Meritage Homes Reports Results for the First Quarter of 2013 Including 35% Growth in Orders, 65% Increase in Revenue and

Meritage Homes Reports Results for the First Quarter of 2013 Including 35% 
Growth in Orders, 65% Increase in Revenue and Diluted
EPS of $0.32 
SCOTTSDALE, AZ -- (Marketwired) -- 04/24/13 --  Meritage Homes
Corporation (NYSE: MTH), a leading U.S. homebuilder, today announced
first quarter results for the period ended March 31, 2013. 


 
                                                                            
                   Summary Operating Results (unaudited)                    
              (Dollars in thousands, except per share amounts)              
                                                                            
                                            Three Months Ended March 31,    
                                            2013        2012         %Chg   
                                         ----------  ----------   --------- 
Homes closed (units)                          1,052         759          39%
Home closing revenue                     $  330,710  $  204,022          62%
Average sales price - closings           $      314  $      269          17%
Home orders (units)                           1,547       1,144          35%
Home order value                         $  520,403  $  308,329          69%
Average sales price - orders             $      336  $      270          25%
Ending backlog (units)                        1,967       1,300          51%
Ending backlog value                     $  668,959  $  353,161          89%
Average sales price - backlog            $      340  $      272          25%
Net income/(loss)                        $   12,041  $   (4,754)        n/m 
Diluted EPS                              $     0.32  $    (0.15)        n/m 

 
MANAGEMENT COMMENTS 
"We continued to achieve significant gains in virtually every key
metric we had targeted and across all of our states during the first
quarter of 2013," said Steven J. Hilton, chairman and chief executive
officer of Meritage Homes. "We grew our first quarter orders,
closings, backlog, average prices, revenue, gross margin and pretax
margin significantly over the prior year, with most of those metrics
reaching heights we haven't seen for many years. I believe our strong
performance is due to sound strategies and operational execution, as
well as healthier market conditions evident during this spring
selling season. 
"Housing demand is greater than the supply of homes available for
sale in many of the areas where we operate, causing home prices to
increase," Mr. Hilton explained. "To meet the higher demand, we
opened 24 new communities during the first quarter and also grew our
active community count to its highest point in almost four years. In
addition, our 9.5 orders per average community for the quarter was a
27% increase over 2012 even as we raised prices in many communities.
As a result, we received orders for 35% more homes for a 69% increase
in total order value compared to the first quarter of 2012. We are
pricing our homes and limiting the number of lots we're releasing for
sale in some communities to better manage our order volumes relative
to our production capacity, and to maximize our profit from those
communities." 
STRONG GROWTH 


 
--  Meritage ended the quarter with 168 active communities, up from 150 at
    March 31, 2012, and 158 at the end of 2012.
--  Meritage has established a solid position in its new Carolinas market
    since opening at the end of 2011, and ended the first quarter of 2013
    with 11 actively selling communities, up from four at March 31, 2012.
--  Orders per average community increased to 9.5 for the first quarter of
    2013 from 7.5 in the prior year period.
--  Order cancellation rate declined in the first quarter to 11% in 2013,
    compared to 15% in the first quarter of 2012.
--  Closings and revenue, orders and order value, and ending backlog
    increased in every state over the first quarter of 2012. California
    led in most areas with a 172% increase in closing revenue, a 113%
    increase in total order value, and the company's highest average
    prices and orders per community for the first quarter of 2013.
--  Average sales prices for home orders reached their highest point since
    the fourth quarter of 2005, largely reflective of the continuing shift
    in orders toward the states where Meritage's average home prices are
    highest, in California, Colorado, the Carolinas and Florida. Those
    four states made up 45% of the company's first quarter 2013 orders and
    55% of the total order value, increasing from 37% of total orders and
    45% of total order value in the first quarter last year.

  
OPERATING LEVERAGE 


 
--  Net income increased by $16.8 million for the first quarter to $12.0
    million or $0.32 per diluted share, from a loss of $4.8 million or
    ($0.15) per share in the first quarter of 2012, primarily due to
    higher home closing revenue and gross margins, supplemented by
    leveraging overhead expenses.
--  Home closing revenue increased 62% over the prior year as a result of
    39% more closings and a 17% increase in the average price of homes
    closed during the quarter.
--  Home closing gross margin increased to 19.5% in the first quarter of
    2013, from 17.2% in the first quarter of 2012 and 18.9% in the fourth
    quarter of 2012.
--  Commissions and other sales costs in the first quarter decreased as a
    percentage of home closing revenue to 7.8% in 2013 from 9.3% in 2012.
--  General and administrative expenses declined to 5.9% of first quarter
    revenue in 2013, from 7.2% in 2012, as revenue grew at nearly twice
    the rate of increase in general and administrative expenses.
--  Interest expense declined to 1.5% of first quarter revenue in 2013
    compared to 3.6% in 2012.
--  As a result, first quarter pre-tax margin increased 710 bps to 4.9% in
    2013 from (2.2%) in 2012, or $16.5 million in 2013 pre-tax income
    compared to a pre-tax loss of $4.6 million in 2012.

  
BALANCE SHEET STRENGTH 


 
--  Meritage replenished its land pipeline by spending approximately $75
    million on land acquisition and development in the first quarter of
    2013, and added approximately 1,600 lots under contract during the
    quarter.
--  Total lot supply at the end of the quarter was approximately 21,000,
    compared to approximately 17,200 a year earlier. Based on trailing
    twelve months closings, the March 31, 2013 balance represents a 4.6
    year supply of lots.
--  In March, Meritage issued $175 million of 4.50% senior notes due 2018,
    in anticipation of retiring $100 million of 7.731% notes due 2017,
    thereby securing $75 million of additional capital for growth with
    minimal added interest expense. Of the $100 million 7.731% issue, $17
    million was retired in the first quarter and the remaining $83 million
    balance was retired in the second quarter of 2013.
--  The company ended the first quarter of 2013 with $453 million in cash
    and cash equivalents, restricted cash and securities, an increase of
    $176 million over the March 31, 2012 total of $277 million. Net debt
    to total capital ratio decreased to 37.6% at March 31, 2013, from
    40.4% at March 31, 2012.

  
SUMMARY 
"We believe job growth in most of our markets has increased demand for
homes, and the limited supply of available resale homes has driven
more prospective home buyers to new construction. Existing homeowners
are also choosing to take advantage of historically low interest
rates and very affordable prices to trade up, increasing the demand
for new homes in already constrained markets," said Mr. Hilton. "We
expect increasing prices to help regulate orders to some degree, but
we believe the homebuilding market is poised for continued growth for
years to come, and Meritage is well positioned to capture much of
that growth. 
"Based on our projections for opening new communities, coupled with a
modest increase in average sales per community and higher average
sales prices, we are projecting approximately a 40-45% year-over-year
increase in home closing revenue for each of the three remaining
quarters of 2013. Assuming some additional improvement in margins --
which are being somewhat constrained by rising construction costs --
and the operating leverage demonstrated in our first quarter results,
we would anticipate earnings per diluted share in the range of
$2.20-$2.45 for the year, representing a 350%-400% increase in pretax
earnings." 
CONFERENCE CALL 
Management will host a conference call today to discuss the Company's
first quarter results at 10:30 a.m. Eastern time (7:30 a.m. Pacific
Time). The call will be webcast with an accompanying slideshow
available on the "Investor Relations" page of the Company's web site
at http://investors.meritagehomes.com. Telephone participants may
avoid any delays by pre-registering for the call using the following
link to receive a special dial-in number and PIN. 
Conference Call Pre-registration link:
http://services.choruscall.com/DiamondPassRegistration/register?confirmationNumb
er=10027059&linkSecurityString=213bae13e1 
Telephone participants who are unable to pre-register may dial in to
888-317-6016 on the day of the call. 
A replay of the call will be available for fifteen days, beginning at
12:30 p.m. ET on April 24, 2013 on the website noted above, or by
dialing 877-344-7529, and referencing conference number 10027059. For
more information, visit meritagehomes.com. 


 
                                                                           
                Meritage Homes Corporation and Subsidiaries                
                             Operating Results                             
                                (Unaudited)                                
                   (In thousands, except per share data)                   
                                                                           
                                                      Three Months Ended   
                                                          March 31,        
                                                      2013         2012    
                                                   ----------   ---------- 
Homebuilding:                                                              
  Home closing revenue                             $  330,710   $  204,022 
  Land closing revenue                                  5,725          328 
                                                   ----------   ---------- 
    Total closing revenue                             336,435      204,350 
                                                   ----------   ---------- 
  Cost of home closings                              (266,350)    (168,909)
  Cost of land closings                                (5,550)        (205)
                                                   ----------   ---------- 
    Total cost of closings                           (271,900)    (169,114)
                                                   ----------   ---------- 
  Home closing gross profit                            64,360       35,113 
  Land closing gross profit                               175          123 
                                                   ----------   ---------- 
    Total closing gross profit                         64,535       35,236 
                                                   ----------   ---------- 
Financial Services:                                                        
  Revenue                                                 842           -- 
  Expense                                                (573)         (25)
  Earnings from financial services unconsolidated                          
   entities and other, net                              2,787        1,606 
                                                   ----------   ---------- 
      Financial services profit                         3,056        1,581 
                                                   ----------   ---------- 
Commissions and other sales costs                     (25,879)     (18,977)
General and administrative expenses                   (19,724)     (14,721)
Loss from other unconsolidated entities, net             (155)        (183)
Interest expense                                       (5,128)      (7,371)
Other income/(expense), net                               470         (139)
Loss on early extinguishment of debt                     (700)          -- 
                                                   ----------   ---------- 
Income/(loss) before income taxes                      16,475       (4,574)
Provision for income taxes                             (4,434)        (180)
                                                   ----------   ---------- 
Net income/(loss)                                  $   12,041   $   (4,754)
                                                   ==========   ========== 
                                                                           
Income/(loss) per share:                                                   
  Basic                                                                    
        Income/(loss) per share                    $     0.34   $    (0.15)
        Weighted average shares outstanding            35,798       32,634 
  Diluted                                                                  
        Income/(loss) per share                    $     0.32   $    (0.15)
        Weighted average shares outstanding            38,440       32,634 
                                                                           
                                                                           
                                                                           
                 Meritage Homes Corporation and Subsidiaries                
                    Condensed Consolidated Balance Sheets                   
                               (In thousands)                               
                                 (unaudited)                                
                                                                            
                                                       March 31,   December 
                                                         2013      31, 2012 
                                                      ----------  ----------
Assets:                                                                     
  Cash and cash equivalents                           $  325,021  $  170,457
  Investments and securities                              88,901      86,074
  Restricted cash                                         38,938      38,938
  Other receivables                                       23,885      20,290
  Real estate (1)                                      1,152,139   1,113,187
  Deposits on real estate under option or contract        11,321      14,351
  Investments in unconsolidated entities                  10,949      12,085
  Property and equipment, net                             16,352      15,718
  Deferred tax asset                                      74,407      77,974
  Prepaid expenses and other assets                       29,072      26,488
                                                      ----------  ----------
    Total assets                                      $1,770,985  $1,575,562
                                                      ==========  ==========
Liabilities:                                                                
  Accounts payable                                    $   60,283  $   49,801
  Accrued liabilities                                    100,102      96,377
  Home sale deposits                                      17,744      12,377
  Senior, senior subordinated, convertible senior                           
   notes and other borrowings                            881,219     722,797
                                                      ----------  ----------
      Total liabilities                                1,059,348     881,352
                                                      ----------  ----------
Stockholders' Equity:                                                       
  Preferred stock, par value $0.01. Authorized                              
   10,000,000 shares; none issued and outstanding at                        
   March 31, 2013 and December 31, 2012                       --          --
  Common stock, par value $0.01. Authorized                                 
   125,000,000 shares; issued 36,010,224 and                                
   35,613,351 shares at March 31, 2013 and December                         
   31, 2012, respectively                                    360         356
  Additional paid-in capital                             395,631     390,249
  Retained earnings                                      315,646     303,605
                                                      ----------  ----------
      Total stockholders' equity                         711,637     694,210
                                                      ----------  ----------
    Total liabilities and stockholders' equity        $1,770,985  $1,575,562
                                                      ==========  ==========
                                                                            
(1)Real estate - Allocated costs:                                           
  Homes under contract under construction             $  247,682  $  192,948
  Unsold homes, completed and under construction         105,094     107,466
  Model homes                                             64,783      62,411
  Finished home sites and home sites under                                  
   development                                           617,507     634,106
  Land held for development                               57,081      56,118
  Land held for sale                                      22,430      21,650
  Communities in mothball status                          37,562      38,488
                                                      ----------  ----------
      Total real estate                               $1,152,139  $1,113,187
                                                      ==========  ==========
                                                                            
                                                                            
                                                                            
Supplemental Information and Non-GAAP Financial Disclosures (In thousands - 
                                 unaudited):                                
                                                                            
                                                       Three Months Ended   
                                                           March 31,        
                                                       2013         2012    
                                                    ----------   ---------- 
Depreciation and amortization                       $    2,158   $    1,693 
                                                    ==========   ========== 
                                                                            
Summary of Capitalized Interest:                                            
Capitalized interest, beginning of period           $   21,600   $   14,810 
Interest incurred                                       12,726       10,847 
Interest expensed                                       (5,128)      (7,371)
Interest amortized to cost of home, land closings                           
 and impairments                                        (5,000)      (2,378)
                                                    ----------   ---------- 
Capitalized interest, end of period                 $   24,198   $   15,908 
                                                    ==========   ========== 
                                                                            
                                                     March 31,    December  
                                                       2013       31, 2012  
                                                    ----------   ---------- 
Notes payable and other borrowings                  $  881,219   $  722,797 
  Less: cash and cash equivalents, restricted                               
   cash, and investments and securities               (452,860)    (295,469)
                                                    ----------   ---------- 
Net debt                                               428,359      427,328 
Stockholders' equity                                   711,637      694,210 
                                                    ----------   ---------- 
Total capital                                       $1,139,996   $1,121,538 
                                                    ==========   ========== 
Net debt-to-capital                                       37.6%        38.1%
                                                                            
                                                                            
                                                                            
                Meritage Homes Corporation and Subsidiaries                 
              Condensed Consolidated Statements of Cash Flows               
                               (In thousands)                               
                                (unaudited)                                 
                                                                            
                                                       Three Months Ended   
                                                           March 31,        
                                                       2013         2012    
                                                    ----------   ---------- 
Cash flows from operating activities:                                       
  Net income/(loss)                                 $   12,041   $   (4,754)
  Adjustments to reconcile net income/(loss) to                             
   net cash provided by/(used in) operating                                 
   activities:                                                              
    Depreciation and amortization                        2,158        1,693 
    Stock-based compensation                             1,844        1,653 
    Loss on early extinguishment of debt                   700           -- 
    Excess income tax benefit from stock-based                              
     awards                                               (464)          -- 
    Equity in earnings from unconsolidated                                  
     entities                                           (2,632)      (1,423)
    Distribution of earnings from unconsolidated                            
     entities                                            3,722        1,252 
    Other                                                3,632          313 
  Changes in assets and liabilities:                                        
    Increase in real estate                            (38,876)     (52,722)
    Decrease in deposits on real estate under                               
     option or contract                                  3,030           99 
    (Increase)/decrease in receivables and prepaid                          
     expenses and other assets                          (5,312)       1,355 
    Increase/(decrease) in accounts payable and                             
     accrued liabilities                                14,671       (5,210)
    Increase in home sale deposits                       5,367        2,382 
                                                    ----------   ---------- 
      Net cash used in operating activities               (119)     (55,362)
                                                    ----------   ---------- 
Cash flows from investing activities:                                       
  Investments in unconsolidated entities                   (28)        (130)
  Distributions of capital from unconsolidated                              
   entities                                                 74           -- 
  Purchases of property and equipment                   (2,704)      (2,336)
  Proceeds of sales from property and equipment             33          350 
  Maturities of investments and securities              43,999       50,000 
  Payments to purchase investments and securities      (46,826)     (76,503)
  Increase in restricted cash                               --          (83)
                                                    ----------   ---------- 
      Net cash used in investing activities             (5,452)     (28,702)
                                                    ----------   ---------- 
Cash flows from financing activities:                                       
  Repayments of senior subordinated notes              (17,264)          -- 
  Proceeds from issuance of new debt                   175,000           -- 
  Debt issuance costs                                   (1,143)          -- 
  Excess income tax benefit from stock-based                                
   awards                                                  464           -- 
  Proceeds from stock option exercises                   3,078        1,055 
                                                    ----------   ---------- 
      Net cash provided by financing activities        160,135        1,055 
                                                    ----------   ---------- 
Net increase/(decrease) in cash                        154,564      (83,009)
Beginning cash and cash equivalents                    170,457      173,612 
                                                    ----------   ---------- 
Ending cash and cash equivalents (2)                $  325,021   $   90,603 
                                                    ==========   ========== 

 
(2) Ending cash and cash equivalents as of March 31, 2013 and December
31, 2012 excludes investments and securities and restricted cash
totaling $128 million and $125 million, respectively. 


 
                                                                            
                                                                            
                                                                            
                 Meritage Homes Corporation and Subsidiaries                
                               Operating Data                               
                           (Dollars in thousands)                           
                                 (unaudited)                                
                                                                            
                                               Three Months Ended           
                                       March 31, 2013       March 31, 2012  
                                    -------------------  -------------------
                                      Homes     Value      Homes     Value  
                                    --------  ---------  --------  ---------
Homes Closed:                                                               
  Arizona                                192  $  57,149       142  $  38,899
  California                             228     90,642        97     33,306
  Colorado                                94     32,204        64     21,300
  Nevada                                  16      3,569         6      1,196
                                    --------  ---------  --------  ---------
  West Region                            530    183,564       309     94,701
                                    --------  ---------  --------  ---------
  Texas                                  354     90,705       317     71,651
                                    --------  ---------  --------  ---------
  Central Region                         354     90,705       317     71,651
                                    --------  ---------  --------  ---------
  Carolinas                               40     14,215        18      6,547
  Florida                                128     42,226       115     31,123
                                    --------  ---------  --------  ---------
  East Region                            168     56,441       133     37,670
                                    --------  ---------  --------  ---------
  Total                                1,052  $ 330,710       759  $ 204,022
                                    ========  =========  ========  =========
Homes Ordered:                                                              
  Arizona                                318  $  97,708       249  $  59,612
  California                             314    133,631       187     62,647
  Colorado                               141     56,795        91     30,313
  Nevada                                  23      5,506         8      1,456
                                    --------  ---------  --------  ---------
  West Region                            796    293,640       535    154,028
                                    --------  ---------  --------  ---------
  Texas                                  503    131,130       463    108,863
                                    --------  ---------  --------  ---------
  Central Region                         503    131,130       463    108,863
                                    --------  ---------  --------  ---------
  Carolinas                               69     26,886        33     12,079
  Florida                                179     68,747       113     33,359
                                    --------  ---------  --------  ---------
  East Region                            248     95,633       146     45,438
                                    --------  ---------  --------  ---------
  Total                                1,547  $ 520,403     1,144  $ 308,329
                                    ========  =========  ========  =========
Order Backlog:                                                              
  Arizona                                375  $ 121,375       265  $  65,945
  California                             401    167,577       172     56,989
  Colorado                               189     74,680        97     32,506
  Nevada                                  21      5,042         7      1,336
                                    --------  ---------  --------  ---------
  West Region                            986    368,674       541    156,776
                                    --------  ---------  --------  ---------
  Texas                                  649    172,742       542    130,706
                                    --------  ---------  --------  ---------
  Central Region                         649    172,742       542    130,706
                                    --------  ---------  --------  ---------
  Carolinas                               78     30,012        39     14,148
  Florida                                254     97,531       178     51,531
                                    --------  ---------  --------  ---------
  East Region                            332    127,543       217     65,679
                                    --------  ---------  --------  ---------
  Total                                1,967  $ 668,959     1,300  $ 353,161
                                    ========  =========  ========  =========
                                                                            
                                                                            
                                                                            
                 Meritage Homes Corporation and Subsidiaries                
                               Operating Data                               
                                 (unaudited)                                
                                                                            
                                                Three Months Ended          
                                      --------------------------------------
                                        March 31, 2013      March 31, 2012  
                                      ------------------  ------------------
                                        Beg.       End      Beg.       End  
                                      --------  --------  --------  --------
Active Communities:                                                         
  Arizona                                   38        40        37        32
  California                                17        15        20        21
  Colorado                                  12        11        10         8
  Nevada                                     1        --         2         2
                                      --------  --------  --------  --------
  West Region                               68        66        69        63
                                      --------  --------  --------  --------
  Texas                                     65        69        67        67
                                      --------  --------  --------  --------
  Central Region                            65        69        67        67
                                      --------  --------  --------  --------
  Carolinas                                  7        11         3         4
  Florida                                   18        22        18        16
                                      --------  --------  --------  --------
  East Region                               25        33        21        20
                                      --------  --------  --------  --------
  Total                                    158       168       157       150
                                      ========  ========  ========  ========

 
About Meritage Homes Corporation 
Meritage Homes is the ninth-largest public homebuilder in the United
States, based on 4,238 homes closed in 2012. Meritage builds and
sells single-family homes for first-time, move-up, luxury and active
adult buyers across the Western, Southern and Southeastern United
States. As of March 31, 2013, the company had 168 actively selling
communities in markets including Sacramento, San Francisco's East
Bay, the Central Valley and Southern California; Houston, Dallas-Ft.
Worth, Austin and San Antonio, Texas; Phoenix/Scottsdale and Tucson,
Arizona; Las Vegas, Nevada; Denver, Colorado; Orlando and Tampa,
Florida; Raleigh and Charlotte, North Carolina. 
Meritage has designed and built more than 75,000 homes in its 27-year
history, and has a reputation for its distinctive style, quality
construction, and positive customer experience. Meritage is the
industry leader in energy efficient homebuilding and in 2013 Meritage
received the U.S. Environmental Protection Agency's ENERGY STAR
Partner of the Year for Sustained Excellence Award, for its
innovation and industry leadership in energy efficient homebuilding.
Meritage was the first national homebuilder to be 100 percent ENERGY
STAR(R) qualified in every home it builds, and far exceeds ENERGY
STAR standards today. 
For more information, visit meritagehomes.com. 
This press release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Such
statements include management's expectations that increasing prices
will help regulate demand for new homes and maximize profit from
communities, that the homebuilding market is poised for years of
continued growth, that Meritage is positioned to capture additional
market growth, and management's projected revenue, pretax earnings
and earnings per share for 2013.  
Such statements are based upon the current beliefs and expectations
of Company management, and current market conditions, which are
subject to significant risks and uncertainties. Actual results may
differ from those set forth in the forward-looking statements. The
Company makes no commitment, and disclaims any duty, to update or
revise any forward-looking statements to reflect future events or
changes in these expectations.  
Meritage's business is subject to a number of risks and
uncertainties. As a result of those risks and uncertainties, the
Company's stock and note prices may fluctuate dramatically. The risks
and uncertainties include but are not limited to the following:
weakness in the homebuilding market resulting from an unexpected
setback in the current economic recovery; the availability of
finished lots and undeveloped land; interest rates and changes in the
availability and pricing of residential mortgages; the availability
and cost of materials and labor; adverse changes in tax laws that
benefit our homebuyers; the ability of our potential buyers to sell
their existing homes; cancellation rates and home prices in our
markets; inflation in the cost of materials used to construct homes;
the adverse effect of slower order absorption rates; potential
write-downs or write-offs of assets, including pre-acquisition costs
and deposits; our potential exposure to natural disasters;
competition; the adverse impacts of cancellations resulting from
small deposits relating to our sales contracts; construction defect
and home warranty claims; our success in prevailing on contested tax
positions; our ability to preserve our deferred tax assets and use
them within the statutory time limits; delays and risks associated
with land development; our ability to obtain performance bonds in
connection with our development work; the liquidity of our joint
ventures and the ability of our joint venture partners to meet their
obligations to us and the joint venture; the loss of key personnel;
changes in or our failure to comply with laws and regulations; our
lack of geographic diversification; fluctuations in quarterly
operating results; our financial leverage and level of indebtedness;
our ability to take certain actions because of restrictions contained
in the indentures for our senior and senior subordinated notes and
our ability to raise additional capital when and if needed; our
credit ratings; successful integration of future acquisitions;
government regulations and legislative or other initiatives that seek
to restrain growth or new housing construction or similar measures;
acts of war; the replication of our "Green" technologies by our
competitors; our exposure to information technology failures and
security breaches; and other factors identified in documents filed by
the company with the Securities and Exchange Commission, including
those set forth in our Form 10-K for the year ended December 31, 2012
under the caption "Risk Factors," which can be found on our website. 
Contacts: 
Brent Anderson
VP Investor Relations
(972) 580-6360 (office)
Brent.Anderson@meritagehomes.com