UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ | |||||
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended SeptemberJune 30, 2021
OR
☐ | |||||
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period fromto
Commission File Number 1-9977
Meritage Homes Corporation
(Exact Name of Registrant as Specified in its Charter)
Maryland | 86-0611231 | ||||||||||||||||
(State or Other Jurisdiction of Incorporation or Organization) | (IRS Employer Identification No.) | ||||||||||||||||
8800 E. Raintree Drive, Suite 300, Scottsdale, Arizona 85260
(Address of Principal Executive Offices) (Zip Code)
(480) 515-8100
(Registrant’sRegistrant’s telephone number, including area code)
N/A
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | |||||||||
Common Stock $.01 par value | MTH | New York Stock Exchange |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes
☒No ☐Indicate by a checkmark whether the registrant has submitted electronically every Interactive Date File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes
☒ No ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☒ | Accelerated filer | ☐ | ||||||||
Non-accelerated filer | ☐ | Smaller reporting company | ☐ | ||||||||
Emerging growth company | ☐ | ||||||||||
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 provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by a checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
☐ No ☒Common shares outstanding as of OctoberJuly 25, 2021: 37,311,125
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBERJune 30, 2021
TABLE OF CONTENTS
Items3-5. Not Applicable | |||||
Item 1.Financial Statements
UNAUDITED CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
June 30, 2022 | December 31, 2021 | |||||||
Assets | ||||||||
Cash and cash equivalents | $ | 272,147 | $ | 618,335 | ||||
Other receivables | 171,408 | 147,548 | ||||||
Real estate | 4,474,062 | 3,734,408 | ||||||
Real estate not owned | 8,011 | 8,011 | ||||||
Deposits on real estate under option or contract | 97,967 | 90,679 | ||||||
Investments in unconsolidated entities | 11,223 | 5,764 | ||||||
Property and equipment, net | 39,030 | 37,340 | ||||||
Deferred tax assets, net | 41,271 | 40,672 | ||||||
Prepaids, other assets and goodwill | 192,604 | 124,776 | ||||||
Total assets | $ | 5,307,723 | $ | 4,807,533 | ||||
Liabilities | ||||||||
Accounts payable | $ | 341,717 | $ | 216,009 | ||||
Accrued liabilities | 326,856 | 337,277 | ||||||
Home sale deposits | 60,820 | 42,610 | ||||||
Liabilities related to real estate not owned | 7,210 | 7,210 | ||||||
Loans payable and other borrowings | 15,613 | 17,552 | ||||||
Senior notes, net | 1,143,038 | 1,142,486 | ||||||
Total liabilities | 1,895,254 | 1,763,144 | ||||||
Stockholders’ Equity | ||||||||
Preferred stock, par value $0.01. Authorized 10,000,000 shares; none issued and outstanding at June 30, 2022 and December 31, 2021 | 0 | 0 | ||||||
Common stock, par value $0.01. Authorized 125,000,000 shares; 36,566,975 and 37,340,855 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively | 366 | 373 | ||||||
Additional paid-in capital | 315,590 | 414,841 | ||||||
Retained earnings | 3,096,513 | 2,629,175 | ||||||
Total stockholders’ equity | 3,412,469 | 3,044,389 | ||||||
Total liabilities and stockholders’ equity | $ | 5,307,723 | $ | 4,807,533 |
September 30, 2021 | December 31, 2020 | |||||||||||||
Assets | ||||||||||||||
Cash and cash equivalents | $ | 562,291 | $ | 745,621 | ||||||||||
Other receivables | 148,743 | 98,573 | ||||||||||||
Real estate | 3,593,007 | 2,778,039 | ||||||||||||
Deposits on real estate under option or contract | 77,987 | 59,534 | ||||||||||||
Investments in unconsolidated entities | 3,905 | 4,350 | ||||||||||||
Property and equipment, net | 36,595 | 38,933 | ||||||||||||
Deferred tax assets, net | 38,850 | 36,040 | ||||||||||||
Prepaids, other assets and goodwill | 104,071 | 103,308 | ||||||||||||
Total assets | $ | 4,565,449 | $ | 3,864,398 | ||||||||||
Liabilities | ||||||||||||||
Accounts payable | $ | 214,575 | $ | 175,250 | ||||||||||
Accrued liabilities | 324,407 | 296,121 | ||||||||||||
Home sale deposits | 40,002 | 25,074 | ||||||||||||
Loans payable and other borrowings | 18,985 | 23,094 | ||||||||||||
Senior notes, net | 1,142,210 | 996,991 | ||||||||||||
Total liabilities | 1,740,179 | 1,516,530 | ||||||||||||
Stockholders’ Equity | ||||||||||||||
Preferred stock, par value $0.01. Authorized 10,000,000 shares; none issued and outstanding at September 30, 2021 and December 31, 2020 | — | — | ||||||||||||
Common stock, par value $0.01. Authorized 125,000,000 shares; 37,555,010 and 37,512,127 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively | 376 | 375 | ||||||||||||
Additional paid-in capital | 433,179 | 455,762 | ||||||||||||
Retained earnings | 2,391,715 | 1,891,731 | ||||||||||||
Total stockholders’ equity | 2,825,270 | 2,347,868 | ||||||||||||
Total liabilities and stockholders’ equity | $ | 4,565,449 | $ | 3,864,398 |
See accompanying notes to unaudited consolidated financial statements
UNAUDITED CONSOLIDATED INCOME STATEMENTS
(in thousands, except per share amounts)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Homebuilding: | ||||||||||||||||
Home closing revenue | $ | 1,408,947 | $ | 1,264,643 | $ | 2,654,403 | $ | 2,344,625 | ||||||||
Land closing revenue | 3,434 | 12,956 | 44,912 | 16,755 | ||||||||||||
Total closing revenue | 1,412,381 | 1,277,599 | 2,699,315 | 2,361,380 | ||||||||||||
Cost of home closings | (964,208 | ) | (919,342 | ) | (1,832,015 | ) | (1,732,669 | ) | ||||||||
Cost of land closings | (2,784 | ) | (13,288 | ) | (33,469 | ) | (16,540 | ) | ||||||||
Total cost of closings | (966,992 | ) | (932,630 | ) | (1,865,484 | ) | (1,749,209 | ) | ||||||||
Home closing gross profit | 444,739 | 345,301 | 822,388 | 611,956 | ||||||||||||
Land closing gross profit/(loss) | 650 | (332 | ) | 11,443 | 215 | |||||||||||
Total closing gross profit | 445,389 | 344,969 | 833,831 | 612,171 | ||||||||||||
Financial Services: | ||||||||||||||||
Revenue | 5,139 | 5,665 | 9,811 | 10,416 | ||||||||||||
Expense | (2,581 | ) | (2,367 | ) | (5,093 | ) | (4,538 | ) | ||||||||
Earnings from financial services unconsolidated entities and other, net | 1,521 | 1,317 | 2,695 | 2,497 | ||||||||||||
Financial services profit | 4,079 | 4,615 | 7,413 | 8,375 | ||||||||||||
Commissions and other sales costs | (69,383 | ) | (73,889 | ) | (134,923 | ) | (141,633 | ) | ||||||||
General and administrative expenses | (47,932 | ) | (43,156 | ) | (87,927 | ) | (81,105 | ) | ||||||||
Interest expense | 0 | (77 | ) | (41 | ) | (167 | ) | |||||||||
Other (expense)/income, net | (458 | ) | 1,377 | (775 | ) | 2,175 | ||||||||||
Loss on early extinguishment of debt | 0 | (18,188 | ) | 0 | (18,188 | ) | ||||||||||
Earnings before income taxes | 331,695 | 215,651 | 617,578 | 381,628 | ||||||||||||
Provision for income taxes | (81,611 | ) | (48,262 | ) | (150,240 | ) | (82,396 | ) | ||||||||
Net earnings | $ | 250,084 | $ | 167,389 | $ | 467,338 | $ | 299,232 | ||||||||
Earnings per common share: | ||||||||||||||||
Basic | $ | 6.82 | $ | 4.43 | $ | 12.69 | $ | 7.93 | ||||||||
Diluted | $ | 6.77 | $ | 4.36 | $ | 12.55 | $ | 7.80 | ||||||||
Weighted average number of shares: | ||||||||||||||||
Basic | 36,647 | 37,818 | 36,820 | 37,731 | ||||||||||||
Diluted | 36,962 | 38,377 | 37,239 | 38,357 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||
Homebuilding: | ||||||||||||||||||||||||||
Home closing revenue | $ | 1,251,435 | $ | 1,133,221 | $ | 3,596,060 | $ | 3,055,229 | ||||||||||||||||||
Land closing revenue | 8,470 | 4,870 | 25,225 | 16,954 | ||||||||||||||||||||||
Total closing revenue | 1,259,905 | 1,138,091 | 3,621,285 | 3,072,183 | ||||||||||||||||||||||
Cost of home closings | (879,759) | (889,654) | (2,612,428) | (2,412,606) | ||||||||||||||||||||||
Cost of land closings | (7,706) | (4,360) | (24,246) | (17,509) | ||||||||||||||||||||||
Total cost of closings | (887,465) | (894,014) | (2,636,674) | (2,430,115) | ||||||||||||||||||||||
Home closing gross profit | 371,676 | 243,567 | 983,632 | 642,623 | ||||||||||||||||||||||
Land closing gross profit/(loss) | 764 | 510 | 979 | (555) | ||||||||||||||||||||||
Total closing gross profit | 372,440 | 244,077 | 984,611 | 642,068 | ||||||||||||||||||||||
Financial Services: | ||||||||||||||||||||||||||
Revenue | 5,208 | 4,939 | 15,624 | 13,329 | ||||||||||||||||||||||
Expense | (2,308) | (2,026) | (6,846) | (5,519) | ||||||||||||||||||||||
Earnings from financial services unconsolidated entities and other, net | 1,324 | 1,402 | 3,821 | 3,132 | ||||||||||||||||||||||
Financial services profit | 4,224 | 4,315 | 12,599 | 10,942 | ||||||||||||||||||||||
Commissions and other sales costs | (68,952) | (73,282) | (210,585) | (204,863) | ||||||||||||||||||||||
General and administrative expenses | (47,192) | (40,737) | (128,297) | (111,083) | ||||||||||||||||||||||
Interest expense | (79) | (55) | (246) | (2,176) | ||||||||||||||||||||||
Other income, net | 1,268 | 1,188 | 3,443 | 3,313 | ||||||||||||||||||||||
Loss on early extinguishment of debt | — | — | (18,188) | — | ||||||||||||||||||||||
Earnings before income taxes | 261,709 | 135,506 | 643,337 | 338,201 | ||||||||||||||||||||||
Provision for income taxes | (60,957) | (26,388) | (143,353) | (67,253) | ||||||||||||||||||||||
Net earnings | $ | 200,752 | $ | 109,118 | $ | 499,984 | $ | 270,948 | ||||||||||||||||||
Earnings per common share: | ||||||||||||||||||||||||||
Basic | $ | 5.33 | $ | 2.90 | $ | 13.26 | $ | 7.17 | ||||||||||||||||||
Diluted | $ | 5.25 | $ | 2.84 | $ | 13.06 | $ | 7.04 | ||||||||||||||||||
Weighted average number of shares: | ||||||||||||||||||||||||||
Basic | 37,647 | 37,607 | 37,703 | 37,763 | ||||||||||||||||||||||
Diluted | 38,229 | 38,405 | 38,285 | 38,491 |
See accompanying notes to unaudited consolidated financial statements
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Six Months Ended June 30, | ||||||||
2022 | 2021 | |||||||
Cash flows from operating activities: | ||||||||
Net earnings | $ | 467,338 | $ | 299,232 | ||||
Adjustments to reconcile net earnings to net cash used in operating activities: | ||||||||
Depreciation and amortization | 11,723 | 13,414 | ||||||
Stock-based compensation | 10,045 | 8,590 | ||||||
Loss on early extinguishment of debt | 0 | 18,188 | ||||||
Equity in earnings from unconsolidated entities | (2,145 | ) | (1,807 | ) | ||||
Distributions of earnings from unconsolidated entities | 2,339 | 2,215 | ||||||
Other | (601 | ) | 2,266 | |||||
Changes in assets and liabilities: | ||||||||
Increase in real estate | (729,450 | ) | (469,733 | ) | ||||
Increase in deposits on real estate under option or contract | (7,288 | ) | (14,863 | ) | ||||
Increase in other receivables, prepaids and other assets | (90,419 | ) | (36,390 | ) | ||||
Increase in accounts payable and accrued liabilities | 113,421 | 26,532 | ||||||
Increase in home sale deposits | 18,210 | 8,884 | ||||||
Net cash used in operating activities | (206,827 | ) | (143,472 | ) | ||||
Cash flows from investing activities: | ||||||||
Investments in unconsolidated entities | (5,653 | ) | (1 | ) | ||||
Purchases of property and equipment | (12,852 | ) | (10,970 | ) | ||||
Proceeds from sales of property and equipment | 247 | 292 | ||||||
Maturities/sales of investments and securities | 1,032 | 2,697 | ||||||
Payments to purchase investments and securities | (1,032 | ) | (2,697 | ) | ||||
Net cash used in investing activities | (18,258 | ) | (10,679 | ) | ||||
Cash flows from financing activities: | ||||||||
Repayment of loans payable and other borrowings | (11,800 | ) | (5,758 | ) | ||||
Repayment of senior notes | 0 | (317,690 | ) | |||||
Proceeds from issuance of senior notes | 0 | 450,000 | ||||||
Payment of debt issuance costs | 0 | (6,102 | ) | |||||
Repurchase of shares | (109,303 | ) | (27,546 | ) | ||||
Net cash (used in)/provided by financing activities | (121,103 | ) | 92,904 | |||||
Net decrease in cash and cash equivalents | (346,188 | ) | (61,247 | ) | ||||
Cash and cash equivalents, beginning of period | 618,335 | 745,621 | ||||||
Cash and cash equivalents, end of period | $ | 272,147 | $ | 684,374 |
Nine Months Ended September 30, | ||||||||||||||
2021 | 2020 | |||||||||||||
Cash flows from operating activities: | ||||||||||||||
Net earnings | $ | 499,984 | $ | 270,948 | ||||||||||
Adjustments to reconcile net earnings to net cash (used in)/provided by operating activities: | ||||||||||||||
Depreciation and amortization | 19,892 | 22,496 | ||||||||||||
Stock-based compensation | 14,435 | 15,724 | ||||||||||||
Loss on early extinguishment of debt | 18,188 | — | ||||||||||||
Equity in earnings from unconsolidated entities | (2,878) | (2,821) | ||||||||||||
Distributions of earnings from unconsolidated entities | 3,324 | 2,449 | ||||||||||||
Other | (3,085) | 1,881 | ||||||||||||
Changes in assets and liabilities: | ||||||||||||||
(Increase)/decrease in real estate | (810,731) | 9,080 | ||||||||||||
Increase in deposits on real estate under option or contract | (18,453) | (12,910) | ||||||||||||
(Increase)/decrease in other receivables, prepaids and other assets | (51,611) | 4,933 | ||||||||||||
Increase in accounts payable and accrued liabilities | 67,301 | 60,039 | ||||||||||||
Increase in home sale deposits | 14,928 | 1,263 | ||||||||||||
Net cash (used in)/provided by operating activities | (248,706) | 373,082 | ||||||||||||
Cash flows from investing activities: | ||||||||||||||
Investments in unconsolidated entities | (1) | (4) | ||||||||||||
Distributions of capital from unconsolidated entities | — | 1,000 | ||||||||||||
Purchases of property and equipment | (17,910) | (14,771) | ||||||||||||
Proceeds from sales of property and equipment | 404 | 528 | ||||||||||||
Maturities/sales of investments and securities | 2,795 | 632 | ||||||||||||
Payments to purchase investments and securities | (2,795) | (632) | ||||||||||||
Net cash used in investing activities | (17,507) | (13,247) | ||||||||||||
Cash flows from financing activities: | ||||||||||||||
Repayment of loans payable and other borrowings | (6,308) | (8,509) | ||||||||||||
Repayment of senior notes | (317,690) | — | ||||||||||||
Proceeds from issuance of senior notes | 450,000 | — | ||||||||||||
Payment of debt issuance costs | (6,102) | — | ||||||||||||
Repurchase of shares | (37,017) | (60,813) | ||||||||||||
Net cash provided by/(used in) financing activities | 82,883 | (69,322) | ||||||||||||
Net (decrease)/increase in cash and cash equivalents | (183,330) | 290,513 | ||||||||||||
Cash and cash equivalents, beginning of period | 745,621 | 319,466 | ||||||||||||
Cash and cash equivalents, end of period | $ | 562,291 | $ | 609,979 |
See Supplemental Disclosure of Cash Flow Information in Note 13.
See accompanying notes to unaudited consolidated financial statements
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1— ORGANIZATION AND BASIS OF PRESENTATION
Organization.
Meritage Homes Corporation ("Meritage Homes") is a leading designer and builder of single-family homes. We primarily build in historically high-growth regions of the United States and offer a variety ofWe commenced our homebuilding operations in 1985 through our predecessor company, known as Monterey Homes. Meritage Homes Corporation was incorporated in the state of Maryland in 1988 under the name of Homeplex Mortgage Investments Corporation and merged with Monterey Homes in 1996, at which time our name was changed to Monterey Homes Corporation and later ultimately to Meritage Homes Corporation. Since that time, we have engaged in homebuilding and related activities and ceased to operate as a real estate investment trust.activities. Meritage Homes Corporation operates as a holding company and has no independent assets or operations. Its homebuilding construction, development and sales activities are conducted through its subsidiaries. Our homebuilding activities are conducted under the name of Meritage Homes in each of our homebuilding markets. At SeptemberJune 30, 2021,2022, we were actively selling homes in 236303 communities, with base prices ranging from approximately $200,000$244,000 to $889,000.
Basis of Presentation
. The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to FormCash and Cash Equivalents.
Liquid investments with an initial maturity of three months or less are classified as cash equivalents. Amounts in transit from title companies or closing agents for home closings of approximatelyReal Estate.
Real estate inventory is stated at cost unless the community or land is determined to be impaired, at which point the inventory is written down to fair value as required by Accounting Standards Codification (“ASC”)We capitalize qualifying interest to inventory during the development and construction periods. Capitalized interest is included in cost of closings when the related inventory is closed. Included within our real estate inventory is land held for development and land held for sale. Land held for development primarily represents land and land development costs related to land where development activity is not currently underway but is expected to begin in the future. For these parcels, we have chosen not to currently develop certain land holdings as they typically represent a portion or phases of a larger land parcel that we plan to build out over several years. We do not capitalize interest for these inactive assets, and all ongoing costs of land ownership (i.e. property taxes, homeowner association dues, etc.) are expensed as incurred.
We rely on certain estimates to determine our construction and land development costs. Construction and land costs are comprised of direct and allocated costs, including estimated future costs. In determining these costs, we compile project budgets that are based on a variety of assumptions, including future construction schedules and costs to be incurred. Actual results can differ from budgeted amounts for various reasons, including construction and weather delays, labor or material shortages, slower absorptions that differ from our expectations, increases in costs that have not yet been committed, changes in governmental requirements, or other unanticipated issues or delays encountered during construction and development and other factors beyond our control. To address uncertainty in these budgets, we assess, update and revise project budgets on a regular basis, utilizing the most current information available to estimate home construction and land development costs.
Typically, a community's life cycle ranges from three to five years, commencing with the acquisition of the land, continuing through the land development phase, if applicable, and concluding with the sale, construction and closing of the homes. Actual community lives will vary based on the size of the community, the sales orders absorption raterates and whether the land purchased was raw, partially-developed or in finished status. Master-planned communities encompassing several phases and super-block land parcels may have significantly longer lives and projects involving smaller finished lot purchases may be significantly shorter.
All of our land inventory and related real estate assets are periodically reviewed for recoverability when certain criteria are met, but at least annually, as our inventory is considered “long-lived” in accordance with GAAP. If the undiscounted cash flows expected to be generated by an asset are lower than its carrying amount, impairment charges are recorded to write down the asset to its estimated fair value. Our determination of fair value is based on projections and estimates. Changes in these expectations may lead to a change in the outcome of our impairment analysis, and actual results may also differ from our assumptions. OurWe conduct an analysis is conducted if indicationindicators of a decline in value of our land and real estate assets exists. If an asset is deemed to be impaired, the impairment recognized is measured as the amount by which the asset'sassets' carrying amount exceeds itstheir fair value. The impairment of a community is allocated to each lot on a straight-line basis.
Deposits.
Deposits paid related to land option and purchase contracts are recorded and classified as Deposits on real estate under option or contract until the related land is purchased. Deposits are reclassified as a component of real estate inventory at the time the deposit is used to offset the acquisition price of the land based on the terms of the underlying agreements. To the extent they are non-refundable, deposits areGoodwill. In accordance with ASC 350,Intangibles, Goodwill and Other ("ASC 350"), we analyze goodwill on an annual basis (or whenever indication of impairment exists) through a qualitative assessment to determine whether it is necessary to perform a goodwill impairment test. ASC 350 states that an entity may assess qualitative factors to determine whether it is necessary to perform a goodwill impairment test. Such qualitative factors include: (1)(1) macroeconomic conditions, such as a deterioration in general economic conditions, (2)(2) industry and market considerations such as deterioration in the environment in which the entity operates, (3)(3) cost factors such as increases in raw materials, labor costs, etc., and (4)(4) overall financial performance such as negative or declining cash flows or a decline in actual or planned revenue or earnings. If the qualitative analysis determines that additional impairment testing is required, a two-steptwo-step impairment test in accordance with ASC 350 would be initiated. We continually evaluate our qualitative inputs to assess whether events and circumstances have occurred that indicate the goodwill balance may not be recoverable. See Note 9 for additional information on our goodwill assets.
Leases.
We lease certain office space and equipment for use in our operations. We assess each of these contracts to determine whether the arrangement contains a lease as defined by ASC 842,Leases ("ASC 842"). In order to meet the definition of a lease under ASC 842, the contractual arrangement must convey to us the right to control the use of an identifiable asset for a period of time in exchange for consideration. Leases that meet the criteria of ASC 842 are recorded on ourThe table below outlines our ROU assets and lease liabilities (in thousands):
As of | ||||||||||||||
September 30, 2021 | December 31, 2020 | |||||||||||||
ROU assets | $ | 17,159 | $ | 21,624 | ||||||||||
Lease liabilities | 22,644 | 28,254 |
As of | ||||||||
June 30, 2022 | December 31, 2021 | |||||||
ROU assets | $ | 19,725 | $ | 21,038 | ||||
Lease liabilities | 24,084 | 26,171 |
Off-Balance Sheet Arrangements - Joint Ventures
. We may participate in land development joint ventures as a means of accessing larger parcels of land and lot positions, expanding our market opportunities, managing our risk profileOff-Balance Sheet Arrangements - Other.
In the normal course of business, we may acquire lots from various development entities pursuant toSurety Bonds and Letters of Credit.
We provide surety bondsThe table below outlines our surety bond and letter of credit obligations (in thousands):
As of | |||||||||||||||||||||||
September 30, 2021 | December 31, 2020 | ||||||||||||||||||||||
Outstanding | Estimated work remaining to complete | Outstanding | Estimated work remaining to complete | ||||||||||||||||||||
Sureties: | |||||||||||||||||||||||
Sureties related to owned projects and lots under contract | $ | 597,379 | $ | 331,195 | $ | 478,788 | $ | 216,708 | |||||||||||||||
Total Sureties | $ | 597,379 | $ | 331,195 | $ | 478,788 | $ | 216,708 | |||||||||||||||
Letters of Credit (“LOCs”): | |||||||||||||||||||||||
LOCs for land development | 71,965 | N/A | 93,661 | N/A | |||||||||||||||||||
LOCs for general corporate operations | 3,000 | N/A | 3,750 | N/A | |||||||||||||||||||
Total LOCs | $ | 74,965 | N/A | $ | 97,411 | N/A |
As of | ||||||||||||||||
June 30, 2022 | December 31, 2021 | |||||||||||||||
Estimated work | Estimated work | |||||||||||||||
remaining to | remaining to | |||||||||||||||
Outstanding | complete | Outstanding | complete | |||||||||||||
Sureties: | ||||||||||||||||
Sureties related to owned projects and lots under contract | $ | 696,017 | $ | 401,730 | $ | 620,297 | $ | 352,152 | ||||||||
Total Sureties | $ | 696,017 | $ | 401,730 | $ | 620,297 | $ | 352,152 | ||||||||
Letters of Credit (“LOCs”): | ||||||||||||||||
LOCs for land development | $ | 58,124 | N/A | $ | 57,396 | N/A | ||||||||||
LOCs for general corporate operations | 5,000 | N/A | 5,000 | N/A | ||||||||||||
Total LOCs | $ | 63,124 | N/A | $ | 62,396 | N/A |
Accrued Liabilities. Accrued liabilities at SeptemberJune 30, 20212022 and December 31, 20202021 consisted of the following (in thousands):As of September 30, 2021 December 31, 2020 Accruals related to real estate development and construction activities $ 116,351 $ 92,701 Payroll and other benefits 85,959 88,337 Accrued interest 21,528 8,457 Accrued taxes 26,526 34,373 Warranty reserves 26,551 23,743 Lease liabilities 22,644 28,254 Other accruals 24,848 20,256 Total $ 324,407 $ 296,121
As of | ||||||||
June 30, 2022 | December 31, 2021 | |||||||
Accruals related to real estate development and construction activities | $ | 150,525 | $ | 115,214 | ||||
Payroll and other benefits | 73,601 | 102,773 | ||||||
Accrued interest | 7,195 | 5,556 | ||||||
Accrued taxes | 17,084 | 37,297 | ||||||
Warranty reserves | 31,437 | 26,264 | ||||||
Lease liabilities | 24,084 | 26,171 | ||||||
Other accruals | 22,930 | 24,002 | ||||||
Total | $ | 326,856 | $ | 337,277 |
Warranty Reserves.
We provide home purchasers with limited warranties against certain building defects and we have certain obligations related to those post-construction warranties for closed homes. The specific terms and conditions of these limited warranties vary by state, but overall the nature of the warranties include a complete workmanship and materials warranty for the first year after the close of the home, a major mechanical warranty for two years after the close of the home and a structural warranty that typically extends up to 10 years after the close of the home. With the assistance of an actuary, we have estimatedA summary of changes in our warranty reserves follows (in thousands):
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
Balance, beginning of period | $ | 25,065 | $ | 21,578 | $ | 23,743 | $ | 22,015 | |||||||||||||||
Additions to reserve from new home deliveries | 4,442 | 4,592 | 12,766 | 12,620 | |||||||||||||||||||
Warranty claims | (2,956) | (2,911) | (9,958) | (11,376) | |||||||||||||||||||
Adjustments to pre-existing reserves | — | — | — | — | |||||||||||||||||||
Balance, end of period | $ | 26,551 | $ | 23,259 | $ | 26,551 | $ | 23,259 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Balance, beginning of period | $ | 26,667 | $ | 23,767 | $ | 26,264 | $ | 23,743 | ||||||||
Additions to reserve from new home deliveries | 5,308 | 4,514 | 9,836 | 8,324 | ||||||||||||
Warranty claims | (538 | ) | (1) | (3,216 | ) | (4,663 | ) | (1) | (7,002 | ) | ||||||
Adjustments to pre-existing reserves | 0 | 0 | 0 | 0 | ||||||||||||
Balance, end of period | $ | 31,437 | $ | 25,065 | $ | 31,437 | $ | 25,065 |
(1) | Includes recoveries for costs incurred over several years on a foundation design and performance matter that affected a single community in Texas. |
Warranty reserves are included in Accrued liabilities on the accompanying unaudited consolidated balance sheets, and additions and adjustments to the reserves are included in Cost of home closings within the accompanying unaudited consolidated income statements. These reserves are intended to cover costs associated with our contractual and statutory warranty obligations, which include, among other items, claims involving defective workmanship and materials. We believe that our total reserves, coupled with our contractual relationships and rights with our trades and the insurance we and our trades maintain, are sufficient to cover our general warranty obligations. However, as unanticipated changes in legal, weather, environmental or other conditions could have an impact on our actual warranty costs, and future costs could differ significantly from our estimates.
Revenue Recognition.
In accordance with ASC 606,Revenue from Contracts with Customers, we apply the following steps in determining the timing and amount of revenue to recognize:• | Revenue from closings of residential real estate is recognized when closings have occurred, the risks and rewards of ownership are transferred to the buyer, and we have no continuing involvement with the property, which is generally upon the close of escrow. Revenue is reported net of any discounts and incentives. |
• | Revenue from land sales is recognized when a significant down payment is received, title passes, and collectability of the receivable, if any, is reasonably assured, and we have no continuing involvement with the property, which is generally upon the close of escrow. |
• | Revenue from financial services is recognized when closings have occurred and all financial services have been rendered, which is generally upon the close of escrow. |
Home closing and land saleclosing revenue expected to be recognized in any future year related to remaining performance obligations (if any) and the associated contract liabilities expected to be recognized as revenue, excluding revenue pertaining to contracts that have an original expected duration of one year or less, is not material. Revenue from financial services includes estimated future insurance policy renewal commissions as our performance obligations are satisfied upon issuance of the initial policy with a third party broker. The related contract assets for these estimated future renewal commissions are not material at SeptemberJune 30, 20212022 and December 31, 2020.2021. Our three sources of revenue are disaggregated by type in the accompanying unaudited consolidated income statements.
Recent Accounting Pronouncements.
There are no recent accounting for income taxes by eliminating certain exceptions within ASC Topic 740,
NOTE 2— REAL ESTATE AND CAPITALIZED INTEREST
Real estate consists of the following (in thousands):
As of | ||||||||||||||
September 30, 2021 | December 31, 2020 | |||||||||||||
Homes under contract under construction (1) | $ | 1,142,724 | $ | 873,365 | ||||||||||
Unsold homes, completed and under construction (1) | 397,422 | 357,861 | ||||||||||||
Model homes (1) | 75,239 | 82,502 | ||||||||||||
Finished home sites and home sites under development (2) (3) | 1,977,622 | 1,464,311 | ||||||||||||
Total | $ | 3,593,007 | $ | 2,778,039 |
As of | ||||||||
June 30, 2022 | December 31, 2021 | |||||||
Homes under contract under construction (1) | $ | 1,527,013 | $ | 1,039,822 | ||||
Unsold homes, completed and under construction (1) | 748,845 | 484,999 | ||||||
Model homes (1) | 89,539 | 81,049 | ||||||
Finished home sites and home sites under development (2) (3) | 2,108,665 | 2,128,538 | ||||||
Total | $ | 4,474,062 | $ | 3,734,408 |
(1) | Includes the allocated land and land development costs associated with each lot for these homes. |
(2) | Includes raw land, land held for development and land held for sale, less impairments, if any. We do not capitalize interest for inactive assets, and all ongoing costs of land ownership (i.e. property taxes, homeowner association dues, etc.) are expensed as incurred. |
(3) | Includes land held for sale of $58.2 million and $62.1 million as of June 30, 2022 and December 31, 2021, respectively. |
Subject to sufficient qualifying assets, we capitalize our development period interest costs incurred to applicable qualifying assets in connection with our real estate development and construction activities. Capitalized interest is allocated to active real estate when incurred and charged to costCost of closings when the related property is delivered. A summary of our capitalized interest is as follows (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Capitalized interest, beginning of period $ 56,710 $ 72,882 $ 58,940 $ 82,014 Interest incurred 15,212 16,103 47,625 50,188 Interest expensed (79) (55) (246) (2,176) Interest amortized to cost of home and land closings (14,550) (21,380) (49,026) (62,476) Capitalized interest, end of period $ 57,293 $ 67,550 $ 57,293 $ 67,550
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Capitalized interest, beginning of period | $ | 59,082 | $ | 57,540 | $ | 56,253 | $ | 58,940 | ||||||||
Interest incurred | 15,171 | 16,321 | 30,384 | 32,413 | ||||||||||||
Interest expensed | 0 | (77 | ) | (41 | ) | (167 | ) | |||||||||
Interest amortized to cost of home and land closings | (12,794 | ) | (17,074 | ) | (25,137 | ) | (34,476 | ) | ||||||||
Capitalized interest, end of period | $ | 61,459 | $ | 56,710 | $ | 61,459 | $ | 56,710 |
NOTE 3— VARIABLE INTEREST ENTITIES AND CONSOLIDATED REAL ESTATE NOT OWNED
We enter into purchase and option agreements for land or lots as part of the normal course of business. These purchase and option agreements enable us to acquire properties at one or multiple future dates at pre-determined prices. We believe these acquisition structures allow us to better leverage our balance sheet and reduce our financial risk associated with land acquisitions. In accordance with ASC 810,
Consolidation, we evaluate all purchase and option agreements for land to determine whether they are a variable interest entity ("VIE"), and if so, whether we are the primary beneficiary. Although we do not have legal title to the underlying land, if we are the primary beneficiary we are required to consolidate the VIE in our financial statements and reflect such assets and liabilities as Real estate notThe table below presents a summary of our lots under option at SeptemberJune 30, 20212022 (dollars in thousands):
Projected Number of Lots | Purchase Price | Option/ Earnest Money Deposits–Cash | |||||||||||||||||||||
Purchase and option contracts recorded on balance sheet as Real estate not owned | — | $ | — | $ | — | ||||||||||||||||||
Option contracts — non-refundable deposits, committed (1) | 11,433 | 530,759 | 43,214 | ||||||||||||||||||||
Purchase contracts — non-refundable deposits, committed (1) | 11,084 | 327,738 | 25,734 | ||||||||||||||||||||
Purchase and option contracts —refundable deposits, committed | 2,619 | 86,635 | 743 | ||||||||||||||||||||
Total committed | 25,136 | 945,132 | 69,691 | ||||||||||||||||||||
Purchase and option contracts — refundable deposits, uncommitted (2) | 31,655 | 769,696 | 8,296 | ||||||||||||||||||||
Total lots under contract or option | 56,791 | $ | 1,714,828 | $ | 77,987 | ||||||||||||||||||
Total purchase and option contracts not recorded on balance sheet (3) | 56,791 | $ | 1,714,828 | $ | 77,987 | (4) |
Projected | Option/ | ||||||||||||
Number | Purchase | Earnest Money | |||||||||||
of Lots | Price | Deposits–Cash | |||||||||||
Purchase and option contracts recorded on balance sheet as Real estate not owned (1) | 1 | $ | 8,011 | $ | 801 | ||||||||
Option contracts — non-refundable deposits, committed (2) | 11,991 | 644,294 | 64,290 | ||||||||||
Purchase contracts — non-refundable deposits, committed (2) | 10,880 | 302,555 | 22,712 | ||||||||||
Purchase and option contracts —refundable deposits, committed | 1,450 | 35,228 | 1,477 | ||||||||||
Total committed | 24,322 | 990,088 | 89,280 | ||||||||||
Purchase and option contracts — refundable deposits, uncommitted (3) | 26,541 | 877,421 | 9,488 | ||||||||||
Total lots under contract or option | 50,863 | $ | 1,867,509 | $ | 98,768 | ||||||||
Total purchase and option contracts not recorded on balance sheet (4) | 50,862 | $ | 1,859,498 | $ | 97,967 | (5) |
(1) | Real estate not owned represents a single parcel of land intended for multi-family housing that, once purchased, the Company intends to sell. |
(2) | Deposits are non-refundable except if certain contractual conditions are not performed by the selling party. |
(3) | Deposits are refundable at our sole discretion. We have not completed our acquisition evaluation process and we have not internally committed to purchase these lots. |
(4) | Except for our specific performance contracts recorded on our unaudited consolidated balance sheets as Real estate not owned (if any), none of our purchase or option contracts require us to purchase lots. |
(5) | Amount is reflected in our unaudited consolidated balance sheets in Deposits on real estate under option or contract as of June 30, 2022. |
Generally, our options to purchase lots remain effective so long as we purchase a pre-established minimum number of lots each month or quarter, as determined by the respective agreement. Although the pre-established number is typically structured to approximate our expected rate of home construction starts, during a weakened homebuilding market, we may purchase lots at an absorption level that exceeds our sales and home starts pace needed to meet the pre-established minimum number of lots or restructure our original contract to terms that more accurately reflect our revised orders pace expectations. During a strong homebuilding market, we may accelerate our pre-established minimum purchases if allowed by the contract.
NOTE 4 - INVESTMENTS IN UNCONSOLIDATED ENTITIES
We may enter into joint ventures as a means of accessing larger parcels of land, expanding our market opportunities, managing our risk profile, optimizing deal structure for the impacted parties and leveraging our capital base.capital. While purchasing land through a joint venture can be beneficial, currently we do not view joint ventures as critical to the success of our homebuilding operations. Our joint venture partners generally are generally other homebuilders, land sellers or other real estate investors. We generally do not always have a controlling interest in these ventures, which means our joint venture partners could cause the venture to take actions we disagree with, or fail to take actions we believe should be undertaken, including the sale of the underlying property to repay debt or recoup all or part of the partners' investments. Based on the structure of eachthese joint venture, it ventures, they may or may not be consolidated into our results. As of SeptemberJune 30, 2021,2022, we had 1two active equity-method land joint venture with limited operations,ventures and 1one mortgage joint venture, which is engaged in mortgage activities and primarily provides services to our homebuyers.
Summarized condensed combined financial information related to unconsolidated joint ventures that are accounted for using the equity method was as follows (in thousands):
As of | |||||||||||
September 30, 2021 | December 31, 2020 | ||||||||||
Assets: | |||||||||||
Cash | $ | 3,985 | $ | 4,656 | |||||||
Real estate | 5,732 | 5,745 | |||||||||
Other assets | 4,655 | 5,118 | |||||||||
Total assets | $ | 14,372 | $ | 15,519 | |||||||
Liabilities and equity: | |||||||||||
Accounts payable and other liabilities | $ | 4,641 | $ | 5,588 | |||||||
Equity of: | |||||||||||
Meritage (1) | 5,184 | 5,330 | |||||||||
Other | 4,547 | 4,601 | |||||||||
Total liabilities and equity | $ | 14,372 | $ | 15,519 |
As of | ||||||||
June 30, 2022 | December 31, 2021 | |||||||
Assets: | ||||||||
Cash | $ | 2,826 | $ | 7,983 | ||||
Real estate | 16,784 | 7,989 | ||||||
Other assets | 7,024 | 3,903 | ||||||
Total assets | $ | 26,634 | $ | 19,875 | ||||
Liabilities and equity: | ||||||||
Accounts payable and other liabilities | $ | 5,990 | $ | 7,899 | ||||
Equity of: | ||||||||
Meritage (1) | 10,198 | 4,752 | ||||||
Other | 10,446 | 7,224 | ||||||
Total liabilities and equity | $ | 26,634 | $ | 19,875 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Revenue | $ | 9,840 | $ | 10,108 | $ | 19,078 | $ | 19,103 | ||||||||
Costs and expenses | (7,936 | ) | (8,404 | ) | (16,208 | ) | (16,529 | ) | ||||||||
Net earnings of unconsolidated entities | $ | 1,904 | $ | 1,704 | $ | 2,870 | $ | 2,574 | ||||||||
Meritage’s share of pre-tax earnings (1) (2) | $ | 1,208 | $ | 1,057 | $ | 2,192 | $ | 1,807 |
(1) | Balance represents Meritage’s interest, as reflected in the financial records of the respective joint ventures. This balance may differ from the balance reported in the accompanying unaudited consolidated financial statements due to the following reconciling items: (i) timing differences for revenue and distributions recognition, (ii) step-up basis and corresponding amortization, (iii) capitalization of interest on qualified assets, (iv) income deferrals as discussed in Note (2) below and (v) the cessation of allocation of losses from joint ventures in which we have previously written down our investment balance to zero and where we have no commitment to fund additional losses. |
(2) | Our share of pre-tax earnings from our mortgage joint venture is recorded in Earnings from financial services unconsolidated entities and other, net on the accompanying unaudited consolidated income statements. Our share of pre-tax earnings from all other joint ventures is recorded in Other (expense)/income, net on the accompanying unaudited consolidated income statements and excludes joint venture profit related to lots we purchased from the joint ventures, if any. Such profit is deferred until homes are delivered by us and title passes to a homebuyer. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
Revenue | $ | 10,070 | $ | 9,630 | $ | 29,173 | $ | 26,903 | |||||||||||||||
Costs and expenses | (8,171) | (8,138) | (24,700) | (21,945) | |||||||||||||||||||
Net earnings of unconsolidated entities | $ | 1,899 | $ | 1,492 | $ | 4,473 | $ | 4,958 | |||||||||||||||
Meritage’s share of pre-tax earnings (1) (2) | $ | 1,071 | $ | 1,129 | $ | 2,878 | $ | 2,864 |
NOTE 5— LOANS PAYABLE AND OTHER BORROWINGS
Loans payable and other borrowings consist of the following (in thousands):
As of | ||||||||||||||
September 30, 2021 | December 31, 2020 | |||||||||||||
Other borrowings, real estate notes payable (1) | $ | 18,985 | $ | 23,094 | ||||||||||
$780.0 million unsecured revolving credit facility with interest approximating LIBOR (approximately 0.08% at September 30, 2021) plus 1.375% or Prime (3.25% at September 30, 2021) plus 0.375% | — | — | ||||||||||||
Total | $ | 18,985 | $ | 23,094 |
As of | ||||||||
June 30, 2022 | December 31, 2021 | |||||||
Other borrowings, real estate notes payable (1) | $ | 15,613 | $ | 17,552 | ||||
$780.0 million unsecured revolving credit facility | 0 | 0 | ||||||
Total | $ | 15,613 | $ | 17,552 |
(1) | Reflects balance of non-recourse notes payable in connection with land purchases. |
The Company entered into an amended and restated unsecured revolving credit facility ("Credit Facility") in 2014 that has been amended from time to time. In December 2020, 2021, the Credit Facility was amended to extend the maturity date to December
The Credit Facility also contains certain financial covenants, including (a) a minimum tangible net worth requirement of $1.5$1.9 billion (which amount is subject to increase over time based on subsequent earnings and proceeds from equity offerings), and (b) a maximum leverage covenant that prohibits the leverage ratio (as defined therein) from exceeding 60%. In addition, we are required to maintain either (i) an interest coverage ratio (EBITDA to interest expense, as defined therein) of at least 1.50 to 1.00 or (ii) liquidity (as defined therein) of an amount not less than our consolidated interest incurred during the trailing 12 months. We were in compliance with all Credit Facility covenants as of SeptemberJune 30, 2021.
We had no0 outstanding borrowings under the Credit Facility as of SeptemberJune 30, 20212022 and December 31, 2020.2021. There were no0 borrowings or repayments during the three and ninesix months ended SeptemberJune 30, 2021. During the first quarter of 2020 we borrowed $500.0 million on our Credit Facility in connection with the perceived potential instability of the financial markets around the COVID-19 pandemic, which we repaid in full during the second quarter of 2020.2022 and 2021. As of SeptemberJune 30, 2021,2022, we had outstanding letters of credit issued under the Credit Facility totaling $75.0$63.1 million, leaving $705.0$716.9 million available under the Credit Facility to be drawn.
NOTE 6— SENIOR NOTES, NET
Senior notes, net consist of the following (in thousands):
As of | ||||||||||||||
September 30, 2021 | December 31, 2020 | |||||||||||||
7.00% senior notes due 2022 | $ | — | $ | 300,000 | ||||||||||
6.00% senior notes due 2025. At September 30, 2021 and December 31, 2020 there was approximately $3,000 and $3,614 in net unamortized premium, respectively. | 403,000 | 403,614 | ||||||||||||
5.125% senior notes due 2027 | 300,000 | 300,000 | ||||||||||||
3.875% senior notes due 2029 | 450,000 | — | ||||||||||||
Net debt issuance costs | (10,790) | (6,623) | ||||||||||||
Total | $ | 1,142,210 | $ | 996,991 |
As of | ||||||||
June 30, 2022 | December 31, 2021 | |||||||
6.00% senior notes due 2025. At June 30, 2022 and December 31, 2021 there was approximately $2,386 and $2,795 in net unamortized premium, respectively. | $ | 402,386 | $ | 402,795 | ||||
5.125% senior notes due 2027 | 300,000 | 300,000 | ||||||
3.875% senior notes due 2029 | 450,000 | 450,000 | ||||||
Net debt issuance costs | (9,348 | ) | (10,309 | ) | ||||
Total | $ | 1,143,038 | $ | 1,142,486 |
The indentures for all of our senior notes contain non-financial covenants including, among others, limitations on the amount of secured debt we may incur, and limitations on sale and leaseback transactions and mergers. We were in compliance with all such covenants as of SeptemberJune 30, 2021.
Obligations to pay principal and interest on the senior notes are guaranteed by substantially all of our wholly-owned subsidiaries (each a “Guarantor” and, collectively, the “Guarantor Subsidiaries”), each of which is directly or indirectly 100% owned by Meritage Homes Corporation. Such guarantees are full and unconditional, and joint and several. In the event of a sale or other disposition of all of the assets of any Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of all of the equity interests of any Guarantor then held by Meritage and its subsidiaries, then that Guarantor may be released and relieved of any obligations under its note guarantee. There are no significant restrictions on our ability or the ability of any Guarantor to obtain funds from their respective subsidiaries, as applicable, by dividend or loan. We do not provide separate financial statements of the Guarantor Subsidiaries because Meritage (the parent company) has no independent assets or operations and the guarantees are full and unconditional and joint and several. Subsidiaries of Meritage Homes Corporation that are non-guarantor subsidiaries are, individually and in the aggregate, minor.
In April 2021, we completed an offering of $450.0 million aggregate principal amount of 3.875% Senior Notes due 2029. We used a portion of the net proceeds from this offering to redeem all $300.0 million aggregate principal outstanding of our 7.00% Senior Notes due 2022, incurring $18.2 million in early debt extinguishment charges in the ninethree and six months ended September June 30,2021, reflected as Loss on early extinguishment of debt in the accompanying unaudited consolidated income statements.
NOTE 7— FAIR VALUE DISCLOSURES
ASC 820-10,
• | Level 1 — Valuation is based on quoted prices in active markets for identical assets and liabilities. | |
• | Level 2 — Valuation is determined from quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar instruments in markets that are not active, or by model-based techniques in which all significant inputs are observable in the market. | |
• | Level 3 — Valuation is derived from model-based techniques in which at least one significant input is unobservable and based on the Company’s own estimates about the assumptions that market participants would use to value the asset or liability. |
If the only observable inputs are from inactive markets or for transactions which the Company evaluates as “distressed”, the use of Level 1 inputs should be modified by the Company to properly address these factors, or the reliance of such inputs may be limited, with a greater weight attributed to Level 3 inputs.
Financial Instruments
: The fair value of our fixed-rate debt is derived from quoted market prices by independent dealers (Level 2 inputs as per the discussion above) and is as follows (in thousands):As of | ||||||||||||||||||||||||||
September 30, 2021 | December 31, 2020 | |||||||||||||||||||||||||
Aggregate Principal | Estimated Fair Value | Aggregate Principal | Estimated Fair Value | |||||||||||||||||||||||
7.00% senior notes due 2022 | $ | — | $ | — | $ | 300,000 | $ | 319,758 | ||||||||||||||||||
6.00% senior notes due 2025 | $ | 400,000 | $ | 451,000 | $ | 400,000 | $ | 451,913 | ||||||||||||||||||
5.125% senior notes due 2027 | $ | 300,000 | $ | 333,000 | $ | 300,000 | $ | 333,328 | ||||||||||||||||||
3.875% senior notes due 2029 | $ | 450,000 | $ | 471,375 | $ | — | $ | — |
As of | ||||||||||||||||
June 30, 2022 | December 31, 2021 | |||||||||||||||
Aggregate | Estimated Fair | Aggregate | Estimated Fair | |||||||||||||
Principal | Value | Principal | Value | |||||||||||||
6.00% senior notes due 2025 | $ | 400,000 | $ | 390,000 | $ | 400,000 | $ | 446,520 | ||||||||
5.125% senior notes due 2027 | $ | 300,000 | $ | 274,500 | $ | 300,000 | $ | 329,640 | ||||||||
3.875% senior notes due 2029 | $ | 450,000 | $ | 372,375 | $ | 450,000 | $ | 472,500 |
Due to the short-term nature of other financial assets and liabilities, including our Loans payable and other borrowings, we consider the carrying amounts of our other short-term financial instruments to approximate fair value.
NOTE 8— EARNINGS PER SHARE
Basic and diluted earnings per common share were calculated as follows (in thousands, except per share amounts):
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Basic weighted average number of shares outstanding | 36,647 | 37,818 | 36,820 | 37,731 | ||||||||||||
Effect of dilutive securities: | ||||||||||||||||
Unvested restricted stock | 315 | 559 | 419 | 626 | ||||||||||||
Diluted average shares outstanding | 36,962 | 38,377 | 37,239 | 38,357 | ||||||||||||
Net earnings | $ | 250,084 | $ | 167,389 | $ | 467,338 | $ | 299,232 | ||||||||
Basic earnings per share | $ | 6.82 | $ | 4.43 | $ | 12.69 | $ | 7.93 | ||||||||
Diluted earnings per share | $ | 6.77 | $ | 4.36 | $ | 12.55 | $ | 7.80 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
Basic weighted average number of shares outstanding | 37,647 | 37,607 | 37,703 | 37,763 | |||||||||||||||||||
Effect of dilutive securities: | |||||||||||||||||||||||
Unvested restricted stock | 582 | 798 | 582 | 728 | |||||||||||||||||||
Diluted average shares outstanding | 38,229 | 38,405 | 38,285 | 38,491 | |||||||||||||||||||
Net earnings | $ | 200,752 | $ | 109,118 | $ | 499,984 | $ | 270,948 | |||||||||||||||
Basic earnings per share | $ | 5.33 | $ | 2.90 | $ | 13.26 | $ | 7.17 | |||||||||||||||
Diluted earnings per share | $ | 5.25 | $ | 2.84 | $ | 13.06 | $ | 7.04 | |||||||||||||||
NOTE 9— ACQUISITIONS AND GOODWILL
Goodwill.
In prior years, we have entered new markets through the acquisition of the homebuilding assets and operations of local/regional homebuilders in Georgia, South Carolina and Tennessee. As a result of these transactions, we recorded approximately $33.0 million of goodwill. Goodwill represents the excessA summary of the carrying amount of goodwill follows (in thousands):
West | Central | East | Financial Services | Corporate | Total | ||||||||||||||||||||||||||||||
Balance at December 31, 2020 | $ | — | $ | — | $ | 32,962 | $ | — | $ | — | $ | 32,962 | |||||||||||||||||||||||
Additions | — | — | — | — | — | — | |||||||||||||||||||||||||||||
Balance at September 30, 2021 | $ | — | $ | — | $ | 32,962 | $ | — | $ | — | $ | 32,962 |
Financial | ||||||||||||||||||||||||
West | Central | East | Services | Corporate | Total | |||||||||||||||||||
Balance at December 31, 2021 | $ | 0 | $ | 0 | $ | 32,962 | $ | 0 | $ | 0 | $ | 32,962 | ||||||||||||
Additions | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||
Balance at June 30, 2022 | $ | 0 | $ | 0 | $ | 32,962 | $ | 0 | $ | 0 | $ | 32,962 |
NOTE 10— STOCKHOLDERS’ STOCKHOLDERS’ EQUITY
A summary of changes in stockholders’ equity is presented below (in thousands):
Nine Months Ended September 30, 2021 | ||||||||||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||
Number of Shares | Common Stock | Additional Paid-In Capital | Retained Earnings | Total | ||||||||||||||||||||||||||||
Balance at December 31, 2020 | 37,512 | $ | 375 | $ | 455,762 | $ | 1,891,731 | $ | 2,347,868 | |||||||||||||||||||||||
Net earnings | — | — | — | 131,843 | 131,843 | |||||||||||||||||||||||||||
Stock-based compensation expense | — | — | 5,367 | — | 5,367 | |||||||||||||||||||||||||||
Issuance of stock | 435 | 4 | (4) | — | — | |||||||||||||||||||||||||||
Share repurchases | (100) | (1) | (8,384) | — | (8,385) | |||||||||||||||||||||||||||
Balance at March 31, 2021 | 37,847 | $ | 378 | $ | 452,741 | $ | 2,023,574 | $ | 2,476,693 | |||||||||||||||||||||||
Net earnings | — | — | — | 167,389 | 167,389 | |||||||||||||||||||||||||||
Stock-based compensation expense | — | — | 3,223 | — | 3,223 | |||||||||||||||||||||||||||
Share repurchases | (200) | (2) | (19,159) | — | (19,161) | |||||||||||||||||||||||||||
Balance at June 30, 2021 | 37,647 | $ | 376 | $ | 436,805 | $ | 2,190,963 | $ | 2,628,144 | |||||||||||||||||||||||
Net earnings | — | — | — | 200,752 | 200,752 | |||||||||||||||||||||||||||
Stock-based compensation expense | — | — | 5,845 | — | 5,845 | |||||||||||||||||||||||||||
Issuance of stock | 3 | — | — | — | — | |||||||||||||||||||||||||||
Share repurchases | (95) | — | (9,471) | — | (9,471) | |||||||||||||||||||||||||||
Balance at September 30, 2021 | $ | 37,555 | $ | 376 | $ | 433,179 | $ | 2,391,715 | $ | 2,825,270 |
Six Months Ended June 30, 2022 | ||||||||||||||||||||
(In thousands) | ||||||||||||||||||||
Additional | ||||||||||||||||||||
Number of | Common | Paid-In | Retained | |||||||||||||||||
Shares | Stock | Capital | Earnings | Total | ||||||||||||||||
Balance at December 31, 2021 | 37,341 | $ | 373 | $ | 414,841 | $ | 2,629,175 | $ | 3,044,389 | |||||||||||
Net earnings | — | 0 | 0 | �� | 217,254 | 217,254 | ||||||||||||||
Stock-based compensation expense | — | 0 | 5,975 | 0 | 5,975 | |||||||||||||||
Issuance of stock | 392 | 4 | (4 | ) | 0 | 0 | ||||||||||||||
Share repurchases | (1,038 | ) | (10 | ) | (99,293 | ) | 0 | (99,303 | ) | |||||||||||
Balance at March 31, 2022 | 36,695 | $ | 367 | $ | 321,519 | $ | 2,846,429 | $ | 3,168,315 | |||||||||||
Net earnings | — | 0 | 0 | 250,084 | 250,084 | |||||||||||||||
Stock-based compensation expense | — | 0 | 4,070 | 0 | 4,070 | |||||||||||||||
Share repurchases | (128 | ) | (1 | ) | (9,999 | ) | 0 | (10,000 | ) | |||||||||||
Balance at June 30, 2022 | 36,567 | $ | 366 | $ | 315,590 | $ | 3,096,513 | $ | 3,412,469 |
Six Months Ended June 30, 2021 | ||||||||||||||||||||
(In thousands) | ||||||||||||||||||||
Additional | ||||||||||||||||||||
Number of | Common | Paid-In | Retained | |||||||||||||||||
Shares | Stock | Capital | Earnings | Total | ||||||||||||||||
Balance at December 31, 2020 | 37,512 | $ | 375 | $ | 455,762 | $ | 1,891,731 | $ | 2,347,868 | |||||||||||
Net earnings | — | 0 | 0 | 131,843 | 131,843 | |||||||||||||||
Stock-based compensation expense | — | 0 | 5,367 | 0 | 5,367 | |||||||||||||||
Issuance of stock | 435 | 4 | (4 | ) | 0 | 0 | ||||||||||||||
Share repurchases | (100 | ) | (1 | ) | (8,384 | ) | 0 | (8,385 | ) | |||||||||||
Balance at March 31, 2021 | 37,847 | $ | 378 | $ | 452,741 | $ | 2,023,574 | $ | 2,476,693 | |||||||||||
Net earnings | — | 0 | 0 | 167,389 | 167,389 | |||||||||||||||
Stock-based compensation expense | — | 0 | 3,223 | 0 | 3,223 | |||||||||||||||
Issuance of stock | (200 | ) | (2 | ) | (19,159 | ) | 0 | (19,161 | ) | |||||||||||
Balance at June 30, 2021 | 37,647 | $ | 376 | $ | 436,805 | $ | 2,190,963 | $ | 2,628,144 |
Nine Months Ended September 30, 2020 | ||||||||||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||
Number of Shares | Common Stock | Additional Paid-In Capital | Retained Earnings | Total | ||||||||||||||||||||||||||||
Balance at December 31, 2019 | 38,199 | $ | 382 | $ | 505,352 | $ | 1,468,256 | $ | 1,973,990 | |||||||||||||||||||||||
Net earnings | — | — | — | 71,152 | 71,152 | |||||||||||||||||||||||||||
Stock-based compensation expense | — | — | 6,437 | — | 6,437 | |||||||||||||||||||||||||||
Issuance of stock | 398 | 4 | (4) | — | — | |||||||||||||||||||||||||||
Share repurchases | (1,000) | (10) | (60,803) | — | (60,813) | |||||||||||||||||||||||||||
Balance at March 31, 2020 | 37,597 | $ | 376 | $ | 450,982 | $ | 1,539,408 | $ | 1,990,766 | |||||||||||||||||||||||
Net earnings | — | — | — | 90,678 | 90,678 | |||||||||||||||||||||||||||
Stock-based compensation expense | — | — | 3,157 | — | 3,157 | |||||||||||||||||||||||||||
Issuance of stock | 6 | 1 | (1) | — | — | |||||||||||||||||||||||||||
Balance at June 30, 2020 | 37,603 | $ | 377 | $ | 454,138 | $ | 1,630,086 | $ | 2,084,601 | |||||||||||||||||||||||
Net earnings | — | — | — | 109,118 | 109,118 | |||||||||||||||||||||||||||
Stock-based compensation expense | — | — | 6,130 | — | 6,130 | |||||||||||||||||||||||||||
Issuance of stock | 9 | — | — | — | — | |||||||||||||||||||||||||||
Balance at September 30, 2020 | 37,612 | $ | 377 | $ | 460,268 | $ | 1,739,204 | $ | 2,199,849 |
NOTE 11— STOCK BASED STOCK-BASED AND DEFERRED COMPENSATION
We have a stock compensation plan, the Meritage Homes Corporation 2018 Stock Incentive Plan (the “2018“2018 Plan"), that was approved by our Board of Directors and our stockholders and adopted in May 2018. The 2018 Plan is administered by our Board of Directors and allows for the grant of stock appreciation rights, restricted stock awards, restricted stock units, performance share awards and performance-based awards in addition to non-qualified and incentive stock options. All available shares from expired, terminated, or forfeited awards that remained under prior plans were merged into and became available for grant under the 2018 Plan. The 2018 Plan authorizes awards to officers, key employees, non-employee directors and consultants. The 2018 Plan authorizes 6,600,000 shares of stock to be awarded, of which 1,050,079722,718 shares remain available for grant at SeptemberJune 30, 2021.2022. We believe that such awards provide a means of performance-based compensation to attract and retain qualified employees and better align the interests of our employees with those of our stockholders. Non-vested stock awards are usually granted with a five-yearfive-year ratable vesting period for employees, a three-yearthree-year cliff vesting for both non-vestedrestricted stock and performance-based awards granted to senior executive officers, and either a three-yearthree-year cliff vesting or one-yearone-year vesting for non-employee directors, dependent on their start date.
Compensation cost related to time-based restricted stock awards is measured as of the closing price on the date of grant and is expensed, less forfeitures, on a straight-line basis over the vesting period of the award. Compensation cost related to performance-based restricted stock awards is also measured as of the closing price on the date of grant but is expensed in accordance with ASC 718-10-25-20,
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
Stock-based compensation expense | $ | 5,845 | $ | 6,130 | $ | 14,435 | $ | 15,724 | |||||||||||||||
Non-vested shares granted | 4,114 | 2,112 | 225,666 | 225,593 | |||||||||||||||||||
Performance-based non-vested shares granted | — | — | 46,593 | 56,139 | |||||||||||||||||||
Performance-based shares issued in excess of target shares granted (1) | — | — | 37,425 | 24,054 | |||||||||||||||||||
Restricted stock awards vested (includes performance-based awards) | 3,615 | 8,610 | 438,344 | 413,016 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Stock-based compensation expense | $ | 4,070 | $ | 3,223 | $ | 10,045 | $ | 8,590 | ||||||||
Non-vested shares granted | 0 | 0 | 264,862 | 221,552 | ||||||||||||
Performance-based non-vested shares granted | 0 | 0 | 40,004 | 46,593 | ||||||||||||
Performance-based shares issued in excess of target shares granted (1) | 0 | 0 | 37,146 | 37,425 | ||||||||||||
Restricted stock awards vested (includes performance-based awards) | 0 | 0 | 392,160 | 434,729 |
(1) | Performance-based shares that vested and were issued as a result of performance achievement exceeding the originally established targeted number of shares related to respective performance metrics. |
The following table includes additional information regarding our stock compensation plan (dollars in thousands):
As of | ||||||||||||||
September 30, 2021 | December 31, 2020 | |||||||||||||
Unrecognized stock-based compensation cost | $ | 29,890 | $ | 22,687 | ||||||||||
Weighted average years expense recognition period | 2.02 | 2.01 | ||||||||||||
Total equity awards outstanding (1) | 910,557 | 1,098,545 |
As of | ||||||||
June 30, 2022 | December 31, 2021 | |||||||
Unrecognized stock-based compensation cost | $ | 38,340 | $ | 25,007 | ||||
Weighted average years expense recognition period | 2.13 | 1.97 | ||||||
Total equity awards outstanding (1) | 816,513 | 883,280 |
(1) | Includes unvested restricted stock awards, restricted stock units and performance-based awards (assuming 100%/target payout). |
We also offer a non-qualified deferred compensation plan ("deferred compensation plan") to highly compensated employees in order to allow them additional pre-tax income deferrals above and beyond the limits that qualified plans, such as 401(k)401(k) plans, impose on highly compensated employees. We do not currently offer a contribution match on the deferred compensation plan. All contributions to the plan to date have been funded by the employees and, therefore, we have no associated expense related to the deferred compensation plan for the three or nine and six months ended SeptemberJune 30, 20212022 or 2020,2021, other than minor administrative costs.
NOTE 12— INCOME TAXES
Components of the income tax provision are as follows (in thousands):
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
Federal | $ | 47,955 | $ | 21,692 | $ | 115,781 | $ | 54,594 | |||||||||||||||
State | 13,002 | 4,696 | 27,572 | 12,659 | |||||||||||||||||||
Total | $ | 60,957 | $ | 26,388 | $ | 143,353 | $ | 67,253 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Federal | $ | 67,118 | $ | 38,713 | $ | 123,463 | $ | 67,826 | ||||||||
State | 14,493 | 9,549 | 26,777 | 14,570 | ||||||||||||
Total | $ | 81,611 | $ | 48,262 | $ | 150,240 | $ | 82,396 |
The effective tax rate for the three and ninesix months ended SeptemberJune 30, 20212022 was 23.3%24.6% and 22.3%24.3%, respectively and for the three and ninesix months ended SeptemberJune 30, 20202021 was 19.5%22.4% and 19.9%21.6%, respectively. The higher tax ratesrate for the three and ninesix months ended SeptemberJune 30, 2021 reflect increased profits in states with higher tax rates and2022 is due to the reduced benefitexpiration of credits earned under the Internal Revenue Code ("IRC") §45L§45L new energy efficient homes credit, due to greater overall profitabilitywhich was enacted into law under the Taxpayer Certainty and Disaster Tax Relief Act of 2019 and subsequently extended through December 31, 2021 by enactment of the Company.
At SeptemberJune 30, 20212022 and December 31, 2020,2021, we have no0 unrecognized tax benefits. We believe that our current income tax filing positions and deductions will be sustained on audit and do not anticipate any adjustments that will result in a material change. Our policy is to accrue interest and penalties on unrecognized tax benefits and include them in federalthe provision for income tax expense.
We determine our deferred tax assets and liabilities in accordance with ASC 740,
Income Taxes. We evaluate our deferred tax assets, including the benefit from net operating losses ("NOLs"), by jurisdiction to determine if a valuation allowance is required. Companies must assess whether a valuation allowance should be established based on the consideration of all available evidence using a “more likely than not” standard with significant weight being given to evidence that can be objectively verified. This assessment considers, among other matters, the nature, frequency and severity of cumulative losses,At SeptemberJune 30, 2021,2022, we have a current income tax payable of $5.6 million and 0 income taxes payable of $15.8 million and income taxes receivable of $0.7 million.receivable. The income taxes payable primarily consists of current federal and state income tax accruals, net of current energy tax credits and estimated tax payments. This amount is recorded in Accrued liabilities on the accompanying unaudited consolidated balance sheets at SeptemberJune 30, 2021. The income taxes receivable primarily consists of additional energy tax credits claimed by amending prior year tax returns and is recorded in Other receivables on the accompanying unaudited consolidated balance sheets at September 30, 2021.
We conduct business and are subject to tax in the U.S. both federally and in several states. With few exceptions, we are no longer subject to U.S. federal, state, or local income tax examinations by taxing authorities for years prior to 2016.2017. We have no federal or state income tax examinations being conducted at this time.
NOTE 13— SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
The following table presents certain supplemental cash flow information (in thousands):
Nine Months Ended September 30, | ||||||||||||||
2021 | 2020 | |||||||||||||
Cash paid during the year for: | ||||||||||||||
Interest, net of interest capitalized | $ | (14,451) | $ | (14,756) | ||||||||||
Income taxes paid | $ | 152,843 | $ | 49,103 | ||||||||||
Non-cash operating activities: | ||||||||||||||
Real estate acquired through notes payable | $ | 2,199 | $ | 8,664 |
Six Months Ended June 30, | ||||||||
2022 | 2021 | |||||||
Cash paid during the year for: | ||||||||
Interest, net of interest capitalized | $ | (1,282 | ) | $ | 227 | |||
Income taxes paid | $ | 168,464 | $ | 83,127 | ||||
Non-cash operating activities: | ||||||||
Real estate acquired through notes payable | $ | 9,861 | $ | 2,198 |
NOTE 14— OPERATING AND REPORTING SEGMENTS
We operate with 2 principal business segments: homebuilding and financial services. As defined in ASC 280-10,
West: | Arizona, California, Colorado and Utah | ||||||||||
Central: | Texas | ||||||||||
East: | |||||||||||
Florida, Georgia, North Carolina, South Carolina and Tennessee |
Management’s evaluation of segment performance is based on segment operating income, which we define as home and land closing revenues less cost of home and land closings, commissions and other sales costs,including land development and other land sales costs, commissions and other sales costs, and other general and administrative costs incurred by or allocated to each segment, including impairments. Each reportable segment follows the same accounting policies described in Note 1, “Organization and Basis of Presentation.” Operating results for each segment may not be indicative of the results for such segment had it been an independent, stand-alone entity for the periods presented.
The following segment information is in thousands:
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
Homebuilding revenue (1): | |||||||||||||||||||||||
West | $ | 460,089 | $ | 434,289 | $ | 1,305,684 | $ | 1,198,782 | |||||||||||||||
Central | 383,206 | 353,208 | 1,109,228 | 909,692 | |||||||||||||||||||
East | 416,610 | 350,594 | 1,206,373 | 963,709 | |||||||||||||||||||
Consolidated total | $ | 1,259,905 | $ | 1,138,091 | $ | 3,621,285 | $ | 3,072,183 | |||||||||||||||
Homebuilding segment operating income: | |||||||||||||||||||||||
West | $ | 95,167 | $ | 53,423 | $ | 238,356 | $ | 140,059 | |||||||||||||||
Central | 90,579 | 52,394 | 232,537 | 119,208 | |||||||||||||||||||
East | 83,853 | 37,791 | 207,509 | 97,343 | |||||||||||||||||||
Total homebuilding segment operating income | 269,599 | 143,608 | 678,402 | 356,610 | |||||||||||||||||||
Financial services segment profit | 4,224 | 4,315 | 12,599 | 10,942 | |||||||||||||||||||
Corporate and unallocated costs (2) | (13,303) | (13,550) | (32,673) | (30,488) | |||||||||||||||||||
Interest expense | (79) | (55) | (246) | (2,176) | |||||||||||||||||||
Other income, net | 1,268 | 1,188 | 3,443 | 3,313 | |||||||||||||||||||
Loss on early extinguishment of debt | — | — | (18,188) | — | |||||||||||||||||||
Net earnings before income taxes | $ | 261,709 | $ | 135,506 | $ | 643,337 | $ | 338,201 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
Land closing revenue: | |||||||||||||||||||||||
West | $ | 8,470 | $ | — | $ | 21,426 | $ | 4,974 | |||||||||||||||
Central | — | 3,301 | 3,799 | 7,901 | |||||||||||||||||||
East | — | 1,569 | — | 4,079 | |||||||||||||||||||
Total | $ | 8,470 | $ | 4,870 | $ | 25,225 | $ | 16,954 |
At September 30, 2021 | ||||||||||||||||||||||||||||||||||||||
West | Central | East | Financial Services | Corporate and Unallocated | Total | |||||||||||||||||||||||||||||||||
Deposits on real estate under option or contract | $ | 23,808 | $ | 12,129 | $ | 42,050 | $ | — | $ | — | $ | 77,987 | ||||||||||||||||||||||||||
Real estate | 1,551,248 | 1,015,779 | 1,025,980 | — | — | 3,593,007 | ||||||||||||||||||||||||||||||||
Investments in unconsolidated entities | 206 | 2,988 | — | — | 711 | 3,905 | ||||||||||||||||||||||||||||||||
Other assets | 83,749 | (1) | 165,693 | (2) | 85,669 | (3) | 713 | 554,726 | (4) | 890,550 | ||||||||||||||||||||||||||||
Total assets | $ | 1,659,011 | $ | 1,196,589 | $ | 1,153,699 | $ | 713 | $ | 555,437 | $ | 4,565,449 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Homebuilding revenue (1): | ||||||||||||||||
West | $ | 487,803 | $ | 452,165 | $ | 982,309 | $ | 845,595 | ||||||||
Central | 424,036 | 403,838 | 779,660 | 726,022 | ||||||||||||
East | 500,542 | 421,596 | 937,346 | 789,763 | ||||||||||||
Consolidated total | $ | 1,412,381 | $ | 1,277,599 | $ | 2,699,315 | $ | 2,361,380 | ||||||||
Homebuilding segment operating income: | ||||||||||||||||
West | $ | 115,403 | $ | 78,938 | $ | 236,259 | $ | 143,189 | ||||||||
Central | 100,203 | 84,965 | 175,463 | 141,958 | ||||||||||||
East | 119,395 | 73,477 | 212,943 | 123,656 | ||||||||||||
Total homebuilding segment operating income | 335,001 | 237,380 | 624,665 | 408,803 | ||||||||||||
Financial services segment profit | 4,079 | 4,615 | 7,413 | 8,375 | ||||||||||||
Corporate and unallocated costs (2) | (6,927 | ) | (9,456 | ) | (13,684 | ) | (19,370 | ) | ||||||||
Interest expense | 0 | (77 | ) | (41 | ) | (167 | ) | |||||||||
Other (expense)/income, net | (458 | ) | 1,377 | (775 | ) | 2,175 | ||||||||||
Loss on early extinguishment of debt | 0 | (18,188 | ) | 0 | (18,188 | ) | ||||||||||
Net earnings before income taxes | $ | 331,695 | $ | 215,651 | $ | 617,578 | $ | 381,628 |
(1) | Homebuilding revenue includes the following land closing revenue, by segment: |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Land closing revenue: | ||||||||||||||||
West | $ | 1,725 | $ | 12,956 | $ | 32,807 | $ | 12,956 | ||||||||
Central | 1,709 | 0 | 9,505 | 3,799 | ||||||||||||
East | 0 | 0 | 2,600 | 0 | ||||||||||||
Total | $ | 3,434 | $ | 12,956 | $ | 44,912 | $ | 16,755 |
(2) | Balance consists primarily of corporate costs and numerous shared service functions such as finance and treasury that are not allocated to the homebuilding or financial services reporting segments. |
At June 30, 2022 | ||||||||||||||||||||||||||||
Financial | Corporate and | |||||||||||||||||||||||||||
West | Central | East | Services | Unallocated | Total | |||||||||||||||||||||||
Deposits on real estate under option or contract | $ | 28,922 | $ | 10,714 | $ | 58,331 | $ | 0 | $ | 0 | $ | 97,967 | ||||||||||||||||
Real estate | 1,861,310 | 1,316,092 | 1,296,660 | 0 | 0 | 4,474,062 | ||||||||||||||||||||||
Investments in unconsolidated entities | 110 | 2,936 | 7,360 | 0 | 817 | 11,223 | ||||||||||||||||||||||
Other assets | 77,526 | (1) | 209,131 | (2) | 120,461 | (3) | 519 | 316,834 | (4) | 724,471 | ||||||||||||||||||
Total assets | $ | 1,967,868 | $ | 1,538,873 | $ | 1,482,812 | $ | 519 | $ | 317,651 | $ | 5,307,723 |
(1) | Balance consists primarily of cash and cash equivalents, development reimbursements from local municipalities and property and equipment. |
(2) | Balance consists primarily of cash and cash equivalents, development reimbursements from local municipalities and prepaids and other assets. |
(3) | Balance consists primarily of cash and cash equivalents, goodwill (see Note 9), prepaids and other assets and property and equipment. |
(4) | Balance consists primarily of cash and cash equivalents, deferred tax assets and prepaids and other assets. |
At December 31, 2021 | ||||||||||||||||||||||||||||
Financial | Corporate and | |||||||||||||||||||||||||||
West | Central | East | Services | Unallocated | Total | |||||||||||||||||||||||
Deposits on real estate under option or contract | $ | 26,687 | $ | 11,132 | $ | 52,860 | $ | 0 | $ | 0 | $ | 90,679 | ||||||||||||||||
Real estate | 1,571,477 | 1,076,300 | 1,086,631 | 0 | 0 | 3,734,408 | ||||||||||||||||||||||
Investments in unconsolidated entities | 87 | 2,974 | 1,707 | 0 | 996 | 5,764 | ||||||||||||||||||||||
Other assets | 66,897 | (1) | 199,791 | (2) | 102,073 | (3) | 610 | 607,311 | (4) | 976,682 | ||||||||||||||||||
Total assets | $ | 1,665,148 | $ | 1,290,197 | $ | 1,243,271 | $ | 610 | $ | 608,307 | $ | 4,807,533 |
(1) | Balance consists primarily of cash and cash equivalents, development reimbursements from local municipalities and property and equipment. |
(2) | Balance consists primarily of cash and cash equivalents, development reimbursements from local municipalities and prepaids and other assets. |
(3) | Balance consists primarily of cash and cash equivalents, real estate not owned, goodwill, prepaids and other assets and property and equipment. |
(4) | Balance consists primarily of cash and cash equivalents, deferred tax assets and prepaids and other assets. |
At December 31, 2020 | ||||||||||||||||||||||||||||||||||||||
West | Central | East | Financial Services | Corporate and Unallocated | Total | |||||||||||||||||||||||||||||||||
Deposits on real estate under option or contract | $ | 22,493 | $ | 11,154 | $ | 25,887 | $ | — | $ | — | $ | 59,534 | ||||||||||||||||||||||||||
Real estate | 1,154,488 | 814,919 | 808,632 | — | — | 2,778,039 | ||||||||||||||||||||||||||||||||
Investments in unconsolidated entities | 261 | 3,090 | — | — | 999 | 4,350 | ||||||||||||||||||||||||||||||||
Other assets | 51,271 | (1) | 122,933 | (2) | 81,601 | (3) | 612 | 766,058 | (4) | 1,022,475 | ||||||||||||||||||||||||||||
Total assets | $ | 1,228,513 | $ | 952,096 | $ | 916,120 | $ | 612 | $ | 767,057 | $ | 3,864,398 |
NOTE 15— COMMITMENTS AND CONTINGENCIES
We are involved in various routine legal and regulatory proceedings, including, without limitation, claims and litigation alleging construction defects. In general, the proceedings are incidental to our business, and most exposure is subject to and should be covered by warranty and indemnity obligations of our consultants and subcontractors. Additionally, some such claims are also covered by insurance. With respect to the majority of pending litigation matters, our ultimate legal and financial responsibility, if any, cannot be estimated with certainty and, in most cases, any potential losses related to these matters are not considered probable. Historically, most disputes regarding warranty claims are resolved prior to litigation. We believe there are no pending legal or warranty matters as of SeptemberJune 30, 20212022 that could have a material adverse impact upon our consolidated financial condition, results of operations or cash flows that have not been sufficiently reserved.
As discussed in Note 1 under the heading “Warranty Reserves”, we have case specificcase-specific reserves within our $26.6$31.4 million
Special Note of Caution Regarding Forward-Looking Statements
In passing the Private Securities Litigation Reform Act of 1995 (“PSLRA”), Congress encouraged public companies to make “forward-looking statements” by creating a safe-harbor to protect companies from securities law liability in connection with forward-looking statements. We intend to qualify both our written and oral forward-looking statements for protection under the PSLRA.
The words “believe,” “expect,” “anticipate,” “forecast,” “plan,” “intend,” "may,“may,” “will,” “should,” “could,” “estimate,” "target," "will," "should," "could," “estimate,”and “project” and similar expressions identify forward-looking statements, which speak only as of the date the statement was made. All statements we make other than statements of historical fact are forward-looking statements within the meaning of that term in Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act"). Forward-looking statements in this QuarterlyAnnual Report include:include statements concerning our expectations for our financial results, business, operations, housing demand and the economy and society in general
Important factors that could cause actual results to differ materially from those in forward-looking statements, and that could negatively affect our business include, but are not limited to, the following: changes in interest rates and the availability and pricing of residential mortgages;mortgages and the potential benefits of rate locks; inflation in the cost of materials used to develop communities and construct homes; supply chain and labor constraints; our ability to acquire and develop lots may be negatively impacted if we are unable to obtain performance and surety bonds in connection with our development work;bonds; the ability of our potential buyers to sell their existing homes; legislation related to tariffs; the adverse effect of slow absorption rates; impairments of our real estate inventory; cancellation rates; competition; home warranty and construction defect claims; failures in health and safety performance; fluctuations in quarterly operating results; our level of indebtedness; our ability to obtain financing if our credit ratings are downgraded; our potential exposure to and impacts from natural disasters or severe weather conditions; the availability and cost of finished lots and undeveloped land; the success of our strategy to offer and market entry-level and first move-up homes; 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 limited geographic diversification; the replication of our energy-efficient technologies by our competitors; shortages in the availability and cost of subcontract labor; our exposure to information technology failures and security breaches and the impact thereof; the loss of key personnel; changes in tax laws that adversely impact us or our homebuyers; our inability to prevail on contested tax positions; failure of our employees and representatives to comply with laws and regulations; our compliance with government regulations;regulations related to our financial services operations; negative publicity that affects our reputation; potential disruptions to our business by an epidemic or pandemic (such as COVID-19), and measures that federal, state and local governments and/or health authorities implement to address it;
Forward-looking statements express expectations of future events. All forward-looking statements are inherently uncertain, as they are based on various expectations and assumptions concerning future events and they are subject to numerous known and unknown risks and uncertainties that could cause actual events or results to differ materially from those projected. Due to these inherent uncertainties, the investment community is urged not to place undue reliance on forward-looking statements. In addition, we disclaim and undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to projections over time, except as required by law.
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Overview and Outlook
The housing market remained solid duringwas strong for the thirdmajority of the second quarter of 2021 as it continues2022, although the unprecedented demand that has been present the past several years showed signs of slowing in June, which we believe was in response to benefit from still lowrising interest rates that impact affordability, as well as a limitedreturn of regular seasonality. We think the continuing low supply of available homes,housing inventory and ongoingfavorable demographics are positive factors for housing demand, particularly withbut anticipate that demand will slow as the millennialmarket adjusts to the higher interest rates and baby boomer generations who are experiencing life eventsgeneral inflation-related increases in household costs. We expect that align with a change incurrent buyer psychology and market volatility will continue to impact demand, sales incentives and home ownership. We believe that these underlying economic and demographic factors will continuepricing in the near term, but we feel that our all-spec strategy for entry-level homes differentiates us from some other new home builders, as it provides our customers with a shorter timeline to mid-term, but will likely taperclose and the ability to a normalized pace over time. Our operating modellock in their interest rates, helping to provide buyers with affordable, healthy, and quick move-in ready homes has positioned us to take full advantagealleviate some of the current market, resulting in the highest third quarter closing volume and the highest quarterly home closing gross margin in the Company's history.
The longstanding supply chain constraints and labor shortages that presented themselves in 2021, caused by COVID-19 and other economic-related disruptions, have impacted production costs and cycle times in the homebuilding industry as a whole and have continued throughout the second quarter of 2022. We have been successful, to date, in offsetting the higher costs with sales price increases due to the elevated buyer demand in recent quarters, although we have experienced elongated cycle times. We continue to carefully navigate this constrained operating environment by expanding our production. Through long-cultivatedtrade base and strengthening critical relationships, with our national and local partners,although we wereare uncertain that we will be able to navigate the current limitations and expect to continue to utilizeoffset future cost increases, if any, with incremental price increases moving forward.
Our focus on maintaining a high level of customer satisfaction and building energy-efficient homes was recognized and rewarded again in 2022. For the ninth time since 2013, we received the ENGERY STAR® Partner of the Year award for Sustained Excellence, and thirteen of our spec-heavy, limited SKU operating model to managedivisions received Avid Awards for excellence in customer service performance in the continuing supply chain concerns that are expected to last into 2022. We metered the number of homes available for sale to align with the current production constraints, causing our average absorption pace to decrease year-over-year during the third quarter, although it remains strong compared to historical trends.
Summary Company Results
Total home closing revenue was $1.3$1.4 billion on 3,1123,221 homes closed for the three months ended SeptemberJune 30, 20212022 compared to $1.1$1.3 billion on 3,0043,273 homes closed for the thirdsecond quarter of 2020, increases of 10.4% and 3.6%, respectively.2021. This 11.4% increase in home closing revenue year-over-year was entirely driven by the 13.2% increase in average sales price ("ASP") on closings due to pricing power resulting from strong buyer demand as volume fell slightly by 1.6% due to production delays, as previously mentioned. In addition to higher home closing revenue, we achieved our highestsecond quarter home closing gross margin in Company history of 29.7%improved 430 basis points to 31.6%, an 820 basis point increase year-over-year that contributed to a $128.1 million increase infor home closing gross profit to $371.7of $444.7 million compared to $243.6$345.3 million in the thirdsecond quarter of 2020. This2021. The margin improvement wasis primarily due to pricing power from strong buyerexperienced over the past few quarters due to elevated demand, and leveraging of our fixed costs on higher home closing volumes,resulting in ASP increases more than offsetting higher lumber costsmaterials and labor cost increases. Gross margin in the second quarter of 2022 also benefited from lower cost of land for entry-level homes and lower amortization of previously capitalized interest, the result of lower interest rates from our debt refinancing transactions in recent years. Commissions and other rising commodity costs. Generalsales costs decreased $4.5 million, and administrative expenses were $47.2 millionas a percentage of home closing revenue improved 90 basis points in the three months ended SeptemberJune 30, 2021, a $6.5 million increase from $40.7 million during the third quarter of 2020, driven by higher performance related compensation expenses and a higher employee headcount. Earnings before income taxes improved by $126.2 million year-over-year to $261.7 million for the third quarter of 2021. These improved year-over-year results combined with our higher effective income tax rate of 23.3%2022 as compared to 19.5% in the prior year, period leddue to net earnings of $200.8lower commission expense and technological efficiencies in marketing. General and administrative expenses increased $4.8 million, in the third quarter of 2021 versus $109.1 million in the third quarter of 2020. The higher effective tax rate in the third quarter of 2021 reflects increased profit in statesor 11.1%, due to costs associated with higher tax ratesheadcount and the reduced benefita return of federal energy efficient home tax credits on higher net earnings before income taxes. For the nine months ended September 30, 2021,travel expenses as COVID-19 restrictions have lifted. Higher home closing revenue was $3.6 billionrevenues provided leverage on 9,275 homes closed, 17.7%these fixed expenses, and 14.6% increases over 2020, respectively. Year-to-date results reflect an increase of $341.0 million in home closing gross profit versus the nine months ended September 30, 2020. Interest expense decreased year-over-year by $1.9 million as we benefited from lower interest rates as a result, general and administrative expenses as a percentage of our debt refinancing in April 2021. In connection with this refinancing transaction,revenue were consistent quarter over quarter despite the dollar increase. During the three months ended June 30, 2021, we recognized an $18.2 million loss on early extinguishment of debt (see Note 6in connection with our debt refinancing in April 2021. There were no such transactions during the second quarter of 2022. Earnings before income taxes improved by $116.0 million, or 54%, year over year to $331.7 million for the second quarter of 2022. These improved year-over-year results were partially offset with a higher effective income tax rate of 24.6% as compared to 22.4% in 2021 due to the elimination of tax credits for energy efficient homes, resulting in net earnings of $250.1 million in the accompanying unaudited financial statements for additional information).second quarter of 2022 versus $167.4 million in the second quarter of 2021. Similar to the second quarter, year-to-date results reflect a $210.4 million increase in home closing gross profit compared to the six months ended June 30, 2021. Higher pre-tax income was reduced by angross profit, technology-enabled marketing and commission savings, leverage of higher home closing revenue on fixed expenses, no loss on early extinguishment of debt in 2022 and a higher effective tax rate of 22.3%, leading24.3% led to net income of $500.0$467.3 million for the ninesix months ended SeptemberJune 30, 20212022 compared to $270.9$299.2 million for the 20202021 period.
In addition to growth in home closing revenue and improved profitability, we had another record breaking quarter in home orders, with the highest second quarter orders in Company history of 3,767 for the three months ended SeptemberJune 30, 2021 compared to2022, a 6.4% increase over 3,542 in the same period of 2021. The growth in 2020, asorders was attributable to a result of metering our orders to align with production and a slight return of traditional seasonality. The third quarter of 2021 orders pace remained elevated at 5.0 per month, down from 5.8 in the third quarter of 2020, which represented the highest third quarter pace in Company history. This was partially offset by a 4.8%33.1% increase in average active communities, partially offset by a 20.0% lower orders pace of 4.4 per month compared to 5.5 per month in 2021. Home order value increased 20.7% year-over-year, to $1.8 billion during the three months ended June 30, 2022, versus $1.5 billion in the same period of 2021. The increase in order value is due to the higher volume combined with a 13.5% increase in ASP on orders. Order cancellation rates increased to 13% for the second quarter of 2022, compared to 8% for the prior year period, a reflection of the softening in the market. For the six months ended June 30, 2022, home orders and home order value increased 9.2% and 25.6%, respectively, over the prior year, comparable period. Order value remained flat aswith a 12.0% increase in average sales price ("ASP") offset the volume decrease. We were able to open 40 communities during the third quarter of 2021 despite delays in permitting, zoning and entitlement as well as land supply chain constraints. Our order cancellation rate dropped to 10% for the third quarter of 202111% compared to 13% for the prior year period. For the nine months ended September 30, 2021, home order volume decreased 1.0% while home order value increased 9.6% over the prior year, and our order cancellation rate dropped to 10% compared to 14%9% for the prior year period. We ended the thirdsecond quarter of 20212022 with 5,8387,241 homes in backlog valued at $2.6$3.4 billion, an 11.4%a 31.4% increase in units and a 27.5%48.4% increase in value over SeptemberJune 30, 2020.
We achieved our long-term growth target of 300 active communities by ending the second quarter of 2022 with 303 active communities, up from 226 at June 30, 2021 and sequentially from 268 at March 31, 2022. This reflects the opening of 49 new communities during the second quarter, despite an environment of supply chain constraints and limited labor availability. During the six months ended June 30, 2022 we have purchased approximately 7,600 lots for $301.4 million, spent $492.0 million on land development and started construction on 9,039 homes.
Company Positioning
We believe that our ongoingthe investments in our new communities designed for the first-time and first move-up homebuyer, our commitment to an all-spec strategy for our entry-level homes, our simplified first move-up design studio process, and industry-leading innovation in our energy-efficient product offerings automation, and transformative customer buying experience,automation create a differentiated strategy that has aided us in our successgrowth in the highly-competitivehighly competitive new home market and will continue to do so in the long-term.
Our focus includes the following strategies:
• | Expanding our community count and market share; |
• | Continuously improving the overall home buying experience through simplification and innovation; |
• | Simplifying our production process to allow us to more efficiently build our homes and reduce our construction costs, which in turn allows us to competitively price our homes and deliver them on a shorter timeline; |
• | Improving our home closing gross profit by growing closing volume, allowing us to better leverage our overhead; |
• | Leveraging and expanding on technological solutions through digital offerings to our customers, such as our virtual home tours, interactive maps, digital financial services offerings and online warranty portal; and |
• | Increasing homeowner satisfaction by setting industry standards for energy-efficiency and offering healthier, safer homes that come equipped with standard features such as multi-speed HVAC systems to save energy and improve air quality and enhanced security features. |
In order to maintain focus on growing our business, we also remain committed to the following long-term objectives:
• | Carefully managing our liquidity and a strong balance sheet; we ended the quarter with a 25.3% debt-to-capital ratio and a 20.6% net debt-to-capital ratio; |
• | Maximizing returns to our shareholders, most recently through our improved financial performance and share repurchase program; |
• | Achieving or maintaining a position of at least 5% market share in all of our markets; |
• | Managing construction efficiencies and costs through national and regional vendor relationships with a focus on timely, quality construction and warranty management; |
• | Promoting a positive environment for our employees through our commitment to foster diversity, equity and inclusion ("DE&I") and providing market-competitive benefits in order to develop and motivate our employees and to minimize turnover and to maximize recruitment efforts; |
• | Maintaining a healthy orders pace through the use of our consumer and market research to ensure that we build homes that offer our buyers their desired features and amenities; and |
• | Continuing to innovate and promote our energy efficiency program and our M.Connected® Automation Suite to create differentiation for the Meritage brand. |
Critical Accounting Policies
The critical accounting policiesestimates that we deem most critical to us and that involve the most difficult, subjective or complex judgments include revenue recognition, valuation of real estate and cost of home closings, warranty reserves and valuation of deferred tax assets. There have been no significant changes to our critical accounting policiesestimates during the ninesix months ended SeptemberJune 30, 20212022 compared to those disclosed in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in our 20202021 Annual Report on Form 10-K.
Home Closing Revenue, Home Orders and Order Backlog
The composition of our closings, home orders and backlog is constantly changing and is based on a changing mix of communities with various price points between periods as new projects open and existing projects wind down and close-out. Further, individual homes within a community can range significantly in price due to differing square footage, option selections, lot sizes and quality and location of lots (e.g. cul-de-sac, view lots, greenbelt lots). These variations result in a lack of meaningful comparability between our home orders, closings and backlog due to the changing mix between periods. The tables on the following pages present operating and financial data that we consider most critical to managing our operations (dollars in thousands):
Three Months Ended September 30, | Quarter over Quarter | |||||||||||||||||||||||||
2021 | 2020 | Change $ | Change % | |||||||||||||||||||||||
Home Closing Revenue | ||||||||||||||||||||||||||
Total | ||||||||||||||||||||||||||
Dollars | $ | 1,251,435 | $ | 1,133,221 | $ | 118,214 | 10.4 | % | ||||||||||||||||||
Homes closed | 3,112 | 3,004 | 108 | 3.6 | % | |||||||||||||||||||||
Average sales price | $ | 402.1 | $ | 377.2 | $ | 24.9 | 6.6 | % | ||||||||||||||||||
West Region | ||||||||||||||||||||||||||
Arizona | ||||||||||||||||||||||||||
Dollars | $ | 193,847 | $ | 143,630 | $ | 50,217 | 35.0 | % | ||||||||||||||||||
Homes closed | 532 | 429 | 103 | 24.0 | % | |||||||||||||||||||||
Average sales price | $ | 364.4 | $ | 334.8 | $ | 29.6 | 8.8 | % | ||||||||||||||||||
California | ||||||||||||||||||||||||||
Dollars | $ | 177,623 | $ | 202,460 | $ | (24,837) | (12.3) | % | ||||||||||||||||||
Homes closed | 295 | 332 | (37) | (11.1) | % | |||||||||||||||||||||
Average sales price | $ | 602.1 | $ | 609.8 | $ | (7.7) | (1.3) | % | ||||||||||||||||||
Colorado | ||||||||||||||||||||||||||
Dollars | $ | 80,149 | $ | 88,199 | $ | (8,050) | (9.1) | % | ||||||||||||||||||
Homes closed | 144 | 183 | (39) | (21.3) | % | |||||||||||||||||||||
Average sales price | $ | 556.6 | $ | 482.0 | $ | 74.6 | 15.5 | % | ||||||||||||||||||
West Region Totals | ||||||||||||||||||||||||||
Dollars | $ | 451,619 | $ | 434,289 | $ | 17,330 | 4.0 | % | ||||||||||||||||||
Homes closed | 971 | 944 | 27 | 2.9 | % | |||||||||||||||||||||
Average sales price | $ | 465.1 | $ | 460.1 | $ | 5.0 | 1.1 | % | ||||||||||||||||||
Central Region - Texas | ||||||||||||||||||||||||||
Central Region Totals | ||||||||||||||||||||||||||
Dollars | $ | 383,206 | $ | 349,907 | $ | 33,299 | 9.5 | % | ||||||||||||||||||
Homes closed | 1,012 | 1,059 | (47) | (4.4) | % | |||||||||||||||||||||
Average sales price | $ | 378.7 | $ | 330.4 | $ | 48.3 | 14.6 | % | ||||||||||||||||||
East Region | ||||||||||||||||||||||||||
Florida | ||||||||||||||||||||||||||
Dollars | $ | 139,642 | $ | 124,836 | $ | 14,806 | 11.9 | % | ||||||||||||||||||
Homes closed | 386 | 339 | 47 | 13.9 | % | |||||||||||||||||||||
Average sales price | $ | 361.8 | $ | 368.2 | $ | (6.4) | (1.7) | % | ||||||||||||||||||
Georgia | ||||||||||||||||||||||||||
Dollars | $ | 52,004 | $ | 62,921 | $ | (10,917) | (17.4) | % | ||||||||||||||||||
Homes closed | 139 | 178 | (39) | (21.9) | % | |||||||||||||||||||||
Average sales price | $ | 374.1 | $ | 353.5 | $ | 20.6 | 5.8 | % | ||||||||||||||||||
North Carolina | ||||||||||||||||||||||||||
Dollars | $ | 145,268 | $ | 98,322 | $ | 46,946 | 47.7 | % | ||||||||||||||||||
Homes closed | 371 | 295 | 76 | 25.8 | % | |||||||||||||||||||||
Average sales price | $ | 391.6 | $ | 333.3 | $ | 58.3 | 17.5 | % | ||||||||||||||||||
South Carolina | ||||||||||||||||||||||||||
Dollars | $ | 31,686 | $ | 25,502 | $ | 6,184 | 24.2 | % | ||||||||||||||||||
Homes closed | 92 | 78 | 14 | 17.9 | % | |||||||||||||||||||||
Average sales price | $ | 344.4 | $ | 326.9 | $ | 17.5 | 5.4 | % | ||||||||||||||||||
Tennessee | ||||||||||||||||||||||||||
Dollars | $ | 48,010 | $ | 37,444 | $ | 10,566 | 28.2 | % | ||||||||||||||||||
Homes closed | 141 | 111 | 30 | 27.0 | % | |||||||||||||||||||||
Average sales price | $ | 340.5 | $ | 337.3 | $ | 3.2 | 0.9 | % | ||||||||||||||||||
East Region Totals | ||||||||||||||||||||||||||
Dollars | $ | 416,610 | $ | 349,025 | $ | 67,585 | 19.4 | % | ||||||||||||||||||
Homes closed | 1,129 | 1,001 | 128 | 12.8 | % | |||||||||||||||||||||
Average sales price | $ | 369.0 | $ | 348.7 | $ | 20.3 | 5.8 | % |
Three Months Ended June 30, | Quarter over Quarter | |||||||||||||||
2022 | 2021 | Change $ | Change % | |||||||||||||
Home Closing Revenue | ||||||||||||||||
Total | ||||||||||||||||
Dollars | $ | 1,408,947 | $ | 1,264,643 | $ | 144,304 | 11.4 | % | ||||||||
Homes closed | 3,221 | 3,273 | (52 | ) | (1.6 | )% | ||||||||||
Average sales price | $ | 437.4 | $ | 386.4 | $ | 51.0 | 13.2 | % | ||||||||
West Region | ||||||||||||||||
Arizona | ||||||||||||||||
Dollars | $ | 234,902 | $ | 165,990 | $ | 68,912 | 41.5 | % | ||||||||
Homes closed | 542 | 481 | 61 | 12.7 | % | |||||||||||
Average sales price | $ | 433.4 | $ | 345.1 | $ | 88.3 | 25.6 | % | ||||||||
California | ||||||||||||||||
Dollars | $ | 173,631 | $ | 198,232 | $ | (24,601 | ) | (12.4 | )% | |||||||
Homes closed | 256 | 318 | (62 | ) | (19.5 | )% | ||||||||||
Average sales price | $ | 678.2 | $ | 623.4 | $ | 54.8 | 8.8 | % | ||||||||
Colorado | ||||||||||||||||
Dollars | $ | 77,545 | $ | 74,987 | $ | 2,558 | 3.4 | % | ||||||||
Homes closed | 127 | 145 | (18 | ) | (12.4 | )% | ||||||||||
Average sales price | $ | 610.6 | $ | 517.2 | $ | 93.4 | 18.1 | % | ||||||||
West Region Totals | ||||||||||||||||
Dollars | $ | 486,078 | $ | 439,209 | $ | 46,869 | 10.7 | % | ||||||||
Homes closed | 925 | 944 | (19 | ) | (2.0 | )% | ||||||||||
Average sales price | $ | 525.5 | $ | 465.3 | $ | 60.2 | 12.9 | % | ||||||||
Central Region - Texas | ||||||||||||||||
Central Region Totals | ||||||||||||||||
Dollars | $ | 422,327 | $ | 403,838 | $ | 18,489 | 4.6 | % | ||||||||
Homes closed | 1,048 | 1,154 | (106 | ) | (9.2 | )% | ||||||||||
Average sales price | $ | 403.0 | $ | 349.9 | $ | 53.1 | 15.2 | % | ||||||||
East Region | ||||||||||||||||
Florida | ||||||||||||||||
Dollars | $ | 169,607 | $ | 160,377 | $ | 9,230 | 5.8 | % | ||||||||
Homes closed | 437 | 443 | (6 | ) | (1.4 | )% | ||||||||||
Average sales price | $ | 388.1 | $ | 362.0 | $ | 26.1 | 7.2 | % | ||||||||
Georgia | ||||||||||||||||
Dollars | $ | 81,227 | $ | 62,477 | $ | 18,750 | 30.0 | % | ||||||||
Homes closed | 179 | 171 | 8 | 4.7 | % | |||||||||||
Average sales price | $ | 453.8 | $ | 365.4 | $ | 88.4 | 24.2 | % | ||||||||
North Carolina | ||||||||||||||||
Dollars | $ | 148,860 | $ | 119,838 | $ | 29,022 | 24.2 | % | ||||||||
Homes closed | 359 | 330 | 29 | 8.8 | % | |||||||||||
Average sales price | $ | 414.7 | $ | 363.1 | $ | 51.6 | 14.2 | % | ||||||||
South Carolina | ||||||||||||||||
Dollars | $ | 44,365 | $ | 28,209 | $ | 16,156 | 57.3 | % | ||||||||
Homes closed | 132 | 81 | 51 | 63.0 | % | |||||||||||
Average sales price | $ | 336.1 | $ | 348.3 | $ | (12.2 | ) | (3.5 | )% | |||||||
Tennessee | ||||||||||||||||
Dollars | $ | 56,483 | $ | 50,695 | $ | 5,788 | 11.4 | % | ||||||||
Homes closed | 141 | 150 | (9 | ) | (6.0 | )% | ||||||||||
Average sales price | $ | 400.6 | $ | 338.0 | $ | 62.6 | 18.5 | % | ||||||||
East Region Totals | ||||||||||||||||
Dollars | $ | 500,542 | $ | 421,596 | $ | 78,946 | 18.7 | % | ||||||||
Homes closed | 1,248 | 1,175 | 73 | 6.2 | % | |||||||||||
Average sales price | $ | 401.1 | $ | 358.8 | $ | 42.3 | 11.8 | % |
Six Months Ended June 30, | Quarter over Quarter | |||||||||||||||
2022 | 2021 | Change $ | Change % | |||||||||||||
Home Closing Revenue | ||||||||||||||||
Total | ||||||||||||||||
Dollars | $ | 2,654,403 | $ | 2,344,625 | $ | 309,778 | 13.2 | % | ||||||||
Homes closed | 6,079 | 6,163 | (84 | ) | (1.4 | )% | ||||||||||
Average sales price | $ | 436.7 | $ | 380.4 | $ | 56.3 | 14.8 | % | ||||||||
West Region | ||||||||||||||||
Arizona | ||||||||||||||||
Dollars | $ | 432,997 | $ | 303,258 | $ | 129,739 | 42.8 | % | ||||||||
Homes closed | 1,000 | 891 | 109 | 12.2 | % | |||||||||||
Average sales price | $ | 433.0 | $ | 340.4 | $ | 92.6 | 27.2 | % | ||||||||
California | ||||||||||||||||
Dollars | $ | 361,041 | $ | 370,131 | $ | (9,090 | ) | (2.5 | )% | |||||||
Homes closed | 531 | 595 | (64 | ) | (10.8 | )% | ||||||||||
Average sales price | $ | 679.9 | $ | 622.1 | $ | 57.8 | 9.3 | % | ||||||||
Colorado | ||||||||||||||||
Dollars | $ | 155,464 | $ | 159,250 | $ | (3,786 | ) | (2.4 | )% | |||||||
Homes closed | 258 | 320 | (62 | ) | (19.4 | )% | ||||||||||
Average sales price | $ | 602.6 | $ | 497.7 | $ | 104.9 | 21.1 | % | ||||||||
West Region Totals | ||||||||||||||||
Dollars | $ | 949,502 | $ | 832,639 | $ | 116,863 | 14.0 | % | ||||||||
Homes closed | 1,789 | 1,806 | (17 | ) | (0.9 | )% | ||||||||||
Average sales price | $ | 530.7 | $ | 461.0 | $ | 69.7 | 15.1 | % | ||||||||
Central Region - Texas | ||||||||||||||||
Central Region Totals | ||||||||||||||||
Dollars | $ | 770,155 | $ | 722,223 | $ | 47,932 | 6.6 | % | ||||||||
Homes closed | 1,921 | 2,117 | (196 | ) | (9.3 | )% | ||||||||||
Average sales price | $ | 400.9 | $ | 341.2 | $ | 59.7 | 17.5 | % | ||||||||
East Region | ||||||||||||||||
Florida | ||||||||||||||||
Dollars | $ | 337,682 | $ | 301,205 | $ | 36,477 | 12.1 | % | ||||||||
Homes closed | 875 | 860 | 15 | 1.7 | % | |||||||||||
Average sales price | $ | 385.9 | $ | 350.2 | $ | 35.7 | 10.2 | % | ||||||||
Georgia | ||||||||||||||||
Dollars | $ | 137,661 | $ | 117,616 | $ | 20,045 | 17.0 | % | ||||||||
Homes closed | 306 | 317 | (11 | ) | (3.5 | )% | ||||||||||
Average sales price | $ | 449.9 | $ | 371.0 | $ | 78.9 | 21.3 | % | ||||||||
North Carolina | ||||||||||||||||
Dollars | $ | 267,864 | $ | 226,851 | $ | 41,013 | 18.1 | % | ||||||||
Homes closed | 656 | 629 | 27 | 4.3 | % | |||||||||||
Average sales price | $ | 408.3 | $ | 360.7 | $ | 47.6 | 13.2 | % | ||||||||
South Carolina | ||||||||||||||||
Dollars | $ | 84,078 | $ | 56,055 | $ | 28,023 | 50.0 | % | ||||||||
Homes closed | 253 | 166 | 87 | 52.4 | % | |||||||||||
Average sales price | $ | 332.3 | $ | 337.7 | $ | (5.4 | ) | (1.6 | )% | |||||||
Tennessee | ||||||||||||||||
Dollars | $ | 107,461 | $ | 88,036 | $ | 19,425 | 22.1 | % | ||||||||
Homes closed | 279 | 268 | 11 | 4.1 | % | |||||||||||
Average sales price | $ | 385.2 | $ | 328.5 | $ | 56.7 | 17.3 | % | ||||||||
East Region Totals | ||||||||||||||||
Dollars | $ | 934,746 | $ | 789,763 | $ | 144,983 | 18.4 | % | ||||||||
Homes closed | 2,369 | 2,240 | 129 | 5.8 | % | |||||||||||
Average sales price | $ | 394.6 | $ | 352.6 | $ | 42.0 | 11.9 | % |
Nine Months Ended September 30, | Quarter over Quarter | |||||||||||||||||||||||||
2021 | 2020 | Change $ | Change % | |||||||||||||||||||||||
Home Closing Revenue | ||||||||||||||||||||||||||
Total | ||||||||||||||||||||||||||
Dollars | $ | 3,596,060 | $ | 3,055,229 | $ | 540,831 | 17.7 | % | ||||||||||||||||||
Homes closed | 9,275 | 8,090 | 1,185 | 14.6 | % | |||||||||||||||||||||
Average sales price | $ | 387.7 | $ | 377.7 | $ | 10.0 | 2.6 | % | ||||||||||||||||||
West Region | ||||||||||||||||||||||||||
Arizona | ||||||||||||||||||||||||||
Dollars | $ | 497,105 | $ | 437,233 | $ | 59,872 | 13.7 | % | ||||||||||||||||||
Homes closed | 1,423 | 1,315 | 108 | 8.2 | % | |||||||||||||||||||||
Average sales price | $ | 349.3 | $ | 332.5 | $ | 16.8 | 5.1 | % | ||||||||||||||||||
California | ||||||||||||||||||||||||||
Dollars | $ | 547,754 | $ | 487,605 | $ | 60,149 | 12.3 | % | ||||||||||||||||||
Homes closed | 890 | 787 | 103 | 13.1 | % | |||||||||||||||||||||
Average sales price | $ | 615.5 | $ | 619.6 | $ | (4.1) | (0.7) | % | ||||||||||||||||||
Colorado | ||||||||||||||||||||||||||
Dollars | $ | 239,399 | $ | 268,970 | $ | (29,571) | (11.0) | % | ||||||||||||||||||
Homes closed | 464 | 553 | (89) | (16.1) | % | |||||||||||||||||||||
Average sales price | $ | 515.9 | $ | 486.4 | $ | 29.5 | 6.1 | % | ||||||||||||||||||
West Region Totals | ||||||||||||||||||||||||||
Dollars | $ | 1,284,258 | $ | 1,193,808 | $ | 90,450 | 7.6 | % | ||||||||||||||||||
Homes closed | 2,777 | 2,655 | 122 | 4.6 | % | |||||||||||||||||||||
Average sales price | $ | 462.5 | $ | 449.6 | $ | 12.9 | 2.9 | % | ||||||||||||||||||
Central Region - Texas | ||||||||||||||||||||||||||
Central Region Totals | ||||||||||||||||||||||||||
Dollars | $ | 1,105,429 | $ | 901,791 | $ | 203,638 | 22.6 | % | ||||||||||||||||||
Homes closed | 3,129 | 2,747 | 382 | 13.9 | % | |||||||||||||||||||||
Average sales price | $ | 353.3 | $ | 328.3 | $ | 25.0 | 7.6 | % | ||||||||||||||||||
East Region | ||||||||||||||||||||||||||
Florida | ||||||||||||||||||||||||||
Dollars | $ | 440,847 | $ | 357,233 | $ | 83,614 | 23.4 | % | ||||||||||||||||||
Homes closed | 1,246 | 942 | 304 | 32.3 | % | |||||||||||||||||||||
Average sales price | $ | 353.8 | $ | 379.2 | $ | (25.4) | (6.7) | % | ||||||||||||||||||
Georgia | ||||||||||||||||||||||||||
Dollars | $ | 169,620 | $ | 163,617 | $ | 6,003 | 3.7 | % | ||||||||||||||||||
Homes closed | 456 | 459 | (3) | (0.7) | % | |||||||||||||||||||||
Average sales price | $ | 372.0 | $ | 356.5 | $ | 15.5 | 4.3 | % | ||||||||||||||||||
North Carolina | ||||||||||||||||||||||||||
Dollars | $ | 372,119 | $ | 276,477 | $ | 95,642 | 34.6 | % | ||||||||||||||||||
Homes closed | 1,000 | 805 | 195 | 24.2 | % | |||||||||||||||||||||
Average sales price | $ | 372.1 | $ | 343.4 | $ | 28.7 | 8.4 | % | ||||||||||||||||||
South Carolina | ||||||||||||||||||||||||||
Dollars | $ | 87,741 | $ | 73,113 | $ | 14,628 | 20.0 | % | ||||||||||||||||||
Homes closed | 258 | 229 | 29 | 12.7 | % | |||||||||||||||||||||
Average sales price | $ | 340.1 | $ | 319.3 | $ | 20.8 | 6.5 | % | ||||||||||||||||||
Tennessee | ||||||||||||||||||||||||||
Dollars | $ | 136,046 | $ | 89,190 | $ | 46,856 | 52.5 | % | ||||||||||||||||||
Homes closed | 409 | 253 | 156 | 61.7 | % | |||||||||||||||||||||
Average sales price | $ | 332.6 | $ | 352.5 | $ | (19.9) | (5.6) | % | ||||||||||||||||||
East Region Totals | ||||||||||||||||||||||||||
Dollars | $ | 1,206,373 | $ | 959,630 | $ | 246,743 | 25.7 | % | ||||||||||||||||||
Homes closed | 3,369 | 2,688 | 681 | 25.3 | % | |||||||||||||||||||||
Average sales price | $ | 358.1 | $ | 357.0 | $ | 1.1 | 0.3 | % | ||||||||||||||||||
Three Months Ended June 30, | Quarter over Quarter | |||||||||||||||
2022 | 2021 | Change $ | Change % | |||||||||||||
Home Orders (1) | ||||||||||||||||
Total | ||||||||||||||||
Dollars | $ | 1,809,870 | $ | 1,499,672 | $ | 310,198 | 20.7 | % | ||||||||
Homes ordered | 3,767 | 3,542 | 225 | 6.4 | % | |||||||||||
Average sales price | $ | 480.5 | $ | 423.4 | $ | 57.1 | 13.5 | % | ||||||||
West Region | ||||||||||||||||
Arizona | ||||||||||||||||
Dollars | $ | 257,162 | $ | 256,804 | $ | 358 | 0.1 | % | ||||||||
Homes ordered | 560 | 624 | (64 | ) | (10.3 | )% | ||||||||||
Average sales price | $ | 459.2 | $ | 411.5 | $ | 47.7 | 11.6 | % | ||||||||
California | ||||||||||||||||
Dollars | $ | 272,601 | $ | 217,228 | $ | 55,373 | 25.5 | % | ||||||||
Homes ordered | 355 | 344 | 11 | 3.2 | % | |||||||||||
Average sales price | $ | 767.9 | $ | 631.5 | $ | 136.4 | 21.6 | % | ||||||||
Colorado | ||||||||||||||||
Dollars | $ | 102,464 | $ | 104,134 | $ | (1,670 | ) | (1.6 | )% | |||||||
Homes ordered | 160 | 181 | (21 | ) | (11.6 | )% | ||||||||||
Average sales price | $ | 640.4 | $ | 575.3 | $ | 65.1 | 11.3 | % | ||||||||
West Region Totals | ||||||||||||||||
Dollars | $ | 632,227 | $ | 578,166 | $ | 54,061 | 9.4 | % | ||||||||
Homes ordered | 1,075 | 1,149 | (74 | ) | (6.4 | )% | ||||||||||
Average sales price | $ | 588.1 | $ | 503.2 | $ | 84.9 | 16.9 | % | ||||||||
Central Region - Texas | ||||||||||||||||
Central Region Totals | ||||||||||||||||
Dollars | $ | 491,394 | $ | 428,375 | $ | 63,019 | 14.7 | % | ||||||||
Homes ordered | 1,096 | 1,101 | (5 | ) | (0.5 | )% | ||||||||||
Average sales price | $ | 448.4 | $ | 389.1 | $ | 59.3 | 15.2 | % | ||||||||
East Region | ||||||||||||||||
Florida | ||||||||||||||||
Dollars | $ | 283,291 | $ | 176,118 | $ | 107,173 | 60.9 | % | ||||||||
Homes ordered | 685 | 468 | 217 | 46.4 | % | |||||||||||
Average sales price | $ | 413.6 | $ | 376.3 | $ | 37.3 | 9.9 | % | ||||||||
Georgia | ||||||||||||||||
Dollars | $ | 107,388 | $ | 77,309 | $ | 30,079 | 38.9 | % | ||||||||
Homes ordered | 225 | 193 | 32 | 16.6 | % | |||||||||||
Average sales price | $ | 477.3 | $ | 400.6 | $ | 76.7 | 19.1 | % | ||||||||
North Carolina | ||||||||||||||||
Dollars | $ | 178,463 | $ | 153,032 | $ | 25,431 | 16.6 | % | ||||||||
Homes ordered | 391 | 390 | 1 | 0.3 | % | |||||||||||
Average sales price | $ | 456.4 | $ | 392.4 | $ | 64.0 | 16.3 | % | ||||||||
South Carolina | ||||||||||||||||
Dollars | $ | 50,716 | $ | 32,595 | $ | 18,121 | 55.6 | % | ||||||||
Homes ordered | 144 | 88 | 56 | 63.6 | % | |||||||||||
Average sales price | $ | 352.2 | $ | 370.4 | $ | (18.2 | ) | (4.9 | )% | |||||||
Tennessee | ||||||||||||||||
Dollars | $ | 66,391 | $ | 54,077 | $ | 12,314 | 22.8 | % | ||||||||
Homes ordered | 151 | 153 | (2 | ) | (1.3 | )% | ||||||||||
Average sales price | $ | 439.7 | $ | 353.4 | $ | 86.3 | 24.4 | % | ||||||||
East Region Totals | ||||||||||||||||
Dollars | $ | 686,249 | $ | 493,131 | $ | 193,118 | 39.2 | % | ||||||||
Homes ordered | 1,596 | 1,292 | 304 | 23.5 | % | |||||||||||
Average sales price | $ | 430.0 | $ | 381.7 | $ | 48.3 | 12.7 | % |
(1) | Home orders for any period represent the aggregate sales price of all homes ordered, net of cancellations. We do not include orders contingent upon the sale of a customer’s existing home or a mortgage pre-approval as a sales contract until the contingency is removed. |
Three Months Ended September 30, | Quarter over Quarter | |||||||||||||||||||||||||
2021 | 2020 | Change $ | Change % | |||||||||||||||||||||||
Home Orders (1) | ||||||||||||||||||||||||||
Total | ||||||||||||||||||||||||||
Dollars | $ | 1,488,951 | $ | 1,488,480 | $ | 471 | — | % | ||||||||||||||||||
Homes ordered | 3,441 | 3,851 | (410) | (10.6) | % | |||||||||||||||||||||
Average sales price | $ | 432.7 | $ | 386.5 | $ | 46.2 | 12.0 | % | ||||||||||||||||||
West Region | ||||||||||||||||||||||||||
Arizona | ||||||||||||||||||||||||||
Dollars | $ | 233,828 | $ | 240,151 | $ | (6,323) | (2.6) | % | ||||||||||||||||||
Homes ordered | 550 | 709 | (159) | (22.4) | % | |||||||||||||||||||||
Average sales price | $ | 425.1 | $ | 338.7 | $ | 86.4 | 25.5 | % | ||||||||||||||||||
California | ||||||||||||||||||||||||||
Dollars | $ | 213,859 | $ | 319,680 | $ | (105,821) | (33.1) | % | ||||||||||||||||||
Homes ordered | 319 | 510 | (191) | (37.5) | % | |||||||||||||||||||||
Average sales price | $ | 670.4 | $ | 626.8 | $ | 43.6 | 7.0 | % | ||||||||||||||||||
Colorado | ||||||||||||||||||||||||||
Dollars | $ | 123,242 | $ | 88,972 | $ | 34,270 | 38.5 | % | ||||||||||||||||||
Homes ordered | 207 | 188 | 19 | 10.1 | % | |||||||||||||||||||||
Average sales price | $ | 595.4 | $ | 473.3 | $ | 122.1 | 25.8 | % | ||||||||||||||||||
West Region Totals | ||||||||||||||||||||||||||
Dollars | $ | 570,929 | $ | 648,803 | $ | (77,874) | (12.0) | % | ||||||||||||||||||
Homes ordered | 1,076 | 1,407 | (331) | (23.5) | % | |||||||||||||||||||||
Average sales price | $ | 530.6 | $ | 461.1 | $ | 69.5 | 15.1 | % | ||||||||||||||||||
Central Region - Texas | ||||||||||||||||||||||||||
Central Region Totals | ||||||||||||||||||||||||||
Dollars | $ | 427,689 | $ | 395,453 | $ | 32,236 | 8.2 | % | ||||||||||||||||||
Homes ordered | 1,070 | 1,183 | (113) | (9.6) | % | |||||||||||||||||||||
Average sales price | $ | 399.7 | $ | 334.3 | $ | 65.4 | 19.6 | % | ||||||||||||||||||
East Region | ||||||||||||||||||||||||||
Florida | ||||||||||||||||||||||||||
Dollars | $ | 192,479 | $ | 179,607 | $ | 12,872 | 7.2 | % | ||||||||||||||||||
Homes ordered | 534 | 491 | 43 | 8.8 | % | |||||||||||||||||||||
Average sales price | $ | 360.4 | $ | 365.8 | $ | (5.4) | (1.5) | % | ||||||||||||||||||
Georgia | ||||||||||||||||||||||||||
Dollars | $ | 74,766 | $ | 62,541 | $ | 12,225 | 19.5 | % | ||||||||||||||||||
Homes ordered | 176 | 172 | 4 | 2.3 | % | |||||||||||||||||||||
Average sales price | $ | 424.8 | $ | 363.6 | $ | 61.2 | 16.8 | % | ||||||||||||||||||
North Carolina | ||||||||||||||||||||||||||
Dollars | $ | 140,135 | $ | 132,988 | $ | 7,147 | 5.4 | % | ||||||||||||||||||
Homes ordered | 347 | 386 | (39) | (10.1) | % | |||||||||||||||||||||
Average sales price | $ | 403.8 | $ | 344.5 | $ | 59.3 | 17.2 | % | ||||||||||||||||||
South Carolina | ||||||||||||||||||||||||||
Dollars | $ | 31,535 | $ | 28,140 | $ | 3,395 | 12.1 | % | ||||||||||||||||||
Homes ordered | 100 | 90 | 10 | 11.1 | % | |||||||||||||||||||||
Average sales price | $ | 315.4 | $ | 312.7 | $ | 2.7 | 0.9 | % | ||||||||||||||||||
Tennessee | ||||||||||||||||||||||||||
Dollars | $ | 51,418 | $ | 40,948 | $ | 10,470 | 25.6 | % | ||||||||||||||||||
Homes ordered | 138 | 122 | 16 | 13.1 | % | |||||||||||||||||||||
Average sales price | $ | 372.6 | $ | 335.6 | $ | 37.0 | 11.0 | % | ||||||||||||||||||
East Region Totals | ||||||||||||||||||||||||||
Dollars | $ | 490,333 | $ | 444,224 | $ | 46,109 | 10.4 | % | ||||||||||||||||||
Homes ordered | 1,295 | 1,261 | 34 | 2.7 | % | |||||||||||||||||||||
Average sales price | $ | 378.6 | $ | 352.3 | $ | 26.3 | 7.5 | % |
Six Months Ended June 30, | Quarter over Quarter | |||||||||||||||
2022 | 2021 | Change $ | Change % | |||||||||||||
Home Orders (1) | ||||||||||||||||
Total | ||||||||||||||||
Dollars | $ | 3,577,580 | $ | 2,848,802 | $ | 728,778 | 25.6 | % | ||||||||
Homes ordered | 7,641 | 7,000 | 641 | 9.2 | % | |||||||||||
Average sales price | $ | 468.2 | $ | 407.0 | $ | 61.2 | 15.0 | % | ||||||||
West Region | ||||||||||||||||
Arizona | ||||||||||||||||
Dollars | $ | 497,169 | $ | 479,239 | $ | 17,930 | 3.7 | % | ||||||||
Homes ordered | 1,110 | 1,226 | (116 | ) | (9.5 | )% | ||||||||||
Average sales price | $ | 447.9 | $ | 390.9 | $ | 57.0 | 14.6 | % | ||||||||
California | ||||||||||||||||
Dollars | $ | 519,944 | $ | 390,619 | $ | 129,325 | 33.1 | % | ||||||||
Homes ordered | 701 | 630 | 71 | 11.3 | % | |||||||||||
Average sales price | $ | 741.7 | $ | 620.0 | $ | 121.7 | 19.6 | % | ||||||||
Colorado | ||||||||||||||||
Dollars | $ | 228,463 | $ | 193,913 | $ | 34,550 | 17.8 | % | ||||||||
Homes ordered | 369 | 350 | 19 | 5.4 | % | |||||||||||
Average sales price | $ | 619.1 | $ | 554.0 | $ | 65.1 | 11.8 | % | ||||||||
West Region Totals | ||||||||||||||||
Dollars | $ | 1,245,576 | $ | 1,063,771 | $ | 181,805 | 17.1 | % | ||||||||
Homes ordered | 2,180 | 2,206 | (26 | ) | (1.2 | )% | ||||||||||
Average sales price | $ | 571.4 | $ | 482.2 | $ | 89.2 | 18.5 | % | ||||||||
Central Region - Texas | ||||||||||||||||
Central Region Totals | ||||||||||||||||
Dollars | $ | 1,039,961 | $ | 820,343 | $ | 219,618 | 26.8 | % | ||||||||
Homes ordered | 2,392 | 2,216 | 176 | 7.9 | % | |||||||||||
Average sales price | $ | 434.8 | $ | 370.2 | $ | 64.6 | 17.5 | % | ||||||||
East Region | ||||||||||||||||
Florida | ||||||||||||||||
Dollars | $ | 510,205 | $ | 355,227 | $ | 154,978 | 43.6 | % | ||||||||
Homes ordered | 1,257 | 947 | 310 | 32.7 | % | |||||||||||
Average sales price | $ | 405.9 | $ | 375.1 | $ | 30.8 | 8.2 | % | ||||||||
Georgia | ||||||||||||||||
Dollars | $ | 208,279 | $ | 138,866 | $ | 69,413 | 50.0 | % | ||||||||
Homes ordered | 445 | 357 | 88 | 24.6 | % | |||||||||||
Average sales price | $ | 468.0 | $ | 389.0 | $ | 79.0 | 20.3 | % | ||||||||
North Carolina | ||||||||||||||||
Dollars | $ | 341,471 | $ | 310,719 | $ | 30,752 | 9.9 | % | ||||||||
Homes ordered | 764 | 809 | (45 | ) | (5.6 | )% | ||||||||||
Average sales price | $ | 447.0 | $ | 384.1 | $ | 62.9 | 16.4 | % | ||||||||
South Carolina | ||||||||||||||||
Dollars | $ | 103,372 | $ | 58,997 | $ | 44,375 | 75.2 | % | ||||||||
Homes ordered | 298 | 164 | 134 | 81.7 | % | |||||||||||
Average sales price | $ | 346.9 | $ | 359.7 | $ | (12.8 | ) | (3.6 | )% | |||||||
Tennessee | ||||||||||||||||
Dollars | $ | 128,716 | $ | 100,879 | $ | 27,837 | 27.6 | % | ||||||||
Homes ordered | 305 | 301 | 4 | 1.3 | % | |||||||||||
Average sales price | $ | 422.0 | $ | 335.1 | $ | 86.9 | 25.9 | % | ||||||||
East Region Totals | ||||||||||||||||
Dollars | $ | 1,292,043 | $ | 964,688 | $ | 327,355 | 33.9 | % | ||||||||
Homes ordered | 3,069 | 2,578 | 491 | 19.0 | % | |||||||||||
Average sales price | $ | 421.0 | $ | 374.2 | $ | 46.8 | 12.5 | % |
(1) | Home orders for any period represent the aggregate sales price of all homes ordered, net of cancellations. We do not include orders contingent upon the sale of a customer’s existing home or a mortgage pre-approval as a sales contract until the contingency is removed. |
Nine Months Ended September 30, | Quarter over Quarter | |||||||||||||||||||||||||
2021 | 2020 | Change $ | Change % | |||||||||||||||||||||||
Home Orders (1) | ||||||||||||||||||||||||||
Total | ||||||||||||||||||||||||||
Dollars | $ | 4,337,753 | $ | 3,958,870 | $ | 378,883 | 9.6 | % | ||||||||||||||||||
Homes ordered | 10,441 | 10,550 | (109) | (1.0) | % | |||||||||||||||||||||
Average sales price | $ | 415.5 | $ | 375.2 | $ | 40.3 | 10.7 | % | ||||||||||||||||||
West Region | ||||||||||||||||||||||||||
Arizona | ||||||||||||||||||||||||||
Dollars | $ | 713,067 | $ | 654,579 | $ | 58,488 | 8.9 | % | ||||||||||||||||||
Homes ordered | 1,776 | 2,016 | (240) | (11.9) | % | |||||||||||||||||||||
Average sales price | $ | 401.5 | $ | 324.7 | $ | 76.8 | 23.7 | % | ||||||||||||||||||
California | ||||||||||||||||||||||||||
Dollars | $ | 604,478 | $ | 769,251 | $ | (164,773) | (21.4) | % | ||||||||||||||||||
Homes ordered | 949 | 1,250 | (301) | (24.1) | % | |||||||||||||||||||||
Average sales price | $ | 637.0 | $ | 615.4 | $ | 21.6 | 3.5 | % | ||||||||||||||||||
Colorado | ||||||||||||||||||||||||||
Dollars | $ | 317,155 | $ | 258,268 | $ | 58,887 | 22.8 | % | ||||||||||||||||||
Homes ordered | 557 | 540 | 17 | 3.1 | % | |||||||||||||||||||||
Average sales price | $ | 569.4 | $ | 478.3 | $ | 91.1 | 19.0 | % | ||||||||||||||||||
West Region Totals | ||||||||||||||||||||||||||
Dollars | $ | 1,634,700 | $ | 1,682,098 | $ | (47,398) | (2.8) | % | ||||||||||||||||||
Homes ordered | 3,282 | 3,806 | (524) | (13.8) | % | |||||||||||||||||||||
Average sales price | $ | 498.1 | $ | 442.0 | $ | 56.1 | 12.7 | % | ||||||||||||||||||
Central Region - Texas | ||||||||||||||||||||||||||
Central Region Totals | ||||||||||||||||||||||||||
Dollars | $ | 1,248,032 | $ | 1,130,943 | $ | 117,089 | 10.4 | % | ||||||||||||||||||
Homes ordered | 3,286 | 3,457 | (171) | (4.9) | % | |||||||||||||||||||||
Average sales price | $ | 379.8 | $ | 327.1 | $ | 52.7 | 16.1 | % | ||||||||||||||||||
East Region | ||||||||||||||||||||||||||
Florida | ||||||||||||||||||||||||||
Dollars | $ | 547,706 | $ | 435,411 | $ | 112,295 | 25.8 | % | ||||||||||||||||||
Homes ordered | 1,481 | 1,198 | 283 | 23.6 | % | |||||||||||||||||||||
Average sales price | $ | 369.8 | $ | 363.4 | $ | 6.4 | 1.8 | % | ||||||||||||||||||
Georgia | ||||||||||||||||||||||||||
Dollars | $ | 213,632 | $ | 182,958 | $ | 30,674 | 16.8 | % | ||||||||||||||||||
Homes ordered | 533 | 518 | 15 | 2.9 | % | |||||||||||||||||||||
Average sales price | $ | 400.8 | $ | 353.2 | $ | 47.6 | 13.5 | % | ||||||||||||||||||
North Carolina | ||||||||||||||||||||||||||
Dollars | $ | 450,854 | $ | 340,626 | $ | 110,228 | 32.4 | % | ||||||||||||||||||
Homes ordered | 1,156 | 999 | 157 | 15.7 | % | |||||||||||||||||||||
Average sales price | $ | 390.0 | $ | 341.0 | $ | 49.0 | 14.4 | % | ||||||||||||||||||
South Carolina | ||||||||||||||||||||||||||
Dollars | $ | 90,532 | $ | 85,316 | $ | 5,216 | 6.1 | % | ||||||||||||||||||
Homes ordered | 264 | 272 | (8) | (2.9) | % | |||||||||||||||||||||
Average sales price | $ | 342.9 | $ | 313.7 | $ | 29.2 | 9.3 | % | ||||||||||||||||||
Tennessee | ||||||||||||||||||||||||||
Dollars | $ | 152,297 | $ | 101,518 | $ | 50,779 | 50.0 | % | ||||||||||||||||||
Homes ordered | 439 | 300 | 139 | 46.3 | % | |||||||||||||||||||||
Average sales price | $ | 346.9 | $ | 338.4 | $ | 8.5 | 2.5 | % | ||||||||||||||||||
East Region Totals | ||||||||||||||||||||||||||
Dollars | $ | 1,455,021 | $ | 1,145,829 | $ | 309,192 | 27.0 | % | ||||||||||||||||||
Homes ordered | 3,873 | 3,287 | 586 | 17.8 | % | |||||||||||||||||||||
Average sales price | $ | 375.7 | $ | 348.6 | $ | 27.1 | 7.8 | % | ||||||||||||||||||
Three Months Ended June 30, | ||||||||||||||||
2022 | 2021 | |||||||||||||||
Ending | Average | Ending | Average | |||||||||||||
Active Communities | ||||||||||||||||
Total | 303 | 285.5 | 226 | 214.5 | ||||||||||||
West Region | ||||||||||||||||
Arizona | 56 | 48.0 | 38 | 35.5 | ||||||||||||
California | 32 | 27.5 | 20 | 19.5 | ||||||||||||
Colorado | 19 | 18.5 | 17 | 14.5 | ||||||||||||
West Region Totals | 107 | 94.0 | 75 | 69.5 | ||||||||||||
Central Region - Texas | ||||||||||||||||
Central Region Totals | 80 | 77.5 | 64 | 61.5 | ||||||||||||
East Region | ||||||||||||||||
Florida | 41 | 41.0 | 34 | 32.0 | ||||||||||||
Georgia | 14 | 14.5 | 10 | 11.0 | ||||||||||||
North Carolina | 32 | 30.5 | 26 | 25.0 | ||||||||||||
South Carolina | 17 | 15.0 | 7 | 6.5 | ||||||||||||
Tennessee | 12 | 13.0 | 10 | 9.0 | ||||||||||||
East Region Totals | 116 | 114.0 | 87 | 83.5 |
Six Months Ended June 30, | ||||||||||||||||
2022 | 2021 | |||||||||||||||
Ending | Average | Ending | Average | |||||||||||||
Active Communities | ||||||||||||||||
Total | 303 | 276.9 | 226 | 207.8 | ||||||||||||
West Region | ||||||||||||||||
Arizona | 56 | 45.0 | 38 | 34.6 | ||||||||||||
California | 32 | 25.7 | 20 | 18.3 | ||||||||||||
Colorado | 19 | 18.0 | 17 | 13.3 | ||||||||||||
West Region Totals | 107 | 88.7 | 75 | 66.2 | ||||||||||||
Central Region - Texas | ||||||||||||||||
Central Region Totals | 80 | 76.1 | 64 | 62.0 | ||||||||||||
East Region | ||||||||||||||||
Florida | 41 | 41.0 | 34 | 31.6 | ||||||||||||
Georgia | 14 | 14.7 | 10 | 9.7 | ||||||||||||
North Carolina | 32 | 29.0 | 26 | 23.7 | ||||||||||||
South Carolina | 17 | 14.7 | 7 | 6.3 | ||||||||||||
Tennessee | 12 | 12.7 | 10 | 8.3 | ||||||||||||
East Region Totals | 116 | 112.1 | 87 | 79.6 |
Three Months Ended September 30, | |||||||||||||||||||||||
2021 | 2020 | ||||||||||||||||||||||
Ending | Average | Ending | Average | ||||||||||||||||||||
Active Communities | |||||||||||||||||||||||
Total | 236 | 231.0 | 204 | 220.5 | |||||||||||||||||||
West Region | |||||||||||||||||||||||
Arizona | 38 | 38.0 | 35 | 36.5 | |||||||||||||||||||
California | 18 | 19.0 | 20 | 24.0 | |||||||||||||||||||
Colorado | 16 | 16.5 | 11 | 12.0 | |||||||||||||||||||
West Region Totals | 72 | 73.5 | 66 | 72.5 | |||||||||||||||||||
Central Region - Texas | |||||||||||||||||||||||
Central Region Totals | 68 | 66.0 | 58 | 63.0 | |||||||||||||||||||
East Region | |||||||||||||||||||||||
Florida | 38 | 36.0 | 34 | 35.0 | |||||||||||||||||||
Georgia | 12 | 11.0 | 11 | 14.0 | |||||||||||||||||||
North Carolina | 26 | 26.0 | 20 | 20.5 | |||||||||||||||||||
South Carolina | 11 | 9.0 | 6 | 5.5 | |||||||||||||||||||
Tennessee | 9 | 9.5 | 9 | 10.0 | |||||||||||||||||||
East Region Totals | 96 | 91.5 | 80 | 85.0 |
Nine Months Ended September 30, | |||||||||||||||||||||||
2021 | 2020 | ||||||||||||||||||||||
Ending | Average | Ending | Average | ||||||||||||||||||||
Active Communities | |||||||||||||||||||||||
Total | 236 | 215.3 | 204 | 232.1 | |||||||||||||||||||
West Region | |||||||||||||||||||||||
Arizona | 38 | 35.5 | 35 | 34.3 | |||||||||||||||||||
California | 18 | 18.3 | 20 | 25.3 | |||||||||||||||||||
Colorado | 16 | 14.0 | 11 | 13.8 | |||||||||||||||||||
West Region Totals | 72 | 67.8 | 66 | 73.4 | |||||||||||||||||||
Central Region - Texas | |||||||||||||||||||||||
Central Region Totals | 68 | 63.6 | 58 | 70.3 | |||||||||||||||||||
East Region | |||||||||||||||||||||||
Florida | 38 | 33.3 | 34 | 34.4 | |||||||||||||||||||
Georgia | 12 | 10.3 | 11 | 15.3 | |||||||||||||||||||
North Carolina | 26 | 24.3 | 20 | 21.6 | |||||||||||||||||||
South Carolina | 11 | 7.5 | 6 | 6.8 | |||||||||||||||||||
Tennessee | 9 | 8.5 | 9 | 10.3 | |||||||||||||||||||
East Region Totals | 96 | 83.9 | 80 | 88.4 | |||||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Cancellation Rates (1) | ||||||||||||||||
Total | 13 | % | 8 | % | 11 | % | 9 | % | ||||||||
West Region | ||||||||||||||||
Arizona | 18 | % | 7 | % | 15 | % | 9 | % | ||||||||
California | 14 | % | 6 | % | 13 | % | 9 | % | ||||||||
Colorado | 17 | % | 6 | % | 13 | % | 8 | % | ||||||||
West Region Totals | 17 | % | 7 | % | 14 | % | 9 | % | ||||||||
Central Region - Texas | ||||||||||||||||
Central Region Totals | 17 | % | 9 | % | 14 | % | 10 | % | ||||||||
East Region | ||||||||||||||||
Florida | 5 | % | 8 | % | 5 | % | 9 | % | ||||||||
Georgia | 7 | % | 6 | % | 10 | % | 10 | % | ||||||||
North Carolina | 6 | % | 6 | % | 6 | % | 7 | % | ||||||||
South Carolina | 17 | % | 9 | % | 14 | % | 13 | % | ||||||||
Tennessee | 6 | % | 13 | % | 5 | % | 11 | % | ||||||||
East Region Totals | 7 | % | 8 | % | 7 | % | 9 | % |
(1) | Cancellation rates are computed as the number of canceled units for the period divided by the gross sales units for the same period. |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||
Cancellation Rates (1) | ||||||||||||||||||||||||||
Total | 10 | % | 13 | % | 10 | % | 14 | % | ||||||||||||||||||
West Region | ||||||||||||||||||||||||||
Arizona | 12 | % | 10 | % | 10 | % | 11 | % | ||||||||||||||||||
California | 10 | % | 13 | % | 10 | % | 15 | % | ||||||||||||||||||
Colorado | 10 | % | 15 | % | 8 | % | 15 | % | ||||||||||||||||||
West Region Totals | 10 | % | 12 | % | 9 | % | 13 | % | ||||||||||||||||||
Central Region - Texas | ||||||||||||||||||||||||||
Central Region Totals | 13 | % | 15 | % | 11 | % | 16 | % | ||||||||||||||||||
East Region | ||||||||||||||||||||||||||
Florida | 5 | % | 12 | % | 8 | % | 12 | % | ||||||||||||||||||
Georgia | 9 | % | 12 | % | 10 | % | 12 | % | ||||||||||||||||||
North Carolina | 7 | % | 11 | % | 7 | % | 9 | % | ||||||||||||||||||
South Carolina | 18 | % | 15 | % | 15 | % | 13 | % | ||||||||||||||||||
Tennessee | 7 | % | 12 | % | 10 | % | 17 | % | ||||||||||||||||||
East Region Totals | 8 | % | 11 | % | 9 | % | 12 | % |
At June 30, 2022 | Quarter over Quarter | |||||||||||||||
2022 | 2021 | Change $ | Change % | |||||||||||||
Order Backlog (1) | ||||||||||||||||
Total | ||||||||||||||||
Dollars | $ | 3,438,853 | $ | 2,317,534 | $ | 1,121,319 | 48.4 | % | ||||||||
Homes in backlog | 7,241 | 5,509 | 1,732 | 31.4 | % | |||||||||||
Average sales price | $ | 474.9 | $ | 420.7 | $ | 54.2 | 12.9 | % | ||||||||
West Region | ||||||||||||||||
Arizona | ||||||||||||||||
Dollars | $ | 557,742 | $ | 520,034 | $ | 37,708 | 7.3 | % | ||||||||
Homes in backlog | 1,255 | 1,328 | (73 | ) | (5.5 | )% | ||||||||||
Average sales price | $ | 444.4 | $ | 391.6 | $ | 52.8 | 13.5 | % | ||||||||
California | ||||||||||||||||
Dollars | $ | 430,202 | $ | 295,198 | $ | 135,004 | 45.7 | % | ||||||||
Homes in backlog | 563 | 479 | 84 | 17.5 | % | |||||||||||
Average sales price | $ | 764.1 | $ | 616.3 | $ | 147.8 | 24.0 | % | ||||||||
Colorado | ||||||||||||||||
Dollars | $ | 271,827 | $ | 139,437 | $ | 132,390 | 94.9 | % | ||||||||
Homes in backlog | 439 | 238 | 201 | 84.5 | % | |||||||||||
Average sales price | $ | 619.2 | $ | 585.9 | $ | 33.3 | 5.7 | % | ||||||||
West Region Totals | ||||||||||||||||
Dollars | $ | 1,259,771 | $ | 954,669 | $ | 305,102 | 32.0 | % | ||||||||
Homes in backlog | 2,257 | 2,045 | 212 | 10.4 | % | |||||||||||
Average sales price | $ | 558.2 | $ | 466.8 | $ | 91.4 | 19.6 | % | ||||||||
Central Region - Texas | ||||||||||||||||
Central Region Totals | ||||||||||||||||
Dollars | $ | 1,042,689 | $ | 670,583 | $ | 372,106 | 55.5 | % | ||||||||
Homes in backlog | 2,349 | 1,729 | 620 | 35.9 | % | |||||||||||
Average sales price | $ | 443.9 | $ | 387.8 | $ | 56.1 | 14.5 | % | ||||||||
East Region | ||||||||||||||||
Florida | ||||||||||||||||
Dollars | $ | 524,940 | $ | 268,971 | $ | 255,969 | 95.2 | % | ||||||||
Homes in backlog | 1,250 | 637 | 613 | 96.2 | % | |||||||||||
Average sales price | $ | 420.0 | $ | 422.2 | $ | (2.2 | ) | (0.5 | )% | |||||||
Georgia | ||||||||||||||||
Dollars | $ | 162,204 | $ | 79,207 | $ | 82,997 | 104.8 | % | ||||||||
Homes in backlog | 342 | 196 | 146 | 74.5 | % | |||||||||||
Average sales price | $ | 474.3 | $ | 404.1 | $ | 70.2 | 17.4 | % | ||||||||
North Carolina | ||||||||||||||||
Dollars | $ | 299,352 | $ | 247,292 | $ | 52,060 | 21.1 | % | ||||||||
Homes in backlog | 673 | 634 | 39 | 6.2 | % | |||||||||||
Average sales price | $ | 444.8 | $ | 390.1 | $ | 54.7 | 14.0 | % | ||||||||
South Carolina | ||||||||||||||||
Dollars | $ | 64,015 | $ | 44,175 | $ | 19,840 | 44.9 | % | ||||||||
Homes in backlog | 178 | 118 | 60 | 50.8 | % | |||||||||||
Average sales price | $ | 359.6 | $ | 374.4 | $ | (14.8 | ) | (4.0 | )% | |||||||
Tennessee | ||||||||||||||||
Dollars | $ | 85,882 | $ | 52,637 | $ | 33,245 | 63.2 | % | ||||||||
Homes in backlog | 192 | 150 | 42 | 28.0 | % | |||||||||||
Average sales price | $ | 447.3 | $ | 350.9 | $ | 96.4 | 27.5 | % | ||||||||
East Region Totals | ||||||||||||||||
Dollars | $ | 1,136,393 | $ | 692,282 | $ | 444,111 | 64.2 | % | ||||||||
Homes in backlog | 2,635 | 1,735 | 900 | 51.9 | % | |||||||||||
Average sales price | $ | 431.3 | $ | 399.0 | $ | 32.3 | 8.1 | % |
(1) | Our backlog represents net sales that have not closed. |
At September 30, | Quarter over Quarter | |||||||||||||||||||||||||
2021 | 2020 | Change $ | Change % | |||||||||||||||||||||||
Order Backlog (1) | ||||||||||||||||||||||||||
Total | ||||||||||||||||||||||||||
Dollars | $ | 2,555,405 | $ | 2,004,981 | $ | 550,424 | 27.5 | % | ||||||||||||||||||
Homes in backlog | 5,838 | 5,242 | 596 | 11.4 | % | |||||||||||||||||||||
Average sales price | $ | 437.7 | $ | 382.5 | $ | 55.2 | 14.4 | % | ||||||||||||||||||
West Region | ||||||||||||||||||||||||||
Arizona | ||||||||||||||||||||||||||
Dollars | $ | 560,090 | $ | 404,044 | $ | 156,046 | 38.6 | % | ||||||||||||||||||
Homes in backlog | 1,346 | 1,212 | 134 | 11.1 | % | |||||||||||||||||||||
Average sales price | $ | 416.1 | $ | 333.4 | $ | 82.7 | 24.8 | % | ||||||||||||||||||
California | ||||||||||||||||||||||||||
Dollars | $ | 331,454 | $ | 373,949 | $ | (42,495) | (11.4) | % | ||||||||||||||||||
Homes in backlog | 503 | 608 | (105) | (17.3) | % | |||||||||||||||||||||
Average sales price | $ | 659.0 | $ | 615.0 | $ | 44.0 | 7.2 | % | ||||||||||||||||||
Colorado | ||||||||||||||||||||||||||
Dollars | $ | 182,536 | $ | 87,047 | $ | 95,489 | 109.7 | % | ||||||||||||||||||
Homes in backlog | 301 | 183 | 118 | 64.5 | % | |||||||||||||||||||||
Average sales price | $ | 606.4 | $ | 475.7 | $ | 130.7 | 27.5 | % | ||||||||||||||||||
West Region Totals | ||||||||||||||||||||||||||
Dollars | $ | 1,074,080 | $ | 865,040 | $ | 209,040 | 24.2 | % | ||||||||||||||||||
Homes in backlog | 2,150 | 2,003 | 147 | 7.3 | % | |||||||||||||||||||||
Average sales price | $ | 499.6 | $ | 431.9 | $ | 67.7 | 15.7 | % | ||||||||||||||||||
Central Region - Texas | ||||||||||||||||||||||||||
Central Region Totals | ||||||||||||||||||||||||||
Dollars | $ | 715,226 | $ | 602,709 | $ | 112,517 | 18.7 | % | ||||||||||||||||||
Homes in backlog | 1,787 | 1,758 | 29 | 1.6 | % | |||||||||||||||||||||
Average sales price | $ | 400.2 | $ | 342.8 | $ | 57.4 | 16.7 | % | ||||||||||||||||||
East Region | ||||||||||||||||||||||||||
Florida | ||||||||||||||||||||||||||
Dollars | $ | 321,831 | $ | 242,419 | $ | 79,412 | 32.8 | % | ||||||||||||||||||
Homes in backlog | 785 | 627 | 158 | 25.2 | % | |||||||||||||||||||||
Average sales price | $ | 410.0 | $ | 386.6 | $ | 23.4 | 6.1 | % | ||||||||||||||||||
Georgia | ||||||||||||||||||||||||||
Dollars | $ | 101,996 | $ | 69,204 | $ | 32,792 | 47.4 | % | ||||||||||||||||||
Homes in backlog | 233 | 192 | 41 | 21.4 | % | |||||||||||||||||||||
Average sales price | $ | 437.8 | $ | 360.4 | $ | 77.4 | 21.5 | % | ||||||||||||||||||
North Carolina | ||||||||||||||||||||||||||
Dollars | $ | 242,192 | $ | 143,741 | $ | 98,451 | 68.5 | % | ||||||||||||||||||
Homes in backlog | 610 | 413 | 197 | 47.7 | % | |||||||||||||||||||||
Average sales price | $ | 397.0 | $ | 348.0 | $ | 49.0 | 14.1 | % | ||||||||||||||||||
South Carolina | ||||||||||||||||||||||||||
Dollars | $ | 44,028 | $ | 36,723 | $ | 7,305 | 19.9 | % | ||||||||||||||||||
Homes in backlog | 126 | 114 | 12 | 10.5 | % | |||||||||||||||||||||
Average sales price | $ | 349.4 | $ | 322.1 | $ | 27.3 | 8.5 | % | ||||||||||||||||||
Tennessee | ||||||||||||||||||||||||||
Dollars | $ | 56,052 | $ | 45,145 | $ | 10,907 | 24.2 | % | ||||||||||||||||||
Homes in backlog | 147 | 135 | 12 | 8.9 | % | |||||||||||||||||||||
Average sales price | $ | 381.3 | $ | 334.4 | $ | 46.9 | 14.0 | % | ||||||||||||||||||
East Region Totals | ||||||||||||||||||||||||||
Dollars | $ | 766,099 | $ | 537,232 | $ | 228,867 | 42.6 | % | ||||||||||||||||||
Homes in backlog | 1,901 | 1,481 | 420 | 28.4 | % | |||||||||||||||||||||
Average sales price | $ | 403.0 | $ | 362.7 | $ | 40.3 | 11.1 | % |
Operating Results
Companywide
. In theFor the ninesix months ended SeptemberJune 30, 2021, home closing volume grew by 1,185 units, or 14.6%, and2022, home closing revenue improved by $540.813.2%, or $309.8 million, on 9,275with 6,079 closings valued at $3.6 billion. Order volume for$2.7 billion, compared to 6,163 closings valued at $2.3 billion during the ninesix months ended SeptemberJune 30, 2021 decreased 1.0%2021. Similar to the second quarter results, home closing revenue in the first half of 2022 increased as a result of higher ASPs achieved over recent quarters, while volume was relatively flat as result of production delays. Orders volume and value both increased year-over-year, to 10,441 orders, while value increased 9.6%, to $4.3with 7,641 units valued at $3.6 billion for the ninesix months ended SeptemberJune 30, 2021.2022, 9.2% and 25.6% higher, respectively from prior year results. Demand for our affordable entry-level homes has provided uscoupled with pricing power, resulting in a 10.7%33.3% increase in ASP on orders foraverage active communities drove the nineincrease in order volume. Orders pace decreased to 4.6 per month during the six months ended SeptemberJune 30, 2021.2022 versus 5.6 in the same period of 2021, largely due to the softening of demand in the second quarter, as discussed above, and metering of orders in the first quarter of 2022. We ended the quarter with 5,8387,241 homes in backlog valued at $2.6$3.4 billion, compared to 5,2425,509 units valued at $2.0$2.3 billion at SeptemberJune 30, 2020. Despite2021, increases of 31.4% and 48.4%, respectively. Increasing order volumes and construction cycle delays in recent quarters have both contributed to the decreaseincrease in order volume, backlog units, andwhile rising ASPs have positively impacted backlog value increased year-over-year from the impacts of rising ASP on orders and cycle time delays.
West
. The West Region closedYear-to-date results in the West Region were similar to those of the thirdsecond quarter. The number and value of homes closed versus prior year was virtually flat, but home closing revenue increased 14.0% driven by 4.6% and 7.6%, respectively, and ASP improved 2.9%.a 15.1% higher ASP. Order volumes forvolume in the West Region declined 13.8%only 1.2% year-to-date, due toas a 7.6%26.8% decline in year-to-date orders pace was offset by a 34.0% increase in the average number of actively selling communities and a 6.7% decline in orders pace.communities. Order value was 2.8% lowerpositively impacted by a 18.5% increase in ASP, which resulted in 17.1% higher order value for the ninesix months ended SeptemberJune 30, 2021, due to the decreased volume partially offset by a 12.7% increase in ASP.2022. The West Region ended the thirdsecond quarter of 20212022 with 2,1502,257 homes in backlog valued at $1.1$1.3 billion, up from 2,0032,045 units valued at $865.0$954.7 million at SeptemberJune 30, 2020. Despite2021, increases of 10.4% and 32.0%, respectively.
Central. The Central Region experienced similar trends as the decreaseWest Region in order volume, backlog increased year-over-year due to entering the period with a higher backlog and closing delays caused by supply chain constraints.
For the prior year quarter, due to pricing power that drove ASP up by 19.6%six months ended June 30, 2022, home closings in the Region.
East
.The year-to-date results of the East Region were similar to those of the thirdsecond quarter, with 25.3%5.8% and 25.7%18.4% improvements in home closing volume and revenue, respectively, compared to 2020,2021, providing 3,3692,369 closings and $1.2 billion$934.7 million in home closing revenue for the nine month period ending Septembersix months ended June 30, 2021. The number and value of orders rose2022. Orders improved by 17.8% and 27.0%, respectively, due to19.0% as a 24.2% increase14.8% decrease in orders pace for the ninesix months ended SeptemberJune 30, 2021 compared to prior year, which more than2022 was offset the 5.1% decreaseby a 40.8% increase in average active communities. Order value improved year over year by 33.9% due to increased volume and a 12.5% increase in ASP on orders. The East Region ended the quarter with 1,9012,635 homes in backlog valued at $766.1 million$1.1 billion compared to 1,4811,735 homes valued at $537.2$692.3 million at SeptemberJune 30, 2020,2021, a 28.4%51.9% increase in units and 42.6%64.2% in order value from strong demand and pricing power.
Land Closing Revenue and Gross Profit/(Loss)
From time to time, we may sell certain lots or land parcels to other homebuilders, developers or investors if we feel the sale will provide a greater economic benefit to us than continuing development or home construction or where we are looking to diversify our land positions in thea specific geography.geography, particularly with assets that no longer align with our strategy. As a result of such sales, we recognized land closing revenue of $8.5$3.4 million and $4.9$13.0 million for the three months ending SeptemberJune 30, 20212022 and 2020,2021, respectively, and profit of $0.8$0.7 million and $0.5 for the third quarterthree months ended June 30, 2022 and a loss of 2021 and 2020, respectively.$0.3 million for the same period in 2021. Year-to-date land sales resulted in a profitprofits of $1.0$11.4 million for the nine months ended September 30,and $0.2 million in 2022 and 2021, and a loss of $0.6 million loss in the prior year.
Other Operating Information (dollars in thousands)
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||||||||||||||||||||||||
Dollars | Percent of Home Closing Revenue | Dollars | Percent of Home Closing Revenue | Dollars | Percent of Home Closing Revenue | Dollars | Percent of Home Closing Revenue | ||||||||||||||||||||||||||||||||||||||||
Home Closing Gross Profit (1) | |||||||||||||||||||||||||||||||||||||||||||||||
Total | $ | 371,676 | 29.7 | % | $ | 243,567 | 21.5 | % | $ | 983,632 | 27.4 | % | $ | 642,623 | 21.0 | % | |||||||||||||||||||||||||||||||
West | $ | 127,783 | 28.3 | % | $ | 88,655 | 20.4 | % | $ | 339,024 | 26.4 | % | $ | 243,252 | 20.4 | % | |||||||||||||||||||||||||||||||
Central | $ | 122,940 | 32.1 | % | $ | 83,452 | 23.8 | % | $ | 327,728 | 29.6 | % | $ | 205,431 | 22.8 | % | |||||||||||||||||||||||||||||||
East | $ | 120,953 | 29.0 | % | $ | 71,460 | 20.5 | % | $ | 316,880 | 26.3 | % | $ | 193,940 | 20.2 | % |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||||||||
Dollars | Percent of Home Closing Revenue | Dollars | Percent of Home Closing Revenue | Dollars | Percent of Home Closing Revenue | Dollars | Percent of Home Closing Revenue | |||||||||||||||||||||||||
Home Closing Gross Profit (1) | ||||||||||||||||||||||||||||||||
Total | $ | 444,739 | 31.6 | % | $ | 345,301 | 27.3 | % | $ | 822,388 | 31.0 | % | $ | 611,956 | 26.1 | % | ||||||||||||||||
West | $ | 148,874 | 30.6 | % | $ | 114,184 | 26.0 | % | $ | 292,633 | 30.8 | % | $ | 211,241 | 25.4 | % | ||||||||||||||||
Central | $ | 135,539 | 32.1 | % | $ | 119,415 | 29.6 | % | $ | 239,944 | 31.2 | % | $ | 204,788 | 28.4 | % | ||||||||||||||||
East | $ | 160,326 | 32.0 | % | $ | 111,702 | 26.5 | % | $ | 289,811 | 31.0 | % | $ | 195,927 | 24.8 | % |
(1) | Home closing gross profit represents home closing revenue less cost of home closings, including impairments, if any. Cost of home closings includes land and lot development costs, direct home construction costs, an allocation of common community costs (such as architectural, legal and zoning costs), interest, sales tax, impact fees, warranty, construction overhead and closing costs. |
Companywide
. Home closing gross margin for theWest. The West Region home closing gross margin improved by 600460 basis points to 26.4%30.6% for the second quarter of 2022 compared to 26.0% in the second quarter of 2021. For the six months ended June 30, 2022, home closing gross margin also improved, by 540 basis points to 30.8% versus 20.4%25.4% for the same period in the prior year. The improvements in the West Region's gross marginshome closing margin are due to pricing power from strong market demandrising ASPs that have more than offset rising commodity and leverage of fixedlabor costs, on higher home closing revenue.
Central. Home closing gross margin in the Central Region improved 250 basis points to 32.1% for the second quarter of 2022 from 29.6% in the prior year quarter. Gross margin also improved for the six months ended June 30, 2022, up 280 basis points to 31.2% as compared to 28.4% for the same 2021 period. Home closing gross margin in the Central Region benefited from pricing power as ASP growth exceeded cost increases, lower cost of land for entry-level homes, lower amortization of interest expense and leverage of higher home closing revenue on fixed construction costs, as discussed above.
East. The East Region was up 850saw the greatest improvement in home closing gross margin at 550 basis points year-over-year our most notable improvement, at 29.0%to 32.0% in the thirdsecond quarter of 20212022 versus 20.5%26.5% for the comparable 20202021 period. ForSimilarly, for the ninesix months ended SeptemberJune 30, 2021,2022, gross margin was up 610620 basis points to 26.3%31.0% versus 20.2%24.8% for the same period in the prior year. Pricing power and leverage of fixed costs on higher closing revenues contributed to improvementsThe improvement in gross margin for both the three and ninesix months ended SeptemberJune 30, 20212022 compared to the respective 2020 periods.
Financial Services Profit (in thousands)
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
Financial services profit | $ | 4,224 | $ | 4,315 | $ | 12,599 | $ | 10,942 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Financial services profit | $ | 4,079 | $ | 4,615 | $ | 7,413 | $ | 8,375 |
Financial services profit represents the net profit of our financial services operations, including the operating profit generated by our wholly-owned title and insurance companies, Carefree Title Agency and Meritage Homes Insurance, Agency, as well as our portion of earnings from oura mortgage joint venture. Financial services profit was $4.2decreased $0.5 million in the second quarter of 2022 to $4.1 million versus $4.6 million in 2021, and $4.3by $1.0 million for the threesix months ended SeptemberJune 30, 2021 and 2020, respectively, and $12.62022 to $7.4 million and $10.9versus $8.4 million, for the nine months ended September 30, 2021 and 2020, respectively. The nominal decreasedue to a change in year-over-year third quarter 2021mix of financial services profit despite an increase in closing volume is largely due to costs attributable to increased employee headcount. The $1.7 million year-over-year increase in year-to-datemarkets where we provide financial services, profit is commensurate withas Carefree Title does not provide title and escrow services in all of the year-over-year 14.6% higher closing volumes.
Selling, General and Administrative Expenses and Other Expenses (dollars in thousands)
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
Commissions and other sales costs | $ | (68,952) | $ | (73,282) | $ | (210,585) | $ | (204,863) | |||||||||||||||
Percent of home closing revenue | 5.5 | % | 6.5 | % | 5.9 | % | 6.7 | % | |||||||||||||||
General and administrative expenses | $ | (47,192) | $ | (40,737) | $ | (128,297) | $ | (111,083) | |||||||||||||||
Percent of home closing revenue | 3.8 | % | 3.6 | % | 3.6 | % | 3.6 | % | |||||||||||||||
Interest expense | $ | (79) | $ | (55) | $ | (246) | $ | (2,176) | |||||||||||||||
Other income, net | $ | 1,268 | $ | 1,188 | $ | 3,443 | $ | 3,313 | |||||||||||||||
Loss on early extinguishment of debt | $ | — | $ | — | $ | (18,188) | $ | — | |||||||||||||||
Provision for income taxes | $ | (60,957) | $ | (26,388) | $ | (143,353) | $ | (67,253) |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Commissions and other sales costs | $ | (69,383 | ) | $ | (73,889 | ) | $ | (134,923 | ) | $ | (141,633 | ) | ||||
Percent of home closing revenue | 4.9 | % | 5.8 | % | 5.1 | % | 6.0 | % | ||||||||
General and administrative expenses | $ | (47,932 | ) | $ | (43,156 | ) | $ | (87,927 | ) | $ | (81,105 | ) | ||||
Percent of home closing revenue | 3.4 | % | 3.4 | % | 3.3 | % | 3.5 | % | ||||||||
Interest expense | $ | — | $ | (77 | ) | $ | (41 | ) | $ | (167 | ) | |||||
Other (expense)/income, net | $ | (458 | ) | $ | 1,377 | $ | (775 | ) | $ | 2,175 | ||||||
Loss on early extinguishment of debt | $ | — | $ | (18,188 | ) | $ | — | $ | (18,188 | ) | ||||||
Provision for income taxes | $ | (81,611 | ) | $ | (48,262 | ) | $ | (150,240 | ) | $ | (82,396 | ) |
Commissions and Other Sales Costs.
Commissions and other sales costs are comprised of internal and external commissions and related sales and marketing expenses such as advertising and sales office costs.General and Administrative Expenses.
General and administrative expenses represent corporate and divisional overhead expenses such as salaries and bonuses, occupancy, insurance and travel expenses. For the three months endedInterest Expense.
Interest expense is comprised of interest incurred, but not capitalized, on our senior notes, other borrowings, and our amended and restated unsecured revolving credit facility ("CreditOther (Expense)/Income, Net.
Other (expense)/income, net, primarily consists of (i) sublease income, (ii) interest earned on our cash and cash equivalents, (iii) payments and awards related to legal settlements and (iv) our portion of pre-tax income or loss from non-financial services joint ventures. For the three and six months endedLoss on Early Extinguishment of Debt.
Loss on early extinguishment of debt of $18.2 million for theIncome Taxes.
We have historically generated cash and funded our operations primarily from cash flows from operating activities. Additional sources of funds may include additional debt or equity financing and borrowing capacity under our Credit Facility. We exercise strict controls and believe we have a prudent strategy for Company-wide cash management, including those related to cash outlays for land acquisition and development and speculative inventory construction. Our principal uses of capital in the first nine months of 2021 werecash include acquisition and development of new and previously controlled land and lot positions, home construction, operating expenses, and the payment of interest and routine liabilities, the repayment of senior notes and repurchases ofliabilities. From time to time, we opportunistically repurchase our common stock. We used funds generated by operations to meet our short-term working capital requirements. In addition, in the second quarter of 2021, we received proceeds from issuing new 3.875%stock and senior notes due 2029, which were used in part to pay off existing 7.00% senior notes due 2022. See Note 6 in the accompanying unaudited consolidated financial statements for more information. We remain focused long-term on acquiring desirable land positions and maintaining a strong balance sheet to support future needs and growth, while leveraging land options where possible.
Cash flows for each of our communities depend on their stage of the development cycle, and can differ substantially from reported earnings. Early stages of development or expansion require significant cash outlays for land acquisitions, zoning plat and other approvals, community and lot development, and construction of model homes, roads, utilities, landscape and other amenities. Because these costs are a component of our inventory and are not recognized in our income statement until a home closes, we incur significant cash outlays prior to recognition of earnings. In the later stages of a community, cash inflows may significantly exceed earnings reported for financial statement purposes, as the cash outflow associated with home and land construction was previously incurred. From a liquidity standpoint,Similarly, in times of community count growth, we are currently acquiring and developing lots in our markets to grow our lot supply and active community count. We intend to increase ourincur significant outlays of cash through the land and development spending over the next several years, consistent with our growth initiatives. We are using our cash on hand to fund operations.
Short-term Liquidity and Capital Resources
Over the course of the next twelve months, we expect that our primary demand for funds will be for the construction of homes, as well as acquisition and development
Between our available cash and cash equivalents on hand combined with the availability of liquidity infrom our Credit Facility, we believe that we currently have sufficient
Long-term Liquidity and Capital Resources
Beyond the next twelve months, our principal demands for funds will be for the construction of homes, land acquisition and development activities needed to grow our lot supply and active community count, payments of principal and interest on our senior notes as they become due or mature and common stock repurchases. We expect our existing and generated cash will be adequate to fund our ongoing operating activities as well as providing capital for investment in future land purchases and related development activities. To the extent the sources of capital described above are insufficient to meet our long-term cash needs, we may be in the formalso conduct additional public offerings of equityour securities, refinance or secure new debt financing and may be from a varietyor dispose of sources.certain assets to fund our operating activities. There can be no assurances that we would be able to obtain such additional capital on terms acceptable to us, if at all, and such additional equity or debt financing could dilute the interests of our existing stockholders or increase our interest costs.
Material Cash Requirements
We may also from timeare a party to time engage in opportunistic repurchases ofmany contractual obligations involving commitments to make payments to third parties. These obligations impact both short-term and long-term liquidity and capital resource needs. Certain contractual obligations are reflected on our common stock in open market or privately-negotiated transactions as well as repurchase or redeem our outstanding senior notes. In April 2021, we completed an offering of $450.0 million aggregate principal amount of 3.875% Senior Notes due 2029. The proceeds were used to redeem all $300.0 million aggregate principal amount outstanding of our 7.00% Senior Notes due 2022. See Note 6 in the accompanying unaudited consolidated financial statements for more information related to the early redemption of our 7.00% Senior Notes due 2022.
As of | ||||||||||||||
September 30, 2021 | December 31, 2020 | |||||||||||||
Senior notes, net, loans payable and other borrowings | $ | 1,161,195 | $ | 1,020,085 | ||||||||||
Stockholders’ equity | 2,825,270 | 2,347,868 | ||||||||||||
Total capital | $ | 3,986,465 | $ | 3,367,953 | ||||||||||
Debt-to-capital (1) | 29.1 | % | 30.3 | % | ||||||||||
Senior notes, net, loans payable and other borrowings | $ | 1,161,195 | $ | 1,020,085 | ||||||||||
Less: cash and cash equivalents | (562,291) | (745,621) | ||||||||||||
Net debt | 598,904 | 274,464 | ||||||||||||
Stockholders’ equity | 2,825,270 | 2,347,868 | ||||||||||||
Total net capital | $ | 3,424,174 | $ | 2,622,332 | ||||||||||
Net debt-to-capital (2) | 17.5 | % | 10.5 | % |
For information about our loans payable and other borrowings, including our Credit Facility, and stockholders' equity.
Reference is made to Notes 1, 3, 4, and 15 in the accompanying notes to the unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q and are incorporated by reference herein. These Notes discuss our off-balance sheet arrangements with respect to land acquisition contracts and option agreements, and land development joint ventures, including the nature and amounts of financial obligations relating to these items. In addition, these Notes discuss the nature and amounts of certain types of commitments that arise in connection with the ordinary course of our land development and homebuilding operations, including commitments of land development joint ventures for which we might be obligated.obligated, if any.
We do not engage in commodity trading or other similar activities. We had no derivative financial instruments at June 30, 2022 or December 31, 2021.
Operating Cash Flow Activities
During the six months ended June 30, 2022, net cash used in operating activities totaled $206.8 million versus $143.5 million during the six months ended June 30, 2021. Operating cash flows in the first six months of 2022 benefited from cash generated by net earnings of $467.3 million and an increase in accounts payable and accrued liabilities of $113.4 million due to timing of payments for routine transactions, offset by a $729.5 million increase in real estate assets largely related to the increase in homes under construction and a $90.4 million increase in other receivables, prepaids and other assets. The increase in other receivables, prepaids and other assets was largely due to the purchase of fixed rate interest locks for eligible buyers in our backlog. For the six months ended June 30, 2021, operating cash flows generated by net earnings were offset by a $469.7 million increase in real estate assets.
Investing Cash Flow Activities
During the six months ended June 30, 2022 and 2021, net cash used in investing activities totaled $18.3 million and $10.7 million, respectively. Cash used in investing activities in the first half of 2022 is mainly attributable to the purchases of property and equipment of $12.9 million and investments in unconsolidated entities of $5.7 million. Cash used in investing activities for the first half of 2021 consisted primarily of purchases of property and equipment of $11.0 million.
Financing Cash Flow Activities
During the six months ended June 30, 2022, net cash used in financing activities totaled $121.1 million, compared to net cash provided by financing activities of $92.9 million during the six months ended June 30, 2021. The net cash used in financing activities in 2022 primarily reflects $109.3 million in share repurchases. See 'Part II, Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds' for more information about our authorized share repurchase program. The net cash provided by financing activities in 2021 primarily reflects the net proceeds of $450.0 million from the issuance of our 3.875% Senior Notes due 2029, offset by the early redemption of our 7.00% Senior Notes due 2022 of $300.0 million principal and associated early tender fees of $17.7 million, along with share repurchases of $27.5 million.
We believe that our leverage ratios provide useful information to the users of our financial statements regarding our financial position and cash and debt management. Debt-to-capital and net debt-to-capital are calculated as follows (dollars in thousands):
As of | ||||||||
June 30, 2022 | December 31, 2021 | |||||||
Senior notes, net, loans payable and other borrowings | $ | 1,158,651 | $ | 1,160,038 | ||||
Stockholders’ equity | 3,412,469 | 3,044,389 | ||||||
Total capital | $ | 4,571,120 | $ | 4,204,427 | ||||
Debt-to-capital (1) | 25.3 | % | 27.6 | % | ||||
Senior notes, net, loans payable and other borrowings | $ | 1,158,651 | $ | 1,160,038 | ||||
Less: cash and cash equivalents | (272,147 | ) | (618,335 | ) | ||||
Net debt | 886,504 | 541,703 | ||||||
Stockholders’ equity | 3,412,469 | 3,044,389 | ||||||
Total net capital | $ | 4,298,973 | $ | 3,586,092 | ||||
Net debt-to-capital (2) | 20.6 | % | 15.1 | % |
(1) | Debt-to-capital is computed as senior notes, net and loans payable and other borrowings divided by the aggregate of total senior notes, net, loans payable and other borrowings and stockholders' equity. |
(2) | Net debt-to-capital is computed as net debt divided by the aggregate of net debt and stockholders' equity. Net debt is comprised of total senior notes, net and loans payable and other borrowings, less cash and cash equivalents. The most directly comparable GAAP financial measure is the ratio of debt-to-capital. We believe the ratio of net debt-to-capital is a relevant financial measure for investors to understand the leverage employed in our operations and as an indicator of our ability to obtain financing. |
We have never declared cash dividends. Currently, we plan to utilize our cash to manage our liquidity and to grow community count. Future cash dividends, if any, will depend upon economic and financial conditions, results of operations, capital requirements, statutory requirements, restrictions imposed by our Credit Facility, as well as other factors considered relevant by our Board of Directors.
Credit Facility Covenants
Borrowings under the Credit Facility are unsecured, but availability is subject to, among other things, a borrowing base. The Credit Facility also contains certain financial covenants, including (a) a minimum tangible net worth requirement of $1.9 billion (which amount is subject to increase over time based on subsequent earnings and proceeds from equity offerings), and (b) a maximum leverage covenant that prohibits the leverage ratio (as defined therein) from exceeding 60%. In addition, we are required to maintain either (i) an interest coverage ratio (EBITDA to interest expense, as defined therein) of at least 1.50 to 1.00 or (ii) liquidity (as defined therein) of an amount not less than our consolidated interest incurred during the trailing 12 months. We were in compliance with all Credit Facility covenants as of June 30, 2022. Our actual financial covenant calculations as of June 30, 2022 are reflected in the table below.
Financial Covenant (dollars in thousands): | Covenant Requirement | Actual | ||||||
Minimum Tangible Net Worth | > $2,301,961 | $ | 3,371,871 | |||||
Leverage Ratio | < 60% | 19.7 | % | |||||
Interest Coverage Ratio (1) | > 1.50 | 21.30 | ||||||
Minimum Liquidity (1) | > $60,807 | $ | 989,023 | |||||
Investments other than defined permitted investments | < $1,011,561 | $ | 11,223 |
(1) | We are required to meet either the Interest Coverage Ratio or Minimum Liquidity, but not both. |
Seasonality
Historically, we have experienced seasonal variations in our quarterly operating results and capital requirements. We typically sell more homes in the first half of the fiscal year than in the second half, which creates additional working capital requirements in the second and third quarters to build our inventories to satisfy the deliveries in the second half of the year. We typically benefit from the cash generated from home closings more in the third and fourth quarters than in the first and second quarters. InDuring 2020, historical cycles were impacted by COVID-19 and its impact on consumer behavior, particularly assince then have been further impacted by sustained increased demand and supply chain and labor constraints. Historical seasonality returned in 2022 and we expect it relates to the homebuilding market. This impact has continued throughout 2021; however, we saw some return of seasonality in the third quarter of 2021 and expect our historical seasonal pattern to continue over the long term, although it may, continuefrom time to time, be affected by short-term volatility in the homebuilding industry and in the overall economy.
Recent Issued Accounting Pronouncements
See Note 1 in the accompanying notes to theour unaudited consolidated financial statements included in this report for discussion of recently issued accounting pronouncements.
Our fixed rate debt is made up primarily of $1.2 billion in principal of our senior notes. Except in limited circumstances, we do not have an obligation to prepay our fixed-rate debt prior to maturity and, as a result, interest rate risk and changes in fair value should not have a significant impact on our fixed rate borrowings until we would be required to repay such debt and access the capital markets to issue new debt. Our Credit Facility is subject to interest rate changes as the borrowing rates are based on LIBOR (or its anticipated future substitute)SOFR or Prime (see Note 5 in the accompanying notes to the unaudited consolidated financial statements included in this Form 10-Q).
Our operations are interest rate sensitive. As overall housing demand is adversely affected by increases in interest rates, a significant increase in mortgage interest rates may negatively affect the ability of homebuyers to secure adequate financing. Higher interest rates and/or rapidly increasing interest rates could adversely affect our revenues, gross margins, and net income and cancellation rates and would also increase our variable rate borrowing costs.costs on our Credit Facility, if any. We do not enter into, or intend to enter into, derivative interest rate swap financial instruments for trading or speculative purposes.
In order to ensure that the information we must disclose in our filings with the SEC is recorded, processed, summarized and reported on a timely basis, we have developed and implemented disclosure controls and procedures. Our management, with the participation of our chief executive officerCEO and chief financial officer,CFO, has reviewed and evaluated the effectiveness of our disclosure controls and procedures, as defined in Exchange Act Rules 13a-15(e) and 15d-15(e), as of SeptemberJune 30, 20212022 (the “Evaluation Date”). Based on such evaluation, our management has concluded that, as of the Evaluation Date, our disclosure controls and procedures were effective at a reasonable assurance level in ensuring that information that is required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.
During the fiscal quarter covered by this Form 10-Q, there has not been any change in our internal control over financial reporting that has materially affected, or that is reasonably likely to materially affect, our internal control over financial reporting.
See Note 15 in the accompanying notes to the unaudited consolidated financial statements in this report for a discussion of our legal proceedings.
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, Item IA "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2020,2021, which could materially affect our business, financial condition or future results. The risks described below and in our Annual Report on Form 10-K are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may eventually prove to materially adversely affect our business, financial condition and/or operating results. Except as described below, there has been no material change in our risk factors as previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020.
Increases in interest rates or decreases in mortgage availability may make purchasing a home more difficult or less desirable and other risks relatedmay negatively impact the ability to thesell new and existing homes.
In general, housing demand for building materials could materially disrupt our operationsis adversely affected by increases in interest rates and increase costs.
A homebuyers' ability to obtain a mortgage loan is largely subject to prevailing interest rates, lenders’ credit standards and appraisals, and the availability of these materials can be significantly impacted by a variety of factors outsidegovernment-supported programs, such as those from the Federal Housing Administration ("FHA"), the
Veterans Administration ("VA"), Federal National Mortgage Association ("Fannie Mae") and the Federal Home Loan Mortgage Corporation ("Freddie Mac"). If credit standards or appraisal guidelines are tightened, or mortgage loan programs are curtailed, potential buyers of our control. Constraints of raw materials and finished goods or in the distribution channels of our construction inputs can delay delivery of our homes to customers and can increase our building costs or lead to sales orders cancellations. For example, in 2021, supply chain constraints for various construction materials related to sustained demand amid the backdrop of a global pandemic have delayed our construction cycle times. These delays impact the timing of our expected home closings and may also result in cost increases that we may not be able to passobtain necessary mortgage financing. There can be no assurance that these programs will continue to be available or that they will be as accommodating as they currently are. Continued legislative and regulatory actions and more stringent underwriting standards could have a material adverse effect on our current or future customers. Sustained increases in construction costs may, over time, erodebusiness if certain buyers are unable to obtain mortgage financing. A prolonged tightening of the financial markets could also negatively impact our margins.business.
The above risks can also indirectly impact us to the extent our customers need to sell their existing homes to purchase a new home from us if the potential buyer of their home is unable to obtain mortgage financing.
We have never declared cash dividends. Currently, we plan to retain our cash to finance the continuing development of the business. Future cash dividends, if any, will depend upon financial condition, results of operations, capital requirements, statutory requirements, compliance with certain restrictive debt covenants,restrictions imposed by our Credit Facility, as well as other factors considered relevant by our Board of Directors.
Issuer Purchases of Equity Securities
On February 13, 2019, our Board of Directors authorized a new stock repurchase program, authorizing the expenditure of up to $100.0 million to repurchase shares of our common stock. On November 13, 2020, the Board of Directors authorized the expenditure of an additional $100.0 million to repurchase shares of our common stock under this program. On August 12, 2021, the Board of Directors authorized the expenditure of an additional $100.0 million to repurchase shares of our common stock under this program, which was announced on August 17, 2021. On May 19, 2022, the Board of Directors authorized the expenditure of an additional $200.0 million to repurchase shares of our common stock under this program, which was announced on May 25, 2022. There is no stated expiration for this program. The repurchases of the Company's shares may be made in the open market, in privately negotiated transactions, or otherwise. The timing and amount of repurchases, if any, will be determined by the Company's management at its discretion and be based on a variety of factors such as the market price of the Company's common stock, corporate and contractual requirements, prevailing market and economic conditions and legal requirements. The share repurchase program may be modified, suspended or discontinued at any time. As of SeptemberJune 30, 20212022, there was $177.4$244.1 million available under this program to repurchase shares. We purchased 95,461128,073 shares under the program during the three months ended SeptemberJune 30, 2021.
Approximate | ||||||||||||||||
Total number of | dollar value of | |||||||||||||||
shares purchased | shares that may | |||||||||||||||
as part of publicly | yet be purchased | |||||||||||||||
Total Number of | Average price paid | announced plans | under the plans or | |||||||||||||
Period | Shares Purchased | per share | or programs | programs | ||||||||||||
April 1, 2022 - April 30, 2022 | — | $ | — | — | $ | 54,077,423 | ||||||||||
May 1, 2022 - May 31, 2022 | 107,328 | $ | 77.78 | 107,328 | $ | 245,729,743 | ||||||||||
June 1, 2022 - June 30, 2022 | 20,745 | $ | 79.65 | 20,745 | $ | 244,077,431 | ||||||||||
Total | 128,073 | 128,073 |
Period | Total Number of Shares Purchased | Average price paid per share | Total number of shares purchased as part of publicly announced plans or programs | Approximate dollar value of shares that may yet be purchased under the plans or programs | |||||||||||||||||||
July 1, 2021 - July 31, 2021 | — | $ | — | — | $ | 86,827,896 | |||||||||||||||||
August 1, 2021 - August 31, 2021 | — | $ | — | — | $ | 186,827,896 | |||||||||||||||||
September 1, 2021 - September 30, 2021 | 95,461 | $ | 99.23 | 95,461 | $ | 177,355,474 | |||||||||||||||||
Total | 95,461 | 95,461 | |||||||||||||||||||||
Exhibit Number | Description | |||||||
Page or Method of Filing | ||||||||
3.1 | Restated Articles of Incorporation of Meritage Homes Corporation | Incorporated by reference to Exhibit 3 of Form 8-K dated June 20, 2002 | ||||||
3.1.1 | Amendment to Articles of Incorporation of Meritage Homes Corporation | Incorporated by reference to Exhibit 3.1 of Form 10-Q for the quarter ended September 30, 1998 | ||||||
3.1.2 | Amendment to Articles of Incorporation of Meritage Homes Corporation | Incorporated by reference to Exhibit 3.1 of Form 8-K dated September 15, 2004 | ||||||
3.1.3 | Amendment to Articles of Incorporation of Meritage Homes Corporation | Incorporated by reference to Appendix A of the Proxy Statement for the Registrant's 2006 Annual Meeting of Stockholders | ||||||
3.1.4 | Amendment to Articles of Incorporation of Meritage Homes Corporation | Incorporated by reference to Appendix B of the Proxy Statement for the Registrant's 2008 Annual Meeting of Stockholders | ||||||
3.1.5 | Amendment to Articles of Incorporation of Meritage Homes Corporation | Incorporated by reference to Appendix A of the Definitive Proxy Statement filed by the Registrant with the Securities and Exchange Commission on January 9, 2009 | ||||||
3.2 | Incorporated by reference to Exhibit 3.1 of Form 8-K dated | |||||||
22 | ||||||||
Incorporated by reference to Exhibit 22 of Form 10-K for the year ended December 31, | ||||||||
31.1 | Rule 13a-14(a)/15d-14(a) Certification of Phillippe Lord, Chief Executive Officer | Filed herewith | ||||||
31.2 | Rule 13a-14(a)/15d-14(a) Certification of Hilla Sferruzza, Chief Financial Officer | Filed herewith | ||||||
32.1 | Section 1350 Certification of Chief Executive Officer and Chief Financial Officer | Furnished herewith | ||||||
101.0 | The following financial statements from the Meritage Homes Corporation Quarterly Report on Form 10-Q as of and for the three | |||||||
104.0 | The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended |
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 thereunto duly authorized.
MERITAGE HOMES CORPORATION, a Maryland corporation | |||||||||||
By: | /s/ HILLA SFERRUZZA | ||||||||||
Hilla Sferruzza Executive Vice President and Chief Financial Officer (Duly Authorized Officer and Principal Financial Officer) | |||||||||||
Date: | July 29, |
3.1 | ||||||||
3.1.1 | ||||||||
3.1.2 | ||||||||
3.1.3 | ||||||||
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3.1.5 | ||||||||
3.2 | Amended and Restated Bylaws of Meritage Homes Corporation | |||||||
22 | ||||||||
31.1 | ||||||||
31.2 | ||||||||
32.1 | ||||||||
101.0 | The following financial statements from the Meritage Homes Corporation Quarterly Report on Form 10-Q as of and for the three | |||||||
104.0 | The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended |