Exhibit 99.1


Contacts:   Arizona:   Texas:   New York:
    Larry Seay   Jane Hays   Chris Tofalli
    CFO & Vice President-Finance   Vice President-Corp. Develop   Broadgate Consultants
    (480) 609-3336   (972) 543-8123   (212) 232-2222



Dallas and Scottsdale, Ariz. (July 21, 2003) – Meritage Corporation (NYSE: MTH) today announced net earnings of $21.3 million, or $1.55 per diluted share, for the second quarter ended June 30, 2003, compared with $14.9 million, or $1.19 per diluted share, in the same period a year ago, an increase in EPS of 30% year-over-year. Net earnings for the first six months of 2003 was $37.1 million, or $2.70 per diluted share, compared with $23.5 million, or $1.92 per diluted share for the same period in 2002, a 41% increase in EPS.


    Three Months Ended June 30,   Six Months Ended June 30,
                    %                   %
    2003   2002   Increase   2003   2002 Increase

Home sales revenue
  $ 325,733     $ 246,441       32 %   $ 609,143     $ 416,172       46 %
Net earnings
  $ 21,312     $ 14,938       43 %   $ 37,085     $ 23,504       58 %
Diluted EPS
  $ 1.55     $ 1.19 %     30 %   $ 2.70     $ 1.92 %     41 %

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2nd Quarter Earnings / 2

“Our second quarter and first half 2003 results set records over the prior year periods for key measures including number of homes ordered and closed, home sales revenue, pre-tax net earnings, and homes in backlog,” said John Landon, Meritage Co-Chairman and Co-CEO. “Meritage has also performed well over the long run, with 15 years of consecutive record growth in revenue and earnings and five-year compounded annual growth rates in homebuilding revenue of 49%, net earnings of 38% and in EPS of 32%. In addition, our return on assets and equity has averaged 14% and 32%, respectively, over the last five years. Our company is successfully executing its strategy of growing market share both organically and through acquisitions, while maintaining excellent returns and a strong balance sheet. We have exceeded our stated goal of doubling the size of the Company every 3-4 years, and are on this growth track in 2003.”

The Company’s pre-tax margins expanded to 10.2% in the second quarter of 2003, a 34 basis point increase over the second quarter of 2002 and primarily the result of limiting increases in SG&A expenses. Home sales gross margins for the quarter were 20.1%, a slight decline of 27 basis points from last year’s quarter. This was attributed mainly to changes in product mix.

“Meritage continues to rank among the top of its industry for growth and returns, and is emerging as a leader in our consolidating industry,” said Steve Hilton, Meritage Co-Chairman and Co-CEO. “We are on track to reach our goal of $1.3 to $1.4 billion in revenue this year. Home sales revenue was up 46% to $609.1 million in the first half of 2003 and the value of homes in backlog was also up 46% over the prior year, to $804.7 million. Demand in our markets remains good and current traffic levels are stable with the last few quarters. Given our expectation for relatively steady margins, we anticipate this level of revenue should produce record 2003 diluted earnings per share in the $6.20 to $6.40 range, representing a full-year increase of 17% to 21%, and an increase from our prior quarter’s guidance of $5.90 to $6.10. For the third quarter, we anticipate diluted earnings per share to range from $1.55 to $1.60. The number of diluted shares increased approximately 17% as a result of our June 2002 equity offering, which was used to finance the Hammonds and Perma-Bilt acquisitions,” continued Hilton.

Meritage received 1,877 orders for new homes valued at $463.2 million in the three months ended June 30, 2003, increases of 64% and 56%, respectively, from the same period a year ago. The number of actively selling communities at quarter end was 137, up 10% from March 31, 2003 and 78% from the same quarter a year ago. The number of active communities is expected to increase 5% to 10% over the remainder of the year, with a significant portion of that growth coming from N. California.”

“Our balance sheet remains strong with a net debt to capital ratio at 49.7%. At the end of the second quarter we had 90 completed unsold homes, less than one per community, compared to a total of 36 a year ago. Most of the increase can be attributed to the acquisition of Hammonds Homes. The number of

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2nd Quarter Earnings / 3

lots controlled at June 30, 2003 increased 59% to 28,551 from the same time last year, with much of that increase coming from our 2002 acquisitions,” said Landon.

Earnings before interest, taxes, depreciation and amortization (EBITDA) in the second quarter was $40.9 million, up 32% from the same period last year, resulting in a trailing four quarter interest coverage ratio of about 7.3 times and a trailing four quarter debt to EBITDA ratio of about 2.3 times. EBITDA represents a non-GAAP financial measure. A table reconciling this measure to the appropriate GAAP measure included with the operating results is a part of this press release.

Meritage and its auditors, KPMG LLP, are working to apply the Financial Accounting Standards Board’s Interpretation No. 46 “Consolidation of Variable Interest Entities” (“FIN 46”). FIN 46 may require the consolidation of certain land and lot purchase and option contracts and associated liabilities. Based on Meritage’s preliminary analysis, the Company does not believe that a significant amount of its land and lot option agreements will require consolidation. These agreements are structured so that the seller retains much of the market risk of owning land. As FIN 46 does not alter the economic substance of these agreements, Meritage does not believe its risk profile will be reassessed by the debt ratings agencies. Meritage intends to include a complete discussion and disclosure of FIN 46 in the Company’s June 30, 2003 report on Form 10-Q.

Meritage will hold its second quarter earnings call on Tuesday, July 22, 2003 at 11:00 a.m. EST (10:00 a.m. CT, 9:00 a.m. MST, 8:00 a.m. PT). To participate in the call, please dial in at least five minutes before the start time. The toll free domestic dial-in number is 1-800-289-0494; international toll free number is 1-913-981-5520. A replay will be available from 2:00 p.m. EST Tuesday, July 22, 2003 through Monday, July 28, 2003 at 12:00 midnight Eastern Time by dialing 1-888-203-1112, code 607471. The call will be available on the Company’s web site at www.meritagehomes.com and through CCBN for two weeks at www.companyboardroom.com.

About Meritage Corporation

Meritage Corporation designs, builds and sells distinctive single-family homes ranging from entry-level to semi-custom luxury and has built approximately 24,000 homes in its 18 year history. The Company was recently ranked as the 14th largest builder in the U.S. for 2002 by Builder Magazine and recently included in THE BLOOMBERG 100 “HOT STOCK” list, compiled by Bloomberg Personal Finance Magazine in their February 2003 issue. In addition, the Company has been ranked by Forbes magazine as #4 of its “200 Best Small Companies in America”, and has appeared twice on Fortune’s list of the “Fastest Growing Companies in America.” Meritage operates in the Phoenix and Tucson, Arizona markets under the Monterey Homes, Hancock Communities and Meritage Homes brand names, in the Dallas/Ft. Worth, Austin, Houston and San Antonio, Texas markets as Legacy Homes, Hammonds Homes and Monterey

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2nd Quarter Earnings / 4

Homes, in the East San Francisco Bay and Sacramento, California markets as Meritage Homes, and in Las Vegas, Nevada as Perma-Bilt Homes. The Meritage web site is located at: www.meritagehomes.com.


      Three Months Ended June 30,   Six Months Ended June 30,
      2003   2002   2003   2002
Operating Results
Home sales revenue
  $ 325,733     $ 246,441     $ 609,143     $ 416,172  
Land sales revenue
    8,100       5,000       8,100       5,000  
    333,833       251,441       617,243       421,172  
Homes sales gross profit
    65,364       50,120       121,718       81,811  
Land sales gross profit
    1,241       141       1,241       141  
    66,605       50,261       122,959       81,952  
Commissions and other sales costs
    (21,328 )     (15,300 )     (41,073 )     (26,596 )
General and administrative expenses
    (12,076 )     (11,324 )     (24,288 )     (18,789 )
Other income
    863       1,169       2,072       2,282  
Pre-tax earnings
    34,064       24,806       59,670       38,849  
Income taxes
    (12,752 )     (9,868 )     (22,585 )     (15,345 )
Net earnings
  $ 21,312     $ 14,938     $ 37,085     $ 23,504  
Earnings per share:
Basic shares:
Earnings per share
  $ 1.64     $ 1.28     $ 2.85     $ 2.06  
Weighted average shares outstanding
    12,984,863       11,665,465       13,012,875       11,400,986  
Diluted shares:
Earnings per share
  $ 1.55     $ 1.19     $ 2.70     $ 1.92  
Weighted average shares outstanding
    13,747,237       12,513,880       13,714,922       12,232,076  

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2nd Quarter Earnings / 5

        Quarter Ended   Six Months Ended
        June 30,   June 30,
        (Unaudited)   (Unaudited)
        2003   2002   2003   2002
EBITDA Reconciliation (1):
Net earnings
  $ 21,312     $ 14,938     $ 37,085     $ 23,504  
Income taxes
    12,752       9,868       22,585       15,345  
    4,829       4,657       8,860       8,031  
    1,740       1,395       3,221       2,617  
    289       131       525       260  
  $ 40,922     $ 30,989     $ 72,276     $ 49,757  

(1)   EBITDA represents earnings before interest expense, interest amortized to cost of sales, income taxes, depreciation and amortization. EBITDA is a non-GAAP financial measure. For purposes of Regulation G, a non-GAAP financial measure is a numerical measure of a registrant’s historical or future financial performance, financial position or cash flows that excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the statement of earnings, balance sheet, or statement of cash flows (or equivalent statements) of the issuer; or includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented. In this regard, GAAP refers to generally accepted accounting principles in the United States. Pursuant to the requirements of Regulation G, we have provided a reconciliation of the non-GAAP financial measure to the most directly comparable GAAP financial measure.
    EBITDA is presented because it is a widely accepted financial indicator used by investors and analysts to analyze and compare companies on the basis of operating performance and we believe is a financial measure widely used by the homebuilding industry. EBITDA, as presented, may not be comparable to similarly titled measures reported by other companies because not all companies calculate EBITDA in an identical manner and, therefore, is not necessarily an accurate means of comparison between companies. EBITDA is not intended to represent cash flows for the period or funds available for management’s discretionary use, nor has it been presented as an alternative to operating income or as an indicator of operating performance and it should not be considered in isolation or as a substitute for measures of performance prepared in accordance with generally accepted accounting principles in the United States of America.


    June 30, 2003    
    (Unaudited)   December 31, 2002
Total assets*
  $ 857,792     $ 691,788  
Real estate*
    611,318       484,970  
Cash and cash equivalents
    26,555       6,600  
Total liabilities*
    507,744       374,480  
Notes payable*
    371,875       264,927  
Stockholders’ equity
    350,048       317,308  

*   Excludes the effect of the application of FIN 46. The impact of FIN 46, if any, on transactions entered into subsequent to January 31, 2003 will be included in the Company’s June 30, 2003 report on Form 10-Q.

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2nd Quarter Earnings / 6


      For The   As Of And For The
      Three Months Ended June 30   Six Months Ended June 30
      2003   2002   2003   2002
      Homes   $   Homes   $   Homes   $   Homes   $
Homes Ordered:
Texas *
    883       181,602       462       85,268       1,674       342,737       934       171,252  
    605       153,252       438       111,491       1,052       276,905       894       228,095  
    169       75,095       244       100,889       349       164,870       476       191,383  
Nevada **
    220       53,240       n/a       n/a       384       91,541       n/a       n/a  
    1,877       463,189       1,144       297,648       3,459       876,053       2,304       590,730  
Homes Closed:
Texas *
    641       130,253       376       64,400       1,247       251,756       739       126,442  
    291       83,184       465       108,999       541       150,309       750       173,725  
    176       77,952       181       73,042       334       145,255       291       116,005  
Nevada **
    150       34,344       n/a       n/a       272       61,823       n/a       n/a  
    1,258       325,733       1,022       246,441       2,394       609,143       1,780       416,172  
Order Backlog:
Texas *
                                    1,512       309,880       888       160,461  
                                    977       270,751       920       260,355  
                                    348       156,542       318       128,694  
Nevada **
                                    298       67,501       n/a       n/a  
                                    3,135       804,674       2,126       549,510  

*   Three months ended June 30, 2003 amounts include 368 ($80,762) homes ordered and 230 ($50,183) homes closed from Hammonds Homes. Six months ended June 30, 2003 amounts include 619 ($135,578) homes ordered, 450 ($97,100) homes closed from Hammonds. Homes in backlog at June 30, 2003 include 555 ($120,598) homes from Hammonds.
**   Amounts are for Perma-Bilt Homes, acquired in October 2002.

* * *

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include statements concerning our expectation of positive operating results in 2003 and beyond, our anticipated homebuilding revenue and earnings per share in 2003, the number of actively selling communities we plan to open during the last half of 2003, our gross and pre-tax margins for the remainder of 2003 and the expected accounting treatment of our land and lot purchase and option contracts under FIN 46, including how such treatment will be perceived by the investment community. Such statements are based upon the current beliefs and expectations of our management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements.

Meritage’s business is subject to a number of risks and uncertainties including: the strength and competitive pricing of the single-family housing market; demand for and acceptance of our homes; changes in the availability and pricing of real estate in the markets in which we operate; our ability to continue to acquire additional land or options to acquire additional land on acceptable terms; general economic slow downs; consumer confidence, which can be impacted by economic and other factors such as terrorism, war, or threats thereof and changes in stock prices; the impact of construction defect and home warranty claims; the cost and availability of insurance, including the availability of insurance for the presence of mold; interest rates and changes in the availability and pricing of residential mortgages; our lack of geographic diversification; our level of indebtedness and our ability to raise additional capital when and if needed; our ability to take certain actions because of restrictions contained in the indenture for our senior notes and the agreement for our senior unsecured credit facility; legislative or other initiatives that seek to restrain growth in new housing construction or similar measures; the success of our program to integrate existing operations with any new operations or those of past or future acquisitions; our success in locating and negotiating favorably with possible

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2nd Quarter Earnings / 7

acquisition candidates; our ability to expand pre-tax margins; our dependence on key personnel and the availability of satisfactory subcontractors; the impact of inflation; our potential exposure to natural disasters; new accounting policies or principles or governmental or stock exchange regulations that could affect our corporate governance or accounting methods; and other factors identified in documents filed by us with the Securities and Exchange Commission, including those set forth in our Form 10-K Report for the year ended December 31, 2002 under the captions “Market for the Registrant’s Common Stock and Related Stockholder Matters – Factors That May Affect Future Stock Performance” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Factors That May Affect Our Future Results and Financial Condition” and in Exhibit 99.4 of Meritage’s Form 10-Q for the quarter ended March 31, 2003. As a result of these and other factors, the Company’s stock and note prices may fluctuate dramatically.

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