Exhibit 99.1
 
 
 
 
 
FOR IMMEDIATE RELEASE
 
 
 
 
Contacts:
Brent Anderson, VP Investor Relations
 
 
 
 
(972) 580-6360 (office)
 
 
 
 
Brent.Anderson@meritagehomes.com

Meritage Homes Reports Results for the First Quarter of 2014
First quarter EPS of $0.62 increased 94% compared to 2013;
Home closing revenue grew 23% and home closing gross margin increased to 22.8%

SCOTTSDALE, Ariz., April 23, 2014 - Meritage Homes Corporation (NYSE: MTH), a leading U.S. homebuilder, today announced first quarter results for the period ended March 31, 2014.

Summary Operating Results (unaudited)
(Dollars in thousands, except per share amounts)
 
    
 
 
Three Months Ended March 31,
 
 
2014
 
2013
 
%Chg
Homes closed (units)
 
1,109

 
1,052

 
5
 %
Home closing revenue
 
$
405,779

 
$
330,710

 
23
 %
Average sales price - closings
 
$
366

 
$
314

 
16
 %
Home orders (units)
 
1,525

 
1,547

 
(1
)%
Home order value
 
$
555,040

 
$
520,403

 
7
 %
Average sales price - orders
 
$
364

 
$
336

 
8
 %
Ending backlog (units)
 
2,269

 
1,967

 
15
 %
Ending backlog value
 
$
835,933

 
$
668,959

 
25
 %
Average sales price - backlog
 
$
368

 
$
340

 
8
 %
Net earnings
 
$
25,377

 
$
12,041

 
111
 %
Diluted EPS
 
$
0.62

 
$
0.32

 
94
 %




1


MANAGEMENT COMMENTS
“We achieved another quarter of strong revenue and earnings growth, generating the second highest quarterly pre-tax earnings we’ve reported in almost eight years,” said Steven J. Hilton, chairman and chief executive officer of Meritage Homes. “We grew home closing revenue by 23% and leveraged that with an improved gross margin to produce a 44% increase in gross profit on home closings, which led to a 111% increase in net earnings over the first quarter of 2013.
“Both our total order value and backlog value grew year over year, and total orders were nearly as high as last year’s first quarter, which was up 35% over 2012, making for a difficult comparison,” said Mr. Hilton. “Our Texas and southeastern markets grew enough to offset the decline in total order value from our western markets, showing the benefit of our strategic diversification. Orders in Texas were up 26% over 2013’s first quarter, and our East region produced 22% year-over-year growth as our new markets in the Carolinas and Florida contributed significantly to our total results.
"The high-pitched pace of sales in our western region has slowed in recent quarters after experiencing very robust demand and significant increases in home prices since 2012," he explained. "Demand in Arizona has softened over the last several months and home prices there have moderated. On the other hand, demand in California and Colorado remains strong, though not as intense as a year ago. We continue to focus on maximizing profitability at a more normalized sales pace."
He concluded, “We remain committed to our forecast of approximately 210-220 active communities by year-end 2014. Based on the trends in sales pace and prices that we’ve experienced so far this year, we are projecting that our 2014 home closing gross margin may be relatively flat compared to 2013, due to less pricing power and higher land costs. With that in mind, we believe we will still achieve significant earnings growth in 2014, and that future years’ earnings growth will be driven mainly by community count growth and operating leverage as we expand and grow our top line while managing our costs.”

FIRST QUARTER RESULTS
•
Net earnings increased by $13.3 million for the first quarter to $25.4 million or $0.62 per diluted share, from $12.0 million or $0.32 per diluted share in the first quarter of 2013, driven by higher home closing revenue and gross margins, assisted by additional operating leverage.
•
Home closing revenue increased 23% over the prior year, resulting from a 5% increase in home closings and a 16% increase in the average price of homes closed during the quarter. Closing revenue grew across all three

2


regions and five of the six states where Meritage operated continuously in both years. Meritage’s East region grew home closing revenue by 70% year over year, with 59% increases in Florida and the Carolinas. The Central region followed with a 30% increase in Texas. Total home closing revenue increased 4% in the West region, with Arizona up 26% and Colorado up 24%, while California was off 12% from the first quarter of 2013, when it led the company with 172% growth in home closing revenue over the first quarter of 2012.
•
Home closing gross margin increased 330 basis points (bps) to 22.8% in the first quarter of 2014 compared to 19.5% in the first quarter of 2013, as home prices increased more than did the costs of land and construction.
•
Commissions and other sales costs in the first quarter decreased slightly as a percentage of home closing revenue to 7.6% in 2014 compared to 7.8% in 2013.
•
General and administrative expenses for the first quarter decreased as a percentage of total closing revenue to 5.3% in 2014, compared to 5.9% in 2013.
•
Interest expense declined to 0.7% of first quarter closing revenue in 2014 compared to 1.5% in 2013, with a larger portion of interest capitalized to lots and homes under development.
•
Pre-tax margin increased 480 bps to 9.7% in the first quarter of 2014 from 4.9% in 2013.
•
Total order value grew 7% to $555.0 million, the second highest quarter for Meritage since the first quarter of 2007, driven primarily by Texas, which generated a $61.1 million year-over-year increase in total order value, 47% higher than 2013. For the company as a whole, an 8% increase in the average selling price of homes ordered more than offset the 1% decline in order volume from the first quarter of 2013.
•
Total orders for 1,525 homes represented the third highest quarterly orders for Meritage in the last six years. Only the first two quarters of 2013 were higher, when average orders per community were at their highest level since the second quarter of 2006.
•
After more than two years of exceptionally strong growth through the first half of 2013, first quarter 2014 orders were down 25% in California and 12% in Colorado compared to 2013. California still led the company with 12.2 orders per average active community during the first quarter of 2014, and Colorado reported an average of 9.2 per average active community, well above the company average. Arizona’s sales pace and order volume declined 32% and 28%, respectively, from the first quarter of 2013.
•
The East region, consisting of Florida, Tennessee and the Carolinas, increased total orders by 22% by expanding average active community count by 43%, partially offset by a 15% decline in average orders per community. Most of the growth came from Meritage’s newest markets in the Carolinas and Tennessee.
•
Ending community count at March 31, 2014 was 189 active communities, compared to 168 at March 31, 2013.
•
Order cancellation rate remained low at 13% in the first quarter of 2014 compared to 11% in 2013.

3


•
Ending backlog value was 25% higher at March 31, 2014 than it was a year earlier, with units in backlog up 15% and average price was 8% higher than it was at March 31, 2013.
BALANCE SHEET
•
The company ended the first quarter of 2014 with $338.7 million in cash and cash equivalents, investments and securities, with no restricted cash, compared to $363.8 million at December 31, 2013, and $452.9 million on March 31, 2013, which included $38.9 million in restricted cash.
•
In January 2014, Meritage issued approximately 2.53 million shares of common stock for net proceeds of approximately $110 million, to use for working capital, potential expansion into new markets and/or expansion of existing markets, including the possible acquisition of other homebuilders or assets and general corporate purposes.
•
Net debt-to-capital ratio at quarter-end was 36.6% compared to 39.1% at December 31, 2013 and 37.6% at March 31, 2013.
•
Real estate assets increased to $1.54 billion at March 31, 2014, compared to $1.41 billion at December 31 and $1.15 billion at March 31, 2013.
•
Total lot supply at the end of the quarter was approximately 25,800, compared to approximately 21,000 a year earlier. Based on trailing twelve months closings, the March 31, 2014 balance represents a 4.9 year supply of lots.
CONFERENCE CALL
Management will host a conference call today to discuss the Company's 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 registration link: http://dpregister.com/10043762.
Telephone participants who are unable to pre-register may dial in to 888-317-6016 on the day of the call. International dial-in number is 1-412-317-6016.
A replay of the call will be available for fifteen days, beginning at 12:30 p.m. ET on April 24, 2014 on the website noted above, or by dialing 877-344-7529, and referencing conference number 10043762. For more information, visit meritagehomes.com.



4



Meritage Homes Corporation and Subsidiaries
Consolidated Income Statements
(Unaudited)
(In thousands, except per share data)
 
 
 
 
Three Months Ended March 31,
 
 
 
2014
 
2013
Homebuilding:
 
 
 
 
 
Home closing revenue
 
$
405,779

 
$
330,710

 
Land closing revenue
 
2,566

 
5,725

 
Total closing revenue
 
408,345

 
336,435

 
Cost of home closings
 
(313,180
)
 
(266,350
)
 
Cost of land closings
 
(3,593
)
 
(5,550
)
 
Total cost of closings
 
(316,773
)
 
(271,900
)
 
Home closing gross profit
 
92,599

 
64,360

 
Land closing gross (loss)/profit
 
(1,027
)
 
175

 
Total closing gross profit
 
91,572

 
64,535

Financial Services:
 
 
 
 
 
Revenue
 
1,899

 
842

 
Expense
 
(1,075
)
 
(573
)
 
Earnings from financial services unconsolidated entities and other, net
 
2,201

 
2,787

 
Financial services profit
 
3,025

 
3,056

Commissions and other sales costs
 
(30,934
)
 
(25,879
)
General and administrative expenses
 
(21,671
)
 
(19,724
)
Loss from other unconsolidated entities, net
 
(169
)
 
(155
)
Interest expense
 
(2,713
)
 
(5,128
)
Other income, net
 
648

 
470

Loss on early extinguishment of debt
 
—

 
(700
)
Earnings before income taxes
 
39,758

 
16,475

Provision for income taxes
 
(14,381
)
 
(4,434
)
Net earnings
 
$
25,377

 
$
12,041

 
 
 
 
 
Earnings per share:
 
 
 
 
 
Basic
 
 
 
 
 
Earnings per share
 
$
0.66

 
$
0.34

 
Weighted average shares outstanding
 
38,687

 
35,798

 
Diluted
 
 
 
 
 
Earnings per share
 
$
0.62

 
$
0.32

 
Weighted average shares outstanding
 
41,308

 
38,440









5




Meritage Homes Corporation and Subsidiaries
Consolidated Balance Sheets
(In thousands)
(unaudited)
 
 
 
March 31, 2014
 
December 31, 2013
Assets:
 
 
 
 
Cash and cash equivalents
 
$
260,956

 
$
274,136

Investments and securities
 
77,698

 
89,687

Other receivables
 
54,165

 
38,983

Real estate (1)
 
1,538,218

 
1,405,299

Real estate not owned
 
48

 
289

Deposits on real estate under option or contract
 
54,666

 
51,595

Investments in unconsolidated entities
 
9,756

 
11,638

Property and equipment, net
 
26,726

 
22,099

Deferred tax asset
 
69,235

 
70,404

Prepaids, other assets and goodwill
 
37,885

 
39,231

Total assets
 
$
2,129,353

 
$
2,003,361

Liabilities:
 
 
 
 
Accounts payable
 
$
76,192

 
$
68,018

Accrued liabilities
 
141,771

 
166,611

Home sale deposits
 
23,835

 
21,996

Liabilities related to real estate not owned
 
48


289

Senior, convertible senior notes and other borrowings
 
904,913

 
905,055

Total liabilities
 
1,146,759

 
1,161,969

Stockholders' Equity:
 
 
 
 
Preferred stock
 
—

 
—

Common stock
 
391

 
362

Additional paid-in capital
 
528,757

 
412,961

Retained earnings
 
453,446

 
428,069

Total stockholders’ equity
 
982,594

 
841,392

Total liabilities and stockholders’ equity
 
$
2,129,353

 
$
2,003,361

(1) Real estate – Allocated costs:
 
 
 
 
Homes under contract under construction
 
$
313,527

 
$
262,633

Unsold homes, completed and under construction
 
165,813

 
147,889

Model homes
 
84,973

 
81,541

Finished home sites and home sites under development
 
874,760

 
813,135

Land held for development
 
50,811

 
52,100

Land held for sale
 
24,548

 
19,112

Communities in mothball status
 
23,786

 
28,889

Total real estate
 
$
1,538,218

 
$
1,405,299







6


Supplemental Information and Non-GAAP Financial Disclosures (In thousands – unaudited):
 
    
 
 
Three Months Ended March 31,
 
 
 
2014
 
2013
 
Depreciation and amortization
 
$
2,512

 
$
2,158

 
 
 
 
 
 
 
Summary of Capitalized Interest:
 
 
 
 
 
Capitalized interest, beginning of period
 
$
32,992

 
$
21,600

 
Interest incurred
 
14,256

 
12,726

 
Interest expensed
 
(2,713
)
 
(5,128
)
 
Interest amortized to cost of home and land closings
 
(5,834
)
 
(5,000
)
 
Capitalized interest, end of period
 
$
38,701

 
$
24,198

 
 
 
 
 
 
 
 
 
March 31, 2014
 
December 31, 2013
 
Notes payable and other borrowings
 
$
904,913

 
$
905,055

 
Stockholders' equity
 
982,594

 
841,392

 
Total capital
 
1,887,507

 
1,746,447

 
Debt-to-capital
 
47.9
%
 
51.8
%
 
 
 
 
 
 
 
Notes payable and other borrowings
 
$
904,913

 
$
905,055

 
Less: cash and cash equivalents and investments and securities
 
(338,654
)
 
(363,823
)
 
Net debt
 
566,259

 
541,232

 
Stockholders’ equity
 
982,594

 
841,392

 
Total net capital
 
$
1,548,853

 
$
1,382,624

 
Net debt-to-capital
 
36.6
%
 
39.1
%
 
 



7


Meritage Homes Corporation and Subsidiaries
Consolidated Statements of Cash Flows 
(In thousands) (unaudited)
 
 
Three Months Ended March 31,
 
 
2014
 
2013
Cash flows from operating activities:
 
 
 
 
Net earnings
 
$
25,377

 
$
12,041

Adjustments to reconcile net earnings to net cash used in operating activities:
 
 
 
 
Depreciation and amortization
 
2,513

 
2,158

Stock-based compensation
 
2,411

 
1,844

Loss on early extinguishment of debt
 
—

 
700

Equity in earnings from unconsolidated entities
 
(2,032
)
 
(2,632
)
Deferred tax asset valuation benefit
 
—

 
(464
)
Distribution of earnings from unconsolidated entities
 
3,955

 
3,722

Other
 
1,843

 
3,632

Changes in assets and liabilities:
 
 
 
 
Increase in real estate
 
(134,807
)
 
(38,876
)
(Increase)/decrease in deposits on real estate under option or contract
 
(3,071
)
 
3,030

Increase in receivables and prepaid expenses and other assets
 
(13,998
)
 
(5,312
)
(Decrease)/increase in accounts payable and accrued liabilities
 
(15,697
)
 
14,671

Increase in home sale deposits
 
1,839

 
5,367

Net cash used in operating activities
 
(131,667
)
 
(119
)
Cash flows from investing activities:
 
 
 
 
Purchases of property and equipment
 
(6,995
)
 
(2,704
)
Maturities of investments and securities
 
47,533

 
43,999

Payments to purchase investments and securities
 
(35,514
)
 
(46,826
)
Other
 
49

 
79

Net cash provided by/(used in) investing activities
 
5,073

 
(5,452
)
Cash flows from financing activities:
 
 
 
 
Repayments of senior and senior subordinated notes
 
—

 
(17,264
)
Proceeds from issuance of senior notes
 
—

 
175,000

Proceeds from sale of common stock, net
 
110,432

 
—

Other
 
2,982

 
2,399

Net cash provided by financing activities
 
113,414

 
160,135

Net (decrease)/increase in cash and cash equivalents
 
(13,180
)
 
154,564

Beginning cash and cash equivalents
 
274,136

 
170,457

Ending cash and cash equivalents (2)
 
$
260,956

 
$
325,021

 (2) Ending cash and cash equivalents as excludes investments and securities totaling $77.7 million as of March 31, 2014 and excludes investments and securities and restricted cash of $127.8 million as of March 31, 2013.

8


 
 
 
 
 
 
 
 
 
Meritage Homes Corporation and Subsidiaries
Operating Data
(Dollars in thousands)
(unaudited)

 
 
Three Months Ended
 
 
March 31, 2014
 
March 31, 2013
 
 
Homes
 
Value
 
Homes
 
Value
Homes Closed:
 
 
 
 
 
 
 
 
Arizona
 
211

 
$
71,782

 
192

 
$
57,149

California
 
165

 
79,927

 
228

 
90,642

Colorado
 
89

 
39,922

 
94

 
32,204

Nevada
 
—

 
—

 
16

 
3,569

West Region
 
465

 
191,631

 
530

 
183,564

Texas
 
403

 
118,199

 
354

 
90,705

Central Region
 
403

 
118,199

 
354

 
90,705

Carolinas
 
55

 
22,579

 
40

 
14,215

Florida
 
163

 
67,098

 
128

 
42,226

Tennessee
 
23

 
6,272

 
—

 
—

East Region
 
241

 
95,949

 
168

 
56,441

Total
 
1,109

 
$
405,779

 
1,052

 
$
330,710

Homes Ordered:
 
 
 
 
 
 
 
 
Arizona
 
228

 
$
75,647

 
318

 
$
97,708

California
 
237

 
120,052

 
314

 
133,631

Colorado
 
124

 
54,758

 
141

 
56,795

Nevada
 
—

 
—

 
23

 
5,506

West Region
 
589

 
250,457

 
796

 
293,640

Texas
 
634

 
192,231

 
503

 
131,130

Central Region
 
634

 
192,231

 
503

 
131,130

Carolinas
 
81

 
34,019

 
69

 
26,886

Florida
 
173

 
64,616

 
179

 
68,747

Tennessee
 
48

 
13,717

 
—

 
—

East Region
 
302

 
112,352

 
248

 
95,633

Total
 
1,525

 
$
555,040

 
1,547

 
$
520,403

 
 
 
 
 
 
 
 
 
Order Backlog:
 
 
 
 
 
 
 
 
Arizona
 
295

 
$
101,104

 
375

 
$
121,375

California
 
297

 
147,588

 
401

 
167,577

Colorado
 
237

 
107,220

 
189

 
74,680

Nevada
 
—

 
—

 
21

 
5,042

West Region
 
829

 
355,912

 
986

 
368,674

Texas
 
1,023

 
319,687

 
649

 
172,742

Central Region
 
1,023

 
319,687

 
649

 
172,742

Carolinas
 
134

 
54,658

 
78

 
30,012

Florida
 
218

 
86,790

 
254

 
97,531

Tennessee
 
65

 
18,886

 
—

 
—

East Region
 
417

 
160,334

 
332

 
127,543

Total
 
2,269

 
$
835,933

 
1,967

 
$
668,959





9


Meritage Homes Corporation and Subsidiaries
Operating Data
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
 
March 31, 2014
 
March 31, 2013
 
 
Beg.
 
End
 
Beg.
 
End
Active Communities:
 
 
 
 
 
 
 
 
Arizona
 
40

 
41

 
38

 
40

California
 
22

 
17

 
17

 
15

Colorado
 
14

 
13

 
12

 
11

Nevada
 
—

 
—

 
1

 
—

West Region
 
76

 
71

 
68

 
66

Texas
 
70

 
77

 
65

 
69

Central Region
 
70

 
77

 
65

 
69

Carolinas
 
17

 
18

 
7

 
11

Florida
 
20

 
17

 
18

 
22

Tennessee
 
5

 
6

 
—

 
—

East Region
 
42

 
41

 
25

 
33

Total
 
188

 
189

 
158

 
168




10


About Meritage Homes Corporation
Meritage Homes is the ninth-largest public homebuilder in the United States, based on homes closed in 2013. 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, 2014, the company had 189 actively selling communities in markets including Sacramento, San Francisco's East Bay, the Central Valley and Orange County, California; Houston, Dallas-Ft. Worth, Austin and San Antonio, Texas; Phoenix/Scottsdale, Green Valley and Tucson, Arizona; Denver, Colorado; Orlando and Tampa, Florida; Raleigh and Charlotte, North Carolina; York County, South Carolina and Nashville, Tennessee.
Meritage has designed and built more than 80,000 homes in its 28-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 has received the U.S. Environmental Protection Agency's ENERGY STAR Partner of the Year for Sustained Excellence Award in 2013 and 2014, for innovation and industry leadership in energy efficient homebuilding. Meritage was the first national homebuilder to be 100 percent ENERGY STAR 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 for positive housing market conditions, its projected community count, flat margins for 2014, and revenue and earnings growth for 2014 and beyond.
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: 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 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

11


prices in our markets; weakness in the homebuilding market resulting from an unexpected setback in the current economic recovery; 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; a change feasibility of projects under option or contract that could result in the write-off of option 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 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 and our ability to take certain actions because of restrictions contained in the indentures for our senior notes and our ability to raise additional capital when and if needed; our credit ratings; successful integration of future acquisitions; our compliance with government regulations and the effect of 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, 2013 under the caption "Risk Factors," which can be found on our website.




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