Meritage Homes Corp., Scottsdale, Az. (NYSE:MTH) after market close Tuesday reported a net profit of $43 million ($1.35 per diluted share) for the fourth quarter ended Dec. 31, 2009. The gain resulted from a $90 million reversal of income tax liabilities made possible by a net-operating-loss carry back law that went into effect in November. The company expects to collect a $93 million tax refund early in 2010.
Shares of Meritage, which closed up 4% at $21.37 during the normal trading session, were up another 4.1% at $22.25 in after-hours trading shortly after 6 p.m. Tuesday.
Without the tax benefit, the company would have posted a net loss of $46.9 million on declining home closing revenue and $39 million in impairments and write downs for the quarter. The profit compares with a loss of $79 million($2.58 per diluted share) for the same period in 2008, which included $110 million in impairments and charges and a $30 million tax benefit.
The company posted a net loss for the full year of $66 million(-$2.12 per diluted share), including $129M in pre-tax real estate-related impairments and a net tax benefit of $88M, compared to net loss of $292 million (-$9.95 per diluted share) in 2008, which included $265million in impairment charges and a $16 million net tax benefit.
Fourth-quarter home closing revenue declined 28% from the prior year quarter to $279.6 million, as homes closed fell 19% to 1,202 and average prices fell 10% to $233,000 due primarily to the company's move to smaller homes and general market price declines. The company cut its community count by 14% to162 compared to the prior-year quarter.
New orders, however, jumped 24% to 621 sales, with gains of 50% in Texas and 19% in California. Sales-per-community also jumped to 3.9 from 2.6 in the comparable quarter of 2008. The cancellation rate improved to 30% from 56%.
Backlog fell 15% to 1,095 homes with a dollar value of $287.5 million, down from $338 million at the end of the 2008 quarter.
For the full year, the company closed 4,039 homes, down from 5,627 in 2008, and the value of closed homes dropped to $962.8 million from $1.51 billion.
At December 31, 2009, Meritage's total 12,906 lots under control represented about 3.2 years lot supply based on trailing twelve months closings, with approximately 77% of total lots owned. By comparison, the Company controlled15,802 lots at December 31, 2008, with 55% of total lots owned. The company added 1,000 lots in the fourth quarter.
The company took an additional $3 million charge to cover the costs of Chinese drywall remediation in Florida, brining its total reserve for that purpose to $6 million. Excluding impairments, gross margins on home closings climbed to 14.9% in the fourth quarter 2009, 16% before the Chinese drywall charge, compared to 14.3% in the prior year's fourth quarter.
Total G&A increased to 7.4% of total revenue in 2009 compared to 3.9% in 2008. General and administrative expenses were 4.2% of fourth quarter 2009 total revenue. Commissions and other sales costs decreased 35% year over year and declined as a percentage of total revenue to 8.1% from 8.9% in 2008.
The Company ended the year with $391 million in cash and cash equivalents, restricted cash and short-term investments, an increase of $185 million over the year-end 2008 total. After retiring $24 million of debt in exchange for equity during 2009, the Company's net debt to total capital ratio was 31% at December 31, 2009, compared to 45% at December 31, 2008. Meritage also terminated its unused credit facility in 2009.
"We sold several non-strategic properties near the end of 2009 that were not needed to execute our current business plan, with the added benefit of harvesting substantial tax benefits from previous impairments incurred on those properties," said Steven J. Hilton, Meritage chairman and CEO."Assuming a stable to improving homebuilding environment in 2010, we believe that our risk of any further significant impairments is minimal."
He continued, "Based on what we've already accomplished and our on-going plans, I believe we have not only positioned the company for a return to profitability in 2010, but have also permanently improved our competitiveness. We have significantly reduced our construction costs and overhead, and expect to realize further gains through a managed process of continuous improvement in our operations. We have built a robust market research function that we believe gives us a strategic advantage in underwriting lot acquisitions and pricing our homes, through a better understanding of the competitive landscape for both resale and new homes, as well as home buyer trends in our markets."
Learn more about markets featured in this article: Phoenix, AZ.