Meritage Homes Corp., No. 12 in the 2006 BUILDER 100, is reporting a net loss of $57 million after real estate and goodwill-related impairments reduced net earnings by $70 million after tax for the second quarter ending June 30. The Scottsdale, Arizona-based home builder joins a number of other public builders who have reported losses this week.
"Weakened demand and increased price incentives have resulted in lower margins on homes sold and more write-offs on remaining inventories," said Steven J. Hilton, chairman and CEO of Meritage Homes. "Based on lower market values, we adjusted our inventory valuations and abandoned certain lot purchase options where previously-negotiated prices won't allow us to generate a reasonable return at today's lower home selling prices.
"We expect the remainder of 2007 will be difficult, but take confidence in our sound strategy, strong organization, proven record of success, and solid franchise that includes some of the historically best home building markets in the country. We are emphasizing value, quality and customer satisfaction, and are determined to maintain a strong balance sheet that will allow us to emerge a stronger competitor when the market improves."
According to the company, the 2007 real estate-related charges stemmed from reduced market valuations of properties in California ($45 million), Florida ($15 million), Nevada ($12 million) and Arizona ($8 million). Due to persistent and severe weakness in southwest Florida, all goodwill and other intangible assets relating to a February 2005 acquisition in Ft. Myers/Naples were impaired and written off. These charges, after tax effects, combined to reduce net earnings from home building operations by $70 million. Excluding these charges, adjusted net earnings for the second quarter 2007 were $13 million, compared to $82 million in 2006.
Second quarter home closing revenue was $568 million in 2007, compared to $903 million in 2006 the company says. The largest year-over-year declines in closing revenue were experienced in Nevada (-69 percent), Arizona (-58 percent) and California (-52 percent), while quarterly revenue from Texas home closings increased 8 percent in 2007 over 2006.
Meritage will hold a Friday morning teleconference to address their second quarter report.