Meritage Homes Corp.(NYSE:MTH) on April 3 reported preliminary results for its fiscal first quarter ended March 31, with sales and closings down significantly but revenue down even more sharply. The company also said it expects $60-65 million of charges related to real estate valuation adjustments and write-offs for the quarter.
Closings fell 26.5% from last year's first quarter to 1,320 homes, but closing revenue fell 35.8% to $370 million. Similarly, net sales fell 21.4% to 1,630, with revenue falling 34.5% to $420 million. The cancellation rate was 27% for both the 2007 and 2008 quarters.
In both cases, the greater revenue decline was driven by what the company called "aggressive pricing of unsold inventory," which it said contributed to the write downs,
Ending backlog at March 31, 2008, had an esimtated value of $720 million, compared to $1.3 billion at March 31, 2007.
"We generated significant cash during the period by closing sales on homes in inventory and collecting $76 million in tax refunds," said said Steven J. Hilton, Meritage CEO. "We reduced our standing inventory of unsold homes by about 340 this quarter, bringing our total inventory of unsold homes completed or under construction down to less than 770 at March 31, 2008. And we paid off all but two million dollars of our bank debt by the end of the quarter, equating to a $250 million total reduction in our bank facility debt over the last nine months."
Hilton also said the company expects to report continued compliance with all debt covenants at quarter-end.
"Considering the level of impairments we've recorded to date, and our much lower inventory levels, we expect our total real estate impairments for the year will be significantly lower than last year's, and they should decline as prices stabilize," said Hilton.
The company plans to release earnings on April 28 after market close, with a conference call on April 29.