Add
MTH to Portfolio
Set Alert
Email to a
Friend
| |||
|
|
Quotes & Info
|
| MTH > SEC Filings for MTH > Form 10-Q on 1-Aug-2012 | All Recent SEC Filings |
1-Aug-2012
Quarterly Report
Overview and Outlook
During the first half of 2012, the overall housing market continued to show signs of improvement largely driven by increasing consumer confidence levels related to the homebuilding industry, continued excellent housing affordability based on historical metrics, decreasing inventory home levels in many markets, and higher consumer sentiment for the overall economy. Individual markets continue to experience varying results as local economic and employment situations strongly influence the local market demand and homebuying abilities; however, most of our markets have shown positive indicators of a sustainable recovery. The resale market continues to be our biggest competition; however, we feel we successfully differentiate ourselves from these homes through our energy efficient offerings, innovative technology, ability to personalize our homes and by providing a home warranty. We improved on almost every key operating metric year over year in the second quarter of 2012, including increasing closings, average sales prices, revenue, orders, backlog, gross margin and net earnings.
We recorded our strongest order value since 2008 and based on our 1,611 homes in backlog and current orders trends, we anticipate that the remainder of 2012 will result in further positive comparative year-over-year results, which we expect to translate to higher closings year over year. In addition to the increased volume of unit activity, we have also experienced a 40.6% increase in our average orders per community in the second quarter of 2012 over the same period in 2011 and an increase of 20.0% sequentially from the first quarter of 2012 to three orders per month per community. In addition to overall improving demand, we also attribute our improving trends to investments in new communities in more desirable submarkets and our Meritage Green energy efficiency initiatives. As buyer demand has strengthened, we continue to initiate price increases in most of our communities, which we expect will more than offset construction cost increases and improve our bottom-line results. We continue to work on streamlining operations that we believe will help us improve profitability as the year progresses.
Summary Company Results
In the second quarter of 2012, we continued to achieve significant improvements in orders, closings and backlog year over year. Aided by a higher beginning backlog entering the quarter coupled with increased orders in the second quarter of 48.7% over the same period a year ago, we believe these results are indicative of increased demand and consumer confidence, which should translate into higher revenues and profitability moving into the last half of the year. While our current operating results indicate a recovering and stronger housing market, we recognize that we are still operating in a volatile economic environment but are cautiously optimistic about our future operational outlook. We believe the housing market will continue to gradually strengthen to the extent the overall economy continues to improve.
Total home closing revenue was $281.3 million and $485.4 million for the three and six months ended June 30, 2012, increasing 27.8% and 22.1%, respectively, from the same periods last year. The increase in closings of 186 units for the quarter ended June 30, 2012 as compared to the same period last year was further aided by a 5.0% increase in average sales prices of $12,800, increasing revenues by $61.2 million over prior year. For the six months ended June 30, 2012, increased closings of 267 units were boosted by a 4.0% increase in average sales price of $10,300 as compared to the six months ended June 30, 2011. We reported net income of $8.0 million and $3.3 million for the three and six months ended June 30, 2012, as compared to net income of $0.6 million and net loss of $6.1 million for the same periods in 2011, respectively. Our 2012 results include a $5.8 million loss from early extinguishment of debt and a $5.2 million tax benefit primarily due to the reversal of most of the company's deferred state tax asset in Florida. We expect improving bottom-line results for the remainder of 2012, as indicated by our high ending backlog.
At June 30, 2012, our backlog of $457.7 million reflects an increase of 75.5% or $196.8 million when compared to the backlog at June 30, 2011. The improvement reflects a 48.7% and 42.7% increase in unit orders in the first three and six months of 2012, respectively, as well as higher average sales prices on home orders of 9.9% and 6.6% for the three and six months ended June 30, 2012, respectively, as compared to the same periods a year ago. In the second quarter of 2012, we were also able to maintain a relatively low cancellation rate on home orders at 13% of gross orders as compared to 15% in the same period a year ago.
Land Closing Revenue and Gross Profit
From time to time, we may sell certain land parcels to other homebuilders, developers or investors if we believe the sale will provide a greater economic benefit to us than continuing home construction or where we are looking to diversify our land positions in the specific geography. As a result of such sales, we recognized land closing revenue of $755,000, and $1.1 million for the three and six months ending June 30, 2012, respectively as compared to $100,000 for the six months ending June 30, 2011. We also recognized impairments related to land sales in the amount of $669,000 for the three and six months ending June 30, 2012 with no such impairments in the prior comparable periods. All of our 2012 land sale impairments related to land sales in connection with the wind-down of our Nevada operations.
Company Actions and Positioning
Over the last several years and continuing through the stabilization and recovery of the homebuilding market that we believe is currently underway, we remain focused on our main goals of generating profit and maintaining a strong balance sheet. To help meet these goals, over the past several years we began and continue to execute on the following initiatives:
• Strengthening our balance sheet through a new senior note issuance and debt tender in 2012, extending our earliest debt maturities until 2017;
• Generating additional working capital and improving liquidity through an equity offering and establishing a revolving credit facility, both of which occurred during July 2012;
• Utilizing our enhanced market research to capitalize on the knowledge of our buyers' demands in each community, tailoring our pricing, product and amenities offered;
• Continuing to innovate and promote the Meritage Green energy efficiency program, where every new home we construct, at a minimum, meets ENERGY STAR ® standards, including the recent construction of the only triple-certified homes in the country, certified by the U.S. Environmental Protection Agency, for indoor air quality, water conservation and overall energy efficiency;
• Aggressively acquiring well-priced and well-positioned land to fund future growth;
• Adapting sales and marketing efforts to generate additional traffic and compete with resale homes;
• Focusing our purchasing efforts to manage cost increases as the economy recovers and demand rises;
• Monitoring our customers' satisfaction as measured by survey scores and working toward improving them based on the results of the surveys.
We have also consolidated overhead functions in all of our divisions and at our corporate offices to hold down general and administrative cost burden.
Additionally, we are evaluating opportunities for expansion into new markets that were less impacted by the homebuilding downturn over the past several years or that appear to be recovering more quickly than other markets. We are looking to redeploy our capital into projects both within our geographic footprint and through entry into new markets. In connection with these efforts, in 2011 we announced our entry into the Raleigh-Durham, North Carolina and Tampa, Florida markets and our intention to wind down operations in the hard-hit Las Vegas, Nevada market. We also recently announced entry into the Charlotte, North Carolina market with operations anticipated to commence in the second half of 2012.
In the second quarter of 2012, we opened 19 new communities while closing out 18 older communities, ending the quarter with 151 active communities. The relatively flat actively-selling community count is to a large extent the result of our improved sales pace in 2012, which has resulted in closing out communities at a faster pace than we anticipated.
In the second quarter of 2012, we also took steps to strengthen our balance sheet and extend debt maturities through a new senior note issuance. In April 2012, we concurrently issued $300.0 million of 7.00% senior notes due 2022 and completed a tender for approximately $259.0 million of our $285.0 million senior notes due 2015 and approximately $26.1 million of our $125.9 million of senior subordinated notes due 2017. We redeemed the remaining $26.0 million of the 2015 notes in early May 2012, which collectively extinguished all of our $285.0 million of notes due 2015 and extended our earliest debt maturities to 2017. See Note 5 to the accompanying unaudited consolidated financial statements for further discussion. Subsequent to June 30, 2012, we completed an equity offering of 2,645,000 shares, generating approximately $87.1 million in net proceeds as well as established an unsecured revolving credit facility with a capacity of $125.0 million. See Note 14 to the accompanying unaudited consolidated financial statements for further discussion.
We believe such initiatives help support our goals and, coupled with the improving economy and homebuilding market, will allow us to be well positioned to take advantage of a full recovery as it occurs.
Critical Accounting Policies
The accounting policies we deem most critical to us and that involve the most difficult, subjective or complex judgments include revenue recognition, valuation of real estate, warranty reserves, off-balance sheet arrangements, valuation of deferred tax assets and share-based payments. There have been no significant changes to our critical accounting policies during the six months ended June 30, 2012 compared to those disclosed in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, included in our 2011 Annual Report on Form 10-K.
The composition of our closings, home orders and backlog is constantly changing and is based on a dissimilar mix of communities between periods as new projects open and existing projects wind down. Further, individual homes within a community can range significantly in price due to differing square footage, option selections, lot sizes and quality of lots (e.g. cul-de-sac, view lots, greenbelt lots). These variations result in a lack of meaningful comparability between our home orders, closings and backlog due to the changing mix between periods.
The tables below present operating and financial data that we consider most critical to managing our operations (dollars in thousands):
Home Closing Revenue
Three Months Ended June 30, Quarter over Quarter
2012 2011 Chg $ Chg %
Total
Dollars $ 281,340 $ 220,131 $ 61,209 27.8 %
Homes closed 1,042 856 186 21.7 %
Avg sales price $ 270.0 $ 257.2 $ 12.8 5.0 %
West Region
California
Dollars $ 50,521 $ 28,051 $ 22,470 80.1 %
Homes closed 148 83 65 78.3 %
Avg sales price $ 341.4 $ 338.0 $ 3.4 1.0 %
Nevada
Dollars $ 2,093 $ 3,159 $ (1,066 ) (33.7 )%
Homes closed 11 15 (4 ) (26.7 )%
Avg sales price $ 190.3 $ 210.6 $ (20.3 ) (9.6 )%
West Region Totals
Dollars $ 52,614 $ 31,210 $ 21,404 68.6 %
Homes closed 159 98 61 62.2 %
Avg sales price $ 330.9 $ 318.5 $ 12.4 3.9 %
Central Region
Arizona
Dollars $ 54,772 $ 34,949 $ 19,823 56.7 %
Homes closed 208 154 54 35.1 %
Avg sales price $ 263.3 $ 226.9 $ 36.4 16.0 %
Texas
Dollars $ 101,744 $ 115,605 $ (13,861 ) (12.0 )%
Homes closed 439 475 (36 ) (7.6 )%
Avg sales price $ 231.8 $ 243.4 $ (11.6 ) (4.8 )%
Colorado
Dollars $ 26,877 $ 18,628 $ 8,249 44.3 %
Homes closed 80 58 22 37.9 %
Avg sales price $ 336.0 $ 321.2 $ 14.8 4.6 %
Central Region Totals
Dollars $ 183,393 $ 169,182 $ 14,211 8.4 %
Homes closed 727 687 40 5.8 %
Avg sales price $ 252.3 $ 246.3 $ 6.0 2.4 %
East Region
North Carolina
Dollars $ 9,507 N/A $ 9,507 N/M
Homes closed 26 N/A 26 N/M
Avg sales price $ 365.7 N/A $ 365.7 N/M
Florida
Dollars $ 35,826 $ 19,739 $ 16,087 81.5 %
Homes closed 130 71 59 83.1 %
Avg sales price $ 275.6 $ 278.0 $ (2.4 ) (0.9 )%
East Region Totals
Dollars $ 45,333 $ 19,739 $ 25,594 129.7 %
Homes closed 156 71 85 119.7 %
Avg sales price $ 290.6 $ 278.0 $ 12.6 4.5 %
|
N/M = Not Meaningful
Home Closing Revenue
Six Months Ended Year over
June 30, Year
2012 2011 Chg $ Chg %
Total
Dollars $ 485,362 $ 397,620 $ 87,742 22.1 %
Homes closed 1,801 1,534 267 17.4 %
Avg sales price $ 269.5 $ 259.2 $ 10.3 4.0 %
West Region
California
Dollars $ 83,827 $ 49,222 $ 34,605 70.3 %
Homes closed 245 145 100 69.0 %
Avg sales price $ 342.2 $ 339.5 $ 2.7 0.8 %
Nevada
Dollars $ 3,289 $ 6,138 $ (2,849 ) (46.4 )%
Homes closed 17 30 (13 ) (43.3 )%
Avg sales price $ 193.5 $ 204.6 $ (11.1 ) (5.4 )%
West Region Totals
Dollars $ 87,116 $ 55,360 $ 31,756 57.4 %
Homes closed 262 175 87 49.7 %
Avg sales price $ 332.5 $ 316.3 $ 16.2 5.1 %
Central Region
Arizona
Dollars $ 93,671 $ 66,916 $ 26,755 40.0 %
Homes closed 350 281 69 24.6 %
Avg sales price $ 267.6 $ 238.1 $ 29.5 12.4 %
Texas
Dollars $ 173,395 $ 200,415 $ (27,020 ) (13.5 )%
Homes closed 756 829 (73 ) (8.8 )%
Avg sales price $ 229.4 $ 241.8 $ (12.4 ) (5.1 )%
Colorado
Dollars $ 48,177 $ 34,257 $ 13,920 40.6 %
Homes closed 144 107 37 34.6 %
Avg sales price $ 334.6 $ 320.2 $ 14.4 4.5 %
Central Region Totals
Dollars $ 315,243 $ 301,588 $ 13,655 4.5 %
Homes closed 1,250 1,217 33 2.7 %
Avg sales price $ 252.2 $ 247.8 $ 4.4 1.8 %
East Region
North Carolina
Dollars $ 16,054 N/A $ 16,054 N/M
Homes closed 44 N/A 44 N/M
Avg sales price $ 364.9 N/A $ 364.9 N/M
Florida
Dollars $ 66,949 $ 40,672 $ 26,277 64.6 %
Homes closed 245 142 103 72.5 %
Avg sales price $ 273.3 $ 286.4 $ (13.1 ) (4.6 )%
East Region Totals
Dollars $ 83,003 $ 40,672 $ 42,331 104.1 %
Homes closed 289 142 147 103.5 %
Avg sales price $ 287.2 $ 286.4 $ 0.8 0.3 %
|
Home Orders (1)
Three Months Ended Quarter over
June 30, Quarter
2012 2011 Chg $ Chg %
Total
Dollars $ 385,829 $ 236,014 $ 149,815 63.5 %
Homes ordered 1,353 910 443 48.7 %
Avg sales price $ 285.2 $ 259.4 $ 25.8 9.9 %
West Region
California
Dollars $ 100,432 $ 30,564 $ 69,868 228.6 %
Homes ordered 279 94 185 196.8 %
Avg sales price $ 360.0 $ 325.1 $ 34.9 10.7 %
Nevada
Dollars $ 5,615 $ 4,868 $ 747 15.3 %
Homes ordered 31 22 9 40.9 %
Avg sales price $ 181.1 $ 221.3 $ (40.2 ) (18.2 )%
West Region Totals
Dollars $ 106,047 $ 35,432 $ 70,615 199.3 %
Homes ordered 310 116 194 167.2 %
Avg sales price $ 342.1 $ 305.4 $ 36.7 12.0 %
Central Region
Arizona
Dollars $ 70,331 $ 41,566 $ 28,765 69.2 %
Homes ordered 260 161 99 61.5 %
Avg sales price $ 270.5 $ 258.2 $ 12.3 4.8 %
Texas
Dollars $ 117,028 $ 104,447 $ 12,581 12.0 %
Homes ordered 482 445 37 8.3 %
Avg sales price $ 242.8 $ 234.7 $ 8.1 3.5 %
Colorado
Dollars $ 28,774 $ 22,448 $ 6,326 28.2 %
Homes ordered 87 70 17 24.3 %
Avg sales price $ 330.7 $ 320.7 $ 10.0 3.1 %
Central Region Totals
Dollars $ 216,133 $ 168,461 $ 47,672 28.3 %
Homes ordered 829 676 153 22.6 %
Avg sales price $ 260.7 $ 249.2 $ 11.5 4.6 %
East Region
North Carolina
Dollars $ 14,053 N/A $ 14,053 N/M
Homes ordered 40 N/A 40 N/M
Avg sales price $ 351.3 N/A $ 351.3 N/M
Florida
Dollars $ 49,596 $ 32,121 $ 17,475 54.4 %
Homes ordered 174 118 56 47.5 %
Avg sales price $ 285.0 $ 272.2 $ 12.8 4.7 %
East Region Totals
Dollars $ 63,649 $ 32,121 $ 31,528 98.2 %
Homes ordered 214 118 96 81.4 %
Avg sales price $ 297.4 $ 272.2 $ 25.2 9.3 %
|
(1) Home orders and home order dollars for any period represent the aggregate units or sales price of all homes ordered, net of cancellations. We do not include orders contingent upon the sale of a customer's existing home or any other material contingency as a sales contract until the contingency is removed.
Home Orders
Six Months Ended Year over
June 30, Year
2012 2011 Chg $ Chg %
Total
Dollars $ 694,158 $ 456,626 $ 237,532 52.0 %
Homes ordered 2,497 1,750 747 42.7 %
Avg sales price $ 278.0 $ 260.9 $ 17.1 6.6 %
West Region
California
Dollars $ 163,079 $ 57,713 $ 105,366 182.6 %
Homes ordered 466 172 294 170.9 %
Avg sales price $ 350.0 $ 335.5 $ 14.5 4.3 %
Nevada
Dollars $ 7,071 $ 8,890 $ (1,819 ) (20.5 )%
Homes ordered 39 41 (2 ) (4.9 )%
Avg sales price $ 181.3 $ 216.8 $ (35.5 ) (16.4 )%
West Region Totals
Dollars $ 170,150 $ 66,603 $ 103,547 155.5 %
Homes ordered 505 213 292 137.1 %
Avg sales price $ 336.9 $ 312.7 $ 24.2 7.7 %
Central Region
Arizona
Dollars $ 129,943 $ 75,908 $ 54,035 71.2 %
Homes ordered 509 310 199 64.2 %
Avg sales price $ 255.3 $ 244.9 $ 10.4 4.2 %
Texas
Dollars $ 225,891 $ 214,128 $ 11,763 5.5 %
Homes ordered 945 891 54 6.1 %
Avg sales price $ 239.0 $ 240.3 $ (1.3 ) (0.5 )%
Colorado
Dollars $ 59,087 $ 44,630 $ 14,457 32.4 %
Homes ordered 178 141 37 26.2 %
Avg sales price $ 331.9 $ 316.5 $ 15.4 4.9 %
Central Region Totals
Dollars $ 414,921 $ 334,666 $ 80,255 24.0 %
Homes ordered 1,632 1,342 290 21.6 %
Avg sales price $ 254.2 $ 249.4 $ 4.8 1.9 %
East Region
North Carolina
Dollars $ 26,132 N/A $ 26,132 N/M
Homes ordered 73 N/A 73 N/M
Avg sales price $ 358.0 N/A $ 358.0 N/M
Florida
Dollars $ 82,955 $ 55,357 $ 27,598 49.9 %
Homes ordered 287 195 92 47.2 %
Avg sales price $ 289.0 $ 283.9 $ 5.1 1.8 %
East Region Totals
Dollars $ 109,087 $ 55,357 $ 53,730 97.1 %
Homes ordered 360 195 165 84.6 %
Avg sales price $ 303.0 $ 283.9 $ 19.1 6.7 %
|
Three Months Ended June 30,
2012 2011
Beginning Ending Beginning Ending
Active Communities
Total 150 151 141 145
West Region
California 21 20 14 18
Nevada 2 2 4 3
West Region Total 23 22 18 21
Central Region
Arizona 32 32 32 35
Texas 67 68 73 68
Colorado 8 8 9 8
Central Region Total 107 108 114 111
East Region
North Carolina 4 5 0 0
Florida 16 16 9 13
East Region Total 20 21 9 13
Six Months Ended June 30,
2012 2011
Beginning Ending Beginning Ending
Active Communities
Total 157 151 151 145
West Region
California 20 20 14 18
Nevada 2 2 4 3
West Region Total 22 22 18 21
Central Region
Arizona 37 32 32 35
. . .
|
|
|