Meritage Homes Corp. (NYSE:MTH) after market close Monday reported a net loss of $18 million (-$0.60 per share) for the first quarter 2009, a far more narrow deficit than the net loss of $45 million (-$1.72 per share) in the first quarter 2008. The loss included $10 million in pre-tax charges for real estate-related valuation adjustments, 83% lower than the $60 million in impairments and charges for the comparable period last year.
First quarter home closing revenue declined 38% year over year to $230.98 million on 30% fewer homes closed (932) and an 11% reduction in average closing price from $280,000 in 2008 to $248,000 in 2009. New orders declined 40% to 987 with a value of $232.1 million, a 45% decline. Backlog at the end of the quarter was 1,336 homes, down 48% from last year's first quarter.Backlog value was down 53% to $339.2 million.
"The continued weakening of the housing market over the last year was reflected in our revenue decline and net loss in the first quarter of 2009,"said Steven J. Hilton, chairman and CEO, in a statement. "Despite harsh conditions, however, many of our results were positive this quarter. We increased our cash position, further strengthened our balance sheet and reduced our construction costs and overhead. In addition, our sales rebounded from a dismal fourth quarter, increasing by 97% sequentially."
The company ended the quarter with $344 million in cash, including a $108 million tax refund in March. It was cash-flow positive even without the tex refund, having generated a total of $30 million in cash from operations in the quarter. The net debt-to-capital ratio was 35%. Meritage was in compliance with all its debt covenants and had available borrowing capacity of $337 million under its $500 million revolving credit facility.
"We have brought our average selling price down more than 30% from its peak in this cycle and by as much as 50% in some markets," said Hilton. "In part, this was due to our redesign of new series of homes that are smaller and more efficient to build, and priced to compete more effectively with resales and foreclosed homes. In order to protect our margins, we have also reduced our construction costs by 30% or more in many divisions by re-bidding vendor contracts, and by realizing many construction efficiencies in our redesigned product."
Community count was down to 170 from 215 at the same time last year. It cut its spec inventory 28% to 550. Lot count was down to 15,069 (8,340 owned), about 2.9-years supply, from 24,591 (9,920 owned) at the same time last year.
The company said it cut S, G&A expenses by 40% from the comparable quarter last year to $33 million. Total gross margins improved to 7.5%, compared to 0.3% in the prior year, primarily due to lower real estate-related impairments in 2009.
Said Hilton, "There is less competition today, as many other builders who were overloaded with land, inventory and debt, or who did not have adequate access to capital, have closed their doors during this recession. Meanwhile, we have increased Meritage's market share and are now the 10th largest builder in the U.S., according to the most recent Big Builder ranking."