MTH
$34.15
Meritage
($.46)
(1.33%)
Earnings Details
2nd Quarter June 2016
Thursday, July 28, 2016 7:30:23 AM
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Summary

Meritage Reaffirms for the Year but Sees Third Quarter Below Estimates

Meritage (MTH) reported 2nd Quarter June 2016 earnings of $0.95 per share on revenue of $797.9 million. The consensus earnings estimate was $0.80 per share on revenue of $751.3 million. Revenue grew 33.5% on a year-over-year basis.

The company said it continues to expect third quarter earnings of $0.80 to $0.85 per share and 2016 earnings of $3.55 to $3.85 per share. The current consensus earnings estimate is $1.02 per share for the quarter ending September 30, 2016 and $3.62 per share for the year ending December 31, 2016.

Meritage Homes Corp is a designer and builder of single-family attached and detached homes in the historically high-growth regions of the southern and western United States.

Results
Reported Earnings
$0.95
Earnings Whisper
-
Consensus Estimate
$0.80
Reported Revenue
$797.9 Mil
Revenue Estimate
$751.3 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Meritage Homes Reports a 35% Increase in Home Closing Revenue and a 37% Increase in Net Earnings, Resulting in Diluted EPS of $0.95 for the Second Quarter 2016

SCOTTSDALE, AZ--(Marketwired - July 28, 2016) - Meritage Homes Corporation (MTH), a leading U.S. homebuilder, announced today second quarter results for the period ended June 30, 2016.

 
 
Summary Operating Results (unaudited)
 
(Dollars in thousands, except per share amounts)
 
 
 
 
  Three Months Ended June 30,
    Six Months Ended June 30,
 
 
  2016
  2015
  % Chg
    2016
  2015
  % Chg
 
Homes closed (units)
    1,950
    1,556
  25
%
    3,438
    2,891
  19
%
Home closing revenue
  $
795,845
  $
591,027
  35
%
  $
1,391,462   $
1,108,300   26
%
Average sales price - closings   $
408
  $
380
  7
%
  $
405
  $
383
  6
%
Home orders (units)
    2,073
    1,986
  4
%
    4,060
    3,965
  2
%
Home order value
  $
845,346
  $
775,815
  9
%
  $
1,649,946   $
1,558,627   6
%
Average sales price - orders
  $
408
  $
391
  4
%
  $
406
  $
393
  3
%
Ending backlog (units)
                      3,314
    3,188
  4
%
Ending backlog value
                    $
1,396,165   $
1,296,779   8
%
Average sales price - backlog
                    $
421
  $
407
  4
%
Net earnings
  $
39,878
  $
29,133
  37
%
  $
60,847
  $
45,533
  34
%
Diluted EPS
  $
0.95
  $
0.70
  36
%
  $
1.45
  $
1.10
  32
%
 
                       
     
     

MANAGEMENT COMMENTS

Steven J. Hilton, chairman and chief executive officer of Meritage Homes, said: "We continue to benefit from our focused strategy, as evidenced by our solid performance in the second quarter and the first half of 2016. We delivered strong top-line growth for the quarter, reflecting a significant increase in our backlog conversion rate. In addition, we successfully managed our overhead costs, which combined with our 35% increase in home closing revenue to generate positive year-over-year earnings growth.

"We continue to make efficiency improvements to create a sustainable platform for increased operating leverage as we grow. We reduced our selling, general and administrative expenses for the second quarter by 150 basis points. This, along with a 60 basis point reduction in interest expense, more than offset a 200 basis point decline in our gross margin. As a result, we delivered a 43% increase in pre-tax earnings compared to last year’s second quarter.

"Importantly, many economic and housing drivers remain positive, including continued job growth, historically low interest rates and a 30-year low supply of homes available for sale. These trends are reflected in the 2,073 new homes we sold during the quarter, the most since the first quarter of 2007. We anticipate these positive conditions will translate to Millennial buyers entering the market in growing numbers, and are working to position Meritage to capture the expected increase in demand from those buyers.

"Based on our outlook and the results for the first half of the year, we are reiterating our projections for 2016 full year orders, closings, revenue and diluted earnings per share, while adjusting our expectations for the timing of improvements in gross margin due to limited pricing power to offset rising costs. We are also providing our third quarter projections, including approximately 1,600-1,800 orders, which should result in 7,350-7,550 orders for the year. We also project 1,750-1,850 homes closings in the third quarter for home closing revenue of $740-760 million, and 7,300-7,600 closings for revenue of $2.9-3.1 billion for the year. We expect home closing gross margins of approximately 17.5-18.0% for the third quarter and for the year. With those projections, we expect to deliver diluted EPS of $0.80-0.85 for the third quarter and $3.55-3.85 for the year."

SECOND QUARTER RESULTS

Net earnings of $39.9 million ($0.95 per diluted share) for the second quarter of 2016, compared to prior year net earnings of $29.1 million ($0.70 per diluted share), primarily reflects higher home closing revenues and greater overhead operating leverage.

Home closing revenue increased 35% due to a 25% increase in home closings combined with a 7% increase in average price over the prior year period. The West region (California, Colorado and Arizona) led with a 51% increase in home closing revenue over the second quarter of 2015, followed by 30% growth in the East region (Florida, Georgia, the Carolinas and Tennessee) and a 19% growth in the Central region (Texas).

Home closing gross profit increased 21% to $137.7 million for the second quarter of 2016, including $2.0 million of real estate impairments, compared to $114.2 million in the second quarter of 2015, which included $1.8 million of impairments. Second quarter home closing gross margin was 17.3% in 2016 (17.6% before impairments), compared to 19.3% in 2015 (19.6% before impairments), primarily reflecting higher land and labor costs, in addition to fewer closings of homes in high-margin communities.

Commissions and other sales costs totaled 7.1% of home closing revenue in the second quarter of 2016, compared to 7.6% in the second quarter of 2015, reflecting the impact of recent company initiatives.

General and administrative expenses for the second quarter of 2016 also benefited from improved operating leverage on higher revenue, decreasing 100 basis points to 3.6% of total closing revenue in 2016 from 4.6% in 2015.

Interest expense declined to $1.7 million or 0.2% of second quarter 2016 revenue from $4.6 million or 0.8% of total second quarter 2015 revenue, due to additional interest capitalized to an increased level of real-estate assets under development.

Second quarter effective tax rate increased to 32% in 2016 from 30% in the second quarter of 2015, and consistent with management’s projected 32% for the full year 2016. Meritage benefits from a lower effective tax rate than statutory rates due to energy tax credits captured on its energy-efficient homes (currently approved through the remainder of 2016) and manufacturing credits.

Second quarter 2016 orders for new homes increased 4% over the prior year and total order value increased 9% year over year. The total value of homes ordered increased 19% in the East and 15% in the West region, partially offset by a 9% decline in Texas.

Total active community count was 241 at June 30, 2016, essentially flat year over year. Average orders per community increased marginally to 8.6 for the second quarter of 2016 from 8.5 in 2015.

YEAR TO DATE RESULTS

Net earnings were $60.8 million for the first half of 2016, compared to $45.5 million for the first half of 2015, primarily driven by a 26% increase in home closing revenue.

Home closings for the first half of the year increased 19% over 2015, combined with a 6% increase in average prices.

Home closing gross profit increased 15% to $241.1 million in the first half of 2016 compared to $209.7 million in the first half of 2015.

Gross margin was 17.3% in the first half of 2016 compared to 18.9% in 2015, reflecting continued cost and pricing headwinds.

Total commissions and selling expenses declined 40 basis points to 7.4% of year-to-date 2016 home closing revenue from 7.8% in 2015, while general and administrative expenses declined 90 basis points to 4.2% of total closing revenue in the first half of 2016, compared to 5.1% in 2015.

BALANCE SHEET

Cash and cash equivalents at June 30, 2016, totaled $128.2 million, compared to $262.2 million at December 31, 2015, primarily reflecting investments in real estate to replace lots and position the company for future growth.

Real estate assets increased by $203.0 million in the first half of the year, ending at $2.30 billion at June 30, 2016, compared to $2.10 billion at December 31, 2015.

Meritage ended the second quarter of 2016 with approximately 28,900 total lots under control, compared to approximately 29,100 total lots at June 30, 2015 and 27,800 at year-end 2015.

Net debt-to-capital ratio at June 30, 2016 was 42.6%, compared to 40.4% at December 31, 2015, due to the intended use of cash to replenish the pipeline for land and development, and a growing inventory of homes under construction during the second quarter of 2016.

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. Arizona 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/10088999.

Telephone participants who are unable to pre-register may dial in to 866-226-4948 on the day of the call. International dial-in number is 1-412-902-4125 or 1-855-669-9657 for Canada.

A replay of the call will be available until August 11, 2016, beginning at approximately 12:30 p.m. ET on July 28, 2016 on the website noted above, or by dialing 877-344-7529, 1-412-317-0088 for international or 1-855-669-9658 for Canada, and referencing conference number 10088999.

 
 
 
 
Meritage Homes Corporation and Subsidiaries
 
Consolidated Income Statements
 
(Unaudited)
 
(In thousands, except per share data)
 
 
 
 
  Three Months Ended
    Six Months Ended
 
June 30,
June 30,
 
  2016
    2015
    2016
    2015
 
Homebuilding:
                     
       
 
 
Home closing revenue
  $
795,845
    $
591,027
    $
1,391,462
    $
1,108,300  
 
Land closing revenue
    2,051
      6,774
      4,200
      8,213
 
 
 
Total closing revenue
    797,896
      597,801
      1,395,662
      1,116,513  
 
Cost of home closings
    (658,099 )
    (476,790 )
    (1,150,369 )
    (898,576
)
 
Cost of land closings
    (1,693
)
    (6,262
)
    (3,393
)
    (7,547
)
 
 
Total cost of closings
    (659,792 )
    (483,052 )
    (1,153,762 )
    (906,123
)
 
Home closing gross profit
    137,746
      114,237
      241,093
      209,724
 
 
Land closing gross profit
    358
      512
      807
      666
 
 
 
Total closing gross profit
    138,104
      114,749
      241,900
      210,390
 
Financial Services:
                     
       
 
 
Revenue
    3,476
      2,741
      5,976
      5,276
 
 
Expense
    (1,508
)
    (1,362
)
    (2,754
)
    (2,661
)
 
Earnings from financial services unconsolidated entities and other, net
    3,795
      2,757
      6,587
      5,301
 
 
 
Financial services profit
    5,763
      4,136
      9,809
      7,916
 
Commissions and other sales costs
    (56,379
)
    (45,167
)
    (102,556
)
    (86,779
)
General and administrative expenses
    (28,898
)
    (27,650
)
    (58,516
)
    (57,300
)
Earnings/(loss) from other unconsolidated entities, net
    573
      (169
)
    416
      (292
)
Interest expense
    (1,672
)
    (4,621
)
    (4,960
)
    (7,775
)
Other income, net
    1,545
      136
      1,828
      551
 
Earnings before income taxes
    59,036
      41,414
      87,921
      66,711
 
Provision for income taxes
    (19,158
)
    (12,281
)
    (27,074
)
    (21,178
)
Net earnings
  $
39,878
    $
29,133
    $
60,847
    $
45,533
 
 
                     
       
 
Earnings per share:
                     
       
 
 
Basic
                     
       
 
 
 
 
Earnings per share
  $
1.00
    $
0.73
    $
1.52
    $
1.15
 
 
 
 
Weighted average shares outstanding     40,012
      39,648
      39,926
      39,520
 
 
Diluted
                     
       
 
 
 
 
Earnings per share
  $
0.95
    $
0.70
    $
1.45
    $
1.10
 
 
 
 
Weighted average shares outstanding     42,533
      42,145
      42,477
      42,079
 
 
                     
       
 
 
Meritage Homes Corporation and Subsidiaries
Consolidated Balance Sheets
(In thousands)
(unaudited)
 
 
  June 30,
  December 31,
2016
2015
Assets:
     
     
  Cash and cash equivalents
    128,171
    262,208
  Other receivables
    68,837
    57,296
  Real estate (1)
    2,301,305     2,098,302
  Deposits on real estate under option or contract
    91,444
    87,839
  Investments in unconsolidated entities
    11,188
    11,370
  Property and equipment, net
    34,009
    33,970
  Deferred tax asset
    58,840
    59,147
  Prepaids, other assets and goodwill
    67,361
    69,645
   
Total assets
  $
2,761,155   $
2,679,777
Liabilities:
     
     
  Accounts payable
    126,028
    106,440
  Accrued liabilities
    154,643
    161,163
  Home sale deposits
    39,646
    36,197
  Loans payable and other borrowings
    19,889
    23,867
  Senior and convertible senior notes, net
    1,094,146     1,093,173
   
 
Total liabilities
    1,434,352     1,420,840
Stockholders’ Equity:
     
     
  Preferred stock
    -
    -
  Common stock
    400
    397
  Additional paid-in capital
    566,508
    559,492
  Retained earnings
    759,895
    699,048
   
 
Total stockholders’ equity     1,326,803     1,258,937
   
Total liabilities and stockholders’ equity
  $
2,761,155   $
2,679,777
(1)Real estate - Allocated costs:
     
     
  Homes under contract under construction
  $
607,390
  $
456,138
  Unsold homes, completed and under construction
    274,824
    307,425
  Model homes
    146,707
    138,546
  Finished home sites and home sites under development
    1,272,384     1,196,193
   
 
Total real estate
  $
2,301,305   $
2,098,302
 
     
     
 
 
Supplemental Information and Non-GAAP Financial Disclosures (Dollars in thousands - unaudited):
 
 
 
 
  Three Months Ended June 30,
    Six Months Ended June 30,
 
 
  2016
    2015
    2016
    2015
 
Depreciation and amortization
  $
4,198
    $
3,518
    $
7,600
    $
6,729
 
 
     
       
                 
Summary of Capitalized Interest:
     
       
                 
Capitalized interest, beginning of period
  $
64,126
    $
56,843
    $
61,202
    $
54,060
 
Interest incurred
    17,713
      16,526
      35,272
      31,808
 
Interest expensed
    (1,672
)
    (4,621
)
    (4,960
)
    (7,775
)
Interest amortized to cost of home and land closings
    (15,485
)
    (9,878
)
    (26,832
)
    (19,223
)
Capitalized interest, end of period
  $
64,682
    $
58,870
    $
64,682
    $
58,870
 
 
     
       
                 
 
  June 30,
    December 31,
     
     
 
2016
2015
Notes payable and other borrowings
    1,114,035       1,117,040                  
Stockholders’ equity
    1,326,803       1,258,937                  
Total capital
    2,440,838       2,375,977                  
Debt-to-capital
    45.6
%
    47.0
%
               
Notes payable and other borrowings
    1,114,035       1,117,040                  
 
Less: cash and cash equivalents   $
(128,171
)
  $
(262,208
)
               
Net debt
    985,864
      854,832
                 
Stockholders’ equity
    1,326,803       1,258,937                  
Total net capital
  $
2,312,667     $
2,113,769                  
Net debt-to-capital
    42.6
%
    40.4
%
               
 
     
       
                 
 
 
Meritage Homes Corporation and Subsidiaries
 
Consolidated Statements of Cash Flows
 
(In thousands) (unaudited)
 
 
 
 
  Six Months Ended June 30,
 
 
  2016
    2015
 
Cash flows from operating activities:
               
 
Net earnings
  $
60,847
    $
45,533
 
 
Adjustments to reconcile net earnings to net cash used in operating activities:
               
 
 
Depreciation and amortization
    7,600
      6,729
 
 
 
Stock-based compensation
    7,313
      8,465
 
 
 
Excess income tax provision/(benefit) from stock-based awards
    526
      (2,012
)
 
 
Equity in earnings from unconsolidated entities
    (7,003
)
    (5,009
)
 
 
Distribution of earnings from unconsolidated entities
    7,343
      5,769
 
 
 
Other
    3,262
      424
 
 
Changes in assets and liabilities:
               
 
 
Increase in real estate
    (193,981 )
    (144,450 )
 
 
(Increase)/decrease in deposits on real estate under option or contract     (3,551
)
    3,604
 
 
 
Increase in other receivables, prepaids and other assets
    (9,368
)
    (10,346
)
 
 
Increase in accounts payable and accrued liabilities
    12,944
      4,996
 
 
 
Increase in home sale deposits
    3,449
      9,349
 
 
 
Net cash used in operating activities
    (110,619 )
    (76,948
)
Cash flows from investing activities:
               
 
Investments in unconsolidated entities
    (159
)
    (282
)
 
Purchases of property and equipment
    (7,570
)
    (7,829
)
 
Proceeds from sales of property and equipment
    87
      62
 
 
Maturities/sales of investments and securities
    645
      -
 
 
Payments to purchase investments and securities
    (645
)
    -
 
 
 
Net cash used in investing activities
    (7,642
)
    (8,049
)
Cash flows from financing activities:
               
 
Repayment of loans payable and other borrowings
    (15,482
)
    (3,211
)
 
Proceeds from issuance of senior notes
    -
      200,000
 
 
Debt issuance costs
    -
      (2,955
)
 
Excess income tax (provision)/benefit from stock-based awards
    (526
)
    2,012
 
 
Proceeds from stock option exercises
    232
      2,839
 
 
 
Net cash (used in)/provided by financing activities
    (15,776
)
    198,685
 
Net (decrease)/increase in cash and cash equivalents
    (134,037 )
    113,688
 
Beginning cash and cash equivalents
    262,208
      103,333
 
Ending cash and cash equivalents
  $
128,171
    $
217,021
 
 
               
 
Meritage Homes Corporation and Subsidiaries
Operating Data
(Dollars in thousands) (unaudited)
 
       
       
 
  Three Months Ended June 30,
 
  2016
  2015
 
  Homes
  Value
  Homes
  Value
Homes Closed:
                   
  Arizona
  279
  $
94,048
  229
  $
71,878
  California
  280
    156,058
  176
    95,763
  Colorado
  169
    82,472
  113
    52,133
  West Region
  728
    332,578
  518
    219,774
  Texas
  556
    206,907
  509
    174,397
  Central Region   556
    206,907
  509
    174,397
  Florida
  257
    103,342
  210
    91,491
  Georgia
  81
    27,383
  42
    13,057
  North Carolina   179
    76,507
  135
    50,214
  South Carolina   88
    27,748
  91
    27,258
  Tennessee
  61
    21,380
  51
    14,836
  East Region
  666
    256,360
  529
    196,856
  Total
  1,950
  $
795,845
  1,556
  $
591,027
Homes Ordered:
                   
  Arizona
  331
  $
115,812
  320
  $
102,714
  California
  289
    165,931
  237
    131,814
  Colorado
  169
    84,398
  181
    84,421
  West Region
  789
    366,141
  738
    318,949
  Texas
  550
    202,948
  635
    224,195
  Central Region   550
    202,948
  635
    224,195
  Florida
  267
    106,913
  218
    92,663
  Georgia
  115
    38,356
  53
    16,690
  North Carolina   159
    66,944
  181
    72,667
  South Carolina   118
    38,468
  99
    29,473
  Tennessee
  75
    25,576
  62
    21,178
  East Region
  734
    276,257
  613
    232,671
  Total
  2,073
  $
845,346
  1,986
  $
775,815
 
                   
 
       
       
 
  Six Months Ended June 30,
 
  2016
  2015
 
  Homes
  Value
  Homes
  Value
Homes Closed:
         
         
  Arizona
  496
  $
169,047
  415
  $
134,479
  California
  487
    276,778
  329
    182,186
  Colorado
  307
    147,799
  241
    109,987
  West Region
  1,290
    593,624
  985
    426,652
  Texas
  1,021
    366,878
  949
    326,984
  Central Region   1,021
    366,878
  949
    326,984
  Florida
  413
    166,664
  387
    164,322
  Georgia
  146
    49,397
  94
    28,515
  North Carolina   297
    126,884
  224
    85,189
  South Carolina   155
    48,919
  167
    51,818
  Tennessee
  116
    39,096
  85
    24,820
  East Region
  1,127
    430,960
  957
    354,664
  Total
  3,438
  $
1,391,462   2,891
  $
1,108,300
Homes Ordered:
         
         
  Arizona
  590
  $
205,992
  608
  $
193,305
  California
  559
    316,943
  547
    309,911
  Colorado
  338
    171,024
  370
    169,828
  West Region
  1,487
    693,959
  1,525
    673,044
  Texas
  1,141
    419,013
  1,192
    409,327
  Central Region   1,141
    419,013
  1,192
    409,327
  Florida
  494
    199,507
  466
    201,520
  Georgia
  220
    73,551
  130
    40,908
  North Carolina   348
    144,025
  329
    134,292
  South Carolina   225
    72,689
  195
    59,001
  Tennessee
  145
    47,202
  128
    40,535
  East Region
  1,432
    536,974
  1,248
    476,256
  Total
  4,060
  $
1,649,946   3,965
  $
1,558,627
 
         
         
Order Backlog:
         
         
  Arizona
  411
  $
154,851
  385
  $
125,044
  California
  361
    224,311
  430
    251,688
  Colorado
  363
    185,376
  397
    181,474
  West Region
  1,135
    564,538
  1,212
    558,206
  Texas
  1,062
    402,329
  1,101
    391,384
  Central Region   1,062
    402,329
  1,101
    391,384
  Florida
  368
    150,849
  316
    139,768
  Georgia
  169
    57,580
  89
    28,977
  North Carolina   311
    128,619
  290
    117,271
  South Carolina   158
    53,881
  98
    33,303
  Tennessee
  111
    38,369
  82
    27,870
  East Region
  1,117
    429,298
  875
    347,189
  Total
  3,314
  $
1,396,165   3,188
  $
1,296,779
   
         
         
 
Meritage Homes Corporation and Subsidiaries
Operating Data
(unaudited)
 
               
 
  Three Months Ended June 30,
 
  2016
  2015
 
  Ending
  Average
  Ending
  Average
Active Communities:
               
 
Arizona
  43
  42.5
  43
  43.5
 
California
  25
  24.5
  20
  20.5
 
Colorado
  12
  13.0
  16
  16.0
 
West Region
  80
  80.0
  79
  80.0
 
Texas
  73
  71.5
  66
  63.5
 
Central Region   73
  71.5
  66
  63.5
 
Florida
  26
  26.0
  30
  28.0
 
Georgia
  17
  17.5
  16
  14.5
 
North Carolina   22
  23.0
  25
  24.0
 
South Carolina   16
  16.0
  20
  20.0
 
Tennessee
  7
  8.0
  4
  4.5
 
East Region
  88
  90.5
  95
  91.0
 
Total
  241
  242.0
  240
  234.5
 
               
 
               
 
  Six Months Ended June 30,
 
  2016
  2015
 
  Ending
  Average
  Ending
  Average
Active Communities:
               
 
Arizona
  43
  42.0
  43
  42.0
 
California
  25
  24.5
  20
  22.0
 
Colorado
  12
  14.0
  16
  16.5
 
West Region
  80
  80.5
  79
  80.5
 
Texas
  73
  72.5
  66
  62.5
 
Central Region   73
  72.5
  66
  62.5
 
Florida
  26
  28.5
  30
  29.5
 
Georgia
  17
  17.0
  16
  14.5
 
North Carolina   22
  24.0
  25
  23.0
 
South Carolina   16
  17.0
  20
  20.0
 
Tennessee
  7
  8.0
  4
  4.5
 
East Region
  88
  94.5
  95
  91.5
 
Total
  241
  247.5
  240
  234.5
 
               

About Meritage Homes Corporation

Meritage Homes is the seventh-largest public homebuilder in the United States, based on homes closed in 2015. Meritage Homes builds and sells single-family homes for first-time, move-up, luxury and active adult buyers across the Western, Southern and Southeastern United States. Meritage Homes builds 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 and Fort Collins, Colorado; Orlando and Tampa, Florida; Raleigh and Charlotte, North Carolina; Greenville-Spartanburg and York County, South Carolina; Nashville, Tennessee; and Atlanta, Georgia.

Meritage Homes has designed and built more than 95,000 homes in its 30-year history, and has a reputation for its distinctive style, quality construction, and positive customer experience. Meritage Homes 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, 2014, 2015 and 2016 for innovation and industry leadership in energy efficient homebuilding. For more information, visit meritagehomes.com.

This press release and the accompanying comments during our analyst call contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include management’s expectations with respect to future revenue and earnings growth, projected orders, home closings and home closing revenue, home closing gross margins, tax rates and diluted earnings per share for the third quarter and full year 2016.

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. These risks and uncertainties include, but are not limited to, the following: the availability and cost of finished lots and undeveloped land; interest rates and changes in the availability and pricing of residential mortgages; fluctuations in the availability and cost of labor; changes in tax laws that adversely impact us or our homebuyers; reversal of the current economic recovery; the ability of our potential buyers to sell their existing homes; cancellation rates; inflation in the cost of materials used to develop communities and construct homes; the adverse effect of slower order absorption rates; impairments of our real estate inventory; a change to the feasibility of projects under option or contract that could result in the write-down or write-off of option deposits; our potential exposure to natural disasters or severe weather conditions; competition; construction defect and home warranty claims; failures in health and safety performance; our success in prevailing on contested tax positions; our ability to obtain performance bonds in connection with our development work; the loss of key personnel; our failure to comply with laws and regulations; our limited geographic diversification; fluctuations in quarterly operating results; our level of indebtedness; our ability to obtain financing due to a downgrade of our credit ratings; our ability to successfully integrate acquired companies and achieve anticipated benefits from these acquisitions; our compliance with government regulations and the effect of legislative or other initiatives that seek to restrain growth of new housing construction or similar measures; legislation relating to energy and climate change; the replication of our energy-efficient 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, 2015 and subsequent quarterly reports on Forms 10-Q under the caption "Risk Factors," which can be found on our website.

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Contacts: Brent Anderson VP Investor Relations (972) 580-6360 (office) investors@meritagehomes.com