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Section 1: 8-K (8-K)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549
_______________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported) April 25, 2018
_______________________
MERITAGE HOMES CORPORATION
(Exact Name of Registrant as Specified in Charter)
 
 
 
 
 
 
 
 
Maryland
 
1-9977
 
86-0611231
(State or Other Jurisdiction
of Incorporation)
 
(Commission File
Number)
 
(IRS Employer
Identification No.)
 
           8800 E. Raintree Drive, Suite 300, Scottsdale, Arizona 85260
 
 
(Address of Principal Executive Offices) (Zip Code)
 
 
 
 
 
(480) 515-8100
 
 
(Registrant’s telephone number, including area code)
 
 
 
 
 
 N/A
 
 
(Former Name or Former Address, if Changed Since Last Report)
 
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
   o   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
   o   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
   o   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
   o   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 

 
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities and Exchange Act of 1934 (§240.12b-2 of this chapter).
 
 
 Emerging growth company  o   
 
 
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13 (a) of the Exchange Act. o
 







ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On April 25, 2018, we announced in a press release information concerning our results for the quarterly period ended March 31, 2018. A copy of this press release, including information concerning forward-looking statements and factors that may affect our future results, is attached as Exhibit 99.1. This press release is being furnished, not filed, under Item 2.02 in this Report on Form 8-K.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
(d) Exhibits
99.1 Press Release dated April 25, 2018






SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: April 25, 2018
 

MERITAGE HOMES CORPORATION
 
 
/s/
Hilla Sferruzza
By:
Hilla Sferruzza
 
Executive Vice President and Chief Financial Officer
(Principal Accounting Officer)



(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit


Exhibit 99.1
393176214_mhlogo1linetaga08.jpg
 
 
 
 
 
 
 
 
Contacts:
Brent Anderson, VP Investor Relations
 
 
 
(972) 580-6360 (office)
 
 
 
investors@meritagehomes.com

Meritage Homes reports first quarter 2018 diluted EPS of $1.07, with a 33% increase in pretax earnings on 10% growth in home closing revenue, higher home closing gross margin and greater overhead leverage;
Strong demand for entry-level homes helps drive 10% increase in orders

SCOTTSDALE, Ariz., April 25, 2018 - Meritage Homes Corporation (NYSE: MTH), a leading U.S. homebuilder, reported its first quarter results for the period ended March 31, 2018.

Summary Operating Results (unaudited)
(Dollars in thousands, except per share amounts)
 
Three Months Ended March 31,
 
2018
 
2017
 
% Chg
Homes closed (units)
1,725

 
1,581

 
9
 %
Home closing revenue
$
728,532

 
$
660,617

 
10
 %
Average sales price - closings
$
422

 
$
418

 
1
 %
Home orders (units)
2,358

 
2,135

 
10
 %
Home order value
$
962,796

 
$
892,703

 
8
 %
Average sales price - orders
$
408

 
$
418

 
(2
)%
Ending backlog (units)
3,508

 
3,181

 
10
 %
Ending backlog value
$
1,482,205

 
$
1,367,844

 
8
 %
Average sales price - backlog
$
423

 
$
430

 
(2
)%
Earnings before income taxes
$
48,884

 
$
36,769

 
33
 %
Net earnings
$
43,874

 
$
23,572

 
86
 %
Diluted EPS
$
1.07

 
$
0.56

 
91
 %




1



MANAGEMENT COMMENTS
“Our first quarter 2018 results reflected performance improvements from our strategic initiatives, as well as strong demand in our markets and growth from our entry-level business,” said Steven J. Hilton, chairman and chief executive officer of Meritage Homes. “Net earnings for the quarter were up 86% over last year’s first quarter, on a 10% increase in home closing revenue, coupled with a 90 bps increase in home closing gross margin and a 30 bps improvement in selling costs and overhead leverage, two of our strategic initiatives to drive earnings growth. We also benefited from a favorable legal settlement, and the extension of energy tax credits on qualifying homes closed in 2017 increased our net earnings for the quarter by approximately $6.3 million.”
He continued, “Total orders for the first quarter were up 10% year-over-year due to increases in our orders pace across all regions. Most notably, a 24% increase in our East region orders pace demonstrates continued progress from the strategic improvements we’ve made in our product, people and execution within those markets.
“Our strategy to focus on the growing demand for entry-level homes with our LiVE.NOW.™ product addresses the need for lower-priced homes as interest rates rise, in order to keep homes affordable for first-time buyers, including millions of Millennials expected to enter the market over the next decade,” explained Mr. Hilton. “As part of this strategic shift, we have simplified our business to gain operating efficiencies and improve our buyers’ experiences throughout the entire home-buying process, which has been very well-received.
"We are pleased with our first quarter performance, especially the improvements in home closing gross margin and our East region operations," he concluded. “We continue to see strong demand for our homes and positive market conditions for homebuilders. Therefore, we are projecting home closings and total home closing revenue will grow to approximately 8,450-8,850 and $3.5-3.65 billion, respectively, for the full year 2018. We're also expecting home closing gross margin to come in at least 18% for the year, a little higher than previously projected. Slightly better overhead leverage should also help drive a strong increase in pre-tax earnings, projected at $285-305 million for the full year. Net earnings growth should be even better with the added benefit of a lower statutory tax rate in 2018 and the one-time catch up for 2017 energy tax credits that we captured in the first quarter.”

FIRST QUARTER RESULTS
Net earnings of $43.9 million ($1.07 per diluted share) for the first quarter of 2018, increased 86% and 91%, respectively, compared to the first quarter of 2017. Earnings before income taxes were up 33% year-over-year, primarily due to increases in home closing revenue and home closing gross margin.

2



Home closing revenue increased 10% on a 9% increase in closing volume and a 1% increase in average sales price over the first quarter of 2017. The increases in closings and revenue were led by the East region (Florida, Georgia, the Carolinas and Tennessee), which delivered a 25% increase in home closing revenue from 29% more home closings at an average sales price 3% lower than the first quarter of 2017. The Central region (Texas) delivered home closings and revenue growth of 9% and 10%, respectively. A 2% increase in West region home closing revenue (California, Colorado and Arizona) was due to a 7% increase in average sales prices compared to the first quarter of 2017, which offset a 5% decline in closings due to 14% fewer communities open on average during the first quarter in 2018 than 2017.
Home closing gross margin increased 90 bps to 17.1% for the first quarter of 2018, compared to 16.2% in the first quarter of 2017, primarily due to improved margins in the East region, as well as moderate increases in home prices and greater cost efficiencies throughout our regions.
Land closing gross profit declined $3.7 million year-over-year due to a $1.2 million net loss from the sale of various land parcels during the first quarter of 2018, compared to land closing gross profit of $2.5 million in the first quarter of 2017.
Selling, general and administrative expenses were 11.5% of first quarter 2018 home closing revenue, 30 bps less than 2017’s first quarter SG&A of 11.8% of home closing revenue, reflecting cost controls and greater leverage on higher closing volumes and revenue.
Other income increased $4.3 million year-over-year, primarily due to a $4.8 million settlement from long-standing litigation related to a previous joint venture in Nevada.
Interest expense declined $0.7 million for the first quarter of 2018 compared to 2017. The reduction was due to a greater percentage of interest capitalized to qualified assets under development, despite a $3.0 million increase in total interest incurred. The Company issued $300 million in new 5.125% senior notes in June 2017 that were primarily used to repay borrowings under the Company’s revolving credit facility and to retire all $126.5 million of the Company's 1.875% convertible senior notes. The Company also issued an additional $200 million of 6.00% senior unsecured notes in March of 2018 and used the net proceeds to repay outstanding borrowings under its revolving credit facility, which included $175 million of borrowings for the February 2018 redemption of the Company’s 4.50% senior notes due in March 2018.
First quarter effective tax rate was approximately 10% in 2018, compared to 36% in 2017, reflecting lower corporate income tax rates enacted for 2018, as well as $6.3 million of energy tax credits recorded in the first quarter of 2018 for all homes closed in 2017 that qualified for the credits. These energy tax credits were

3



extended by Congress in 2018 for 2017 only, and are expected to reduce the full year 2018 effective tax rate by about 200 basis points.
Total orders for the first quarter of 2018 increased 10% year-over-year, driven by a 10% increase in absorption pace (orders per average active community). Total active community count increased during the first quarter of 2018, though the ending and average community counts were consistent year-over-year. The improved performance in the East region reflected management’s focused efforts over the past year on new regional product offerings and better sales execution. Strong order growth of 23% and 17% respectively in the East and Central regions offset a 2% decline in orders within the West region. The decline in the West region reflected fewer average actively selling communities in the first quarter of 2018 over 2017. Most of the new communities opened during the first quarter in the West were opened late in the quarter and only minimally contributed to first quarter 2018 orders. Community count is expected to increase in the West region this year.
Partially offsetting the 10% increase in orders was a 2% decrease in average sales price (ASP) as the ratio of lower-priced entry-level homes increased, resulting in an 8% increase in the total value of orders. California’s ASP was a notable exception, increasing 24% year-over-year primarily due to high demand in several higher-priced communities in the first quarter of 2018.

BALANCE SHEET
Cash and cash equivalents at March 31, 2018, totaled $172.6 million, compared to $170.7 million at December 31, 2017, as net cash generated was invested in real estate to support additional orders and closings. Real estate assets increased to $2.80 billion at March 31, 2018, compared to $2.73 billion at December 31, 2017. Approximately $82.3 million of the increase related to homes under construction or completed, offset by a slight decrease in finished home sites or land under development.
Meritage ended the first quarter of 2018 with approximately 34,000 total lots owned or under control, compared to approximately 31,300 total lots at March 31, 2017. Approximately 80% of the lots added during the first quarter were in communities planned for entry-level product.
Debt-to-capital ratios were 44.7% at March 31, 2018 and 44.9% at December 31, 2017, with net debt-to-capital ratios of 41.2% and 41.4%, respectively, remaining well within management’s target range for this key ratio.

4



CONFERENCE CALL
Management will host a conference call to discuss the results at 8:00 a.m. Arizona Time (11:00 a.m. Eastern Time) on Thursday, April 26.
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/10118384
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 beginning at approximately 1:00 p.m. ET on April 26 and extending through May 10, 2018, 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 10118384.

5




Meritage Homes Corporation and Subsidiaries
Consolidated Income Statements
(In thousands, except per share data)
(Unaudited)

 
 
 
Three Months Ended March 31,
 
 
2018
 
2017
Homebuilding:
 
 
 
 
Home closing revenue
$
728,532

 
$
660,617

 
Land closing revenue
14,032

 
12,155

 
Total closing revenue
742,564

 
672,772

 
Cost of home closings
(604,202
)
 
(553,349
)
 
Cost of land closings
(15,242
)
 
(9,660
)
 
Total cost of closings
(619,444
)
 
(563,009
)
 
Home closing gross profit
124,330

 
107,268

 
Land closing gross (loss)/profit
(1,210
)
 
2,495

 
Total closing gross profit
123,120

 
109,763

Financial Services:
 
 
 
 
Revenue
3,048

 
2,944

 
Expense
(1,484
)
 
(1,379
)
 
Earnings from financial services unconsolidated entities and other, net
2,656

 
2,725

 
Financial services profit
4,220

 
4,290

Commissions and other sales costs
(52,752
)
 
(48,320
)
General and administrative expenses
(30,893
)
 
(29,622
)
(Loss)/earnings from other unconsolidated entities, net
(46
)
 
373

Interest expense
(136
)
 
(825
)
Other income, net
5,371

 
1,110

Earnings before income taxes
48,884

 
36,769

Provision for income taxes
(5,010
)
 
(13,197
)
Net earnings
$
43,874

 
$
23,572

 
 
 
 
Earnings per share:
 
 
 
 
Basic
 
 
 
 
Earnings per share
$
1.08

 
$
0.59

 
Weighted average shares outstanding
40,488

 
40,178

 
Diluted
 
 
 
 
Earnings per share
$
1.07

 
$
0.56

 
Weighted average shares outstanding
41,140

 
42,808





6




Meritage Homes Corporation and Subsidiaries
Consolidated Balance Sheets
(In thousands)
(Unaudited)
 
 
 
March 31, 2018
 
December 31, 2017
Assets:
 
 
 
 
Cash and cash equivalents
 
$
172,552

 
$
170,746

Other receivables
 
74,380

 
79,317

Real estate (1)
 
2,802,798

 
2,731,380

Real estate not owned
 
38,864

 
38,864

Deposits on real estate under option or contract
 
52,539

 
59,945

Investments in unconsolidated entities
 
16,441

 
17,068

Property and equipment, net
 
49,761

 
33,631

Deferred tax asset
 
35,269

 
35,162

Prepaids, other assets and goodwill
 
84,560

 
85,145

Total assets
 
$
3,327,164

 
$
3,251,258

Liabilities:
 
 
 
 
Accounts payable
 
$
140,557

 
$
140,516

Accrued liabilities
 
181,188

 
181,076

Home sale deposits
 
33,761

 
34,059

Liabilities related to real estate not owned
 
34,978

 
34,978

Loans payable and other borrowings
 
16,854

 
17,354

Senior notes, net
 
1,294,494

 
1,266,450

Total liabilities
 
1,701,832

 
1,674,433

Stockholders' Equity:
 
 
 
 
Preferred stock
 

 

Common stock
 
406

 
403

Additional paid-in capital
 
589,791

 
584,578

Retained earnings
 
1,035,135

 
991,844

Total stockholders’ equity
 
1,625,332

 
1,576,825

Total liabilities and stockholders’ equity
 
$
3,327,164

 
$
3,251,258


(1) Real estate – Allocated costs:
 
 
 
 
Homes under contract under construction
 
$
668,579

 
$
566,474

Unsold homes, completed and under construction
 
499,998

 
516,577

Model homes
 
138,848

 
142,026

Finished home sites and home sites under development
 
1,495,373

 
1,506,303

Total real estate
 
$
2,802,798

 
$
2,731,380






7



Supplemental Information and Non-GAAP Financial Disclosures (Dollars in thousands – unaudited):
 
    
 
Three Months Ended March 31,
 
2018
 
2017
Depreciation and amortization
$
5,866

 
$
3,670

 
 
 
 
Summary of Capitalized Interest:
 
 
 
Capitalized interest, beginning of period
$
78,564

 
$
68,196

Interest incurred
20,869

 
17,895

Interest expensed
(136
)
 
(825
)
Interest amortized to cost of home and land closings
(17,469
)
 
(14,381
)
Capitalized interest, end of period
$
81,828

 
$
70,885

 
 
 
 
 
March 31, 2018
 
December 31, 2017
Notes payable and other borrowings
$
1,311,348

 
$
1,283,804

Stockholders' equity
1,625,332

 
1,576,825

Total capital
2,936,680

 
2,860,629

Debt-to-capital
44.7
%
 
44.9
%
Notes payable and other borrowings
$
1,311,348

 
$
1,283,804

Less: cash and cash equivalents
$
(172,552
)
 
$
(170,746
)
Net debt
1,138,796

 
1,113,058

Stockholders’ equity
1,625,332

 
1,576,825

Total net capital
$
2,764,128

 
$
2,689,883

Net debt-to-capital
41.2
%
 
41.4
%
 



8



Meritage Homes Corporation and Subsidiaries
Consolidated Statements of Cash Flows 
(In thousands)
(Unaudited)
 
 
Three Months Ended March 31,
 
 
2018
 
2017
Cash flows from operating activities:
 
 
 
 
Net earnings
 
$
43,874

 
$
23,572

Adjustments to reconcile net earnings to net cash used in operating activities:
 
 
 
 
Depreciation and amortization
 
5,866

 
3,670

Stock-based compensation
 
5,209

 
3,295

Equity in earnings from unconsolidated entities
 
(2,610
)
 
(3,098
)
Distribution of earnings from unconsolidated entities
 
3,244

 
3,280

Other
 
2,301

 
(18
)
Changes in assets and liabilities:
 
 
 
 
Increase in real estate
 
(87,732
)
 
(89,222
)
Decrease in deposits on real estate under option or contract
 
7,406

 
5,532

Decrease/(increase) in other receivables, prepaids and other assets
 
5,426

 
(20,162
)
Decrease in accounts payable and accrued liabilities
 
(15
)
 
(16,064
)
(Decrease)/increase in home sale deposits
 
(298
)
 
4,449

Net cash used in operating activities
 
(17,329
)
 
(84,766
)
Cash flows from investing activities:
 
 
 
 
Investments in unconsolidated entities
 

 
(10
)
Purchases of property and equipment
 
(6,383
)
 
(3,238
)
Proceeds from sales of property and equipment
 
30

 
49

Maturities/sales of investments and securities
 
1,018

 
1,226

Payments to purchase investments and securities
 
(1,018
)
 
(1,226
)
Net cash used in investing activities
 
(6,353
)
 
(3,199
)
Cash flows from financing activities:
 
 
 
 
Proceeds from Credit Facility, net
 

 
45,000

Repayment of loans payable and other borrowings
 
(2,197
)
 
(3,048
)
Repayment of senior notes
 
(175,000
)
 

Proceeds from issuance of senior notes
 
206,000

 

Payment of debt issuance costs
 
(3,315
)
 

Net cash provided by financing activities
 
25,488

 
41,952

Net increase/(decrease) in cash and cash equivalents
 
1,806

 
(46,013
)
Beginning cash and cash equivalents
 
170,746

 
131,702

Ending cash and cash equivalents
 
$
172,552

 
$
85,689

 


9



Meritage Homes Corporation and Subsidiaries
Operating Data
(Dollars in thousands)
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31,
 
 
2018
 
2017
 
 
Homes
 
Value
 
Homes
 
Value
Homes Closed:
 
 
 
 
 
 
 
 
Arizona
 
275

 
$
90,996

 
296

 
$
100,550

California
 
231

 
159,391

 
210

 
132,094

Colorado
 
94

 
54,386

 
128

 
67,360

West Region
 
600

 
304,773

 
634

 
300,004

Texas
 
542

 
191,745

 
495

 
174,709

Central Region
 
542

 
191,745

 
495

 
174,709

Florida
 
260

 
112,787

 
146

 
65,574

Georgia
 
73

 
24,973

 
55

 
20,475

North Carolina
 
128

 
50,673

 
131

 
56,907

South Carolina
 
66

 
22,121

 
73

 
26,055

Tennessee
 
56

 
21,460

 
47

 
16,893

East Region
 
583

 
232,014

 
452

 
185,904

Total
 
1,725

 
$
728,532

 
1,581

 
$
660,617

Homes Ordered:
 
 
 
 
 
 
 
 
Arizona
 
459

 
$
153,161

 
403

 
$
133,832

California
 
219

 
160,398

 
328

 
193,758

Colorado
 
175

 
97,095

 
143

 
82,095

West Region
 
853

 
410,654

 
874

 
409,685

Texas
 
809

 
279,503

 
693

 
251,773

Central Region
 
809

 
279,503

 
693

 
251,773

Florida
 
263

 
112,670

 
239

 
101,560

Georgia
 
148

 
50,870

 
69

 
22,402

North Carolina
 
157

 
61,485

 
150

 
66,332

South Carolina
 
80

 
28,674

 
72

 
25,538

Tennessee
 
48

 
18,940

 
38

 
15,413

East Region
 
696

 
272,639

 
568

 
231,245

Total
 
2,358

 
$
962,796

 
2,135

 
$
892,703

 
 
 
 
 
 
 
 
 
Order Backlog:
 
 
 
 
 
 
 
 
Arizona
 
510

 
$
181,979

 
551

 
$
194,625

California
 
306

 
223,982

 
349

 
215,302

Colorado
 
280

 
157,602

 
288

 
168,819

West Region
 
1,096

 
563,563

 
1,188

 
578,746

Texas
 
1,287

 
470,392

 
1,129

 
431,798

Central Region
 
1,287

 
470,392

 
1,129

 
431,798

Florida
 
449

 
196,470

 
346

 
152,440

Georgia
 
226

 
76,358

 
105

 
35,290

North Carolina
 
272

 
107,578

 
212

 
96,677

South Carolina
 
113

 
42,027

 
115

 
40,119

Tennessee
 
65

 
25,817

 
86

 
32,774

East Region
 
1,125

 
448,250

 
864

 
357,300

Total
 
3,508

 
$
1,482,205

 
3,181

 
$
1,367,844



10



Meritage Homes Corporation and Subsidiaries
Operating Data
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31,
 
 
2018
 
2017
 
 
Ending
 
Average
 
Ending
 
Average
Active Communities:
 
 
 
 
 
 
 
 
Arizona
 
37

 
37.5

 
42

 
42.0

California
 
15

 
17.5

 
29

 
28.5

Colorado
 
17

 
14.0

 
10

 
10.0

West Region
 
69

 
69.0

 
81

 
80.5

Texas
 
97

 
94.5

 
85

 
82.5

Central Region
 
97

 
94.5

 
85

 
82.5

Florida
 
28

 
28.0

 
32

 
29.5

Georgia
 
21

 
20.0

 
17

 
17.0

North Carolina
 
20

 
18.5

 
18

 
17.5

South Carolina
 
12

 
12.5

 
15

 
15.0

Tennessee
 
6

 
6.0

 
8

 
7.5

East Region
 
87

 
85.0

 
90

 
86.5

Total
 
253

 
248.5

 
256

 
249.5


 
 
 
 
 
 
 
 
 



11



About Meritage Homes Corporation
Meritage Homes is the seventh-largest public homebuilder in the United States, based on homes closed in 2017. Meritage Homes builds and sells single-family homes for first- time, move-up, and active adult buyers in markets including California, Texas, Arizona, Colorado, Florida, North Carolina, South Carolina, Tennessee and Georgia. Meritage Homes has designed and built over 110,000 homes in its 32-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 every year since 2013 for innovation and industry leadership in energy efficient homebuilding.
For more information, visit www.meritagehomes.com.
The information included in this press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include management's projected home closings, home closing revenue, home closing gross margin and pre-tax earnings for the full year 2018, as well as improved overhead leverage and net earnings growth in 2018; and expected future growth and earnings expansion opportunities from millions of Millennials expected to enter the homebuilding market in the next decade.
Such statements are based on the current beliefs and expectations of Company management, and current market conditions, which are subject to significant uncertainties and fluctuations. 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; shortages in the availability and cost of labor; changes in interest rates and the availability and pricing of residential mortgages; changes in tax laws that adversely impact us or our homebuyers; inflation in the cost of materials used to develop communities and construct homes; the success of strategic initiatives; the ability of our potential buyers to sell their existing homes; cancellation rates; the adverse effect of slow absorption rates; competition; 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 earnest or option deposits; our potential exposure to and impacts from natural disasters or severe weather conditions; home warranty and construction defect claims; failures in health and safety performance; our success in

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prevailing on contested tax positions; our ability to obtain performance bonds in connection with our development work; the loss of key personnel; 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 if our credit ratings are downgraded; our ability to successfully integrate acquired companies and achieve anticipated benefits from these acquisitions; our compliance with government regulations, the effect of legislative and other governmental actions, orders, policies or initiatives that impact housing, labor availability, construction, mortgage availability, our access to capital, the cost of capital or the economy in general, 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; negative publicity that affects our reputation; 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, 2017 under the caption "Risk Factors," which can be found on our website at www.investors.meritagehomes.com.


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