SECOND QUARTER RESULTS (PERCENT CHANGE 2008 VS. 2007):
-- Net loss of $23M or $(0.79) per share, driven by $39M pre-tax
real estate-related charges
-- Pre-tax income of $5M, excluding real estate-related impairment
charges
-- Net orders declined 15% -- Texas down 4%, compared to a 28%
decrease outside of Texas
-- Ended the quarter with $115M cash, no bank debt, and no bond
maturities until 2014
-- Raised $83M cash through stock offering of 4.3M shares
-- Amended credit facility in July 2008 to relax the most
restrictive covenants
YEAR TO DATE RESULTS (PERCENT CHANGE 2008 VS. 2007):
-- Reduced inventory of unsold homes by 35% -- 48% lower than
June 2007 peak
-- Control approximately 3.2 years lot supply, a 60% reduction
from the September 2005 peak
-- Reduced net debt-to-capital ratio to 41% at June 30, 2008, from
49% at year-end 2007
-- Generated $102M positive cash flow from operations, despite
modest acquisitions of new lots
SCOTTSDALE, Ariz., July 28, 2008 (PRIME NEWSWIRE) -- Meritage Homes Corporation (NYSE:MTH) today announced second quarter and year-to-date results for the periods ended June 30, 2008.
Summary Operating Results (Unaudited)
(Dollars in millions, except per share amounts)
---------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 %Chg 2008 2007 %Chg
---------------------------------------------------------------------
Homes closed (units) 1,388 1,858 -25% 2,716 3,654 -26%
Home closing revenue $ 374 $ 568 -34% $ 746 $1,144 -35%
---------------------------------------------------------------------
Sales orders (units) 1,473 1,734 -15% 3,107 3,807 -18%
Sales order value $ 387 $ 501 -23% $ 807 $1,142 -29%
---------------------------------------------------------------------
Ending backlog (units) 2,679 3,838 -30%
Ending backlog value $ 731 $1,198 -39%
---------------------------------------------------------------------
Net loss (including
write-offs) $ (23) $ (57) 59% $ (69) $ (41) -66%
Adjusted pre-tax earnings/
(loss)*
(excluding write-offs) $ 5 $ 19 -74% $ (6) $ 58 -110%
Diluted EPS (including
write-offs) $(0.79) $(2.16) 63% $(2.46) $(1.58) -56%
---------------------------------------------------------------------
* see non-GAAP reconciliation between net loss and adjusted pre-tax
earnings /(loss) on Operating Results table.
POSITIVE EARNINGS FROM OPERATIONS BEFORE IMPAIRMENTS
Meritage reported a net loss of $23 million for the second quarter of 2008 due to continued weakness in U.S. housing markets, which included real estate-related and joint venture charges of $39 million (pre-tax). Excluding these primarily non-cash impairments, the Company generated pretax income of $5 million in the second quarter of 2008. A little more than half of the second quarter impairment charges were in California, Meritage's toughest market. By comparison, the second quarter 2007 net loss of $57 million included $80 million (pre-tax) of primarily non-cash real estate-related and joint venture charges, plus an additional $28 million (pre-tax) charge to impair goodwill.
Second quarter home closing revenue was down 34% from the prior year as a result of 25% fewer closings and 12% lower average sale prices. Arizona and Florida experienced the largest revenue percentage declines year over year (-43% and -45%, respectively.)
"We've experienced three years of dramatically lower sales, softening prices, tightening credit for homebuyers and rising inventories, compounded recently by increased foreclosures and an uncertain economic outlook," said Steven J. Hilton, chairman and CEO of Meritage. "However, our impairment charges have trended lower over the last three quarters, and we continue to benefit from our relatively strong position in Texas.
"We remain a build-to-order homebuilder, appealing primarily to move-up buyers, but are re-positioning many of our communities to attract buyers at lower price points, in response to demand for more affordable homes. We're offering smaller homes with fewer standard features, while still allowing customers the flexibility to upgrade from a good selection of options, and make the house distinctively their own," continued Mr. Hilton.
"We have wound down operations in Ft. Myers and Reno, consolidated several divisions, continued to cut overhead expenses and reduced our inventories to maximize operating profitability, maintain a strong balance sheet and generate positive cash flow. We've managed our financial position to improve liquidity, maintain flexibility, and position Meritage for the eventual recovery in our markets."
Due to lower impairment charges included in cost of sales, homebuilding gross margins increased to 6.2% in the second quarter 2008 over the prior year's 1.7%. Excluding the real-estate related charges in cost of sales for both years, second quarter gross margins were 13.8% in 2008 compared to 15.6% in 2007. The tighter margins before impairments reflect lower prices driven by weak demand and intense competition, offset partially by cost reductions achieved in materials and labor components.
Second quarter general and administrative expenses fell 27%, from $28 million in 2007 to $21 million in 2008, excluding the impact of $10 million received in a legal settlement. This reduction resulted from savings in overhead expenses resulting from continued cost controls, which held general and administrative expenses to a small increase as a percentage of revenue in 2008 before consideration of the legal settlement.
TEXAS SALES SOFTEN OVERALL DECLINE IN NET ORDERS
While second quarter net orders declined 15% year over year in total, orders in Texas were down just 4%, compared to a 28% average decline in other markets. Analysts attribute strong economies, favorable climates, lower costs of living and robust job growth as key factors that contributed to Houston, Dallas/Fort Worth, Austin and San Antonio being four of the top ten fastest growing metro areas last year. Meritage has a large and established presence in these markets, and although some builders have experienced weaker results, Meritage has gained market share in the largest Texas markets over the last year, according to reports from independent local housing market analysts.
Order cancellation rate decreased to 29% of gross orders in the second quarter of 2008, from 37% in the second quarter of 2007, and only slightly increased sequentially from the first quarter 2008. While higher than historical averages, the 2008 rate shows a moderate improvement over those experienced throughout most of 2006 and 2007.
POSITIVE CASH FLOW
In a quarter that has traditionally been cash flow negative due to seasonally higher construction activity and related costs, Meritage generated $21 million positive cash flow from operations in the second quarter 2008, driven mainly by inventory reductions through home sales.
Meritage continued its long-established "asset light" strategy by reducing total lot and land inventory by $26 million in the quarter, even after taking into account modest lot acquisitions. In addition, Meritage has reduced its total inventory of unsold homes by $25 million during the quarter and reduced the number of unsold homes by 48% from the peak in 2007, to a total of 725 at June 30, 2008, with only 297 of those completed. Total unsold homes at quarter-end represent 27% of total homes under construction, compared to 30% at the end of the previous quarter.
In addition to generating positive cash flow from operations in the quarter, the Company completed a stock offering of 4.3 million shares on April 25, 2008, raising $83 million, to end the quarter with $115 million in cash and no bank debt.
FURTHER STRENGTHENED BALANCE SHEET
The increased cash and reduced debt resulted in a lower net debt-to-capital ratio of 41% at June 30, 2008, an improvement from 47% at both the end of the previous quarter, and at June 30, 2007. Notably, Meritage has no bonds maturing until 2014.
Meritage reduced its total lot supply by 11%, or almost 2,700 lots, during the quarter. The total supply of 21,902 lots controlled at June 30, 2008 is 60% lower than the peak number of lots controlled at September of 2005, representing approximately a 3.2-year supply based on trailing twelve months closings. Approximately 57% of all lots are in Texas and 56% of total lots are controlled under purchase or option contracts. Management believes the combination of a shorter lot supply, use of option and the large percentage of lots in the relatively stronger Texas market should result in decreased future impairments.
Additionally, Meritage to further reduced its exposure to joint ventures, shrinking the Company's investment in JV's to $21 million at second quarter-end. Although joint ventures remain a source of investor concern related to homebuilders, management believes joint venture holdings currently represent limited exposure to Meritage.
OPPORTUNITIES TO IMPROVE PROFITABILITY
"Although our community count decreased to 213 at quarter end, versus 220 at the beginning of the year, approximately 40% of our communities outside of Texas have fewer than 25 remaining lots for sale. As these older, low-margin lots are sold, our active community count should contract over the next several quarters," Mr. Hilton explained.
"Our intent is to redeploy the cash generated from closing out some of our low-margin communities to new higher-margin communities with lower-priced lots, thereby improving our homebuilding margins. Though we do not intend to increase our leverage by significantly increasing our lot inventory, we are looking for select opportunities to acquire small finished lot positions in certain markets at deeply distressed prices, where we believe we can earn near-normal returns at today's home prices. We are targeting finished lots in well-located areas on which we can immediately begin building and selling homes."
Mr. Hilton continued, "In some cases, we've been able to purchase lots at or below their cost of improvements, with zero or negative residual land value. We recently purchased lots at one-third to one-half of their original cost, which we believe will allow us to earn good margins at today's home prices, which are substantially lower than prices were at their peak."
AMENDMENT OF CREDIT FACILITY IMPROVES FLEXIBILITY AND LIQUIDITY
At June 30, 2008, the Company had no borrowings outstanding under its credit facility. Meritage's liquidity, consisting of borrowing capacity and cash, was $408 million, after considering the most restrictive covenants in place at that time.
In July, Meritage and its bank group amended the Company's credit facility to loosen its most restrictive borrowing covenants and modify its pricing structure. These modifications provide additional covenant cushion by relaxing the minimum interest coverage ratio and tangible net worth covenants, as well as the maximum leverage ratio covenant, should the housing recession be longer or deeper than anticipated. These modifications are intended to provide the Company greater flexibility to manage through this homebuilding cycle. The credit facility was reduced in size to $500 million, which management believes will be sufficient to support current operations for the foreseeable future.
SUMMARY AND FUTURE OUTLOOK
"Despite an extremely challenged housing market for homebuilders, we are pleased that Meritage has made significant progress over the last several quarters to reduce inventory and debt, cut costs, generate positive cash flow and strengthen our balance sheet," said Mr. Hilton. "At the same time, we've significantly improved our customer satisfaction, training programs and operating efficiencies. We believe that the combination of strong financial management, well-located markets and enhanced operating capabilities will enable Meritage to compete successfully through this cycle and the next."
CONFERENCE CALL AND WEBCAST
The Company will host a conference call to discuss these results on July 29, 2008, at 11:00 a.m. Pacific Time (2:00 p.m. Eastern Time.) The call will be webcast by B2i Technologies, with an accompanying slideshow on the "Investor Relations" page of the Company's web site at http://www.meritagehomes.com. For telephone participants, the dial-in number is 888-241-0558 with a passcode of "Meritage". Participants are encouraged to dial in five minutes before the call begins. A replay of the call will be available after 4:00 p.m. EDT July 29, 2008, through midnight August 29, 2008 on the websites noted above, or by dialing 800-374-8789, and referencing passcode 53837777.
Meritage Homes Corporation and Subsidiaries
Operating Results
(Unaudited)
(In thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
----------- ----------- ----------- -----------
Operating results
Home closing
revenue $ 373,923 $ 567,748 $ 745,579 $ 1,143,863
Land closing
revenue 1,375 919 3,148 2,254
----------- ----------- ----------- -----------
Total closing
revenue 375,298 568,667 748,727 1,146,117
Home closing gross
profit 23,268 9,588 24,349 99,739
Land closing gross
(loss)/profit (6,652) 171 (6,566) 360
----------- ----------- ----------- -----------
Total closing
gross profit 16,616 9,759 17,783 100,099
Commissions and
other sales costs (33,669) (48,067) (67,434) (95,405)
General and
administrative
expenses (1) (10,453) (28,414) (31,746) (55,077)
Goodwill-related
impairments -- (27,952) -- (27,952)
Interest expense (5,538) (319) (11,199) (319)
Other income/
(loss), net (2) (1,116) 5,789 (12,348) 12,068
----------- ----------- ----------- -----------
Loss before benefit
for income taxes (34,160) (89,204) (104,944) (66,586)
Benefit for
income taxes 10,692 32,628 36,171 25,126
----------- ----------- ----------- -----------
Net loss $ (23,468) $ (56,576) $ (68,773) $ (41,460)
=========== =========== =========== ===========
Loss per share
Basic:
Loss per share $ (0.79) $ (2.16) $ (2.46) $ (1.58)
Weighted average
shares outstanding
- no dilution
assumed due to
anti-dilutive
losses 29,594 26,232 27,953 26,199
Non-GAAP
Reconciliations:
Total closing
gross profit $ 16,616 $ 9,759 $ 17,783 $ 100,099
Add Real
estate-related
impairments:
Terminated lot
options &
land sales 10,968 20,162 25,597 36,119
Impaired projects 24,174 58,700 53,894 59,780
----------- ----------- ----------- -----------
Adjusted closing
gross profit $ 51,758 $ 88,621 $ 97,274 $ 195,998
=========== =========== =========== ===========
Loss before
provision for
income taxes $ (34,160) $ (89,204) $ (104,944) $ (66,586)
Add Real
estate-related &
Joint Venture (JV)
impairments:
Terminated lot
options &
land sales 10,968 20,162 25,597 36,119
Impaired projects 24,174 58,700 53,894 59,780
JV impairments 3,873 1,120 19,689 1,120
Goodwill-related
impairments -- 27,952 -- 27,952
----------- ----------- ----------- -----------
Adjusted earnings/
(loss) before
provision of
income taxes 4,855 18,730 (5,764) 58,385
Adjusted (provision)
/benefit for
income taxes (2,963) (5,235) 1,458 (18,714)
----------- ----------- ----------- -----------
Adjusted net
earnings/(loss) $ 1,892 $ 13,495 $ (4,306) $ 39,671
=========== =========== =========== ===========
(1) General and administrative expenses in 2008 include
$10.2 million received, related to a successful legal settlement.
(2) Other income is net of the Joint Venture (JV) impairments shown
in the "Non-GAAP reconciliations" section above.
Meritage Homes Corporation and Subsidiaries
Non-GAAP Financial Disclosures
(Unaudited)
(Dollars in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
---- ---- ---- ----
EBITDA reconciliation: (1)
Net (loss)/earnings $ (23,468) $ (56,576) $ (68,773) $ (41,460)
(Benefit)/provision for
income taxes (10,692) (32,628) (36,171) (25,126)
Interest amortized to cost
of sales and
interest expense 13,007 9,928 27,768 17,900
Depreciation and
amortization 3,216 4,775 6,564 9,044
---------- --------- --------- ---------
EBITDA (17,937) (74,501) (70,612) (39,642)
Add back:
Real estate-related
impairments 39,015 79,982 99,180 97,019
Fixed asset impairments -- -- -- --
Goodwill-related
impairments -- 27,952 -- 27,952
---------- --------- --------- ---------
Adjusted EBITDA $ 21,078 $ 33,433 $ 28,568 $ 85,329
========== ========= ========= =========
As of and for the
Four Quarters Ended
June 30,
2008 2007
---- ----
EBITDA reconciliation: (1)
Net (loss)/earnings $(316,164) $ 27,103
(Benefit)/provision for income taxes (178,676) 14,379
Interest amortized to cost of sales and
interest expense 58,862 40,607
Depreciation and amortization 15,338 22,596
--------- ---------
EBITDA (420,640) 104,685
Add back:
Real estate-related impairments 400,459 167,992
Fixed asset impairments 3,124 --
Goodwill-related impairments 102,538 27,952
--------- ---------
Adjusted EBITDA $ 85,481 $ 300,629
========= =========
Interest coverage ratio: (2)
Adjusted EBITDA $ 85,481 $ 300,629
Interest incurred 56,004 58,524
Interest coverage ratio 1.5 5.1
Net debt-to-capital: (3)
Notes payable and other borrowings $ 634,976 $ 903,330
Less: cash and cash equivalents $(115,153) $ (51,678)
--------- ---------
Net debt 519,823 851,652
Stockholders' equity 746,794 968,937
--------- ---------
Capital 1,266,617 1,820,589
Net debt-to-capital 41% 46.8%
(1) EBITDA and adjusted EBITDA are non-GAAP financial measures
representing net earnings before interest expense amortized to
cost of sales, income taxes, depreciation and amortization, with
write-offs and impairment charges also excluded from adjusted
EBITDA. A non-GAAP financial measure is a numerical measure of a
company'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 Company; 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.
We have provided a reconciliation of these non-GAAP financial
measures to the most directly comparable GAAP financial measure.
EBITDA is presented here because it is used by management to
analyze and compare Meritage with other homebuilding companies
on the basis of operating performance and we believe it is a
financial measure widely used by investors and analysts in 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, it 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 GAAP. Adjusted EBITDA is
presented because it more closely, although not exactly,
resembles the comparable covenant calculations under our
revolving credit facility and senior and senior subordinated
note indentures.
(2) Interest coverage ratio is calculated as the trailing four
quarters' Adjusted EBITDA divided by the trailing four quarters'
interest incurred. This calculation may differ from our interest
coverage ratio as computed for our credit facility covenant due to
additional non-cash reconciling items, such as stock compensation.
(3) Net debt-to-capital is calculated as notes payable and other
borrowings less cash and cash equivalents, divided by the sum of
notes payable and other borrowings, less cash and cash
equivalents, plus stockholders' equity.
Meritage Homes Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
June 30, Dec. 31, June 30,
2008 2007 2007
Assets:
Cash and cash equivalents $ 115,153 $ 27,677 $ 51,678
Receivables 73,707 123,503 73,201
Real estate (1) 1,120,311 1,267,879 1,619,705
Investment in unconsolidated
entities 21,429 26,563 95,880
Deferred tax assets, net 148,080 139,057 61,422
Option deposits 71,003 87,191 126,095
Other assets 70,127 76,511 201,614
---------- ---------- ----------
Total Assets $1,619,810 $1,748,381 $2,229,595
========== ========== ==========
Liabilities:
Senior notes 478,885 478,802 478,719
Senior subordinated notes 150,000 150,000 150,000
Revolving facility -- 82,000 251,500
Other borrowings 6,091 19,073 23,111
Accounts payable, accrued
liabilities, homebuyer
deposits, and other
liabilities 238,040 288,342 357,328
---------- ---------- ----------
Total Liabilities 873,016 1,018,217 1,260,658
---------- ---------- ----------
Total Equity 746,794 730,164 968,937
---------- ---------- ----------
Total Liabilities & Equity $1,619,810 $1,748,381 $2,229,595
========== ========== ==========
(1) Real estate -
Allocated costs:
Homes under contract
under construction 357,304 327,416 586,142
Finished homesites / under
development 544,191 596,752 675,416
Unsold homes, completed and
under construction 137,785 236,099 267,199
Model homes 59,551 61,172 53,800
Model home lease program 6,091 19,073 23,111
Land held for development 15,389 27,367 14,037
---------- ---------- ----------
Total allocated costs $1,120,311 $1,267,879 $1,619,705
========== ========== ==========
Meritage Homes Corporation and Subsidiaries
Condensed Consolidated Statement of Cash Flows
(Unaudited)
(in thousands, except per share data)
Six Months Ended June 30,
2008 2007
---- ----
Net loss $ (68,773) $ (41,460)
Real estate-related impairments 79,491 95,899
Goodwill-related impairments -- 27,952
Increase in deferred taxes (9,023) (32,503)
Equity in (losses)/earnings from JVs and
distributions of JV
earnings, net 20,979 3,822
Decrease/(increase) in real estate and
deposits, net 81,246 (130,576)
Other operating activities (2,164) (89,642)
---------- ----------
Net cash provided by/(used in) operating
activities 101,756 (166,508)
---------- ----------
Cash used in investing activities (15,835) (11,377)
---------- ----------
Net (payments)/borrowings under
Credit Facility (82,000) 25,000
Proceeds from issuance of senior
subordinated notes, net -- 146,957
Proceeds from issuance of
common stock, net 82,775 --
Other financing activities 780 896
---------- ----------
Net cash provided by financing activities 1,555 172,853
---------- ----------
Net increase/(decrease) in cash 87,476 (5,032)
Beginning cash and cash equivalents 27,677 56,710
---------- ----------
Ending cash and cash equivalents $ 115,153 $ 51,678
========== ==========
Meritage Homes Corporation and Subsidiaries
Operating Data (Unaudited)
(Dollars in Thousands)
For the Three Months Ended June 30,
2008 2007
------------------ ------------------
Homes Value Homes Value
----- ----- ----- -----
Homes Closed:
California 152 $ 64,548 208 $ 99,256
Nevada 61 16,242 58 21,649
-------- -------- -------- --------
West Region 213 80,790 266 120,905
Arizona 266 68,432 358 120,735
Texas 789 191,839 1,074 273,200
Colorado 26 9,197 28 9,810
-------- -------- -------- --------
Central Region 1,081 269,468 1,460 403,745
Florida 94 23,665 132 43,098
-------- -------- -------- --------
East Region 94 23,665 132 43,098
-------- -------- -------- --------
Total 1,388 $373,923 1,858 $567,748
======== ======== ======== ========
Homes Ordered:
California 165 $65,137 243 $104,407
Nevada 67 17,509 70 24,769
-------- -------- -------- --------
West Region 232 82,646 313 129,176
Arizona 285 60,823 369 104,824
Texas 876 218,454 908 222,270
Colorado 29 10,282 56 20,449
-------- -------- -------- --------
Central Region 1,190 289,559 1,333 347,543
Florida 51 14,599 88 24,747
-------- -------- -------- --------
East Region 51 14,599 88 24,747
-------- -------- -------- --------
Total 1,473 $386,804 1,734 $501,466
======== ======== ======== ========
Meritage Homes Corporation and Subsidiaries
Operating Data (Unaudited)
(Dollars in Thousands)
As of and For the Six Months Ended June 30,
2008 2007
--------------------- ----------------------
Homes Value Homes Value
----- ----- ----- -----
Homes Closed:
California 325 $ 134,827 402 $ 201,391
Nevada 134 36,117 103 36,926
--------- ---------- ---------- ----------
West Region 459 170,944 505 238,317
Arizona 475 129,868 856 303,024
Texas 1,528 374,611 1,986 496,088
Colorado 64 21,981 61 23,473
--------- ---------- ---------- ----------
Central Region 2,067 526,460 2,903 822,585
Florida 190 48,175 246 82,961
--------- ---------- ---------- ----------
East Region 190 48,175 246 82,961
--------- ---------- ---------- ----------
Total 2,716 $ 745,579 3,654 $1,143,863
========= ========== ========== ==========
Homes Ordered:
California 366 $ 145,145 534 $ 244,391
Nevada 152 39,053 154 55,635
--------- ---------- ---------- ----------
West Region 518 184,198 688 300,026
Arizona 545 120,902 847 257,166
Texas 1,801 435,817 2,004 500,814
Colorado 77 27,550 104 38,969
--------- ---------- ---------- ----------
Central Region 2,423 584,269 2,955 796,949
Florida 166 38,546 164 45,107
--------- ---------- ---------- ----------
East Region 166 38,546 164 45,107
--------- ---------- ---------- ----------
Total 3,107 $ 807,013 3,807 $1,142,082
========= ========== ========== ==========
Order Backlog:
California 205 $ 91,850 358 $ 172,816
Nevada 82 21,596 108 40,434
--------- ---------- ---------- ----------
West Region 287 113,446 466 213,250
Arizona 460 111,592 896 301,448
Texas 1,745 445,557 2,227 586,889
Colorado 66 23,706 88 34,279
--------- ---------- ---------- ----------
Central Region 2,271 580,855 3,211 922,616
Florida 121 37,118 161 62,414
--------- ---------- ---------- ----------
East Region 121 37,118 161 62,414
--------- ---------- ---------- ----------
Total 2,679 $ 731,419 3,838 $1,198,280
========= ========== ========== ==========
Meritage Homes Corporation and Subsidiaries
Operating Data (Unaudited)
First Half 2008 First Half 2007
--------------- ---------------
Active Beg. End Beg. End
---- --- ---- ---
Communities:
California 27 17 26 29
Nevada 11 12 5 11
--------- ---------- ---------- ----------
West Region 38 29 31 40
Arizona 36 31 42 39
Texas 127 136 121 123
Colorado 6 5 6 7
--------- ---------- ---------- ----------
Central Region 169 172 169 169
Florida 13 12 13 13
--------- ---------- ---------- ----------
East Region 13 12 13 13
--------- ---------- ---------- ----------
Total 220 213 213 222
========= ========== ========== ==========
ABOUT MERITAGE HOMES CORPORATION
Meritage Homes Corporation (NYSE:MTH) builds primarily single-family homes across the southern and western United States under the Meritage, Monterey and Legacy brands. Meritage has active communities in Houston, Dallas/Ft. Worth, Austin, San Antonio, Phoenix/Scottsdale, Tucson, Las Vegas, the California East Bay/Central Valley and Inland Empire, Denver and Orlando. The Company was ranked by Builder magazine in 2007 as the 12th largest homebuilder in the U.S. and ranked #803 on the 2008 Fortune 1000 list. For more information about the Company, visit www.meritagehomes.com.
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This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include those regarding the Company's projections for lot supply, our intentions about where to deploy cash resources, the availability of lower-priced lots to replace low-margin communities and improve or produce near-normal margins and our lot acquisition strategies in general, our ability to continue to comply with credit facility covenants, our expectations about the number of communities we will build in, the eventual recovery in the Company's markets, potential decreases in future charges related to real estate valuation adjustments and write-offs, the risk associated with our joint ventures, continued compliance with debt covenants and expectations for additional progress on the Company's operating and financial objectives. Such statements are based upon preliminary financial and operating data which are subject to finalization by management and review by our independent public accountants, as well as 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, including: weakness in the homebuilding market resulting from the current downturn; interest rates and changes in the availability and pricing of residential mortgages; housing affordability; fluctuations in demand, competition, sales orders, cancellation rates and home prices in our markets; potential write-downs or write-offs of assets, including pre-acquisition costs, or deposits; investments in land and development joint ventures; the exposure to obligations under performance and surety bonds, performance guarantees and letters of credit; the cost and availability of insurance, including the unavailability of insurance for the presence of mold; the impact of construction defect and home warranty claims; our success in prevailing on contested tax positions and the impact of deferred tax valuation allowances; materials and labor costs; changes in the availability and pricing of real estate in the markets in which the Company operates; the ability to acquire additional land or options to acquire additional land on acceptable terms; general economic slow downs; dependence on key personnel and the availability of satisfactory subcontractors; the Company's lack of geographic diversification; inflation in the cost of materials used to construct homes; fluctuations in quarterly operating results; the Company's financial leverage and level of indebtedness; our ability to take certain actions because of restrictions contained in the indentures for the Company's senior and senior subordinated notes and the agreement for the unsecured credit facility and our ability to raise additional capital when and if needed; success in locating and negotiating potential acquisitions; successful integration of acquired operations with existing operations; legislative or other initiatives that seek to restrain growth or new housing construction or similar measures; consumer confidence, which can be impacted by economic and other factors such as terrorism, war, or threats thereof and changes in energy prices or stock markets; our potential exposure to natural disasters; 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, 2007, under the caption "Risk Factors." As a result of these and other factors, the Company's stock and note prices may fluctuate dramatically.