Meritage Homes Corp. (MTH) filed Quarterly Report for the period ended 2009-09-30.
Meritage Homes Corp. is one of the nation's largest single-family homebuilders. Meritage Homes Corp. has a market cap of $595.2 million; its shares were traded at around $18.79 with and P/S ratio of 0.4.
Highlight of Business Operations:
During 2009, we continued to focus on our goals to return to profitability, generate positive cash flow and strengthen our balance sheet. We grew our cash, cash equivalents and restricted cash balance to $365.6 million at September 30, 2009, including the collection of $107.7 million in income tax refunds in the first three quarters of 2009. We also increased gross margins excluding impairments to 14.5%, a record-high for the past eight quarters. Additionally, we have begun to rebuild our lot positions with well located low-cost lots to supplement and replace our older communities as they close out. We believe our strategy provides us with flexibility given the current difficult market conditions but also allows us to take advantage of unique opportunities to continue to purchase deeply-discounted lots in select markets.
To appeal to our target customers in the first-time and first-time move-up demographic, we are also planning to temporarily increase our spec starts to ensure we have a sufficient supply of completed homes for buyers looking for an immediate move-in. Approximately half of our sales during the third quarter of 2009 were from spec sales, which contributed to the decline in our unsold inventory to $67.9 million, or 407 homes, at September 30, 2009, as compared to $158.4 million at December 31, 2008, comprised of 768 homes. During the current quarter, the decline in our unsold inventory was partly due to the demand for our started unsold homes as they were being sold faster than we were starting them, as well as our improved cycle times, which allow us to maintain a lower level of inventory to meet demand as we are able to turn the inventory faster.
Total home closing revenue was $231.8 and $683.2 million for the three and nine months ended September 30, 2009, respectively, decreasing 37.8% and 38.9% from the same periods last year, due to slower sales and closings volumes, lower average selling prices and a planned decrease in our actively-selling communities. Net loss for the three and nine months ended September 30, 2009 decreased $126.2 and $103.0 million to a loss of $(17.8) and $(109.7) million, respectively. The quarter-over-quarter net loss improvement is primarily due to a reduced level of impairments, with $13.2 million (pre-tax) of real estate-related impairments recorded in the third quarter of 2009 as compared to $55.1 million in the same period of 2008. Impairments for the nine months ended September 30, 2009 were $90.3 million as compared to $154.3 million for the nine months ended September 30, 2008. The impairments for the three quarters ended September 30, 2009 include a $55.4 million write-off related to the termination of our last significant optioned project. The project in North Phoenix was no longer projected to generate profits sufficient to justify the additional investment needed to continue development.
At September 30, 2009, our backlog of $404.8 million reflects a decrease of 34.0% or $208.1 million when compared to the backlog at September 30, 2008 but improved $22.5 million from our June 30, 2009 balance of $382.3 million and has improved sequentially each quarter since December 31, 2008. The year-over-year decreases are due to the declines in demand and average sales price which decreased from $270,100 at September 30, 2008 to $241,500 at September 30, 2009. The price decreases are due to both the continued downward pressure on pricing as well as the execution of our strategy to re-align our product offerings to target the entry-level and first-time move-up payment levels. In the third quarter of 2009, our cancellation rate on sales orders improved to 20% of gross orders, back to our historical average, as compared to 40% in the same period a year ago.
MTH is in the portfolios of Bill Miller of Legg Mason Value Trust.
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