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Press release from GlobeNewswire (a Nasdaq OMX company)

Meritage Homes Reports Fourth Quarter 2011 Gains in Orders, Closings, Revenue, Backlog and Home Closing Margins

Tuesday, January 31, 2012

Meritage Homes Reports Fourth Quarter 2011 Gains in Orders, Closings, Revenue, Backlog and Home Closing Margins05:00 EST Tuesday, January 31, 2012SCOTTSDALE, Ariz., Jan. 31, 2012 (GLOBE NEWSWIRE) -- Meritage Homes Corporation (NYSE:MTH), a leading U.S. homebuilder, today announced fourth quarter and full year results for the period ended December 31, 2011, posting increases over the prior year's fourth quarter sales, closings, backlog, revenue and home closing margins.Summary Operating Results (unaudited)(Dollars in thousands, except per share amounts)    Three Months Ended December 31,Full year Ended December 31,  20112010%Chg20112010%Chg Homes closed (units) 894 837 7% 3,268 3,700 -12% Home closing revenue $245,730 $214,616 14% $860,884 $940,406 -8% Sales orders (units) 749 713 5% 3,405 3,383 1% Sales order value $206,061 $174,021 18% $907,922 $854,687 6% Ending backlog (units)       915 778 18% Ending backlog value       $248,854 $201,816 23% Net (loss)/income– incl. impairments   $(11,774)  $(895) n/m  $(21,106) $7,150 n/m Adjusted pre-tax income/(loss) -- excl. impairments and loss on early extinguishment of debt $2,267  $(311) n/m  $(4,204) $12,684 n/m Diluted EPS (including impairments)  $(0.36)  $(0.03) n/m  $(0.65) $0.22 n/m* Adjusted pre-tax income/(loss) excludes impairments: See non-GAAP reconciliations of net (loss)/income to adjusted pre-tax (loss)/income on "Operating Results" statement.ADDITIONAL FOURTH QUARTER 2011 SELECTED RESULTS: Net loss of $11.8M included $13.9M of asset impairments, primarily due to wind-down of Las Vegas operations; net loss of $0.9M in 2010 included $5.1M asset impairments and $4.5M net tax benefit Home closing gross margin improved to 16.0%, or 18.8% before impairments, over fourth quarter 2010 gross margin of 15.8%, or 18.1% before impairments Gross profit before impairments on homes closed grew 18% to $46.1M from $38.9M in the prior year Opened 19 new communities, including three in new Raleigh division, increasing total active communities to 157 at December 31, 2011 from 151 at December 31, 2010ADDITIONAL FULL YEAR 2011 SELECTED RESULTS: Net loss of $21.1M included $16.2M of asset impairments; net income of $7.2M in 2010 included $6.7M asset impairments, $3.5M loss on early extinguishment of debt and $4.7M net tax benefit Completed the year with $333M cash and short-term investments, no short-term debt and 35.8% net debt to capital ratioMANAGEMENT COMMENTS "We finished 2011 on a positive note by posting gains across many of our key operating metrics for the fourth quarter, including closings, revenue, sales, backlog, home closing gross margins and our total number of active communities," said Steven J. Hilton, chairman and chief executive officer of Meritage Homes. "This was our third consecutive quarter of year-over-year increases in sales. It was also our second year to achieve an increase in fourth quarter sales, after being the only public homebuilder to report sales gains in the fourth quarter of 2010. Our fourth quarter orders were up 15% in 2010, while other builders were down an average of 19%, which made for a more difficult year-over-year comparison. It was also encouraging that December was our strongest month of the quarter, and our comparisons to 2010 got progressively better throughout the quarter. "Although we reported a net loss for the quarter due to asset impairments, primarily related to our winding down of operations in Las Vegas, we increased our home closing gross profit and margins, both before and after impairments," said Mr. Hilton. "We are continuing to focus on top line growth as well as margin improvement, while controlling our overhead expenses, to drive greater profitability and improved returns for our shareholders."SALES Fourth quarter 2011 net order value increased 18% as a result of 5% more homes sold and a 13% increase in average selling prices. Total fourth quarter orders increased over 2010 due to a 2% increase in average active community count and a 4% increase in average sales per community to 4.9 in 2011 compared to 4.7 in 2010. The increase in active communities included Meritage's first three communities opened in Raleigh during the fourth quarter of 2011, which contributed 24 sales in the quarter. Florida, California and Arizona posted the largest increases in 2011 fourth quarter sales over 2010, due to increases in both the number of communities open for sale and higher sales per community in Florida and California. Full year orders increased 1% and combined with a 6% increase in average selling price to drive a 6% increase in total order value for 2011 over 2010. The gains were in Florida, Colorado and California, in addition to the new North Carolina market in 2011. The total value of orders in backlog at year-end 2011 increased by 23% over the prior year.  FOURTH QUARTER RESULTS Fourth quarter 2011 home closing revenue increased 14% over 2010 due to 7% increases in both closing volume and average prices. The average closing price increased to $275,000 in the fourth quarter of 2011, from $256,000 in 2010. Higher average prices in 2011 primarily reflected a shift in geographic mix, with a greater portion of closings in California, Arizona, Colorado and Florida, where home prices are generally higher, and a smaller portion in Texas, where home prices are generally lower. Home closing gross margins improved to 16.0% in 2011 from 15.8% in 2010, including impairments; or to 18.8% from 18.1%, respectively, excluding impairments.   Home closing gross profit increased 16% to $39.4 million in the fourth quarter of 2011 from $34.0 million in the prior year, due to greater closing revenue and expanded margins on closings. Home closing cost of sales included $6.7 million of impairments in the fourth quarter of 2011, of which $3.3 million related to Las Vegas communities in which Meritage intends to continue to build homes. Land closing gross loss included another $5.9 million of impairments related to vacant lots in Las Vegas that the company plans to sell. Fourth quarter 2010 home closing gross profit included $4.9 million of impairments, by comparison. Meritage reported a net loss of $11.8 million or $0.36 per diluted share in the fourth quarter of 2011, compared to a net loss of $0.9 million or $0.03 per diluted share in the fourth quarter of 2010. The loss in 2011 included $13.9 million of impairments, primarily due to $9.2 million total charges related to the wind down of operations in Las Vegas, as well as a $0.8 million loss from the sale of the only two golf courses the company owned, both in Arizona active adult communities. The 2010 net loss of $0.9 million included $5.1 million of impairments, partially offset by a $4.5 million net tax benefit. Excluding those items, Meritage generated pre-tax income of $2.3 million compared to a pre-tax loss of $311,000 in the prior year.FULL YEAR OPERATING RESULTS 2011 annual home closing revenue decreased $79.5 million, or 8%, from 2010, due to 12% fewer homes closed, partially offset by a 4% increase in average closing prices, at $263,000 in 2011 compared to $254,000 in 2010. The increase in average closing prices reflected a greater percentage of closings in move-up communities and a mix shift from Texas markets to higher-priced Colorado and Florida markets. Home closing gross margins were 17.1% in 2011 and 17.8% in 2010, including $8.9 million and $6.4 million of impairments, respectively; or 18.2% in 2011 and 18.5% in 2010, excluding impairments. In addition to larger impairments in 2011, lower margins were reflective of relatively weaker market conditions earlier in 2011, as compared to 2010 when the home buyer tax credit was in place during the first half of the year. Home closing gross profit of $147.4 million was 12% lower than 2010 gross profit of $167.5 million.   Meritage reported a net loss of $21.1 million or $0.65 per share for 2011, which included $16.2 million of asset impairments, compared to net income of $7.2 million or $0.22 per diluted share in 2010, which included $6.7 million in real estate-related impairment charges and a $3.5 million loss on extinguishment of debt, partially offset by a $4.7 million net tax benefit.BALANCE SHEET Meritage maintained its strong balance sheet, ending the year with $333.2 million of cash, no near-term maturities and a net debt to capital ratio of 35.8% at December 31, 2011, compared to 27.9% at December 31, 2010. The $79.5 million decrease in total cash and securities during 2011 was primarily converted into real estate inventory, which increased $76.5 million during 2011, including a $32.4 million increase in lot inventory and a $27.5 million increase in homes under construction or completed. The company spent a total of $192.9 million on lot purchases and an additional $53.7 million on land development during 2011. Meritage acquired control of approximately 5,500 new lots in 94 communities during 2011, most of which replaced lots that were used in homebuilding operations during the year. At December 31, 2011, Meritage controlled 16,722 lots representing approximately 5.1 years supply, based on trailing twelve months closings, compared to a total of 15,224 lots or 4.1 years lot supply at December 31, 2010. Meritage owned approximately 83% of its total lots under control at year-end 2011, consistent with 85% in 2010. SUMMARY Considering that 2011 turned out to be another tough year for the overall economy and homebuilding, we are pleased to have completed the year with positive trends in most of our operating metrics, while posting only a modest loss for the year before impairments. I'm also pleased with the progress we made on our strategic initiatives during the year, including our expansion into the promising Raleigh market, and our decision to wind down operations in the struggling Las Vegas market. While that decision was difficult, we believe it was the right one, considering the prolonged economic issues facing that market. We continued to lead the industry by incorporating advanced building technologies into the design of our homes, delivering better value to our home buyers through greater energy efficiency and comfort. And we made strategic investments in marketing and operations that I am confident will pay dividends for years to come. "As we begin 2012, we are focused on prudently growing our community count, home closings and related revenue, increasing our margins and keeping overhead costs in check. Considering that we're entering the year with a larger backlog than we had last year, and have recently added new divisions in Raleigh and Tampa, I am confident we can grow our sales, revenue and earnings in 2012," said Mr. Hilton.CONFERENCE CALL Management will host a conference call to discuss their results at 10:00 a.m. Eastern Time (7:00 a.m. Pacific Time) today. 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 and the conference number is 10008536. Participants are encouraged to dial in five minutes before the call begins. A replay of the call will be available for fifteen days, beginning at 12:00 p.m. ET on January 31, 2012 on the website noted above, or by dialing 877-344-7529, and referencing conference number 10008536. For more information, visit meritagehomes.com.                    Meritage Homes Corporation and SubsidiariesOperating Results(Unaudited)(In thousands, except per share data)                      Three Months Ended December 31,Full year Ended December 31,  2011201020112010Operating results          Home closing revenue $245,730 $214,616 $860,884 $940,406 Land closing revenue 260 28 360 1,250           Total closing revenue 245,990 214,644 861,244 941,656           Home closing gross profit (1) 39,411 34,001 147,448 167,456 Land closing gross (loss)/profit (1) (6,222) (18) (6,340) 240 Total closing gross profit 33,189 33,983 141,108 167,696           Commissions and other sales costs (21,036) (18,346) (74,912) (76,798) General and administrative expenses  (17,602) (12,684) (64,184) (59,784) Interest expense (7,363) (8,449) (30,399) (33,722) Loss on extinguishment of debt -- -- -- (3,454) Other income, net 1,208 77 8,011 8,546 (Loss)/earnings before income taxes (11,604) (5,419) (20,376) 2,484 (Provision)/benefit for income taxes (170) 4,524 (730) 4,666 Net (loss)/income  $(11,774)  $(895)  $(21,106) $7,150          Earnings/(loss) per share                   Basic:         (Loss)/earnings per share  $(0.36)  $(0.03)  $(0.65) $0.22 Weighted average shares outstanding 32,452 32,127 32,382 32,060           Diluted:         (Loss)/earnings per share  $(0.36)  $(0.03)  $(0.65) $0.22 Weighted average shares outstanding 32,452 32,127 32,382 32,322          Non-GAAP Reconciliations:         Home closing gross profit $39,411 $34,001 $147,448 $167,456 Add Real estate-related impairments: 6,696 4,908 8,870 6,434 Adjusted home closing gross profit  $46,107 $38,909 $156,318 $173,890           (Loss)/income before income taxes  $(11,604)  $(5,419)  $(20,376) $2,484 Add: Real estate-related and joint venture impairments:       Terminated lot options and land sales 8,994 1,047 9,221 1,047 Impaired projects 4,029 3,878 6,103 5,404 Joint venture impairments -- 183 -- 295 Fixed asset impairments 848 -- 848 -- Loss on early extinguishment of debt -- -- -- 3,454 Adjusted income/(loss) before income taxes $2,267  $(311)  $(4,204) $12,684   (1)  Home closing gross profit and land closing gross profit for both the 2011 year and quarter periods include impairments related to the wind-down of operations in Las Vegas in the amounts of $3.3 million and $5.9 million, respectively.            Meritage Homes Corporation and SubsidiariesCondensed Consolidated Balance Sheets(In thousands)(unaudited)        December 31, 2011December 31, 2010Assets:     Cash and cash equivalents $173,612 $103,953 Investments and securities 147,429 299,345 Restricted cash 12,146 9,344 Other receivables 14,932 20,835 Real estate (1) 815,425 738,928 Investments in unconsolidated entities 11,088 10,987 Deposits on real estate under option or contract 15,208 10,359 Other assets 31,538 31,187  Total assets $1,221,378 $1,224,938      Liabilities:     Accounts payable, accrued liabilities, home sale deposits and other liabilities $126,057 $119,163 Senior notes 480,534 479,905 Senior subordinated notes 125,875 125,875  Total liabilities 732,466 724,943  Total equity 488,912 499,995  Total liabilities and equity $1,221,378 $1,224,938      (1) Real estate – Allocated costs:     Homes under contract under construction $101,445 $97,002 Unsold homes, completed and under construction 97,246 87,011 Model homes 49,892 37,027 Finished homesites and homesites under development  467,867 435,473 Land held for development  69,067 59,692 Land held for sale 29,908 22,723  Total allocated costs $815,425 $738,928                    Supplemental Information and Non-GAAP Financial Disclosures (In thousands – unaudited):            As of and for the Three Months Ended December 31, As of and for the Full Year Ended December 31,  2011201020112010 Interest amortized to cost of sales and interest expense 10,153 10,805 40,262 45,733 Depreciation and amortization 1,911 1,835 7,178 7,974                20112010Net debt-to-capital:         Notes payable and other borrowings   $606,409 $605,780 Less: cash and cash equivalents, restricted cash, and investments and securities (333,187) (412,642) Net debt     273,222 193,138 Stockholders' equity     488,912 499,995 Capital     762,134 693,133 Net debt-to-capital     35.8% 27.9%                    Meritage Homes Corporation and SubsidiariesCondensed Consolidated Statement of Cash Flows(In thousands)(unaudited)                      Three Months Ended December 31,Full year Ended December 31,  2011201020112010           Net (loss)/income  $(11,774)  $(895)  $(21,106) $7,150 Loss on early extinguishment of debt -- -- -- 3,454 Real-estate related impairments 13,023 4,925 15,324 6,451 Equity in earnings from JVs (including impairments) and distributions of JV earnings, net (30) 616 648 2,020 (Increase)/decrease in real estate and deposits, net (31,851) 1,957 (95,697) (69,964) Other operating activities 7,709 (12,215) 26,695 83,440Net cash (used in)/provided by operating activities  (22,923) (5,612) (74,136) 32,551           Net payments to purchase investments and securities 41,600 (33,953) 151,704 (174,449) (Payments)/distribution to fund restricted cash (1,037) (396) (28,020) 7,004 Other investing activities (1,914) (1,702) (7,720) (7,070)Cash provided by/(used in) investing activities 38,649 (36,051) 141,182 (174,515)           Proceeds from issuance of new debt  -- -- -- 195,134 Debt issuance cost -- -- -- (3,067) Repayments of senior notes -- -- -- (197,543)           Proceeds from issuance of common, stock, net 782 292 2,613 2,062Net cash provided by/(used in) financing activities 782 292 2,613 (3,414)          Net increase/(decrease) in cash 16,508 (41,371) 69,659 (145,378)Beginning cash and cash equivalents 157,104 145,324 103,953 249,331Ending cash and cash equivalents (1) $173,612 $103,953 $173,612 $103,953           (1)  Ending cash and cash equivalents balances at December 31 exclude investments and securities of $147 million and restricted cash of $12 million in 2011, and $299 million and $9 million, respectively, in 2010.                    Meritage Homes Corporation and SubsidiariesOperating Data(Dollars in thousands) (unaudited)            For the Three Months Ended December 31,  20112010  HomesValueHomesValue          Homes Closed:          California  127 $42,389 94 $32,696 Nevada  10 2,233 16 3,378West Region 137 44,622 110 36,074           Arizona  176 50,028 152 36,970 Texas  391 92,742 450 105,205 Colorado  83 27,338 52 16,099Central Region 650 170,108 654 158,274           North Carolina -- -- -- -- Florida  107 31,000 73 20,268East Region 107 31,000 73 20,268           Total  894 $245,730 837 $214,616          Homes Ordered:          California  99 $33,813 61 $20,011 Nevada  1 228 20 4,053West Region 100 34,041 81 24,064           Arizona  128 34,918 118 29,244 Texas  341 80,279 401 87,258 Colorado  55 18,279 57 17,425Central Region 524 133,476 576 133,927           North Carolina 24 8,616 -- -- Florida  101 29,928 56 16,030East Region 125 38,544 56 16,030           Total  749 $206,061 713 $174,021                    Meritage Homes Corporation and SubsidiariesOperating Data(Dollars in thousands) (unaudited)            For the Full Year Ended December 31,  20112010  HomesValueHomesValue          Homes Closed:          California  355 $120,319 417 $147,194 Nevada  59 12,593 81 16,006West Region 414 132,912 498 163,200           Arizona  594 150,258 700 156,117 Texas  1,660 395,278 2,028 487,797 Colorado  258 83,095 162 48,820Central Region 2,512 628,631 2,890 692,734           North Carolina -- -- -- -- Florida  342 99,341 312 84,472East Region 342 99,341 312 84,472           Total  3,268 $860,884 3,700 $940,406          Homes Ordered:          California  392 $132,672 373 $128,167 Nevada  52 11,300 79 15,704West Region 444 143,972 452 143,871           Arizona  627 163,510 678 155,987 Texas  1,593 377,165 1,776 417,840 Colorado  276 89,624 175 54,328Central Region 2,496 630,299 2,629 628,155           North Carolina 24 8,616 -- -- Florida  441 125,035 302 82,661East Region 465 133,651 302 82,661           Total  3,405 $907,922 3,383 $854,687          Order Backlog:          California  82 $27,648 45 $15,295 Nevada  5 1,076 12 2,369West Region 87 28,724 57 17,664           Arizona  158 45,232 125 31,980 Texas  396 93,494 463 111,607 Colorado  70 23,493 52 16,964Central Region 624 162,219 640 160,551           North Carolina 24 8,616 -- -- Florida  180 49,295 81 23,601East Region 204 57,911 81 23,601           Total  915 $248,854 778 $201,816                    Meritage Homes Corporation and SubsidiariesOperating Data (unaudited)            Three Months Ended December 31, 2011Three Months Ended December 31, 2010  Beg. End Beg. EndActive Communities:          California 22 20 13 14 Nevada 3 2 5 4West Region 25 22 18 18           Arizona  37 37 32 32 Texas  65 67 82 82 Colorado  9 10 8 9Central Region 111 114 122 123           North Carolina -- 3 -- -- Florida  13 18 10 10East Region 13 21 10 10           Total  149 157 150 151                      Full year Ended December 31, 2011Full year Ended December 31, 2010  Beg. End Beg. EndActive Communities:          California 14 20 7 14 Nevada 4 2 6 4West Region 18 22 13 18           Arizona  32 37 26 32 Texas  82 67 98 82 Colorado  9 10 6 9Central Region 123 114 130 123                     North Carolina -- 3 -- -- Florida  10 18 10 10East Region 10 21 10 10           Total  151 157 153 151ABOUT MERITAGE HOMES CORPORATION Meritage Homes is one of the top 10 homebuilders 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 December 31, 2011, the Company had 157 actively selling communities in 13 metropolitan areas, including Houston, Dallas/Ft. Worth, Austin, San Antonio, Phoenix/Scottsdale, Tucson, Las Vegas, Denver, Orlando, Raleigh and the East Bay/Central Valley and Southern California. Meritage also announced its expansion into the Tampa, Florida market in December 2011. Meritage has designed and built more than 70,000 homes in its 26-year history, and has a reputation for its distinctive style, quality construction and positive customer experience. In 2010, Meritage launched its new Simply Smart Series™ of homes and its 99-day guaranteed completion program in certain communities. Meritage was the first large national homebuilder to be 100 percent ENERGY STAR® qualified in every home started since January 1, 2010. 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 http://www.globenewswire.com/newsroom/prs/?pkgid=2624FORWARD-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 belief that the Company will grow its community count, sales, home closings, revenue and earnings in 2012; increase home closing margins and keep overhead costs in check; and that its strategic investments in marketing and operations will benefit future years. 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; 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 recent Quarterly Reports on Form 10-Q, all of which can be found on our website.CONTACT: Brent Anderson (972) 580-6360 (office) Brent.Anderson@meritagehomes.com