Meritage expecting to be profitable in second half of '09 by capitalizing on land deals

By Jennifer Lanning Drey

Portland, Ore., June 19 - Meritage Homes Corp. projects it will return to profitability in the second half of 2009 by taking advantage of land deals expected to materialize over the next two to three quarters, Steven J. Hilton, chief executive officer of Meritage, said Thursday during a presentation at the Bank of America Homebuilders Conference in New York.

"We really want to be one of the first builders to be profitable going forward, and I think the builders that have land-light business models like ourselves will be the first ones to make profits," Hilton said.

In the coming quarters, Meritage plans to build homes on about $650 million of finished lots currently on its balance sheet and then liquidate through the land. The company will then look to redeploy the capital to discounted land deals in about half of the 12 markets it serves, Larry Seay, chief financial officer of Meritage, said during the presentation.

"We really think it's the time to start thinking about offense and not being so worried about defense," Hilton said.

The company also has about $100 million in cash and a zero balance on its revolving credit facility, both of which could be used to pursue land deals, Hilton said, but added the revolver would be used as little as possible.

When asked whether the company is interested in making any acquisitions in the near term, Hilton said Meritage would only buy another builder for its lot position, as opposed to gaining entry in a new market. However, he said he did not foresee such an opportunity becoming available.

Meritage is a Scottsdale, Ariz.-based builder of single-family homes.

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