Our effective tax rate was 23.3%24.6% and 19.5%22.4% for the three months ended SeptemberJune 30, 20212022 and 2020,2021, respectively, and 22.3%24.3% and 19.9%21.6% for the ninesix months ended SeptemberJune 30, 20212022 and 2020, respectively.2021. The higher tax rates forin 2022 is due to the three and nine months ended September 30, 2021, reflect increased profit in states with higher tax rates and a reduced benefitexpiration of the federal energy efficient home credits earned under Internal Revenue Code §45L applied to greater earnings before income taxes. The tax rates for the three and nine months ended September 30, 2020, reflect credits earned under Internal Revenue Code §45L new energy efficient homes.homes credits on December 31, 2021.
Liquidity and Capital Resources
Overview
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.
Operating Cash Flow Activities
During the nine months ended September 30, 2021, net cash used in operating activities totaled $248.7 million versus cash provided by operating activities of $373.1 million during the nine months ended September 30, 2020. Operating cash flows in 2021 and 2020 benefited from cash generated by net earnings of $500.0 million and $270.9 million, respectively. For the nine months ended September 30, 2021, operating cash flows generated by net earnings were offset by an $810.7 million increase in real estate assets due to our increased home construction, land acquisition and development activities. For the nine months ended September 30, 2020, operating cash flows also benefited from an increase in accounts payable and accrued liabilities of $60.0 million due to timing of payments for routine transactions.
Investing Cash Flow Activities
During the nine months ended September 30, 2021, net cash used in investing activities totaled $17.5 million as compared to $13.2 million for the same period in 2020. Cash used in investing activities in the first nine months of 2021 and 2020 is mainly attributable to the purchases of property and equipment of $17.9 million and $14.8 million for the 2021 and 2020 periods, respectively.
Financing Cash Flow Activities
During the nine months ended September 30, 2021, net cash provided by financing activities totaled $82.9 million as compared to net cash used of $69.3 million for the same period in 2020. 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 $37.0 million. An additional $0.5 million of non-cash charges associated with the early redemption of our 7.00% Senior Notes due 2022 were recognized as Loss on early extinguishment of debt in the accompanying unaudited consolidated income statements. The activity in 2020 was primarily due to $60.8 million of share repurchases.
Overview of Cash Management
notes.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.
During the nine months ended September 30, 2021, we closed 9,275 homes, purchased approximately 24,800 lots for $824.6 million, spent $623.0 million on landpurchase, development and started construction on 10,554 homes. We primarily purchase undeveloped land or partially-finished lots requiring developmentcommunity opening stages whereas in order to bring them toin times of community count stability, these cash outlays are incurred in a finished status ready formore even-flow cadence with cash inflows from actively selling communities that are contributing closing volume and home construction. We exercise strict controls and believe we haveclosing revenue. Conversely, in a prudent strategy for Company-wide cash management, including those related todown turn environment, cash outlays for land and inventorycommunity count growth may be scaled back.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
. of both new and existing lots, operating expenses, including general and administrative expenses, interest payments and opportunistic common stock repurchases. We ended the third quarter of 2021 with $562.3 million ofexpect to meet these short-term liquidity requirements primarily through our cash and cash equivalents a decrease of $183.3 million from December 31, 2020, with no outstanding borrowings on hand and our Credit Facility. We expect to generatenet cash from the sale of our inventory, but we intend to redeploy that cash primarily to acquire and develop strategic and well-positioned lots to grow our business.
flows provided by operations.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
liquidity to manage through our strategic growth goals. liquidity. Nevertheless, we may seek additional capital to strengthen our liquidity position. Suchposition, enable us to acquire additional land inventory in anticipation of improving market conditions, and/or strengthen our long-term capital structure.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.
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. 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 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. The Company intends to retire any shares repurchased. In the nine months ended September 30, 2021, we purchased and retired 395,461 shares of our
common stock at an aggregate purchase price of $37.0 million andbalance sheet as of SeptemberJune 30, 2021, $177.4 million remained available under this program.
We believe that2022, while others are considered future commitments for materials or services not yet provided. Our contractual obligations primarily consist of principal and interest payments on 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 |
| | 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 | % |
(1)Debt-to-capital is computed as senior notes, net and loans payable and other borrowings, dividedincluding our Credit Agreement, letters of credit and surety bonds and operating leases. We have no debt maturities until 2025. We also have certain short-term lease commitments, commitments to fund our existing unconsolidated joint ventures and other purchase obligations in the normal course of business. Other material cash requirements include land acquisition and development costs, home construction costs and operating expenses, including our selling, general and administrative expenses, as previously discussed. We plan to fund these commitments primarily with cash flows generated by the aggregateoperations, but may also utilize additional debt or equity financing and borrowing capacity under our Credit Facility. Our maximum exposure to loss on our purchase and option agreements is generally limited to non-refundable deposits and capitalized pre-acquisition costs.For information about our loans payable and other borrowings, including our Credit Facility, 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, compliance with certain restrictive debt covenants, 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 $1.5 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 in the credit facility) of at least 1.50 to 1.00 or (ii) liquidity (as defined in the credit facility) 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 September 30, 2021. Our actual financial covenant calculations as of September 30, 2021 are reflected in the table below.
| | | | | | | | | | | |
Financial Covenant (dollars in thousands): | Covenant Requirement | | Actual |
Minimum Tangible Net Worth | > $1,839,475 | | $2,785,088 |
Leverage Ratio | < 60% | | 15.3% |
Interest Coverage Ratio (1)
| > 1.50 | | 15.69 |
Minimum Liquidity (1)
| > $63,726 | | $1,192,361 |
Investments other than defined permitted investments | < $835,526 | | $3,905 |
(1)We are required to meet either the Interest Coverage Ratio or Minimum Liquidity, but not both.
Off-Balance Sheet Arrangements
Referencereference is made to Notes
1, 3,5 and
46 in the accompanying notes to the unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q
whichand are incorporated by reference herein. For information about our lease obligations, reference is made to Note 4 in the consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2021.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.
Item3. | | | | | |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
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.
Item4. | | | | | |
Item 4. | Controls and Procedures |
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.
PART II - OTHER INFORMATION
Item1. | | | | | |
Item 1. | Legal Proceedings |
See Note 15 in the accompanying notes to the unaudited consolidated financial statements in this report for a discussion of our legal proceedings.
Item1A. | | | | | |
Item 1A. | Risk Factors |
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.
Supply shortages2021.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.
We depend on continueda lack of availability of
building materialsmortgage financing. Most of our buyers finance their home purchases through our mortgage joint venture or third party lenders providing mortgage financing. If mortgage interest rates increase and, consequently, the ability of prospective buyers to finance home purchases is adversely affected, our home sales and cash flow may be adversely affected and the impact may be material. Additionally, rapid increases in
interest rates may negatively impact affordability of a home purchase for existing buyers in backlog who have not yet locked in a mortgage interest rate for their loan. This could lead to an increase in the number of contract cancellations in our reported sales order
numbers. For example, although long-term interest rates remain low compared to
timely construct our homes. Thehistorical averages, in the first half of 2022 they have trended upward and are anticipated to continue to increase in the near term. We may have the ability to offset the impact of rising interest rates on affordability by purchasing interest rate locks; however, there is no guarantee that interest rate locks will be available for us to purchase at desirable terms, or if they are available, there is no guarantee that they will be utilized by potential customers. 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.
Item2. | | | | | |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
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.
2022.| | | | | | | | | | | | | | | 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 | | | | | | | |
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 |
| | |
3.1.23.1.3 | 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 |
| | |
3.1.33.1.4 | 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 |
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3.1.43.1.5 | 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 |
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3.2 | Amended and Restated Bylaws of Meritage Homes Corporation | Incorporated by reference to Exhibit 3.1 of Form 8-K dated May 10, 2017 November 23, 2021 |
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10.122 | Amended and Restated Employment Agreement between the Company and Clinton Szubinski* | Incorporated by reference to Exhibit 10.1 of Form 8-K dated August 17, 2021 |
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10.2 | Amendment to the Third Amended and Restated Employment Agreement between the Company and C. Timothy White* | Incorporated by reference to Exhibit 10.1 of Form 8-K dated September 3, 2021 |
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22 | List of Guarantor Subsidiaries | Incorporated by reference to Exhibit 22 of Form 10-K for the year ended December 31, 2020 2021 |
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31.1 | Rule 13a-14(a)/15d-14(a) Certification of Phillippe Lord, Chief Executive Officer | Filed herewith |
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31.2 | Rule 13a-14(a)/15d-14(a) Certification of Hilla Sferruzza, Chief Financial Officer | Filed herewith |
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32.1 | Section 1350 Certification of Chief Executive Officer and Chief Financial Officer | Furnished herewith |
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101.0 | The following financial statements from the Meritage Homes Corporation Quarterly Report on Form 10-Q as of and for the three months and ninesix months ended SeptemberJune 30, 20212022 were formatted in Inline XBRL (Extensible Business Reporting Language); (i) Unaudited Consolidated Balance Sheets, (ii) Unaudited Consolidated Income Statements, (iii) Unaudited Consolidated Statements of Cash Flows, and (iv) Notes to Unaudited Consolidated Financial Statements. |
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104.0 | The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended SeptemberJune 30, 2021,2022, formatted in Inline XBRL. XBRL and contained in exhibit 101. |
* Indicates a management contract or compensation plan.
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.
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| MERITAGE HOMES CORPORATION,
a Maryland corporation | |
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By: | /s/ HILLA SFERRUZZA | | |
| Executive Vice President and Chief Financial Officer and Chief Accounting Officer (Duly Authorized Officer and Principal Financial Officer) | |
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Date: | OctoberJuly 29, 2021 2022 | | |
3.1 | | | | | | | | |
3.1 | | |
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3.1.1 | | |
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3.1.2 | | |
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3.1.3 | | |
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3.1.4 | | |
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3.23.1.5 | | |
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3.2 | | Amended and Restated Bylaws of Meritage Homes Corporation |
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10.122 | | |
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10.2 | | |
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22 | | | |
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31.1 | | |
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31.2 | | |
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32.1 | | |
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101.0 | | The following financial statements from the Meritage Homes Corporation Quarterly Report on Form 10-Q as of and for the three months and ninesix months ended SeptemberJune 30, 20212022 were formatted in Inline XBRL (Extensible Business Reporting Language); (i) Unaudited Consolidated Balance Sheets, (ii) Unaudited Consolidated Income Statements, (iii) Unaudited Consolidated Statements of Cash Flows, and (iv) Notes to Unaudited Consolidated Financial Statements. |
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104.0 | | The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended SeptemberJune 30, 2021,2022, formatted in Inline XBRL. XBRL and contained in exhibit 101. |
* Indicates a management contract or compensation plan.
