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Press release from GlobeNewswire (a Nasdaq OMX company)

Meritage Homes Reports 40% Increase in First Quarter Sales Order Value to Highest Value Since Second Quarter of 2008

Thursday, April 26, 2012

Meritage Homes Reports 40% Increase in First Quarter Sales Order Value to Highest Value Since Second Quarter of 200805:30 EDT Thursday, April 26, 2012SCOTTSDALE, Ariz., April 26, 2012 (GLOBE NEWSWIRE) -- Meritage Homes Corporation (NYSE:MTH), a leading U.S. homebuilder, today announced first quarter results for the period ended March 31, 2012.  Summary Operating Results (unaudited)(Dollars in thousands, except per share amounts)   As of and for the Three Months EndedMarch 31,  20122011% Chg Homes closed (units)  759  678 12% Home closing revenue $204,022 $177,489 15% Sales orders (units)  1,144  840 36% Sales order value $308,329 $220,612 40% Ending backlog (units)  1,300  940 38% Ending backlog value $353,161 $244,939 44% Net loss -- including impairments ($4,754) ($6,659) n/m Adjusted pre-tax loss* -- excluding impairments  (4,281)  (5,780) n/m Diluted EPS (including impairments) ($0.15) ($0.21) n/m *see non-GAAP reconciliation of net loss to adjusted pre-tax loss on "Operating Results" statementFIRST QUARTER 2012 SELECTED OPERATING RESULTS AND OTHER NEWS: Net loss narrowed to $4.8M from $6.7M a year ago, due to higher closings and lower overhead costs Highest quarterly sales orders since 2Q 2009 and highest total sales value since 2Q 2008, with year over year sales gains in every state except Nevada Highest average sales per community since the first quarter of 2008 – 29% increase over 1Q 2011 Active community count increased to 150 at March 31, 2012 from 141 at March 31, 2011 Highest backlog in units and value since the first quarter of 2010 Home closing gross margin of 17.2% consistent with 17.1% in 1Q 2011 Contracted for approximately 1,500 lots during 1Q 2012, increasing total lots under control to 17,216 Launched new issue of $300M 7.0% senior notes due in 2022 and a tender offer to retire 2015 notes in 2Q 2012, pushing out nearest debt maturity to 2017SALES STRENGTH "Our spring selling season got off to a strong start, as evidenced by our 36% increase in sales in the first quarter," said Steven J. Hilton, chairman and chief executive officer of Meritage Homes. "Consumer confidence has improved, and more buyers are searching for homes while inventories of existing homes have declined substantially in many of our markets. Our new website and national Contact Center are driving traffic to our well-positioned communities, where our sales teams have done an excellent job converting that traffic to sales. Our monthly sales have grown progressively since November last year, and March was our best sales month since June of 2008." First quarter 2012 net order value increased 40% as a result of 36% more homes sold and a 3% increase in average selling prices. Meritage ended the quarter with 150 active communities, up from 141 at the end of the first quarter of 2011, though down from 157 at year-end 2011 as some communities closed out sooner than anticipated due to the increased sales pace. Average sales per community increased to 7.5 for the first quarter of 2012 from 5.8 in 2011. All states except Nevada increased sales orders, with California, Arizona and Colorado leading in sales gains and average sales pace per community. California increased sales by 140% over the first quarter of 2011, with 9.1 sales per community; Arizona increased sales by 67%, with 7.2 per community; and Colorado increased sales by 28%, with 10.1 per community. North Carolina contributed 33 sales during the first quarter of 2012 from its first four communities opened since October of 2011, an average of 9.4 sales per community. "As demand has strengthened, we've begun to raise prices in most of our communities this year," said Mr. Hilton. "While certain of our best communities have seen several price increases in 2012 already, most increases have been modest to date, but demonstrate that the market is getting stronger." The total value of orders in backlog at March 31, 2012 increased by 44% over March 31, 2011, due to a 38% increase in units and a 4% increase in average sales prices, mainly reflecting a shift toward higher-priced states and communities, in addition to modest price increases.NET LOSS NARROWED Meritage narrowed its net loss to $4.8 million or ($0.15) per diluted share for the first quarter of 2012, compared to a net loss of $6.7 million or ($0.21) per diluted share for the first quarter of 2011, due to increased closings and revenue, combined with lower overhead and interest expense. "We have been operating around break-even for the last two years, excluding the impairments related to winding down our Las Vegas operations, and just a small number of home closings can make the difference between being profitable in a quarter," said Mr. Hilton. "We expected to report a loss in the first quarter due to our seasonally low fourth quarter sales and backlog entering the quarter. "With the levels of sales and backlog we reported in the first quarter this year, we expect to achieve higher closings over the next couple of quarters, providing significant overhead leverage and pushing us into profitable territory." First quarter 2012 home closing revenue increased 15% over 2011, reflecting a 12% increase in closing volume and a 3% increase in average prices, primarily reflecting a mix shift toward higher-priced states and communities. Home closing gross margins held steady year to year in the first quarter, at 17.2% in 2012 compared to 17.1% in 2011. Lower general and administrative overhead and interest expense partially offset increased commissions and other sales costs. Total selling, general and administrative expenses were 16.5% of total revenue in the first quarter of 2012, down from 17.1% a year earlier. Interest expense decreased 8% to $7.4 million, or 3.6% of first quarter 2012 revenue, compared to $8.0 million or 4.5% of first quarter 2011 revenue.CASH FLOW AND BALANCE SHEET "We spent $61 million to purchase approximately 1,300 lots during the first quarter of 2012, and we contracted for approximately 1,500 new lots in 32 communities during the quarter," said Mr. Hilton. "Our land acquisition teams are working hard to secure high quality communities in excellent locations that provide us the best opportunities for above-average sales and higher margins, and we have a healthy pipeline of lots to replenish our communities even at our current sales pace." Meritage ended the first quarter with a total lot supply of approximately 17,200 total lots, an increase of nearly 1,800 over the prior year and approximately 500 more than its 2011 year-end total of approximately 16,700 lots. Based on trailing twelve months closings, the March 31, 2012 balance represents a 5.1 year supply of lots. Total real estate inventory increased by $53 million, accounting for nearly the entire decrease in cash and investments during the quarter. Meritage ended the quarter with $277 million in cash and cash equivalents, restricted cash and securities. Net debt to total capital ratio was 40.4% at March 31, 2012, compared to of 30.5% at March 31, 2011. Meritage launched a series of related financing transactions in the first quarter of 2012, which are scheduled to close in the second quarter, including the private placement of $300 million of 7.0% senior notes due in 2022, and using the net proceeds of the new issue along with available cash to retire all $285 million of its senior notes due in 2015 and $26 million of senior subordinated notes due in 2017. These transactions will extend the company's earliest debt maturities to 2017. The transactions will result in approximately $6 million of expense for the early retirement of debt in the second quarter of 2012.SUMMARY "The U.S. economy and employment picture have improved, and buyers seem to be much more confident than they were a year ago," said Mr. Hilton. "We believe the market has clearly turned in a more positive direction, and we are playing offense rather than defense. Based on current market conditions, we believe we can continue to post substantial year over year increases in sales during the remainder of 2012, and with our increased backlog, we are confident we'll be profitable for the full year. Our challenge now is to continue to find well-priced lots in great locations for new Meritage communities, maximize that value of our land positions, and maintain cost controls while continually striving for operational excellence to improve our earnings power. It's good to have such challenges to face in a stronger market."CONFERENCE CALL Management will host a conference call today to discuss their results at 10:30 a.m. Eastern Time (7:30 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 and the conference number is 10012517. 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 12:30 p.m. ET on April 26, 2012 on the website noted above, or by dialing 877-344-7529, and referencing conference number 10012517. For more information, visit investors.meritagehomes.com.  Meritage Homes Corporation and SubsidiariesOperating Results(Unaudited)(In thousands, except per share data)   Three Months EndedMarch 31, 20122011Operating results     Home closing revenue $ 204,022 $ 177,489 Land closing revenue   328   100  Total closing revenue   204,350   177,589       Home closing gross profit   35,113   30,380 Land closing gross profit   123   9  Total closing gross profit  35,236   30,389       Commissions and other sales costs  (18,977)   (15,315) General and administrative expenses  (14,721)   (15,126) Interest expense  (7,371)   (8,023) Other income, net  1,259   1,631 Loss before income taxes  (4,574)  (6,444) Provision for income taxes  (180)  (215) Net loss $ (4,754) $ (6,659)     Loss per share     Basic and diluted:      Loss per share $ (0.15) $ (0.21)  Weighted average shares outstanding  32,634  32,260            Non-GAAP Reconciliations:     Total home closing gross profit   35,113  30,380 Impaired projects   293  664 Adjusted total home closing gross profit   35,406  31,044       Loss before income taxes   (4,574)  (6,444) Add real estate-related impairments:      Impaired projects  293  664 Adjusted loss before income taxes $ (4,281) $ (5,780) Meritage Homes Corporation and SubsidiariesCondensed Consolidated Balance Sheets(In thousands)(unaudited)      March 31, 2012December 31, 2011Assets:     Cash and cash equivalents $ 90,603 $ 173,612 Investments and securities  173,955  147,429 Restricted cash  12,229  12,146 Other receivables  14,884  14,932 Real estate (1)  868,034  815,425 Investments in unconsolidated entities  11,389  11,088 Option deposits  15,028  15,208 Other assets  31,492  31,538 Total assets $ 1,217,614 $ 1,221,378      Liabilities and Equity:     Accounts payable, accrued liabilities, home sale deposits and other liabilities $ 124,181 $ 126,057 Senior notes  480,692  480,534 Senior subordinated notes  125,875  125,875 Total liabilities  730,748  732,466 Total stockholders' equity  486,866  488,912 Total liabilities and equity $ 1,217,614 $ 1,221,378      (1) Real estate – Allocated costs:     Homes under contract under construction $ 133,930 $ 101,445 Unsold homes, completed and under construction  91,301  97,246 Model homes  53,265  49,892 Finished homesites and homesites under development  498,645  467,867 Land held for development  68,242  69,067 Land held for sale  22,651  29,908 Total allocated costs $ 868,034  $ 815,425 Supplemental Information and Non-GAAP Financial Disclosures (In thousands – unaudited):  Three Months Ended March 31,As of and for the Twelve Months Ended March 31, 2012201120122011 Interest amortized to cost of sales $ 2,378 $ 2,196 $ 10,045  $ 10,989 Interest expensed $ 7,371 $ 8,023 $ 29,747 $ 33,450 Depreciation and amortization $ 1,693 $ 1,756 $ 7,115 $ 7,783     Net debt-to-capital:     Notes payable and other borrowings $ 606,567 $ 605,937 Less: cash and cash equivalents, restricted cash, and investments and securities (276,787) (387,722) Net debt  329,780  218,215 Stockholders' equity  486,866  496,567 Capital $ 816,646 $ 714,782 Net debt-to-capital  40.4%  30.5% Meritage Homes Corporation and SubsidiariesCondensed Consolidated Statements of Cash Flows(In thousands)(unaudited)  Three Months EndedMarch 31, 20122011    Net loss $ (4,754) $ (6,659) Real-estate related impairments  293  664 Equity in earnings from JVs (including impairments) and distributions of JV earnings, net  (171)  280 Net increase in real estate and deposits  (52,623)  (19,261) Other operating activities  1,893  413Net cash used in operating activities  (55,362)  (24,563)      Payments to purchase investments and securities  (76,503)  (59,908) Payments to fund restricted cash  (83)  (926) Maturities of investments and securities  50,000  85,000 Other financing activities  (2,116)  (1,566)Cash (used in)/provided by investing activities  (28,702)  22,600             Proceeds from issuance of common stock, net  1,055  1,518Net cash provided by financing activities  1,055  1,518     Net decrease in cash  (83,009)  (445)Beginning cash and cash equivalents  173,612  103,953Ending cash and cash equivalents(1) $ 90,603 $ 103,508   (1) Ending cash and cash equivalents exclude investments and securities, and restricted cash totaling $186 million and $284 million as of March 31, 2012 and March 31, 2011, respectively. Meritage Homes Corporation and SubsidiariesOperating Data(Dollars in thousands)(unaudited)   For the Three Months Ended March 31,  20122011  HomesValueHomesValue      Homes Closed:         California  97 $ 33,306  62 $ 21,171 Nevada  6  1,196  15  2,979West Region  103  34,502  77  24,150 Arizona  142  38,899  127  31,967 Texas  317  71,651  354  84,810 Colorado  64  21,300  49  15,629Central Region  523  131,850  530  132,406 North Carolina  18  6,547  --  -- Florida  115  31,123  71  20,933East Region  133  37,670  71  20,933 Total  759 $ 204,022  678 $ 177,489      Homes Ordered:       California  187 $ 62,647  78 $ 27,149 Nevada  8  1,456  19  4,022West Region  195  64,103  97  31,171 Arizona  249  59,612  149  34,342 Texas  463  108,863  446  109,681 Colorado  91  30,313  71  22,182Central Region  803  198,788  666  166,205 North Carolina  33  12,079  --  -- Florida  113  33,359  77  23,236East Region  146  45,438  77  23,236 Total  1,144 $ 308,329  840 $ 220,612          Order Backlog:         California  172 $ 56,989  61 $ 21,273 Nevada  7   1,336  16  3,412West Region  179   58,325  77  24,685 Arizona  265   65,945  147  34,355 Texas  542   130,706  555  136,478 Colorado  97   32,506  74  23,517Central Region  904   229,157  776  194,350 North Carolina  39   14,148  --  --  Florida  178   51,531  87  25,904East Region  217   65,679  87  25,904           Total  1,300  $ 353,161  940 $ 244,939 Meritage Homes Corporation and SubsidiariesOperating Data(unaudited)  Three Months EndedMarch 31, 2012Three Months EndedMarch 31, 2011  Beg. End Beg. EndActive Communities:         California  20  21  14  14 Nevada  2  2  4  4West Region  22  23  18  18           Arizona  37  32  32  32 Texas  67  67  82  73 Colorado  10  8  9  9Central Region  114  107  123  114           North Carolina 3 4 -- -- Florida  18  16  10 9East Region  21  20  10  9           Total  157  150  151  141  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 March 31, 2012, the company had 150 actively selling communities in 15 metropolitan areas, including Northern California, East Bay/Central Valley and Southern California, Houston, Dallas/Ft. Worth, Austin, San Antonio, Phoenix/Scottsdale, Tucson, Las Vegas, Denver, Orlando, Tampa and Raleigh-Durham. Meritage offers its Simply Smart Series™ of homes and a 99-day guaranteed completion program in certain communities, and was 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 http://www.globenewswire.com/newsroom/prs/?pkgid=2624 This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include management's expectations that its backlog conversion rate will decline with the sale of more unstarted homes relative to spec homes, that greater backlog should translate to increased closings and provide positive earnings leverage in the coming quarters, that the market has turned the corner, and that it will report increased sales and be profitable for the full year in 2012. Such statements are based upon 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; the availability of finished lots and undeveloped land; 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; our exposure to information technology failures and security breaches; 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, 2011 under the caption "Risk Factors," which can be found on our website.CONTACT: Brent Anderson (972) 580-6360 (office) Brent.Anderson@meritagehomes.com