SCOTTSDALE, Ariz., Feb. 01, 2017 (GLOBE NEWSWIRE) -- Meritage Homes Corporation (NYSE:MTH), a leading U.S. homebuilder, reported fourth quarter and full year results for the year ended December 31, 2016.

Summary Operating Results (unaudited) (Dollars in thousands, except per share amounts)
		Three Months Ended December 31,											Twelve Months Ended December 31,
		2016				2015				% Chg			2016				2015				% Chg
Homes closed (units)		2,117				1,919				10	%		7,355				6,522				13	%
Home closing revenue		$	876,094			$	761,372			15	%		$	3,003,426			$	2,531,556			19	%
Average sales price - closings		$	414			$	397			4	%		$	408			$	388			5	%
Home orders (units)		1,493				1,568				(5	)%		7,290				7,100				3	%
Home order value		$	635,995			$	634,181			—	%		$	3,001,503			$	2,822,785			6	%
Average sales price - orders		$	426			$	404			5	%		$	412			$	398			4	%
Ending backlog (units)													2,627				2,692				(2	)%
Ending backlog value													$	1,135,758			$	1,137,681			—	%
Average sales price - backlog													$	432			$	423			2	%
Net earnings		$	51,807			$	52,897			(2	)%		$	149,541			$	128,738			16	%
Diluted EPS		$	1.22			$	1.26			(3	)%		$	3.55			$	3.09			15	%

MANAGEMENT COMMENTS

“We delivered solid closings, revenue and earnings growth in 2016, maintained a strong balance sheet and executed our strategy for future growth,” said Steven J. Hilton, chairman and chief executive officer of Meritage Homes.

“We generated a 16% increase in net earnings with 19% growth in home closing revenue, and controlled our overhead costs to help offset the negative impact from higher land, development and construction labor costs. We delivered 7,355 homes during the year -- a 13% increase over 2015 -- and surpassed the historic milestone of 100,000 home closings, a proud achievement for Meritage.

“Our fourth quarter results contributed significantly to the gains we achieved for the full year. We grew home closing revenue by 15%, delivering nearly the same level of earnings as we did in the fourth quarter of 2015 despite lower home closing margin in the fourth quarter of 2016.”

Mr. Hilton continued, “Our ending community count was down year over year as some community openings were delayed, which impacted our order volumes for the fourth quarter and full year 2016. We expect that to translate to slightly lower year-over-year order volume for the first quarter of 2017. However, we expect to open these communities in the first half of the year and are projecting significant year-over-year growth in the second half of 2017, resulting in new home deliveries of approximately 7,500-7,900 for the full year and total closing revenue of $3.1-3.3 billion.

“We anticipate gross margins will be in line with 2016 due to continued cost pressures. However, we are projecting a 6-12% increase in pre-tax earnings through a combination of cost management and additional operating leverage from our anticipated top-line growth.

“We are successfully shifting our community offerings to fully embrace the growing number of first-time home buyers and are well on our way to achieving our target of 35-40% of our communities being aimed at this market segment by the end of 2018,” stated Mr. Hilton. “We believe this strategy will provide value to both our customers and shareholders over the long term.”

FOURTH QUARTER RESULTS

• Net earnings for the fourth quarter of 2016 were $51.8 million or $1.22 per diluted share, compared to $52.9 million or $1.26 per diluted share reported for the fourth quarter of 2015. A 15% increase in home closing revenue was partially offset by higher construction labor, land and development costs, as well as lower land closing profit, resulting in a 4% increase in total closing gross profit. A higher effective tax rate reduced net earnings in the fourth quarter of 2016 compared to 2015.
   
• Home closing revenue increased to $876.1 million for the fourth quarter of 2016, compared to $761.4 million for the fourth quarter of 2015, reflecting a 10% increase in home closings and a 4% increase in the average price of homes closed during the quarter. The regions that posted the best year-over-year increases in home closing revenue were the East region (notably Georgia, Tennessee and the Carolinas), delivering a 22% revenue increase on 20% greater closings, and the West region (notably Arizona and Colorado), where home closing revenue was up 14% over the fourth quarter of 2015. Texas home closing revenue rose 9% primarily due to an 8% increase in average closing price.
   
• Home closing gross margin of 17.9% in the fourth quarter of 2016 was the highest quarterly margin in 2016, benefiting from cost efficiencies related to higher closings and revenue. It was lower than last year’s fourth quarter margin of 19.3%, primarily due to the impact of cost inflation in land and construction.
   
• Selling, general and administrative expenses of 10.5% were flat with the prior year’s fourth quarter, and improved sequentially from the third quarter’s 11.7% due to the leverage from higher closing revenue, as well as management cost controls.
   
• Nearly 100% of interest incurred was capitalized to additional assets under development, resulting in a negligible amount of interest expense in the fourth quarter of 2016, compared to $4.0 million in the prior year.
   
• The fourth quarter effective tax rate was 32.1% in 2016, compared to 30.5% in the fourth quarter of 2015, due to the timing of recognition of federal energy tax credits on Meritage’s highly energy efficient homes. The benefit was recognized throughout 2016 instead of being fully recognized in the fourth quarter, as it was in 2015 following the legislative extension of tax credits.
   
• Total order value for the quarter was consistent with the fourth quarter of 2015, as a 5% increase in average sales price offset a 5% decline in orders, while absorptions per community were consistent with the prior year’s fourth quarter.
   
• Orders and order value increased in the West region, primarily due to strong demand in Arizona and Colorado, as well as in the Central region, primarily due to growth in community count to meet demand. Order volumes in the East region were 27% lower than the prior year’s fourth quarter, primarily due to a 16% decline in average community count, from 100 in 2015 to 84 in 2016.
   
• Ending community count at December 31, 2016 was 243, compared to 254 at December 31, 2015, but up sequentially from 237 at September 30, 2016. Various delays pushed the opening dates for a number of communities into 2017, which are expected to occur in the first half of the year.

FULL YEAR RESULTS

• Net earnings were up 16% year over year to $149.5 million ($3.55 per fully diluted share) for the full year of 2016, compared to $128.7 million ($3.09 per fully diluted share) for 2015. The earnings increase was primarily due to 19% growth in home closing revenue, combined with a 14% increase in financial services profit, improved overhead leverage, reduced interest expense and increased other income, partially offset by lower home closing gross margin and land closing profit compared to 2015.
  
  
• Meritage closed 13% more homes in 2016 than in 2015, at an average sales price of $408,000 compared to $388,000 in 2015. The combination of higher closing volume and prices drove the increase in annual home closing revenue.
  
  
• Overhead leverage improved by 60 bps as total selling, general and administrative expenses declined to 11.3% in 2016 from 11.9% in 2015. The improvement reflects a revised commission structure and cost controls implemented by management during 2016.
  
  
• Interest expense for the full year decreased to $5.2 million in 2016 compared to $16.0 million in 2015, as most interest incurred was capitalized to higher real estate assets under development.
  
  
• Home closing gross margin in 2016 was 17.6%, compared to 19.0% for 2015, reflecting higher costs with limited pricing power to offset them, as well as the close-out of several high-margin communities.
  

BALANCE SHEET

• The company ended the fourth quarter of 2016 with $131.7 million in cash and cash equivalents, compared to $262.2 million at December 31, 2015. The decrease in cash was primarily due to investments in real estate inventory as a result of organic growth. $15.0 million was drawn on the revolving credit facility at year-end 2016 with no comparable balance outstanding at December 31, 2015.
  
  
• Real estate assets increased to $2.42 billion at December 31, 2016, compared to $2.10 billion at December 31, 2015, primarily due to increases in the balances of finished home sites and home sites under development, as well as unsold homes.
  
  
• Net debt-to-capital ratio at December 31, 2016 was 41.2%, compared to 40.4% at December 31, 2015, reflecting the investment of cash into inventory of homes and land under development.
  
  
• Total lot supply at the end of the quarter was approximately 29,800, a 7% increase over approximately 27,800 lots at December 31, 2015, representing approximately four years’ supply of lots based on trailing twelve months closings on both dates.
  

CONFERENCE CALL

Management will host a conference call today to discuss the Company's results at 10:00 a.m. Eastern Time (8:00 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/10097854. 

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 in Canada.

A replay of the call will be available through February 15, 2017, beginning at 12:00 p.m. Eastern Time on February 1, 2017 on the website noted above, or by dialing 877-344-7529, and referencing conference number 10092994. For more information, visit www.meritagehomes.com. 

	Meritage Homes Corporation and Subsidiaries Consolidated Income Statements (In thousands, except per share data) (Unaudited)
		Three Months Ended December 31,								Twelve Months Ended December 31,
		2016				2015				2016				2015
Homebuilding:
	Home closing revenue	$	876,094			$	761,372			$	3,003,426			$	2,531,556
	Land closing revenue	4,614				20,241				25,801				36,526
	Total closing revenue	880,708				781,613				3,029,227				2,568,082
	Cost of home closings	(719,324		)		(614,794		)		(2,474,584		)		(2,049,637		)
	Cost of land closings	(3,946		)		(14,744		)		(23,431		)		(29,736		)
	Total cost of closings	(723,270		)		(629,538		)		(2,498,015		)		(2,079,373		)
	Home closing gross profit	156,770				146,578				528,842				481,919
	Land closing gross profit	668				5,497				2,370				6,790
	Total closing gross profit	157,438				152,075				531,212				488,709
Financial Services:
	Revenue	3,392				3,101				12,507				11,377
	Expense	(1,435		)		(1,289		)		(5,587		)		(5,203		)
	Earnings from financial services unconsolidated entities and other, net	4,180				3,942				14,982				13,097
	Financial services profit	6,137				5,754				21,902				19,271
Commissions and other sales costs		(60,058		)		(53,542		)		(215,092		)		(188,418		)
General and administrative expenses		(32,029		)		(26,775		)		(123,803		)		(112,849		)
Earnings/(loss) from other unconsolidated entities, net		3,204				77				4,060				(338		)
Interest expense		(45		)		(4,003		)		(5,172		)		(15,965		)
Other income/(expense), net		1,690				2,499				4,953				(946		)
Earnings before income taxes		76,337				76,085				218,060				189,464
Provision for income taxes		(24,530		)		(23,188		)		(68,519		)		(60,726		)
Net earnings		$	51,807			$	52,897			$	149,541			$	128,738
Earnings per share:
	Basic
	Earnings per share	$	1.29			$	1.33			$	3.74			$	3.25
	Weighted average shares outstanding	40,028				39,667				39,976				39,593
	Diluted
	Earnings per share	$	1.22			$	1.26			$	3.55			$	3.09
	Weighted average shares outstanding	42,667				42,214				42,585				42,164

Meritage Homes Corporation and Subsidiaries  Consolidated Balance Sheets (In thousands) (Unaudited)
		December 31, 2016				December 31, 2015
Assets:
Cash and cash equivalents		$	131,702			$	262,208
Other receivables		70,355				57,296
Real estate (1)		2,422,063				2,098,302
Deposits on real estate under option or contract		85,556				87,839
Investments in unconsolidated entities		17,097				11,370
Property and equipment, net		33,202				33,970
Deferred tax asset		53,320				59,147
Prepaids, other assets and goodwill		75,396				69,645
Total assets		$	2,888,691			$	2,679,777
Liabilities:
Accounts payable		$	140,682			$	106,440
Accrued liabilities		170,852				161,163
Home sale deposits		28,348				36,197
Loans payable and other borrowings		32,195				23,867
Senior and convertible senior notes, net		1,095,119				1,093,173
Total liabilities		1,467,196				1,420,840
Stockholders' Equity:
Preferred stock		—				—
Common stock		400				397
Additional paid-in capital		572,506				559,492
Retained earnings		848,589				699,048
Total stockholders’ equity		1,421,495				1,258,937
Total liabilities and stockholders’ equity		$	2,888,691			$	2,679,777
(1) Real estate – Allocated costs:
Homes under contract under construction		$	508,927			$	456,138
Unsold homes, completed and under construction		431,725				307,425
Model homes		147,406				138,546
Finished home sites and home sites under development		1,334,005				1,196,193
Total real estate		$	2,422,063			$	2,098,302

Supplemental Information and Non-GAAP Financial Disclosures (Dollars in thousands – unaudited):
	Three Months Ended December 31,								Twelve Months Ended December 31,
	2016				2015				2016				2015
Depreciation and amortization	$	4,508			$	3,947			$	15,978			$	14,241
Summary of Capitalized Interest:
Capitalized interest, beginning of period	$	67,631			$	61,396			$	61,202			$	54,060
Interest incurred	17,704				17,877				70,348				67,542
Interest expensed	(45		)		(4,003		)		(5,172		)		(15,965		)
Interest amortized to cost of home and land closings	(17,094		)		(14,068		)		(58,182		)		(44,435		)
Capitalized interest, end of period	$	68,196			$	61,202			$	68,196			$	61,202
	December 31, 2016				December 31, 2015
Notes payable and other borrowings	$	1,127,314			$	1,117,040
Stockholders' equity	1,421,495				1,258,937
Total capital	2,548,809				2,375,977
Debt-to-capital	44.2		%		47.0		%
Notes payable and other borrowings	$	1,127,314			$	1,117,040
Less: cash and cash equivalents	$	(131,702	)		$	(262,208	)
Net debt	995,612				854,832
Stockholders’ equity	1,421,495				1,258,937
Total net capital	$	2,417,107			$	2,113,769
Net debt-to-capital	41.2		%		40.4		%

Meritage Homes Corporation and Subsidiaries Consolidated Statements of Cash Flows (In thousands) (Unaudited)
		Twelve Months Ended December 31,
		2016				2015
Cash flows from operating activities:
Net earnings		$	149,541			$	128,738
Adjustments to reconcile net earnings to net cash used in operating activities:
Depreciation and amortization		15,978				14,241
Stock-based compensation		13,741				15,781
Excess income tax provision/(benefit) from stock-based awards		956				(2,043		)
Equity in earnings from unconsolidated entities		(19,042		)		(12,759		)
Distribution of earnings from unconsolidated entities		16,959				12,650
Other		9,539				11,530
Changes in assets and liabilities:
Increase in real estate		(311,426		)		(209,407		)
Decrease in deposits on real estate under option or contract		2,337				6,316
Increase in other receivables, prepaids and other assets		(17,513		)		(7,083		)
Increase in accounts payable and accrued liabilities		43,377				31,883
(Decrease)/increase in home sale deposits		(7,849		)		6,818
Net cash used in operating activities		(103,402		)		(3,335		)
Cash flows from investing activities:
Investments in unconsolidated entities		(7,244		)		(481		)
Distributions of capital from unconsolidated entities		3,600				—
Purchases of property and equipment		(16,662		)		(16,092		)
Proceeds from sales of property and equipment		200				86
Maturities/sales of investments and securities		746				1,555
Payments to purchase investments and securities		(746		)		(1,555		)
Net cash used in investing activities		(20,106		)		(16,487		)
Cash flows from financing activities:
Proceeds from Credit Facility, net		15,000				—
Repayment of loans payable and other borrowings		(21,274		)		(23,226		)
Proceeds from issuance of senior notes		—				200,000
Debt issuance costs		—				(3,006		)
Excess income tax (provision)/benefit from stock-based awards		(956		)		2,043
Proceeds from stock option exercises		232				2,886
Net cash (used in)/provided by financing activities		(6,998		)		178,697
Net (decrease)/increase in cash and cash equivalents		(130,506		)		158,875
Beginning cash and cash equivalents		262,208				103,333
Ending cash and cash equivalents		$	131,702			$	262,208

Meritage Homes Corporation and Subsidiaries Operating Data (Dollars in thousands) (Unaudited)
		Three Months Ended December 31,
		2016							2015
		Homes			Value				Homes			Value
Homes Closed:
Arizona		373			$	126,628			291			$	98,004
California		282			171,506				323			175,601
Colorado		160			78,278				131			57,211
West Region		815			376,412				745			330,816
Texas		567			212,587				559			194,879
Central Region		567			212,587				559			194,879
Florida		276			116,253				254			106,520
Georgia		108			37,263				72			23,735
North Carolina		198			80,222				162			66,921
South Carolina		97			32,274				83			24,217
Tennessee		56			21,083				44			14,284
East Region		735			287,095				615			235,677
Total		2,117			$	876,094			1,919			$	761,372
Homes Ordered:
Arizona		314			$	105,397			253			$	86,887
California		187			116,969				215			118,370
Colorado		116			64,887				105			51,033
West Region		617			287,253				573			256,290
Texas		490			185,557				465			171,938
Central Region		490			185,557				465			171,938
Florida		159			71,559				200			80,929
Georgia		28			11,682				73			25,704
North Carolina		108			48,959				159			67,492
South Carolina		60			19,253				65			20,071
Tennessee		31			11,732				33			11,757
East Region		386			163,185				530			205,953
Total		1,493			$	635,995			1,568			$	634,181

		Twelve Months Ended December 31,
		2016							2015
		Homes			Value				Homes			Value
Homes Closed:
Arizona		1,122			$	384,767			1,008			$	325,371
California		1,020			590,340				888			478,174
Colorado		634			310,191				495			224,125
West Region		2,776			1,285,298				2,391			1,027,670
Texas		2,130			778,964				2,025			705,318
Central Region		2,130			778,964				2,025			705,318
Florida		895			368,564				843			361,127
Georgia		337			114,137				228			72,913
North Carolina		672			278,747				551			215,642
South Carolina		328			103,851				330			101,847
Tennessee		217			73,865				154			47,039
East Region		2,449			939,164				2,106			798,568
Total		7,355			$	3,003,426			6,522			$	2,531,556
Homes Ordered:
Arizona		1,249			$	428,204			1,133			$	377,059
California		962			559,832				965			538,357
Colorado		575			302,124				559			264,643
West Region		2,786			1,290,160				2,657			1,180,059
Texas		2,119			783,504				2,109			746,471
Central Region		2,119			783,504				2,109			746,471
Florida		861			367,012				893			376,563
Georgia		333			114,074				270			89,755
North Carolina		605			254,521				626			258,952
South Carolina		356			114,376				348			105,838
Tennessee		230			77,856				197			65,147
East Region		2,385			927,839				2,334			896,255
Total		7,290			$	3,001,503			7,100			$	2,822,785
Order Backlog:
Arizona		444			$	161,343			317			$	117,906
California		231			153,638				289			184,146
Colorado		273			154,084				332			162,151
West Region		948			469,065				938			464,203
Texas		931			354,734				942			350,194
Central Region		931			354,734				942			350,194
Florida		253			116,454				287			118,006
Georgia		91			33,363				95			33,426
North Carolina		193			87,252				260			111,478
South Carolina		116			40,636				88			30,111
Tennessee		95			34,254				82			30,263
East Region		748			311,959				812			323,284
Total		2,627			$	1,135,758			2,692			$	1,137,681

Meritage Homes Corporation and Subsidiaries Operating Data (Unaudited)
		Three Months Ended December 31,
		2016						2015
		Ending			Average			Ending			Average
Active Communities:
Arizona		42			41.0			41			41.0
California		28			28.5			24			25.0
Colorado		10			10.0			16			15.5
West Region		80			79.5			81			81.5
Texas		80			77.0			72			71.0
Central Region		80			77.0			72			71.0
Florida		27			26.5			31			31.0
Georgia		17			17.0			17			17.0
North Carolina		17			18.0			26			25.5
South Carolina		15			15.0			18			17.5
Tennessee		7			7.0			9			8.5
East Region		83			83.5			101			99.5
Total		243			240.0			254			252.0

		Twelve Months Ended December 31,
		2016						2015
		Ending			Average			Ending			Average
Active Communities:
Arizona		42			41.5			41			41.0
California		28			26.0			24			24.0
Colorado		10			13.0			16			16.5
West Region		80			80.5			81			81.5
Texas		80			76.0			72			65.5
Central Region		80			76.0			72			65.5
Florida		27			29.0			31			30.0
Georgia		17			17.0			17			15.0
North Carolina		17			21.5			26			23.5
South Carolina		15			16.5			18			19.0
Tennessee		7			8.0			9			7.0
East Region		83			92.0			101			94.5
Total		243			248.5			254			241.5

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 Bay area, southern coastal and Inland Empire markets in California; Houston, Dallas-Ft. Worth, Austin and San Antonio, Texas; Phoenix/Scottsdale, Green Valley and Tucson, Arizona; Denver and Fort Collins, Colorado; Orlando, Tampa and south Florida; Raleigh and Charlotte, North Carolina; Greenville-Spartanburg and York County, South Carolina; Nashville, Tennessee; and Atlanta, Georgia.

Meritage Homes has designed and built over 100,000 homes in its 31-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 its 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 growth, our strategy and projections with respect to the entry-level and first-time home buyer market, the timing of community openings in 2017, quarterly order trends during 2017, projected home closings and home closing revenue, home closing gross margins, operating leverage and pre-tax earnings for the full year 2017.

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; enactment of new laws or regulations or 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.

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