SCOTTSDALE, AZ--(Marketwired - April 28, 2016) - Meritage Homes Corporation (NYSE: MTH), a leading U.S. homebuilder, announced today first quarter results for the period ended March 31, 2016.
Summary Operating Results (unaudited) (Dollars in thousands, except per share amounts) Three Months Ended March 31, 2016 2015 %Chg ---------- ---------- ---------- Homes closed (units) 1,488 1,335 11% Home closing revenue $ 595,617 $ 517,273 15% Average sales price - closings $ 400 $ 387 3% Home orders (units) 1,987 1,979 0% Home order value $ 804,600 $ 782,812 3% Average sales price - orders $ 405 $ 396 2% Ending backlog (units) 3,191 2,758 16% Ending backlog value $1,346,664 $1,111,991 21% Average sales price - backlog $ 422 $ 403 5% Net earnings $ 20,969 $ 16,400 28% Diluted EPS $ 0.50 $ 0.40 25%
MANAGEMENT COMMENTS
"We were pleased with our results for the first quarter, including first quarter net earnings growth of 28%, which reflected an 11% increase in home closings, a 15% increase in home closing revenue, improved overhead leverage and tax credits earned for our energy efficient homes," said Steven J. Hilton, chairman and chief executive officer of Meritage Homes. "Based on our first quarter closings volume, we are confident we'll achieve our projected 7,000-7,500 total closings in 2016, driving substantial revenue and earnings growth for the year.
"The housing market has remained healthy and we continue to experience solid demand overall," said Mr. Hilton. "Orders of 1,987 homes in the first quarter of 2016 were in line with last year's first quarter due to the early sell-out of some very successful communities, a slower sales pace in Houston and an intentional metering of order flow in northern California and Colorado.
"Our East region delivered 10% order growth over the first quarter of 2015, as we continue to expand and develop that region. We also grew our total orders in Texas by 6%, despite rising home prices in most Texas markets and the impact of weak energy prices on the Houston market. First quarter orders in the West region were down 11% from last year, as demand eased after a year of strong growth in 2015, though our West region sales pace remained the highest in the company.
"We are still facing the challenges of high land and labor costs, although the rate of inflation has slowed," Mr. Hilton explained, "Part of our strategy to address those challenges is to develop communities with higher densities at lower price points, which we are doing across many of our markets, targeting the same or better net margins.
He continued, "Based on the demand we are experiencing on the ground and in line with our market research, we continue to invest in new communities, putting approximately 2,400 new lots under control during the first quarter and ending the quarter with approximately 28,400 total lots owned or controlled."
Mr. Hilton concluded, "Considering our increased home closing revenue during our first quarter and a 21% higher ending backlog value at the end of the quarter, we are confident that we'll achieve revenue and earnings growth in 2016, despite the margin compression we've experienced over the last year. We were pleased that Moody's Investors Service recently upgraded their corporate ratings for Meritage Homes' notes due to positive momentum in our financial performance over the past several quarters."
FIRST QUARTER RESULTS
- Net earnings of $21.0 million ($0.50 per diluted share) for the first quarter of 2016, compared to prior year net earnings of $16.4 million ($0.40 per diluted share), primarily reflects higher home closing revenues, greater overhead leverage and the benefit of energy tax credits that reduced the company's effective tax rate.
- Home closing revenue increased 15% due to an 11% increase in home closings combined with a 3% increase in average price over the prior year period. The West region (California, Colorado and Arizona) led with a 26% increase in home closing revenue over the first quarter of 2015, followed by 11% growth in the East region (Florida, Georgia, the Carolinas and Tennessee) and 5% in the Central region (Texas).
- Home closing gross margin was 17.4% for the first quarter of 2016 compared to 18.5% in the first quarter of 2015, primarily reflecting higher land and labor costs, as well as a high volume of closings from a limited number of under-performing communities within Arizona and southern California, where management is strategically working through its remaining inventory.
- Commissions and other sales costs totaled 7.8% of home closing revenue in the first quarter of 2016, compared to 8.0% in the first quarter of 2015, reflecting greater leverage of non-commission selling expenses.
- General and administrative expenses for the first quarter of 2016 also benefited from improved leverage on higher revenue, and decreased 70 basis points to 5.0% of total closing revenue in 2016, compared to 5.7% in 2015.
- First quarter effective tax rate declined to 27% in 2016 from 35% in the first quarter of 2015 and management's projected 32% for the full year, due to energy tax credits captured on energy-efficient homes closed in prior periods. The lower than expected tax rate had a net impact of approximately $0.03 per diluted share.
- First quarter 2016 orders for homes were consistent with 2015 and total order value increased 3% year over year. The total value of homes ordered increased 17% in Texas and 7% in the East, partially offset by a 7% decline in the West. The largest increases outside of Texas came from Georgia, with a 45% increase in total order value, North Carolina, with a 25% increase and South Carolina, with a 16% increase in total order value, while Florida and California were off by 15% from the first quarter of 2015 due to successful early closeouts of high-absorption communities.
- Total active community count was 243 at March 31, 2016, a 6% increase over the 229 reported as of March 31, 2015. Average orders per community were 8.0 for the first quarter of 2016, compared to 8.6 in 2015.
BALANCE SHEET
- Cash and cash equivalents at March 31, 2016, totaled $172.2 million, compared to $262.2 million at December 31, 2015, primarily reflecting investments in real estate to replace lots and position the company for future growth.
- Real estate assets increased by $120.9 million for the first quarter, ending at $2.22 billion at March 31, 2016, compared to $2.10 billion at December 31, 2015.
- Meritage ended the first quarter of 2016 with approximately 28,400 total lots under control, compared to approximately 29,300 total lots at March 31, 2015 and 27,800 at year-end 2015.
- Net debt-to-capital ratio at March 31, 2016 was 42.4%, compared to 40.4% at December 31, 2015, due to the use of cash for land and development, and a growing inventory of homes under construction during the first quarter of 2016.
CONFERENCE CALL
Management will host a conference call today to discuss the Company's results at 10:30 a.m. Eastern Time (7:30 a.m. Arizona Time). The call will be webcast with an accompanying slideshow available on the "Investor Relations" page of the Company's web site at http://investors.meritagehomes.com. Telephone participants may avoid any delays by pre-registering for the call using the following link to receive a special dial-in number and PIN.
Conference Call registration link: http://dpregister.com/10083245.
Telephone participants who are unable to pre-register may dial in to 866-226-4948 on the day of the call. International dial-in number is 1-412-902-4125 or 1-855-669-9657 for Canada.
A replay of the call will be available until May 12, 2016, beginning at approximately 12:30 p.m. ET on April 28 on the website noted above, or by dialing 877-344-7529, 1-412-317-0088 for international or 1-855-669-9658 for Canada, and referencing conference number 10083245.
Meritage Homes Corporation and Subsidiaries Consolidated Income Statements (Unaudited) (In thousands, except per share data) Three Months Ended March 31, 2016 2015 ----------- ----------- Homebuilding: Home closing revenue $ 595,617 $ 517,273 Land closing revenue 2,149 1,439 ----------- ----------- Total closing revenue 597,766 518,712 ----------- ----------- Cost of home closings (492,270) (421,786) Cost of land closings (1,700) (1,285) ----------- ----------- Total cost of closings (493,970) (423,071) ----------- ----------- Home closing gross profit 103,347 95,487 Land closing gross profit 449 154 ----------- ----------- Total closing gross profit 103,796 95,641 Financial Services: Revenue 2,500 2,535 Expense (1,246) (1,299) Earnings from financial services unconsolidated entities and other, net 2,792 2,544 ----------- ----------- Financial services profit 4,046 3,780 ----------- ----------- Commissions and other sales costs (46,177) (41,612) General and administrative expenses (29,618) (29,650) Loss from other unconsolidated entities, net (157) (123) Interest expense (3,288) (3,154) Other income/(loss), net 283 415 ----------- ----------- Earnings before income taxes 28,885 25,297 Provision for income taxes (7,916) (8,897) ----------- ----------- Net earnings $ 20,969 $ 16,400 =========== =========== Earnings per share: Basic Earnings per share $ 0.53 $ 0.42 Weighted average shares outstanding 39,839 39,390 Diluted Earnings per share $ 0.50 $ 0.40 Weighted average shares outstanding 42,363 41,948
Meritage Homes Corporation and Subsidiaries Consolidated Balance Sheets (In thousands) (unaudited) March 31, December 2016 31, 2015 ---------- ---------- Assets: Cash and cash equivalents $ 172,175 $ 262,208 Other receivables 60,491 57,296 Real estate (1) 2,219,169 2,098,302 Deposits on real estate under option or contract 91,991 87,839 Investments in unconsolidated entities 10,592 11,370 Property and equipment, net 34,544 33,970 Deferred tax asset 58,989 59,147 Prepaids, other assets and goodwill 66,562 69,645 ---------- ---------- Total assets $2,714,513 $2,679,777 ========== ========== Liabilities: Accounts payable $ 122,289 $ 106,440 Accrued liabilities 145,883 161,163 Home sale deposits 42,639 36,197 Loans payable and other borrowings 25,734 23,867 Senior and convertible senior notes, net 1,093,659 1,093,173 ---------- ---------- Total liabilities 1,430,204 1,420,840 ---------- ---------- Stockholders' Equity: Preferred stock - - Common stock 400 397 Additional paid-in capital 563,892 559,492 Retained earnings 720,017 699,048 ---------- ---------- Total stockholders' equity 1,284,309 1,258,937 ---------- ---------- Total liabilities and stockholders' equity $2,714,513 $2,679,777 ========== ========== (1) Real estate - Allocated costs: Homes under contract under construction $ 580,194 $ 456,138 Unsold homes, completed and under construction 269,353 307,425 Model homes 138,109 138,546 Finished home sites and home sites under development 1,231,513 1,196,193 ---------- ---------- Total real estate $2,219,169 $2,098,302 ========== ==========
Supplemental Information and Non-GAAP Financial Disclosures (Dollars in thousands - unaudited): Three Months Ended March 31, 2016 2015 ----------- ----------- Depreciation and amortization $ 3,402 $ 3,211 =========== =========== Summary of Capitalized Interest: Capitalized interest, beginning of period $ 61,202 $ 54,060 Interest incurred 17,559 15,282 Interest expensed (3,288) (3,154) Interest amortized to cost of home and land closings (11,347) (9,345) ----------- ----------- Capitalized interest, end of period $ 64,126 $ 56,843 =========== =========== March 31, December 2016 31, 2015 ----------- ----------- Notes payable and other borrowings $1,119,393 $1,117,040 Stockholders' equity 1,284,309 1,258,937 ----------- ----------- Total capital 2,403,702 2,375,977 Debt-to-capital 46.6% 47.0% Notes payable and other borrowings $1,119,393 $1,117,040 Less: cash and cash equivalents (172,175) (262,208) ----------- ----------- Net debt 947,218 854,832 Stockholders' equity 1,284,309 1,258,937 ----------- ----------- Total net capital $2,231,527 $2,113,769 Net debt-to-capital 42.4% 40.4%
Meritage Homes Corporation and Subsidiaries Consolidated Statements of Cash Flows (In thousands) (unaudited) Three Months Ended March 31, 2016 2015 ----------- ----------- Cash flows from operating activities: Net earnings $ 20,969 $ 16,400 Adjustments to reconcile net earnings to net cash used in operating activities: Depreciation and amortization 3,402 3,211 Stock-based compensation 4,758 4,630 Excess income tax provision/(benefit) from stock-based awards 516 (1,935) Equity in earnings from unconsolidated entities (2,635) (2,421) Distribution of earnings from unconsolidated entities 3,477 3,035 Other 1,048 (490) Changes in assets and liabilities: Increase in real estate (116,035) (58,906) (Increase)/decrease in deposits on real estate under option or contract (4,046) 3,767 Increase in receivables, prepaids and other assets (168) (5,695) Increase/(decrease) in accounts payable and accrued liabilities 455 (3,179) Increase in home sale deposits 6,442 3,392 ----------- ----------- Net cash used in operating activities (81,817) (38,191) ----------- ----------- Cash flows from investing activities: Investments in unconsolidated entities (63) (104) Purchases of property and equipment (3,940) (4,589) Proceeds from sales of property and equipment 35 44 Maturities of investments and securities 645 - Payments to purchase investments and securities (645) - ----------- ----------- Net cash used in investing activities (3,968) (4,649) ----------- ----------- Cash flows from financing activities: Proceeds from Credit Facility, net - 27,000 Repayment of loans payable and other borrowings (3,893) (3,017) Excess income tax (provision)/benefit from stock- based awards (516) 1,935 Proceeds from stock option exercises 161 2,834 ----------- ----------- Net cash (used in)/provided by financing activities (4,248) 28,752 ----------- ----------- Net decrease in cash and cash equivalents (90,033) (14,088) Beginning cash and cash equivalents 262,208 103,333 ----------- ----------- Ending cash and cash equivalents $ 172,175 $ 89,245 =========== ===========
Meritage Homes Corporation and Subsidiaries Operating Data (Dollars in thousands) (unaudited) Three Months Ended March 31, 2016 March 31, 2015 -------------------- -------------------- Homes Value Homes Value --------- ---------- --------- ---------- Homes Closed: Arizona 217 $ 74,999 186 $ 62,601 California 207 120,720 153 86,423 Colorado 138 65,327 128 57,854 --------- ---------- --------- ---------- West Region 562 261,046 467 206,878 --------- ---------- --------- ---------- Texas 465 159,971 440 152,587 --------- ---------- --------- ---------- Central Region 465 159,971 440 152,587 --------- ---------- --------- ---------- Florida 156 63,322 177 72,831 Georgia 65 22,014 52 15,458 North Carolina 118 50,377 89 34,975 South Carolina 67 21,171 76 24,560 Tennessee 55 17,716 34 9,984 --------- ---------- --------- ---------- East Region 461 174,600 428 157,808 --------- ---------- --------- ---------- Total 1,488 $ 595,617 1,335 $ 517,273 ========= ========== ========= ========== Homes Ordered: Arizona 259 $ 90,180 288 $ 90,591 California 270 151,012 310 178,097 Colorado 169 86,626 189 85,407 --------- ---------- --------- ---------- West Region 698 327,818 787 354,095 --------- ---------- --------- ---------- Texas 591 216,065 557 185,132 --------- ---------- --------- ---------- Central Region 591 216,065 557 185,132 --------- ---------- --------- ---------- Florida 227 92,594 248 108,857 Georgia 105 35,195 77 24,218 North Carolina 189 77,081 148 61,625 South Carolina 107 34,221 96 29,528 Tennessee 70 21,626 66 19,357 --------- ---------- --------- ---------- East Region 698 260,717 635 243,585 --------- ---------- --------- ---------- Total 1,987 $ 804,600 1,979 $ 782,812 ========= ========== ========= ========== Order Backlog: Arizona 359 $ 133,087 294 $ 94,208 California 352 214,438 369 215,637 Colorado 363 183,450 329 149,186 --------- ---------- --------- ---------- West Region 1,074 530,975 992 459,031 --------- ---------- --------- ---------- Texas 1,068 406,288 975 341,586 --------- ---------- --------- ---------- Central Region 1,068 406,288 975 341,586 --------- ---------- --------- ---------- Florida 358 147,278 308 138,596 Georgia 135 46,607 78 25,344 North Carolina 331 138,182 244 94,818 South Carolina 128 43,161 90 31,088 Tennessee 97 34,173 71 21,528 --------- ---------- --------- ---------- East Region 1,049 409,401 791 311,374 --------- ---------- --------- ---------- Total 3,191 $1,346,664 2,758 $1,111,991 ========= ========== ========= ==========
Meritage Homes Corporation and Subsidiaries Operating Data (unaudited) Three Months Ended --------------------------------------- March 31, 2016 March 31, 2015 ------------------- ------------------- Ending Average Ending Average --------- --------- --------- --------- Active Communities: Arizona 42 41.5 44 42.5 California 24 24.0 21 22.5 Colorado 14 15.0 16 16.5 --------- --------- --------- --------- West Region 80 80.5 81 81.5 --------- --------- --------- --------- Texas 70 71.0 61 60.0 --------- --------- --------- --------- Central Region 70 71.0 61 60.0 --------- --------- --------- --------- Florida 26 27.0 26 27.5 Georgia 18 17.5 13 13.0 North Carolina 24 25.0 23 22.0 South Carolina 16 17.0 20 20.0 Tennessee 9 9.0 5 5.0 --------- --------- --------- --------- East Region 93 95.5 87 87.5 --------- --------- --------- --------- Total 243 247.0 229 229.0 ========= ========= ========= =========
About Meritage Homes Corporation
Meritage Homes is the seventh-largest public homebuilder in the United States, based on homes closed in 2015. Meritage builds and sells single-family homes for first-time, move-up, luxury and active adult buyers across the Western, Southern and Southeastern United States. Meritage builds in markets including: Sacramento, San Francisco Bay area, southern coastal and Inland Empire markets in California; Houston, Dallas-Ft. Worth, Austin and San Antonio, Texas; Phoenix/Scottsdale, Green Valley and Tucson, Arizona; Denver and Fort Collins, Colorado; Orlando, Tampa and southern Florida; Raleigh and Charlotte, North Carolina; Greenville-Spartanburg and York County, South Carolina; Nashville, Tennessee and Atlanta, Georgia.
Meritage has designed and built more than 90,000 homes in its 30-year history, and has a reputation for its distinctive style, quality construction, and positive customer experience. Meritage is the industry leader in energy-efficient homebuilding and has received the U.S. Environmental Protection Agency's ENERGY STAR Partner of the Year for Sustained Excellence Award in each of the last four years, for innovation and industry leadership in energy efficient homebuilding.
For more information, visit investors.meritagehomes.com.
This press release and the accompanying comments during our analyst call contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include management's expectations with respect to future revenue and earnings growth, projected home closings and home closing revenue for the year 2016, and the Company's strategy to develop communities with higher densities, lower price points and similar net margins.
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. These risks and uncertainties include, but are not limited to, the following: the availability of finished lots and undeveloped land; interest rates and changes in the availability and pricing of residential mortgages; fluctuations in the availability and cost of labor; changes in tax laws that adversely impact us or our homebuyers; reversal of the current economic recovery; the ability of our potential buyers to sell their existing homes; cancellation rates; inflation in the cost of materials used to develop communities and construct homes; the adverse effect of slower order absorption rates; impairments of our real estate inventory; a change to the feasibility of projects under option or contract that could result in the write-down or write-off of option deposits; our potential exposure to natural disasters or severe weather conditions; competition; construction defect and home warranty claims; failures in health and safety performance; our success in prevailing on contested tax positions; our ability to obtain performance bonds in connection with our development work; the loss of key personnel; or our failure to comply with, laws and regulations; limitations of our geographic diversification; fluctuations in quarterly operating results; our level of indebtedness; our ability to obtain financing due to a downgrade of our credit ratings; our ability to successfully integrate acquired companies and achieve anticipated benefits from these acquisitions; our compliance with government regulations and the effect of legislative or other initiatives that seek to restrain growth of new housing construction or similar measures; legislation relating to energy and climate change; 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, 2015 and subsequent quarterly reports on Forms 10-Q under the caption "Risk Factors," which can be found on our website.
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Contacts:
Brent Anderson
VP Investor Relations
(972) 580-6360 (office)
investors@meritagehomes.com