988
|
|
405,251
|
|
|
Arizona
|
|
560
|
|
127,516
|
|
325
|
|
83,774
|
|
1,414
|
|
340,983
|
|
866
|
|
234,083
|
|
|
California
|
|
367
|
|
166,819
|
|
206
|
|
96,459
|
|
968
|
|
421,529
|
|
540
|
|
241,714
|
|
|
Nevada
|
|
44
|
|
16,316
|
|
192
|
|
47,024
|
|
307
|
|
85,267
|
|
464
|
|
108,847
|
|
|
Total
|
|
1,671
|
|
462,711
|
|
1,464
|
|
380,752
|
|
4,860
|
|
1,317,488
|
|
3,858
|
|
989,895
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Order Backlog:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Texas
|
|
|
|
|
|
|
|
|
|
1,722
|
|
365,439
|
|
1,501
|
|
312,567
|
|
|
Arizona
|
|
|
|
|
|
|
|
|
|
2,195
|
|
587,117
|
|
1,133
|
|
313,898
|
|
|
California
|
|
|
|
|
|
|
|
|
|
655
|
|
338,041
|
|
361
|
|
160,631
|
|
|
Nevada
|
|
|
|
|
|
|
|
|
|
175
|
|
58,724
|
|
222
|
|
52,513
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
4,747
|
|
1,349,321
|
|
3,217
|
|
839,609
|
|
#
# #
This
press release contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements include statements concerning
our anticipated results for fiscal 2004, including expected home closings,
revenue, earnings per share and pre-tax margin and our anticipated closings and
revenue for fiscal 2005. Such statements
are based upon the current beliefs and expectations of our management and are
subject to significant risks and uncertainties.
Actual results may differ from those set forth in the forward-looking
statements.
Meritage’s
business is subject to a number of risks and uncertainties including: the
strength and competitive pricing of the single-family housing market; demand
for and acceptance of our homes; changes in the availability and pricing of
real estate in the markets in which we operate; our ability to continue to
acquire additional land or options to acquire additional land on acceptable
terms; general economic slow downs; consumer confidence, which can be impacted
by economic and other factors such as terrorism, war, or threats thereof and
changes in stock markets; the impact of construction defect and home warranty
claims; the cost and availability of insurance, including the unavailability of
insurance for the presence of mold; interest rates and changes in the
availability and pricing of residential mortgages; our lack of geographic
diversification; our level of indebtedness and our ability to raise additional
capital when and if needed; our ability to take certain actions because of
restrictions contained in the indentures for our senior notes and the agreement
for our senior unsecured credit facility; legislative or other initiatives that
seek to restrain growth in new housing construction or similar measures; the
success of our program to integrate existing operations with any new operations
or those of past or future acquisitions; our success in locating and
negotiating favorably with possible acquisition candidates; our ability to
achieve certain pre-tax margins; our dependence on key personnel and the
availability of satisfactory subcontractors; the impact of inflation; our
potential exposure to natural disasters; the impact of new accounting
principles; and other factors identified in documents filed by us with the
Securities and Exchange Commission, including those set forth in our Form 10-K
for the year ended December 31, 2003 under the caption “Management’s Discussion
and Analysis of Financial Condition and Results of Operations — Factors That
May Affect Our Future Results and Financial Condition” and in Exhibit 99.1 of
Meritage’s Form 10-Q for the quarter ended June 30, 2004. As a result of these and other factors, the
Company’s stock and note prices may fluctuate dramatically.
#
# #
7