There were 92 press releases posted in the last 24 hours and 170,596 in the last 365 days.

Meritage Homes reports third quarter 2016 diluted EPS of $0.88 on a 22% increase in net earnings, with 11% growth in home closing revenue and home orders

SCOTTSDALE, Ariz., Oct. 27, 2016 (GLOBE NEWSWIRE) -- Meritage Homes Corporation (NYSE:MTH), a leading U.S. homebuilder, announced today third quarter results for the period ended September 30, 2016.

 
Summary Operating Results (unaudited)
(Dollars in thousands, except per share amounts)
 
    Three Months Ended September 30,   Nine Months Ended September 30,
    2016   2015   % Chg   2016   2015   % Chg
Homes closed (units)   1,800     1,712     5 %   5,238     4,603     14 %
Home closing revenue   $ 735,870     $ 661,884     11 %   $ 2,127,332     $ 1,770,184     20 %
Average sales price - closings   $ 409     $ 387     6 %   $ 406     $ 385     6 %
Home orders (units)   1,737     1,567     11 %   5,797     5,532     5 %
Home order value   $ 715,562     $ 629,977     14 %   $ 2,365,508     $ 2,188,604     8 %
Average sales price - orders   $ 412     $ 402     2 %   $ 408     $ 396     3 %
Ending backlog (units)               3,251     3,043     7 %
Ending backlog value               $ 1,375,857     $ 1,264,872     9 %
Average sales price - backlog               $ 423     $ 416     2 %
Net earnings   $ 36,887     $ 30,308     22 %   $ 97,734     $ 75,841     29 %
Diluted EPS   $ 0.88     $ 0.73     21 %   $ 2.33     $ 1.83     27 %
                                             

/EIN News/ -- MANAGEMENT COMMENTS

“We delivered another quarter of strong earnings growth as we continued to execute on our strategic plan,” said Steven J. Hilton, chairman and chief executive officer of Meritage Homes. “Earnings growth was driven primarily by increased home closing revenue on higher closing volumes. We delivered 1,800 homes during the quarter and celebrated the closing of our 100,000th home in October. We have expanded and diversified strategically over the past 31 years, and continue to have significant opportunities for growth.

“I am very pleased with the initial success we’re having in our ‘entry-level plus’ communities, including the first of our new LiVE.NOW.™ homes, which we unveiled earlier this month,” said Mr. Hilton. “We are offering homes that are a cut above traditional entry-level homes and include Meritage’s signature energy efficiency, designed to appeal to more discerning first-time buyers. Many of those are Millennials, who represent millions of additional household formations over the next decade or more, and additional growth potential for Meritage. Our enhanced product offering provides a broader range of affordably-priced homes to address pent-up demand, which we expect will produce top-line growth and operational efficiencies over time to drive additional earnings.”

He added, “We are benefitting from the numerous operational changes we made last year in our latest expansion markets and are experiencing higher absorptions in Georgia, North Carolina and Tennessee, which should lead to better returns and improved operating leverage for our company. As a result of those changes and stronger demand, we achieved a 14% increase in our orders per average community over last year’s third quarter, which drove our 11% order growth during the quarter," continued Mr. Hilton. “We believe the economic drivers of the housing market, including job growth, increased household formations and low interest rates, point to continued growth for well-positioned homebuilders.

“Based on our results for the first three quarters of the year and our positive outlook for the market, we have refined our projections for 2016 full year orders, closings, revenue and diluted earnings per share: We expect 7,300-7,500 orders and 7,300-7,500 home closings for full year home closing revenue of $2.9-3.1 billion in 2016. With a projected home closing gross margin of approximately 17.5% for the year, we expect to deliver full year diluted EPS of $3.40-3.60 for 2016.”

THIRD QUARTER RESULTS

  • Net earnings for the third quarter of 2016 were $36.9 million or $0.88 per diluted share, 22% higher than the $30.3 million or $0.73 per diluted share reported for the third quarter of 2015, primarily reflecting higher home closing revenue offsetting lower home closing gross margins in the 2016 quarter.
  • Home closing revenue increased 11% over the third quarter of 2015, combining a 5% increase in home closings with a 6% increase in the average price of homes closed during the quarter. The rise in average closing price was driven primarily by increased closings and higher average prices in the West region. Central region home closing revenue grew 9% on a 5% increase in closings over the prior year. Closings grew 10% in the East region, partially offset by a 3% decline in average closing price, for a 6% increase in home closing revenue.
  • Home closing gross margin of 17.8% in the third quarter of 2016 declined from 19.0% in the third quarter of 2015, though it improved sequentially from 17.3% in the second quarter of 2016. Margins have been compressed in 2016 primarily due to limited pricing power to offset increased land and construction costs.
  • Selling, general and administrative expenses were 11.4% of third quarter 2016 total closing revenue, compared to 11.5% in the prior year.
  • Interest expense decreased by $4.0 million to $0.2 million in the third quarter of 2016, as more interest incurred was capitalized to assets under development.
  • Other income/(expense) increased by a net $5.4 million in the third quarter of 2016 compared to 2015, reflecting a $4.1 million adverse legal ruling in 2015, while the 2016 quarter included additional income from municipalities related to reimbursable property development expenditures.
  • The effective tax rate was 31.4% in the third quarter of 2016, compared to 35.1% in the third quarter of 2015, reflecting the benefit from federal energy tax credits on Meritage’s highly energy efficient homes. The benefit was recognized in the third quarter of 2016 compared to the fourth quarter of 2015, following the legislative extension of energy tax credits.
  • Total order value grew 14% to $715.6 million in the third quarter of 2016, compared to $630.0 million in the third quarter of the prior year. Total orders increased 11% due to a 14% increase in orders per average community, despite a lower community count in the third quarter of 2016 than in 2015. Orders per average community were 7.3 in the third quarter of 2016 compared to 6.4 in the prior year. Average sales prices also rose 2% over 2015’s third quarter.  
  • Ending community count at September 30, 2016 was 237, compared to 250 at September 30, 2015, with a 2% decline in average active communities for the third quarter of 2016 compared to 2015.
  • September 30th ending backlog value was 9% higher in 2016 than in 2015, combining 7% more units in backlog with a 2% increase in the average price of orders in backlog.

YEAR TO DATE RESULTS

  • Net earnings were $97.7 million or $2.33 per fully diluted share for the first nine months of 2016, compared to $75.8 million or $1.83 per diluted share for the first nine months of 2015, a 29% increase in net earnings and 27% increase in fully diluted EPS. The increased earnings were primarily the result of a 20% increase in 2016 year-to-date home closing revenue and greater overhead leverage, partially offset by lower home closing gross margins.
  • Home closings for the first three quarters of the year increased 14% over 2015, and average closing prices increased 6% for the same period.
  • Year-to-date home closing gross margin in 2016 was 17.5%, compared to 18.9% for 2015, reflecting limited pricing power relative to increased land and construction costs, as well as immature markets within the East region.
  • Total commissions and selling expenses declined to 7.3% of year-to-date 2016 home closing revenue from 7.6% in 2015. General and administrative expenses declined to 4.3% of total closing revenue in 2016 compared to 4.8% in 2015.
  • Interest expense for the first nine months of the year decreased to $5.1 million in 2016 compared to $12.0 million in 2015, as more interest was capitalized to assets under development.

BALANCE SHEET

  • The company ended the third quarter of 2016 with $107.9 million in cash and cash equivalents, compared to $262.2 million at December 31, 2015. The decrease in cash was primarily due to investments in real estate inventory as a result of organic growth. The company had $25 million drawn on its revolving credit facility at quarter-end, which was repaid in early October.
  • Real estate assets increased to $2.43 billion at September 30, 2016, compared to $2.10 billion at December 31, 2015, as the balance of homes under contract under construction increased $176 million, accounting for most of the increase.
  • Net debt-to-capital ratio at September 30 was 43.0%, consistent with June 30, 2016 at 42.6%, and up from 40.4% at December 31, 2015 due to the use of cash to replenish the company’s land pipeline, as well as a growing inventory of homes under construction during 2016.
  • Total lot supply at the end of the quarter was approximately 28,800, compared to approximately 29,000 at September 30, 2015 and 27,800 at year-end 2015. Based on trailing twelve months closings, total lots at September 30, 2016 represented approximately a 4.0 year supply of lots.

CONFERENCE CALL

Management will host a conference call today to discuss the Company's results at 12:30 p.m. Eastern Time (9:30 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/10092994.

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 in Canada.

A replay of the call will be available through November 10, 2016, beginning at 2:30 p.m. ET on October 27, 2016 on the website noted above, or by dialing 877-344-7529, and referencing conference number 10092994. For more information, visit www.meritagehomes.com.

   
  Meritage Homes Corporation and Subsidiaries
  Consolidated Income Statements
  (In thousands, except per share data)
  (Unaudited)
   
    Three Months Ended
September 30,
  Nine Months Ended
September 30,
    2016   2015   2016   2015
Homebuilding:              
  Home closing revenue $ 735,870     $ 661,884     $ 2,127,332     $ 1,770,184  
  Land closing revenue 16,987     8,072     21,187     16,285  
  Total closing revenue 752,857     669,956     2,148,519     1,786,469  
  Cost of home closings (604,891 )   (536,267 )   (1,755,260 )   (1,434,843 )
  Cost of land closings (16,092 )   (7,445 )   (19,485 )   (14,992 )
  Total cost of closings (620,983 )   (543,712 )   (1,774,745 )   (1,449,835 )
  Home closing gross profit 130,979     125,617     372,072     335,341  
  Land closing gross profit 895     627     1,702     1,293  
  Total closing gross profit 131,874     126,244     373,774     336,634  
Financial Services:              
  Revenue 3,139     3,000     9,115     8,276  
  Expense (1,398 )   (1,253 )   (4,152 )   (3,914 )
  Earnings from financial services unconsolidated entities and other, net 4,215     3,854     10,802     9,155  
  Financial services profit 5,956     5,601     15,765     13,517  
Commissions and other sales costs (52,478 )   (48,097 )   (155,034 )   (134,876 )
General and administrative expenses (33,258 )   (28,774 )   (91,774 )   (86,074 )
Earnings/(loss) from other unconsolidated entities, net 440     (123 )   856     (415 )
Interest expense (167 )   (4,187 )   (5,127 )   (11,962 )
Other income/(expense), net 1,435     (3,996 )   3,263     (3,445 )
Earnings before income taxes 53,802     46,668     141,723     113,379  
Provision for income taxes (16,915 )   (16,360 )   (43,989 )   (37,538 )
Net earnings $ 36,887     $ 30,308     $ 97,734     $ 75,841  
               
Earnings per share:              
  Basic              
  Earnings per share $ 0.92     $ 0.76     $ 2.45     $ 1.92  
  Weighted average shares outstanding 40,022     39,663     39,958     39,568  
  Diluted              
  Earnings per share $ 0.88     $ 0.73     $ 2.33     $ 1.83  
  Weighted average shares outstanding 42,608     42,192     42,541     42,134  


 
Meritage Homes Corporation and Subsidiaries
Consolidated Balance Sheets
(In thousands)
(Unaudited)
 
    September 30, 2016   December 31, 2015
Assets:        
Cash and cash equivalents   $ 107,915     $ 262,208  
Other receivables   76,371     57,296  
Real estate (1)   2,429,014     2,098,302  
Deposits on real estate under option or contract   91,053     87,839  
Investments in unconsolidated entities   11,831     11,370  
Property and equipment, net   33,983     33,970  
Deferred tax asset   57,552     59,147  
Prepaids, other assets and goodwill   65,436     69,645  
Total assets   $ 2,873,155     $ 2,679,777  
Liabilities:        
Accounts payable   $ 148,260     $ 106,440  
Accrued liabilities   180,687     161,163  
Home sale deposits   36,988     36,197  
Loans payable and other borrowings   45,183     23,867  
Senior and convertible senior notes, net   1,094,632     1,093,173  
Total liabilities   1,505,750     1,420,840  
Stockholders' Equity:        
Preferred stock        
Common stock   400     397  
Additional paid-in capital   570,223     559,492  
Retained earnings   796,782     699,048  
Total stockholders’ equity   1,367,405     1,258,937  
Total liabilities and stockholders’ equity   $ 2,873,155     $ 2,679,777  
 (1) Real estate – Allocated costs:        
Homes under contract under construction   $ 632,454     $ 456,138  
Unsold homes, completed and under construction   377,490     307,425  
Model homes   150,662     138,546  
Finished home sites and home sites under development   1,268,408     1,196,193  
Total real estate   $ 2,429,014     $ 2,098,302  


Supplemental Information and Non-GAAP Financial Disclosures (Dollars in thousands – unaudited):
 
  Three Months Ended
September 30,
  Nine Months Ended
September 30,
  2016   2015   2016   2015
Depreciation and amortization $ 3,870     $ 3,565     $ 11,470     $ 10,294  
               
Summary of Capitalized Interest:              
Capitalized interest, beginning of period $ 64,682     $ 58,870     $ 61,202     $ 54,060  
Interest incurred 17,372     17,857     52,644     49,665  
Interest expensed (167 )   (4,187 )   (5,127 )   (11,962 )
Interest amortized to cost of home and land closings (14,256 )   (11,144 )   (41,088 )   (30,367 )
Capitalized interest, end of period $ 67,631     $ 61,396     $ 67,631     $ 61,396  
               
  September
30, 2016
  December
31, 2015
       
Notes payable and other borrowings $ 1,139,815     $ 1,117,040          
Stockholders' equity 1,367,405     1,258,937          
Total capital 2,507,220     2,375,977          
Debt-to-capital 45.5 %   47.0 %        
Notes payable and other borrowings $ 1,139,815     1,117,040          
Less: cash and cash equivalents $ (107,915 )   $ (262,208 )        
Net debt 1,031,900     854,832          
Stockholders’ equity 1,367,405     1,258,937          
Total net capital $ 2,399,305     $ 2,113,769          
Net debt-to-capital 43.0 %   40.4 %        


 
Meritage Homes Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 
    Nine Months Ended September 30,
    2016   2015
Cash flows from operating activities:        
Net earnings   $ 97,734     $ 75,841  
Adjustments to reconcile net earnings to net cash used in operating activities:        
Depreciation and amortization   11,470     10,294  
Stock-based compensation   11,042     12,418  
Excess income tax provision/(benefit) from stock-based awards   540     (2,040 )
Equity in earnings from unconsolidated entities   (11,658 )   (8,740 )
Distribution of earnings from unconsolidated entities   11,439     9,446  
Other   4,942     1,246  
Changes in assets and liabilities:        
Increase in real estate   (318,490 )   (198,520 )
(Increase)/decrease in deposits on real estate under option or contract   (3,160 )   2,719  
Increase in other receivables, prepaids and other assets   (14,201 )   (6,067 )
Increase in accounts payable and accrued liabilities   61,206     39,949  
Increase in home sale deposits   791     10,208  
Net cash used in operating activities   (148,345 )   (53,246 )
Cash flows from investing activities:        
Investments in unconsolidated entities   (242 )   (300 )
Purchases of property and equipment   (12,256 )   (12,334 )
Proceeds from sales of property and equipment   144     92  
Maturities/sales of investments and securities   645      
Payments to purchase investments and securities   (645 )    
Net cash used in investing activities   (12,354 )   (12,542 )
Cash flows from financing activities:        
Proceeds from Credit Facility, net   25,000      
Repayment of loans payable and other borrowings   (18,286 )   (4,044 )
Proceeds from issuance of senior notes       200,000  
Debt issuance costs       (3,013 )
Excess income tax (provision)/benefit from stock-based awards   (540 )   2,040  
Proceeds from stock option exercises   232     2,881  
Net cash provided by financing activities   6,406     197,864  
Net (decrease)/increase in cash and cash equivalents   (154,293 )   132,076  
Beginning cash and cash equivalents   262,208     103,333  
Ending cash and cash equivalents   $ 107,915     $ 235,409  



 
Meritage Homes Corporation and Subsidiaries
Operating Data
(Dollars in thousands)
(Unaudited)
                 
    Three Months Ended September 30,
    2016   2015
    Homes   Value   Homes   Value
Homes Closed:                
Arizona   253     $ 89,092     302     $ 92,888  
California   251     142,056     236     120,387  
Colorado   167     84,114     123     56,927  
West Region   671     315,262     661     270,202  
Texas   542     199,499     517     183,455  
Central Region   542     199,499     517     183,455  
Florida   206     85,647     202     90,285  
Georgia   83     27,477     62     20,663  
North Carolina   177     71,641     165     63,532  
South Carolina   76     22,658     80     25,812  
Tennessee   45     13,686     25     7,935  
East Region   587     221,109     534     208,227  
Total   1,800     $ 735,870     1,712     $ 661,884  
Homes Ordered:                
Arizona   345     $ 116,815     272     $ 96,867  
California   216     125,920     203     110,076  
Colorado   121     66,213     84     43,782  
West Region   682     308,948     559     250,725  
Texas   488     178,934     452     165,206  
Central Region   488     178,934     452     165,206  
Florida   208     95,946     227     94,114  
Georgia   85     28,841     67     23,143  
North Carolina   149     61,537     138     57,168  
South Carolina   71     22,434     88     26,766  
Tennessee   54     18,922     36     12,855  
East Region   567     227,680     556     214,046  
Total   1,737     $ 715,562     1,567     $ 629,977  


                 
    Nine Months Ended September 30,
    2016   2015
    Homes   Value   Homes   Value
Homes Closed:                
Arizona   749     $ 258,139     717     $ 227,367  
California   738     418,834     565     302,573  
Colorado   474     231,913     364     166,914  
West Region   1,961     908,886     1,646     696,854  
Texas   1,563     566,377     1,466     510,439  
Central Region   1,563     566,377     1,466     510,439  
Florida   619     252,311     589     254,607  
Georgia   229     76,874     156     49,178  
North Carolina   474     198,525     389     148,721  
South Carolina   231     71,577     247     77,630  
Tennessee   161     52,782     110     32,755  
East Region   1,714     652,069     1,491     562,891  
Total   5,238     $ 2,127,332     4,603     $ 1,770,184  
Homes Ordered:                
Arizona   935     $ 322,807     880     $ 290,172  
California   775     442,863     750     419,987  
Colorado   459     237,237     454     213,610  
West Region   2,169     1,002,907     2,084     923,769  
Texas   1,629     597,947     1,644     574,533  
Central Region   1,629     597,947     1,644     574,533  
Florida   702     295,453     693     295,634  
Georgia   305     102,392     197     64,051  
North Carolina   497     205,562     467     191,460  
South Carolina   296     95,123     283     85,767  
Tennessee   199     66,124     164     53,390  
East Region   1,999     764,654     1,804     690,302  
Total   5,797     $ 2,365,508     5,532     $ 2,188,604  
                 
Order Backlog:                
Arizona   503     $ 182,574     355     $ 129,023  
California   326     208,175     397     241,377  
Colorado   317     167,475     358     168,329  
West Region   1,146     558,224     1,110     538,729  
Texas   1,008     381,764     1,036     373,135  
Central Region   1,008     381,764     1,036     373,135  
Florida   370     161,148     341     143,597  
Georgia   171     58,944     94     31,457  
North Carolina   283     118,515     263     110,907  
South Carolina   153     53,657     106     34,257  
Tennessee   120     43,605     93     32,790  
East Region   1,097     435,869     897     353,008  
Total   3,251     $ 1,375,857     3,043     $ 1,264,872  



Meritage Homes Corporation and Subsidiaries
Operating Data
(Unaudited)
                 
    Three Months Ended September 30,
    2016   2015
    Ending   Average   Ending   Average
Active Communities:                
Arizona   40     41.5     41     42.0  
California   29     27.0     26     23.0  
Colorado   10     11.0     15     15.5  
West Region   79     79.5     82     80.5  
Texas   74     73.5     70     68.0  
Central Region   74     73.5     70     68.0  
Florida   26     26.0     31     30.5  
Georgia   17     17.0     17     16.5  
North Carolina   19     20.5     25     25.0  
South Carolina   15     15.5     17     18.5  
Tennessee   7     7.0     8     6.0  
East Region   84     86.0     98     96.5  
Total   237     239.0     250     245.0  


                 
    Nine Months Ended September 30,
    2016   2015
    Ending   Average   Ending   Average
Active Communities:                
Arizona   40     40.5     41     41.0  
California   29     26.5     26     25.0  
Colorado   10     13.0     15     16.0  
West Region   79     80.0     82     82.0  
Texas   74     73.0     70     64.5  
Central Region   74     73.0     70     64.5  
Florida   26     28.5     31     30.0  
Georgia   17     17.0     17     15.0  
North Carolina   19     22.5     25     23.0  
South Carolina   15     16.5     17     18.5  
Tennessee   7     8.0     8     6.5  
East Region   84     92.5     98     93.0  
Total   237     245.5     250     239.5  

About Meritage Homes Corporation

Meritage Homes is the seventh-largest public homebuilder in the United States, based on homes closed in 2015. Meritage Homes 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 Homes 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 south Florida; Raleigh and Charlotte, North Carolina; Greenville-Spartanburg and York County, South Carolina; Nashville, Tennessee; and Atlanta, Georgia.

Meritage Homes has designed and built over 100,000 homes in its 31-year history, and has a reputation for its distinctive style, quality construction, and positive customer experience. Meritage Homes 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 every year since 2013 for innovation and industry leadership in energy efficient homebuilding. For more information, visit 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 growth, projected orders, home closings and home closing revenue, home closing gross margins and diluted earnings per share for the full year 2016.

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 and cost 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; enactment of new laws or regulations or our failure to comply with laws and regulations; our limited 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 energy-efficient 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.

Contacts:	Brent Anderson, VP Investor Relations
(972) 580-6360 (office)
investors@meritagehomes.com

Primary Logo

Distribution channels: Building & Construction Industry