Annual report pursuant to Section 13 and 15(d)


12 Months Ended
Dec. 31, 2019
Share-based Payment Arrangement [Abstract]  
We have a stock compensation plan, the Meritage Homes Corporation 2018 Stock Incentive Plan (the “2018 Plan"), that
was approved by our Board of Directors and our stockholders and adopted in May 2018. The 2018 Plan is administered by our
Board of Directors and allows for the grant of stock appreciation rights, restricted stock awards, restricted stock units,
performance share awards and performance-based awards in addition to non-qualified and incentive stock options. We have not granted any stock options since 2009. Effective May 2019, our prior stock compensation plan, the Amended and Restated 2006 Stock Incentive Plan (the “2006 Plan”) expired, and all available shares from expired, terminated, or forfeited awards that remained under the 2006 Plan and prior plans were available for grant under the 2018 Plan. The 2018 Plan authorizes awards to officers, key employees, non-employee directors and consultants. The 2018 Plan authorizes 6,600,000 shares of common stock to be awarded, of which 1,581,383 shares remain available for grant at December 31, 2019. We believe that such awards provide a means of performance-based compensation to attract and retain qualified employees and better align the interests of our employees with those of our stockholders. Non-vested stock awards are usually granted with a five-year ratable vesting period for employees and with a three-year cliff vesting for both non-vested stock and performance-based awards granted to senior executive officers and non-employee directors.
Summary of Nonvested (Restricted) Shares and Units Activity:

We grant time-based and performance-based restricted shares or units. Performance-based restricted shares are only granted to executive officers. All performance shares only vest upon the attainment of certain financial and operational criteria as established and approved by our Board of Directors. The number of shares that may be issued to the award recipients may be greater or lesser than the target award amount depending on actual performance achieved as compared to the performance targets set forth in the awards.
Restricted Share
Grant Date
Fair Value
Share Activity
Grant Date
Fair Value
Outstanding at January 1, 2017 962,303    $ 37.00    184,968    $ 34.84   
Granted 430,575    34.45    154,120    34.10   
Vested (Earned/Released) (279,856)   38.39    (20,367)   45.60   
Forfeited (1) (130,370)   35.09    (31,716)   45.60   
Outstanding as of December 31, 2017 982,652    35.59    287,005    35.80   
Granted 315,247    46.07    157,637    45.20   
Vested (Earned/Released) (288,709)   37.93    (36,801)   41.17   
Forfeited (1) (85,900)   37.53    (29,386)   41.17   
Outstanding at December 31, 2018 923,290    38.25    378,455    38.77   
Granted (2) 385,328    44.46    115,191    40.46   
Vested (Earned/Released) (2) (347,555)   37.15    (87,737)   34.39   
Forfeited (1) (126,443)   40.45    —    —   
Outstanding at December 31, 2019 834,620    $ 41.25    405,909    $ 40.20   
(1)Forfeitures on time-based nonvested shares are a result of terminations of employment, while forfeitures on performance-based nonvested shares are a result of failing to attain certain goals as outlined in our executive officers' compensation agreements.
(2)Performance-based shares granted for the year ended December 31, 2019 includes 21,039 shares that were issued as a result of the performance achievement exceeding the performance targets related to grants to our executive officers for the year ended December 31, 2016. These shares vested in March 2019.

Compensation cost related to time-based restricted stock awards is measured as of the closing price on the date of grant and is expensed, less forfeitures, on a straight-line basis over the vesting period of the award. Compensation cost related to performance-based restricted stock awards is also measured as of the closing price on the date of grant but is expensed in accordance with ASC 718, which requires an assessment of probability of attainment of the performance target. As our performance targets are dependent on performance over a specified measurement period, once we determine that the performance target outcome is probable, the cumulative expense is recorded immediately with the remaining expense and recorded on a straight-line basis through the end of the award’s vesting period. A portion of the performance-based restricted stock awards granted contain market conditions as defined by ASC 718. The guidance in ASC 718 requires that compensation expense for stock awards with market conditions be expensed based on a derived grant date fair value and expensed over the service period. We engaged a third party to perform a valuation analysis on the awards containing market conditions and our associated expense with those awards is based on the derived fair value from that analysis and is being expensed straight line over the service period of the awards. Below is a summary of compensation expense and stock award activity (in thousands):
  Years Ended December 31,
  2019 2018 2017
Stock-based compensation expense $ 19,607    $ 17,170    $ 12,056   

The following table includes additional information regarding our Plan (dollars in thousands):
  At December 31,
  2019 2018
Unrecognized stock-based compensation cost $ 22,341    $ 24,954   
Weighted average years expense recognition period 1.70 2.24
Total equity awards outstanding 1,240,529    1,301,745   
We also offer a non-qualified deferred compensation plan ("deferred compensation plan") to highly compensated employees in order to allow them additional pre-tax income deferrals above and beyond the limits that qualified plans, such as 401(k) plans, impose on highly compensated employees. We do not currently offer a contribution match on the deferred compensation plan. All contributions to the plan to date have been funded by the employees and, therefore, we have no associated expense related to the deferred compensation plan for the years ended December 31, 2019, 2018 and 2017, other than minor administrative costs.