Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2017 | Aug. 01, 2017 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | Meritage Homes CORP | |
Entity Central Index Key | 833,079 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2017 | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q2 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 40,320,282 |
UNAUDITED CONSOLIDATED BALANCE
UNAUDITED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Assets | ||
Cash and cash equivalents | $ 216,739 | $ 131,702 |
Other receivables | 73,109 | 70,355 |
Real estate | 2,638,407 | 2,422,063 |
Real estate not owned | 9,987 | 0 |
Deposits on real estate under option or contract | 74,750 | 85,556 |
Investments in unconsolidated entities | 16,678 | 17,097 |
Property and equipment, net | 32,620 | 33,202 |
Deferred tax asset | 55,290 | 53,320 |
Prepaids, other assets and goodwill | 83,112 | 75,396 |
Total assets | 3,200,692 | 2,888,691 |
Liabilities | ||
Accounts payable | 139,957 | 140,682 |
Accrued liabilities | 166,080 | 170,852 |
Home sale deposits | 36,197 | 28,348 |
Liabilities related to real estate not owned | 8,489 | 0 |
Loans payable and other borrowings | 17,256 | 32,195 |
Senior and convertible senior notes, net | 1,340,274 | 1,095,119 |
Total liabilities | 1,708,253 | 1,467,196 |
Stockholders’ Equity | ||
Preferred stock, par value $0.01. Authorized 10,000,000 shares; none issued and outstanding at June 30, 2017 and December 31, 2016 | 0 | 0 |
Common stock, par value $0.01. Authorized 125,000,000 shares; issued 40,320,282 and 40,030,518 shares at June 30, 2017 and December 31, 2016, respectively | 403 | 400 |
Additional paid-in capital | 578,295 | 572,506 |
Retained earnings | 913,741 | 848,589 |
Total stockholders’ equity | 1,492,439 | 1,421,495 |
Total liabilities and stockholders’ equity | $ 3,200,692 | $ 2,888,691 |
UNAUDITED CONSOLIDATED BALANCE3
UNAUDITED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Jun. 30, 2017 | Dec. 31, 2016 |
Statement of Financial Position [Abstract] | ||
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized (in shares) | 10,000,000 | 10,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 125,000,000 | 125,000,000 |
Common stock, shares issued (in shares) | 40,320,282 | 40,030,518 |
UNAUDITED CONSOLIDATED INCOME S
UNAUDITED CONSOLIDATED INCOME STATEMENTS - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | ||
Homebuilding: | |||||
Home closing revenue | $ 797,780 | $ 795,845 | $ 1,458,397 | $ 1,391,462 | |
Land closing revenue | 4,198 | 2,051 | 16,353 | 4,200 | |
Total closing revenue | 801,978 | 797,896 | 1,474,750 | 1,395,662 | |
Cost of home closings | (656,870) | (658,099) | (1,210,219) | (1,150,369) | |
Cost of land closings | (4,198) | (1,693) | (13,858) | (3,393) | |
Total cost of closings | (661,068) | (659,792) | (1,224,077) | (1,153,762) | |
Home closing gross profit | 140,910 | 137,746 | 248,178 | 241,093 | |
Land closing gross profit | 0 | 358 | 2,495 | 807 | |
Total closing gross profit | 140,910 | 138,104 | 250,673 | 241,900 | |
Financial Services: | |||||
Revenue | 3,649 | 3,476 | 6,593 | 5,976 | |
Expense | (1,551) | (1,508) | (2,930) | (2,754) | |
Earnings from financial services unconsolidated entities and other, net | 3,459 | 3,795 | 6,184 | 6,587 | |
Financial services profit | 5,557 | 5,763 | 9,847 | 9,809 | |
Commissions and other sales costs | (54,701) | (56,379) | (103,021) | (102,556) | |
General and administrative expenses | (29,591) | (28,898) | (59,213) | (58,516) | |
Earnings from other unconsolidated entities, net | 570 | 573 | 943 | 416 | |
Interest expense | (1,620) | (1,672) | (2,445) | (4,960) | |
Other income, net | 2,080 | 1,545 | 3,190 | 1,828 | |
Earnings before income taxes | 63,205 | 59,036 | 99,974 | 87,921 | |
Provision for income taxes | (21,625) | (19,158) | (34,822) | (27,074) | |
Net earnings | $ 41,580 | $ 39,878 | $ 65,152 | $ 60,847 | |
Earnings per common share: | |||||
Basic (in dollars per share) | $ 1.03 | $ 1 | $ 1.62 | $ 1.52 | |
Diluted (in dollars per share) | [1] | $ 0.98 | $ 0.95 | $ 1.54 | $ 1.45 |
Weighted average number of shares: | |||||
Basic (in shares) | 40,317 | 40,012 | 40,248 | 39,926 | |
Diluted (in shares) | 42,781 | 42,533 | 42,836 | 42,477 | |
[1] | In accordance with ASC 260-10, Earnings Per Share, ("ASC 260-10") we calculate the dilutive effect of convertible securities using the "if-converted" method |
UNAUDITED CONSOLIDATED STATEMEN
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Cash flows from operating activities: | ||
Net earnings | $ 65,152 | $ 60,847 |
Adjustments to reconcile net earnings to net cash used in operating activities: | ||
Depreciation and amortization | 7,872 | 7,600 |
Stock-based compensation | 5,785 | 7,313 |
Excess income tax provision from stock-based awards | 0 | 526 |
Equity in earnings from unconsolidated entities | (7,127) | (7,003) |
Distributions of earnings from unconsolidated entities | 6,712 | 7,343 |
Other | 10 | 3,262 |
Changes in assets and liabilities: | ||
Increase in real estate | (211,384) | (193,981) |
Decrease/(increase) in deposits on real estate under option or contract | 9,308 | (3,551) |
Increase in other receivables, prepaids and other assets | (9,428) | (9,368) |
(Decrease)/increase in accounts payable and accrued liabilities | (5,497) | 12,944 |
Increase in home sale deposits | 7,849 | 3,449 |
Net cash used in operating activities | (130,748) | (110,619) |
Cash flows from investing activities: | ||
Investments in unconsolidated entities | (408) | (159) |
Distributions of capital from unconsolidated entities | 1,250 | 0 |
Purchases of property and equipment | (8,322) | (7,570) |
Proceeds from sales of property and equipment | 86 | 87 |
Maturities/sales of investments and securities | 1,258 | 645 |
Payments to purchase investments and securities | (1,258) | (645) |
Net cash used in investing activities | (7,394) | (7,642) |
Cash flows from financing activities: | ||
Repayment of Credit Facility, net | (15,000) | 0 |
Repayment of loans payable and other borrowings | (5,725) | (15,482) |
Repayments of Convertible Debt | (52,098) | 0 |
Proceeds from issuance of senior notes | 300,000 | 0 |
Payment of debt issuance costs | (3,998) | 0 |
Excess income tax provision from stock-based awards | 0 | (526) |
Proceeds from stock option exercises | 0 | 232 |
Net cash provided by/(used in) financing activities | 223,179 | (15,776) |
Net increase/(decrease) in cash and cash equivalents | 85,037 | (134,037) |
Cash and cash equivalents, beginning of period | 131,702 | 262,208 |
Cash and cash equivalents, end of period | $ 216,739 | $ 128,171 |
ORGANIZATION AND BASIS OF PRESE
ORGANIZATION AND BASIS OF PRESENTATION | 6 Months Ended |
Jun. 30, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
ORGANIZATION AND BASIS OF PRESENTATION | ORGANIZATION AND BASIS OF PRESENTATION Organization. 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 of homes that are designed to appeal to a wide range of homebuyers, including first-time, move-up, active adult and luxury. We have homebuilding operations in three regions: West, Central and East, which are comprised of nine states: Arizona, California, Colorado, Texas, Florida, Georgia, North Carolina, South Carolina and Tennessee. We also operate a wholly-owned title company, Carefree Title Agency, Inc. ("Carefree Title"). Carefree Title's core business includes title insurance and closing/settlement services we offer to our homebuyers. Through our predecessors, we commenced our homebuilding operations in 1985. Meritage Homes Corporation was incorporated in 1988 in the state of Maryland. Our homebuilding and marketing activities are conducted under the name of Meritage Homes in each of our homebuilding markets. We also offer luxury homes under the brand name of Monterey Homes in some markets. At June 30, 2017 , we were actively selling homes in 257 communities, with base prices ranging from approximately $170,000 to $1,380,000 . 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 Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. These financial statements should be read in conjunction with the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2016. The consolidated financial statements include the accounts of Meritage Homes Corporation and those of our consolidated subsidiaries, partnerships and other entities in which we have a controlling financial interest, and of variable interest entities (see Note 3) in which we are deemed the primary beneficiary (collectively, “us”, “we”, “our” and “the Company”). Intercompany balances and transactions have been eliminated in consolidation. In the opinion of management, the accompanying unaudited financial statements include all adjustments (consisting only of normal recurring entries), necessary for the fair presentation of our results for the interim periods presented. Results for interim periods are not necessarily indicative of results to be expected for the full year. Cash 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 approximately $35.2 million and $75.3 million are included in cash and cash equivalents at June 30, 2017 and December 31, 2016 , respectively. Real Estate. Real estate is stated at cost unless the asset is determined to be impaired, at which point the inventory is written down to fair value as required by Accounting Standards Codification (“ASC”) 360-10, Property, Plant and Equipment (“ASC 360-10”) . Inventory includes the costs of land acquisition, land development, home construction, capitalized interest, real estate taxes, capitalized direct overhead costs incurred during development and home construction that benefit the entire community, less impairments, if any. Land and development costs are typically allocated and transferred to homes under construction when construction begins. Home construction costs are accumulated on a per-home basis, while selling costs are expensed as incurred. Cost of home closings includes the specific construction costs of the home and all related allocated land acquisition, land development and other common costs (both incurred and estimated to be incurred) that are allocated based upon the total number of homes expected to be closed in each community or phase. Any changes to the estimated total development costs of a community or phase are allocated to the remaining homes in the community or phase. When a home closes, we may have incurred costs for goods and services that have not yet been paid. An accrued liability to capture such obligations is recorded in connection with the home closing and charged directly to cost of sales. 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. It is possible that actual results could differ from budgeted amounts for various reasons, including construction delays, labor or material shortages, increases in costs that have not yet been committed, changes in governmental requirements, or other unanticipated issues 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 construction and land 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 absorption rate 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 shorter. All of our land inventory and related real estate assets are reviewed for recoverability, as our inventory is considered “long-lived” in accordance with GAAP. Impairment charges are recorded to write down an asset to its estimated fair value if the undiscounted cash flows expected to be generated by the asset are lower than its carrying amount. 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. Such an analysis is conducted if there is an indication of a decline in value of our land and real estate assets. The impairment of a community is allocated to each lot on a straight-line basis. Deposits. Deposits paid related to land options 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 applied to the acquisition price of the lots based on the terms of the underlying agreements. To the extent they are non-refundable, deposits are charged to expense if the land acquisition is terminated or no longer considered probable. Since our acquisition contracts typically do not require specific performance, we do not consider such contracts to be contractual obligations to purchase the land and our total exposure under such contracts is limited to the loss of the non-refundable deposits and any ancillary capitalized costs. Our deposits on real estate under option or contract were $74.8 million and $85.6 million as of June 30, 2017 and December 31, 2016 , respectively. Goodwill. 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 two-step goodwill impairment test. ASC 350 states that an entity may first assess qualitative factors to determine whether it is necessary to perform a goodwill impairment test. Such qualitative factors include: (1) macroeconomic conditions, such as a deterioration in general economic conditions, (2) industry and market considerations such as deterioration in the environment in which the entity operates, (3) cost factors such as increases in raw materials and labor costs, and (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, the two-step impairment testing 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. 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 profile and leveraging our capital base. See Note 4 for additional discussion of our investments in unconsolidated entities . Off-Balance Sheet Arrangements - Other. In the normal course of business, we may acquire lots from various development entities pursuant to option and purchase agreements. The purchase price generally approximates the market price at the date the contract is executed (with possible future escalators). See Note 3 for additional information on off-balance sheet arrangements. Surety Bonds and Letters of Credit. We provide letters of credit in support of our obligations relating to the development of our projects and other corporate purposes. Surety bonds are generally posted in lieu of letters of credit or cash deposits. The amount of these obligations outstanding at any time varies depending on the stage and level of completion of our development activities. Bonds are generally not released until all development activities under the bond are complete. In the event a bond or letter of credit is drawn upon, we would be obligated to reimburse the issuer for any amounts advanced under the bond. We believe it is unlikely that any significant amounts of these bonds or letters of credit will be drawn upon. The table below outlines our surety bond and letter of credit obligations (in thousands): As of June 30, 2017 December 31, 2016 Outstanding Estimated work remaining to complete Outstanding Estimated work remaining to complete Sureties: Sureties related to owned projects and lots under contract $ 262,702 $ 107,198 $ 239,246 $ 85,706 Total Sureties $ 262,702 $ 107,198 $ 239,246 $ 85,706 Letters of Credit (“LOCs”): LOCs in lieu of deposits for contracted lots $ 3,631 N/A $ 250 N/A LOCs for land development 51,261 N/A 39,839 N/A LOCs for general corporate operations 3,750 N/A 3,750 N/A Total LOCs $ 58,642 N/A $ 43,839 N/A Accrued Liabilities . Accrued liabilities at June 30, 2017 and December 31, 2016 consisted of the following (in thousands): As of June 30, 2017 December 31, 2016 Accruals related to real estate development and construction activities $ 57,691 $ 53,778 Payroll and other benefits 38,608 52,941 Accrued taxes 13,525 9,637 Warranty reserves 23,620 22,660 Legal reserves (1) 615 673 Other accruals 32,021 31,163 Total $ 166,080 $ 170,852 (1) See Note 15 for additional information related to our legal reserves. 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 typically during the first one to two years after the close of the home and a structural warranty that typically extends up to 10 years subsequent to the close of the home. With the assistance of an actuary, we have estimated these reserves for the structural warranty based on the number of homes still under warranty and historical data and trends for our communities. We also use industry data with respect to similar product types and geographic areas in markets where our experience is incomplete to draw a meaningful conclusion. We regularly review our warranty reserves and adjust them, as necessary, to reflect changes in trends as information becomes available. In the three and six months ended June 30, 2016 we decreased our warranty reserve balance by $275,000 , which decreased our cost of sales. We had no such adjustments for the three and six months ended June 30, 2017 . A summary of changes in our warranty reserves follows (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Balance, beginning of period $ 22,477 $ 22,308 $ 22,660 $ 21,615 Additions to reserve from new home deliveries 4,310 4,423 8,125 7,958 Warranty claims (3,167 ) (3,757 ) (7,165 ) (6,599 ) Adjustments to pre-existing reserves — (275 ) — (275 ) Balance, end of period $ 23,620 $ 22,699 $ 23,620 $ 22,699 Warranty reserves are included in Accrued liabilities on the accompanying unaudited consolidated balance sheets, and additions and adjustments to the reserves, if any, 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 general liability insurance we 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, future costs could differ significantly from our estimates. Recent Accounting Pronouncements. In August 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-15, Classification of Certain Cash Receipts and Cash Payments (Topic 230) ("ASU 2016-15"). ASU 2016-15 adds and clarifies guidance on the classification of certain cash receipts and payments in the statement of cash flows, reducing the existing diversity in practice that has resulted from the lack of consistent principles on this topic. ASU 2016-15 is effective for us beginning January 1, 2018. Early adoption is permitted. We are currently evaluating the impact adopting this guidance will have on classifications in our statement of cash flows. In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting ("ASU 2016-09"). ASU 2016-09 simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. In addition, ASU 2016-09 permits entities to make an election to either estimate forfeitures or recognize them as they occur. ASU 2016-09 was effective for us beginning January 1, 2017, and is reflected prospectively in the provision for income taxes in the accompanying unaudited consolidated income statement. The impact of the adoption was not material to our consolidated financial statements, including our prior year statement of cash flow, which was not revised. We continue to estimate forfeitures in calculating stock-based compensation expense and have not elected to recognize forfeitures as they occur. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) ("ASU 2016-02"), which amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets. ASU 2016-02 will be effective for us beginning January 1, 2019, and early adoption is permitted. ASU 2016-02 requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. We are currently evaluating the impact adopting this guidance will have on our financial statements. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), (“ASU 2014-09”). ASU 2014-09 requires entities to recognize revenue that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services by applying the following steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the entity satisfies a performance obligation. ASU 2014-09 supersedes the revenue recognition requirements in ASU 605, Revenue Recognition , most industry-specific guidance throughout the industry topics of the ASC, and some cost guidance related to construction-type and production-type contracts. ASU 2014-09 is effective for us on January 1, 2018, and the guidance allows for full retrospective or modified retrospective methods of adoption. We are currently evaluating the potential impact of adopting this guidance on our consolidated financial statements. We do not believe the adoption of ASU 2014-09 will have an impact on the amount or timing of our homebuilding revenues. We are still evaluating the potential impact the adoption of ASU 2014-09 will have on the timing and recognition of certain selling costs we incur to obtain a sales contract. |
REAL ESTATE AND CAPITALIZED INT
REAL ESTATE AND CAPITALIZED INTEREST | 6 Months Ended |
Jun. 30, 2017 | |
Inventory Disclosure [Abstract] | |
REAL ESTATE AND CAPITALIZED INTEREST | REAL ESTATE AND CAPITALIZED INTEREST Real estate consists of the following (in thousands): As of June 30, 2017 December 31, 2016 Homes under contract under construction (1) $ 662,829 $ 508,927 Unsold homes, completed and under construction (1) 423,887 431,725 Model homes (1) 146,602 147,406 Finished home sites and home sites under development (2) 1,405,089 1,334,005 Total $ 2,638,407 $ 2,422,063 (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. Land held for development primarily reflects 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 may 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 inactive assets, and all ongoing costs of land ownership (i.e. property taxes, homeowner association dues, etc.) are expensed as incurred. Subject to sufficient qualifying assets, we capitalize our development period interest costs incurred in connection with our real estate development and construction activities. Capitalized interest is allocated to active real estate when incurred and charged to cost of closings when the related property is delivered. A summary of our capitalized interest is as follows (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Capitalized interest, beginning of period $ 70,885 $ 64,126 $ 68,196 $ 61,202 Interest incurred 19,280 17,713 37,175 35,272 Interest expensed (1,620 ) (1,672 ) (2,445 ) (4,960 ) Interest amortized to cost of home and land closings (16,218 ) (15,485 ) (30,599 ) (26,832 ) Capitalized interest, end of period $ 72,327 $ 64,682 $ 72,327 $ 64,682 |
VARIABLE INTEREST ENTITIES AND
VARIABLE INTEREST ENTITIES AND CONSOLIDATED REAL ESTATE NOT OWNED | 6 Months Ended |
Jun. 30, 2017 | |
Variable Interest Entities and Consolidated Real Estate Not Owned [Abstract] | |
VARIABLE INTEREST ENTITIES AND CONSOLIDATED REAL ESTATE NOT OWNED | 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 reduce our financial risk associated with land acquisitions and allow us to better leverage our balance sheet. Based on the provisions of the relevant accounting guidance, we have concluded that when we enter into a purchase or option agreement to acquire land or lots from an entity, a variable interest entity, or “VIE”, may be created. We evaluate all purchase and option agreements for land to determine whether they are a VIE. ASC 810, Consolidation , requires that for each VIE, we assess whether we are the primary beneficiary and, if so, consolidate the VIE in our financial statements and reflect such assets and liabilities as Real estate not owned. The liabilities related to consolidated VIEs are generally excluded from our debt covenant calculations. In order to determine if we are the primary beneficiary, we must first assess whether we have the ability to control the activities of the VIE that most significantly impact its economic performance. Such activities include, but are not limited to: the ability to determine the budget and scope of land development work, if any; the ability to control financing decisions for the VIE; the ability of the VIE to acquire additional land or dispose of land not under contract with Meritage; and the ability to change or amend the existing option contract with the VIE. If we are not determined to control such activities, we are not considered the primary beneficiary of the VIE. If we do have the ability to control such activities, we will continue our analysis by determining if we are also expected to absorb a potentially significant amount of the VIE’s losses or, if no party absorbs the majority of such losses, if we will benefit from a potentially significant amount of the VIE’s expected gains. In substantially all cases, creditors of the entities with which we have option agreements have no recourse against us and the maximum exposure to loss in our option agreements is limited to non-refundable option deposits and any capitalized pre-acquisition costs. Often, we are at risk for items over budget related to land development on property we have under option if we are the land developer. In these cases, we have contracted to complete development at a fixed cost for our benefit, but on behalf of the land owner, and any budget savings or shortfalls are typically borne by us. Some of our option deposits may be refundable to us if certain contractual conditions are not performed by the party selling the lots. The table below presents a summary of our lots under option at June 30, 2017 (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 65 $ 9,987 $ 1,498 Option contracts — non-refundable deposits, committed (1) 4,202 324,101 43,139 Purchase contracts — non-refundable deposits, committed (1) 6,974 354,503 25,645 Purchase and option contracts —refundable deposits, committed 1,935 68,966 1,366 Total committed 13,176 757,557 71,648 Purchase and option contracts — refundable deposits, uncommitted (2) 9,323 264,717 4,600 Total lots under contract or option 22,499 $ 1,022,274 $ 76,248 Total purchase and option contracts not recorded on balance sheet (3) 22,434 $ 1,012,287 $ 74,750 (4) (1) Deposits are non-refundable except if certain contractual conditions are not performed by the selling party. (2) 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. (3) Except for our specific performance contracts recorded on our balance sheet as Real estate not owned, none of our option agreements require us to purchase lots. (4) Amount is reflected on our consolidated balance sheet in Deposits on real estate under option or contract as of June 30, 2017 . 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 in order to meet the pre-established minimum number of lots or we will work to restructure our original contract to terms that more accurately reflect our revised sales pace expectations. |
INVESTMENTS IN UNCONSOLIDATED E
INVESTMENTS IN UNCONSOLIDATED ENTITIES | 6 Months Ended |
Jun. 30, 2017 | |
Equity Method Investments and Joint Ventures [Abstract] | |
INVESTMENTS IN UNCONSOLIDATED ENTITIES | INVESTMENTS IN UNCONSOLIDATED ENTITIES We may enter into land development joint ventures as a means of accessing larger parcels of land, expanding our market opportunities, managing our risk profile and leveraging our capital base. 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. In 2016, we entered into our first new joint venture since 2008. Based on the structure of each joint venture, it may or may not be consolidated into our results. Our joint venture partners are generally other homebuilders, land sellers or other real estate investors. We generally do not 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. As of June 30, 2017 , we had three active equity-method land ventures. As of June 30, 2017 , we also participated in one mortgage joint venture, which is engaged in mortgage activities and provides services to both our homebuyers as well as other buyers. Our investment in this mortgage joint venture as of June 30, 2017 and December 31, 2016 was $1.8 million and $2.3 million , respectively. 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 June 30, 2017 December 31, 2016 Assets: Cash $ 7,807 $ 7,446 Real estate 53,172 54,319 Other assets 4,572 6,461 Total assets $ 65,551 $ 68,226 Liabilities and equity: Accounts payable and other liabilities $ 5,679 $ 7,339 Notes and mortgages payable 23,887 23,000 Equity of: Meritage (1) 14,430 14,245 Other 21,555 23,642 Total liabilities and equity $ 65,551 $ 68,226 Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Revenue $ 13,430 $ 10,430 $ 21,029 $ 21,501 Costs and expenses (6,106 ) (4,670 ) (10,586 ) (9,646 ) Net earnings of unconsolidated entities $ 7,324 $ 5,760 $ 10,443 $ 11,855 Meritage’s share of pre-tax earnings (1) (2) $ 4,068 $ 4,402 $ 7,250 $ 7,038 (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 our 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 is recorded in Earnings from financial services unconsolidated entities and other, net and Earnings/(loss) from other unconsolidated entities, net on our consolidated income statements and excludes joint venture profit related to lots we purchased from the joint ventures. Such profit is deferred until homes are delivered by us and title passes to a homebuyer. Our total investment in all of these joint ventures is $16.7 million and $17.1 million as of June 30, 2017 and December 31, 2016 , respectively. We believe these ventures are in compliance with their respective debt agreements, if applicable, and such debt is non-recourse to us. |
LOANS PAYABLE AND OTHER BORROWI
LOANS PAYABLE AND OTHER BORROWINGS | 6 Months Ended |
Jun. 30, 2017 | |
Debt Disclosure [Abstract] | |
LOANS PAYABLE AND OTHER BORROWINGS | LOANS PAYABLE AND OTHER BORROWINGS Loans payable and other borrowings consist of the following (in thousands): As of June 30, 2017 December 31, 2016 Other borrowings, real estate notes payable (1) $ 17,256 $ 17,195 $625 million unsecured revolving credit facility with interest approximating LIBOR (approximately 1.22% at June 30, 2017) plus 1.75% or Prime (4.25% at June 30, 2017) plus 0.75% — 15,000 Total $ 17,256 $ 32,195 (1) Reflects balance of non-recourse notes payable in connection with land purchases, with interest rates ranging from 0% to 8% . The Company has a $625.0 million unsecured revolving credit facility ("Credit Facility"), with an accordion feature that permits the size of the facility to increase to a maximum of $725.0 million . In May 2017, the maturity date of the credit facility was extended whereby $60.0 million matures in July 2019 with the remainder maturing in July 2021. 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 $987.4 million (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 had no outstanding borrowings under the Credit Facility as of June 30, 2017 and $15.0 million in borrowings at December 31, 2016 . During the three months ended June 30, 2017 we had $85.0 million of gross borrowings and $145.0 million of repayments. During the six months ended June 30, 2017 we had $245.0 million of gross borrowings and $260.0 million of repayments. During both the three and six months ended June 30, 2016 we had $56.0 million of gross borrowings and repayments. As of June 30, 2017 we had outstanding letters of credit issued under the Credit Facility totaling $58.6 million , leaving $566.4 million available under the Credit Facility to be drawn. |
SENIOR AND CONVERTIBLE SENIOR N
SENIOR AND CONVERTIBLE SENIOR NOTES, NET | 6 Months Ended |
Jun. 30, 2017 | |
Debt Disclosure [Abstract] | |
SENIOR AND CONVERTIBLE SENIOR NOTES, NET | SENIOR AND CONVERTIBLE SENIOR NOTES, NET Senior and convertible senior notes, net consist of the following (in thousands): As of June 30, 2017 December 31, 2016 4.50% senior notes due 2018 $ 175,000 $ 175,000 7.15% senior notes due 2020. At June 30, 2017 and December 31, 2016 there was approximately $1,564 and $1,849 in net unamortized premium, respectively 301,564 301,849 7.00% senior notes due 2022 300,000 300,000 6.00% senior notes due 2025 200,000 200,000 5.125% senior notes due 2027 300,000 — 1.875% convertible senior notes due 2032 74,593 126,500 Net debt issuance costs (10,883 ) (8,230 ) Total $ 1,340,274 $ 1,095,119 On June 6, 2017, we completed an offering of $ 300.0 million aggregate principal amount of Senior Notes due 2027 (the "2027 Notes"). The 2027 Notes bear interest at 5.125% per annum, payable on June 6 and December 6 of each year, commencing on December 6, 2017. The indentures for all of our senior notes contain covenants including, among others, limitations on the amount of secured debt we may incur, and limitations on sale and leaseback transactions and mergers. We believe we are in compliance with all such covenants as of June 30, 2017 . Our convertible senior notes ("Convertible Notes") do not have any financial covenants. The Convertible Notes are convertible into shares of our common stock at an initial conversion rate of 17.1985 shares of our common stock per $1,000 principal amount of convertible senior notes. This corresponds to an initial conversion price of $58.14 per share and represented a 47.5% conversion premium based on the closing price of our common stock on the issue date of the convertible senior notes. In June 2017, we repurchased in privately negotiated transactions $51.9 million of the Convertible Notes aggregate principal amount, incurring a loss on extinguishment of debt of $0.3 million included in Other income, net, in the accompanying consolidated income statements for the three and six months ended June 30, 2017. The Convertible Notes may be redeemed by the note-holders on the fifth, tenth and fifteenth anniversary dates of the Convertible Notes. On such dates, the note-holders may require us to repurchase all or any portion of their outstanding notes. The fifth anniversary of the Convertible Notes is September 15, 2017. On or after September 20, 2017, we may redeem for cash all or part of the Convertible Notes at a redemption price equal to 100% of the principal amount of the notes being redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. The Company intends to issue a notice of redemption to the holders of its Convertible Notes to redeem all outstanding Convertible Notes ( $74.6 million as of June 30, 2017) on September 20, 2017. Obligations to pay principal and interest on the senior and convertible 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 nonguarantor subsidiaries are, individually and in the aggregate, minor. |
FAIR VALUE DISCLOSURES
FAIR VALUE DISCLOSURES | 6 Months Ended |
Jun. 30, 2017 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE DISCLOSURES | FAIR VALUE DISCLOSURES We account for non-recurring fair value measurements of our non-financial assets and liabilities in accordance with ASC 820-10 Fair Value Measurement ("ASC 820"). This guidance defines fair value, establishes a framework for measuring fair value and addresses required disclosures about fair value measurements. This standard establishes a three-level hierarchy for fair value measurements based upon the significant inputs used to determine fair value. Observable inputs are those which are obtained from market participants external to the company while unobservable inputs are generally developed internally, utilizing management’s estimates, assumptions and specific knowledge of the assets/liabilities and related markets. The three levels are defined as follows: • 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. Refer to Notes 1 and 2 for additional information regarding the valuation of our non-financial assets. 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 June 30, 2017 December 31, 2016 Aggregate Principal Estimated Fair Value Aggregate Principal Estimated Fair Value 4.50% senior notes $ 175,000 $ 176,313 $ 175,000 $ 177,625 7.15% senior notes $ 300,000 $ 331,500 $ 300,000 $ 325,500 7.00% senior notes $ 300,000 $ 341,250 $ 300,000 $ 324,750 6.00% senior notes $ 200,000 $ 214,000 $ 200,000 $ 202,500 5.125% senior notes $ 300,000 $ 300,390 $ — $ — 1.875% convertible senior notes $ 74,593 $ 74,593 $ 126,500 $ 126,105 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. |
EARNINGS PER SHARE
EARNINGS PER SHARE | 6 Months Ended |
Jun. 30, 2017 | |
Earnings Per Share [Abstract] | |
EARNINGS PER SHARE | 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, 2017 2016 2017 2016 Basic weighted average number of shares outstanding 40,317 40,012 40,248 39,926 Effect of dilutive securities: Convertible senior notes (1) 1,991 2,176 2,083 2,176 Unvested restricted stock 473 345 505 375 Diluted average shares outstanding 42,781 42,533 42,836 42,477 Net earnings as reported $ 41,580 $ 39,878 $ 65,152 $ 60,847 Interest attributable to convertible senior notes, net of income taxes 354 400 739 801 Net earnings for diluted earnings per share $ 41,934 $ 40,278 $ 65,891 $ 61,648 Basic earnings per share $ 1.03 $ 1.00 $ 1.62 $ 1.52 Diluted earnings per share (1) $ 0.98 $ 0.95 $ 1.54 $ 1.45 Antidilutive stock not included in the calculation of diluted earnings per share 59 289 2 19 (1) In accordance with ASC 260-10, Earnings Per Share , ("ASC 260-10") we calculate the dilutive effect of convertible securities using the "if-converted" method based on the number of days the convertible senior notes were outstanding during the period. |
ACQUISITIONS AND GOODWILL
ACQUISITIONS AND GOODWILL | 6 Months Ended |
Jun. 30, 2017 | |
Business Acquisitions and Goodwill [Abstract] | |
ACQUISITIONS AND GOODWILL | ACQUISITIONS AND GOODWILL Goodwill. Over the past several years, we 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 excess of the purchase price of our acquisitions over the fair value of the net assets acquired. Our acquisitions are recorded in accordance with ASC 805, Business Combination s ("ASC 805") and ASC 820, using the acquisition method of accounting. The purchase price for acquisitions is allocated based on estimated fair value of the assets and liabilities at the date of the acquisition. The combined excess purchase price of our acquisitions over the fair value of the net assets is classified as goodwill and is included on our consolidated balance sheet in Prepaids, other assets and goodwill. In accordance with ASC 350, we assess the recoverability of goodwill annually, or more frequently, if impairment indicators are present. A summary of the carrying amount of goodwill follows (in thousands): West Central East Financial Services Corporate Total Balance at December 31, 2016 $ — $ — $ 32,962 $ — $ — $ 32,962 Additions — — — — — — Impairments — — — — — — Balance at June 30, 2017 $ — $ — $ 32,962 $ — $ — $ 32,962 |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 6 Months Ended |
Jun. 30, 2017 | |
Stockholders' Equity Note [Abstract] | |
STOCKHOLDERS' EQUITY | STOCKHOLDERS’ EQUITY A summary of changes in stockholders’ equity is presented below (in thousands): Six Months Ended June 30, 2017 (In thousands) Number of Shares Common Stock Additional Paid-In Capital Retained Earnings Total Balance at December 31, 2016 40,031 $ 400 $ 572,506 $ 848,589 $ 1,421,495 Net earnings — — — 65,152 65,152 Exercise/vesting of stock-based awards 289 3 (3 ) — — Stock-based compensation expense — — 5,792 — 5,792 Balance at June 30, 2017 40,320 $ 403 $ 578,295 $ 913,741 $ 1,492,439 Six Months Ended June 30, 2016 (In thousands) Number of Shares Common Stock Additional Paid-In Capital Retained Earnings Total Balance at December 31, 2015 39,669 $ 397 $ 559,492 $ 699,048 $ 1,258,937 Net earnings — — — 60,847 60,847 Exercise/vesting of stock-based awards 349 3 229 — 232 Excess income tax benefit from stock-based awards — — (526 ) — (526 ) Stock-based compensation expense — — 7,313 — 7,313 Balance at June 30, 2016 40,018 $ 400 $ 566,508 $ 759,895 $ 1,326,803 |
STOCK BASED AND DEFERRED COMPEN
STOCK BASED AND DEFERRED COMPENSATION | 6 Months Ended |
Jun. 30, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
STOCK BASED AND DEFERRED COMPENSATION | STOCK BASED AND DEFERRED COMPENSATION We have a stock-based compensation plan, the Amended and Restated 2006 Stock Incentive Plan (the “Plan”), that was adopted in 2006 and has been amended or restated from time to time. The Plan was approved by our stockholders and is administered by our Board of Directors. The provisions of the Plan allow 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. The Plan authorizes awards to officers, key employees, non-employee directors and consultants for up to 5,350,000 shares of common stock, of which 1,102,665 shares remain available for grant at June 30, 2017 . The available shares include shares from expired, terminated or forfeited awards under prior plans that have since expired and are thus available for grant under the Plan. 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 -year ratable vesting period for employees and with a three -year cliff vesting for both non-vested stock and performance-based awards granted to certain senior executive officers and non-employee directors. Compensation cost related to time-based restricted stock awards is measured as of the closing price on the date of grant and is expensed 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, Compensation – Stock Compensation ("ASC 718"), which requires an assessment of probability of attainment of the performance target. As our performance targets are dependent on performance over a specified measurement period, once we determine that the performance target outcome is probable, the cumulative expense is recorded immediately with the remaining expense recorded on a straight-line basis through the end of the award vesting period. Beginning with grants in 2014, a portion of the performance-based restricted stock awards granted contain market conditions as defined by ASC 718. The guidance in ASC 718 requires that compensation expense for stock awards with market conditions be expensed based on a derived grant date fair value and expensed over the service period. We engaged a third party to perform a valuation analysis on the awards containing market conditions and our associated expense with those awards is based on the derived fair value from that analysis and is being expensed straight-line over the service period of the awards. Below is a summary of compensation expense and stock award activity (dollars in thousands): Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Stock-based compensation expense $ 2,490 $ 2,555 $ 5,785 $ 7,313 Non-vested shares granted — — 416,500 493,865 Performance-based non-vested shares granted — — 154,120 66,698 Stock options exercised (1) — 3,200 — 14,400 Restricted stock awards vested (includes performance-based awards) 6,190 29,465 289,764 334,550 (1) As of December 31, 2016, we have no remaining unexercised stock options. The following table includes additional information regarding our Plan (dollars in thousands): As of June 30, 2017 December 31, 2016 Unrecognized stock-based compensation cost $ 24,115 $ 18,528 Weighted average years expense recognition period 4.15 2.56 Total stock-based awards outstanding (1) 1,328,601 1,147,271 (1) Includes unvested restricted stock and performance-based awards (at target level) and restricted stock units. 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 401k 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 and six months ended June 30, 2017 or 2016 , other than minor administrative costs. |
INCOME TAXES
INCOME TAXES | 6 Months Ended |
Jun. 30, 2017 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXES Components of the income tax provision are as follows (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Federal $ 19,215 $ 16,568 $ 30,788 $ 23,109 State 2,410 2,590 4,034 3,965 Total $ 21,625 $ 19,158 $ 34,822 $ 27,074 The effective tax rate for the three and six months ended June 30, 2017 was 34.2% and 34.8% , respectively, and for the three and six months ended June 30, 2016 was 32.5% and 30.8% , respectively. Our tax rate has been favorably impacted in both years by the homebuilding manufacturing deduction. The lower 2016 effective tax rate reflects the benefit of federal energy credits for homes sold in both 2016 and in prior periods as a result of the Protecting Americans from Tax Hikes (PATH) Act of 2015. The PATH Act was the enabling legislation for claiming federal energy tax credits on homes qualifying in 2015 and 2016. This legislation has expired and has not yet been renewed for 2017. Accordingly, our effective tax rate for 2017 does no t reflect a tax benefit from federal energy credits for homes sold in 2017. At June 30, 2017 and December 31, 2016 , we have no 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 federal income tax expense. We determine our deferred tax assets and liabilities in accordance with ASC 740-10, Income Taxes ("ASC 740" ) . 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, forecasts of future profitability, the length of statutory carry forward periods, experiences with operating losses and experiences of utilizing tax credit carry forwards and tax planning alternatives. We have no valuation allowance on our deferred tax assets and NOL carryovers at June 30, 2017 . At June 30, 2017 , we had no remaining federal NOL carry forward or un-utilized federal tax credits. At June 30, 2017 , and December 31, 2016 we had tax benefits for state NOL carry forwards of $1.4 million , net of federal benefit, that begin to expire in 2028. At June 30, 2017 , we have income taxes payable of $8.3 million , which primarily consists of current federal and state tax accruals, net of estimated tax payments and tax credits. This amount is recorded in Accrued liabilities on the accompanying unaudited balance sheet at June 30, 2017 . We conduct business and are subject to tax in the U.S. and 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 2012. We have one state income tax examination of multiple years under audit at this time and do not expect it to have a material outcome. The tax benefits from NOLs, built-in losses, and tax credits would be materially reduced or potentially eliminated if we experience an “ownership change” as defined under Internal Revenue Code §382. Based on our analysis performed as of June 30, 2017 we do not believe that we have experienced an ownership change. As a protective measure, our stockholders held a Special Meeting of Stockholders on February 16, 2009 and approved an amendment to our Articles of Incorporation that restricts certain transfers of our common stock. The amendment is intended to help us avoid an unintended ownership change and thereby preserve the value of any tax benefit for future utilization. |
SUPPLEMENTAL DISCLOSURE OF CASH
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | 6 Months Ended |
Jun. 30, 2017 | |
Supplemental Cash Flow Elements [Abstract] | |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION The following table presents certain supplemental cash flow information (in thousands): Six Months Ended June 30, 2017 2016 Interest capitalized, net $ 161 $ 2,672 Income taxes paid $ 34,426 $ 24,722 Non-cash operating activities: Real estate not owned increase $ 9,987 $ — Real estate acquired through notes payable $ 5,786 $ 11,101 |
OPERATING AND REPORTING SEGMENT
OPERATING AND REPORTING SEGMENTS | 6 Months Ended |
Jun. 30, 2017 | |
Segment Reporting [Abstract] | |
OPERATING AND REPORTING SEGMENTS | OPERATING AND REPORTING SEGMENTS We operate with two principal business segments: homebuilding and financial services. As defined in ASC 280-10, Segment Reporting , we have nine homebuilding operating segments. The homebuilding segments are engaged in the business of acquiring and developing land, constructing homes, marketing and selling those homes and providing warranty and customer services. We aggregate our homebuilding operating segments into reporting segments based on similar long-term economic characteristics and geographical proximity. Our current reportable homebuilding segments are as follows: West: Arizona, California and Colorado 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 homebuilding and land revenues less cost of home construction, commissions and other sales costs, land development and other land sales costs and other 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 June 30, Six Months Ended June 30, 2017 2016 2017 2016 Homebuilding revenue (1) : West $ 369,574 $ 332,643 $ 681,378 $ 593,689 Central 225,679 208,701 400,510 370,590 East 206,725 256,552 392,862 431,383 Consolidated total $ 801,978 $ 797,896 $ 1,474,750 $ 1,395,662 Homebuilding segment operating income: West $ 35,131 $ 27,495 $ 59,143 $ 43,558 Central 23,230 19,784 37,120 33,678 East 5,285 12,322 7,721 18,181 Total homebuilding segment operating income 63,646 59,601 103,984 95,417 Financial services segment profit 5,557 5,763 9,847 9,809 Corporate and unallocated costs (2) (7,028 ) (6,774 ) (15,545 ) (14,589 ) Earnings/(loss) from other unconsolidated entities, net 570 573 943 416 Interest expense (1,620 ) (1,672 ) (2,445 ) (4,960 ) Other income, net 2,080 1,545 3,190 1,828 Net earnings before income taxes $ 63,205 $ 59,036 $ 99,974 $ 87,921 (1) Homebuilding revenue includes the following land closing revenue, by segment, as outlined in the table below. Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Land closing revenue: West $ — $ 65 $ 11,800 $ 65 Central — 1,794 122 3,712 East 4,198 192 4,431 423 Total $ 4,198 $ 2,051 $ 16,353 $ 4,200 (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, 2017 West Central East Financial Services Corporate and Unallocated Total Deposits on real estate under option or contract $ 20,491 $ 23,788 $ 30,471 $ — $ — $ 74,750 Real estate 1,179,257 671,392 787,758 — — 2,638,407 Investments in unconsolidated entities 7,708 7,205 — — 1,765 16,678 Other assets 46,699 (1) 89,947 (2) 73,315 (3) 689 260,207 (4) 470,857 Total assets $ 1,254,155 $ 792,332 $ 891,544 $ 689 $ 261,972 $ 3,200,692 (1) Balance consists primarily of cash, real estate not owned and property and equipment. (2) Balance consists primarily of development reimbursements from local municipalities and cash. (3) Balance consists primarily of goodwill (see Note 9) and prepaid permits and fees to local municipalities. (4) Balance consists primarily of cash and our deferred tax asset. At December 31, 2016 West Central East Financial Services Corporate and Unallocated Total Deposits on real estate under option or contract $ 25,863 $ 27,669 $ 32,024 $ — $ — $ 85,556 Real estate 1,120,038 595,485 706,540 — — 2,422,063 Investments in unconsolidated entities 7,362 7,450 — — 2,285 17,097 Other assets 45,624 (1) 94,299 (2) 93,245 (3) 812 129,995 (4) 363,975 Total assets $ 1,198,887 $ 724,903 $ 831,809 $ 812 $ 132,280 $ 2,888,691 (1) Balance consists primarily of cash and property and equipment. (2) Balance consists primarily of development reimbursements from local municipalities and cash. (3) Balance consists primarily of goodwill (see Note 9), prepaid permits and fees to local municipalities and cash. (4) Balance consists primarily of cash and our deferred tax asset. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 6 Months Ended |
Jun. 30, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES We are involved in various routine legal and regulatory proceedings, including, without limitation, warranty claims and litigation and arbitration proceedings 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 such legal proceedings, 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 without the initiation of legal proceedings. We believe there are not any pending legal or warranty matters that could have a material adverse impact upon our consolidated financial condition, results of operations or cash flows that have not been sufficiently reserved. |
ORGANIZATION AND BASIS OF PRE21
ORGANIZATION AND BASIS OF PRESENTATION (Policies) | 6 Months Ended |
Jun. 30, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | 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 Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. These financial statements should be read in conjunction with the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2016. The consolidated financial statements include the accounts of Meritage Homes Corporation and those of our consolidated subsidiaries, partnerships and other entities in which we have a controlling financial interest, and of variable interest entities (see Note 3) in which we are deemed the primary beneficiary (collectively, “us”, “we”, “our” and “the Company”). Intercompany balances and transactions have been eliminated in consolidation. In the opinion of management, the accompanying unaudited financial statements include all adjustments (consisting only of normal recurring entries), necessary for the fair presentation of our results for the interim periods presented. Results for interim periods are not necessarily indicative of results to be expected for the full year. |
Cash and Cash Equivalents | Cash and Cash Equivalents. Liquid investments with an initial maturity of three months or less are classified as cash equivalents. |
Real Estate | Real Estate. Real estate is stated at cost unless the asset is determined to be impaired, at which point the inventory is written down to fair value as required by Accounting Standards Codification (“ASC”) 360-10, Property, Plant and Equipment (“ASC 360-10”) . Inventory includes the costs of land acquisition, land development, home construction, capitalized interest, real estate taxes, capitalized direct overhead costs incurred during development and home construction that benefit the entire community, less impairments, if any. Land and development costs are typically allocated and transferred to homes under construction when construction begins. Home construction costs are accumulated on a per-home basis, while selling costs are expensed as incurred. Cost of home closings includes the specific construction costs of the home and all related allocated land acquisition, land development and other common costs (both incurred and estimated to be incurred) that are allocated based upon the total number of homes expected to be closed in each community or phase. Any changes to the estimated total development costs of a community or phase are allocated to the remaining homes in the community or phase. When a home closes, we may have incurred costs for goods and services that have not yet been paid. An accrued liability to capture such obligations is recorded in connection with the home closing and charged directly to cost of sales. 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. It is possible that actual results could differ from budgeted amounts for various reasons, including construction delays, labor or material shortages, increases in costs that have not yet been committed, changes in governmental requirements, or other unanticipated issues 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 construction and land 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 absorption rate 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 shorter. All of our land inventory and related real estate assets are reviewed for recoverability, as our inventory is considered “long-lived” in accordance with GAAP. Impairment charges are recorded to write down an asset to its estimated fair value if the undiscounted cash flows expected to be generated by the asset are lower than its carrying amount. 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. Such an analysis is conducted if there is an indication of a decline in value of our land and real estate assets. The impairment of a community is allocated to each lot on a straight-line basis. |
Deposits | Deposits. Deposits paid related to land options 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 applied to the acquisition price of the lots based on the terms of the underlying agreements. To the extent they are non-refundable, deposits are charged to expense if the land acquisition is terminated or no longer considered probable. Since our acquisition contracts typically do not require specific performance, we do not consider such contracts to be contractual obligations to purchase the land and our total exposure under such contracts is limited to the loss of the non-refundable deposits and any ancillary capitalized costs. |
Goodwill | Goodwill. 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 two-step goodwill impairment test. ASC 350 states that an entity may first assess qualitative factors to determine whether it is necessary to perform a goodwill impairment test. Such qualitative factors include: (1) macroeconomic conditions, such as a deterioration in general economic conditions, (2) industry and market considerations such as deterioration in the environment in which the entity operates, (3) cost factors such as increases in raw materials and labor costs, and (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, the two-step impairment testing 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. |
Off-Balance Sheet Arrangements | 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 profile and leveraging our capital base. See Note 4 for additional discussion of our investments in unconsolidated entities . Off-Balance Sheet Arrangements - Other. In the normal course of business, we may acquire lots from various development entities pursuant to option and purchase agreements. The purchase price generally approximates the market price at the date the contract is executed (with possible future escalators). See Note 3 for additional information on off-balance sheet arrangements. Surety Bonds and Letters of Credit. We provide letters of credit in support of our obligations relating to the development of our projects and other corporate purposes. Surety bonds are generally posted in lieu of letters of credit or cash deposits. The amount of these obligations outstanding at any time varies depending on the stage and level of completion of our development activities. Bonds are generally not released until all development activities under the bond are complete. In the event a bond or letter of credit is drawn upon, we would be obligated to reimburse the issuer for any amounts advanced under the bond. We believe it is unlikely that any significant amounts of these bonds or letters of credit will be drawn upon. |
Warranty Reserves | 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 typically during the first one to two years after the close of the home and a structural warranty that typically extends up to 10 years subsequent to the close of the home. With the assistance of an actuary, we have estimated these reserves for the structural warranty based on the number of homes still under warranty and historical data and trends for our communities. We also use industry data with respect to similar product types and geographic areas in markets where our experience is incomplete to draw a meaningful conclusion. We regularly review our warranty reserves and adjust them, as necessary, to reflect changes in trends as information becomes available. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements. In August 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-15, Classification of Certain Cash Receipts and Cash Payments (Topic 230) ("ASU 2016-15"). ASU 2016-15 adds and clarifies guidance on the classification of certain cash receipts and payments in the statement of cash flows, reducing the existing diversity in practice that has resulted from the lack of consistent principles on this topic. ASU 2016-15 is effective for us beginning January 1, 2018. Early adoption is permitted. We are currently evaluating the impact adopting this guidance will have on classifications in our statement of cash flows. In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting ("ASU 2016-09"). ASU 2016-09 simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. In addition, ASU 2016-09 permits entities to make an election to either estimate forfeitures or recognize them as they occur. ASU 2016-09 was effective for us beginning January 1, 2017, and is reflected prospectively in the provision for income taxes in the accompanying unaudited consolidated income statement. The impact of the adoption was not material to our consolidated financial statements, including our prior year statement of cash flow, which was not revised. We continue to estimate forfeitures in calculating stock-based compensation expense and have not elected to recognize forfeitures as they occur. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) ("ASU 2016-02"), which amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets. ASU 2016-02 will be effective for us beginning January 1, 2019, and early adoption is permitted. ASU 2016-02 requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. We are currently evaluating the impact adopting this guidance will have on our financial statements. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), (“ASU 2014-09”). ASU 2014-09 requires entities to recognize revenue that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services by applying the following steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the entity satisfies a performance obligation. ASU 2014-09 supersedes the revenue recognition requirements in ASU 605, Revenue Recognition , most industry-specific guidance throughout the industry topics of the ASC, and some cost guidance related to construction-type and production-type contracts. ASU 2014-09 is effective for us on January 1, 2018, and the guidance allows for full retrospective or modified retrospective methods of adoption. We are currently evaluating the potential impact of adopting this guidance on our consolidated financial statements. We do not believe the adoption of ASU 2014-09 will have an impact on the amount or timing of our homebuilding revenues. We are still evaluating the potential impact the adoption of ASU 2014-09 will have on the timing and recognition of certain selling costs we incur to obtain a sales contract. |
Variable Interest Entities | Based on the provisions of the relevant accounting guidance, we have concluded that when we enter into a purchase or option agreement to acquire land or lots from an entity, a variable interest entity, or “VIE”, may be created. We evaluate all purchase and option agreements for land to determine whether they are a VIE. ASC 810, Consolidation , requires that for each VIE, we assess whether we are the primary beneficiary and, if so, consolidate the VIE in our financial statements and reflect such assets and liabilities as Real estate not owned. The liabilities related to consolidated VIEs are generally excluded from our debt covenant calculations. In order to determine if we are the primary beneficiary, we must first assess whether we have the ability to control the activities of the VIE that most significantly impact its economic performance. Such activities include, but are not limited to: the ability to determine the budget and scope of land development work, if any; the ability to control financing decisions for the VIE; the ability of the VIE to acquire additional land or dispose of land not under contract with Meritage; and the ability to change or amend the existing option contract with the VIE. If we are not determined to control such activities, we are not considered the primary beneficiary of the VIE. If we do have the ability to control such activities, we will continue our analysis by determining if we are also expected to absorb a potentially significant amount of the VIE’s losses or, if no party absorbs the majority of such losses, if we will benefit from a potentially significant amount of the VIE’s expected gains. In substantially all cases, creditors of the entities with which we have option agreements have no recourse against us and the maximum exposure to loss in our option agreements is limited to non-refundable option deposits and any capitalized pre-acquisition costs. Often, we are at risk for items over budget related to land development on property we have under option if we are the land developer. In these cases, we have contracted to complete development at a fixed cost for our benefit, but on behalf of the land owner, and any budget savings or shortfalls are typically borne by us. Some of our option deposits may be refundable to us if certain contractual conditions are not performed by the party selling the lots. |
Fair Value Disclosures | We account for non-recurring fair value measurements of our non-financial assets and liabilities in accordance with ASC 820-10 Fair Value Measurement ("ASC 820"). This guidance defines fair value, establishes a framework for measuring fair value and addresses required disclosures about fair value measurements. This standard establishes a three-level hierarchy for fair value measurements based upon the significant inputs used to determine fair value. Observable inputs are those which are obtained from market participants external to the company while unobservable inputs are generally developed internally, utilizing management’s estimates, assumptions and specific knowledge of the assets/liabilities and related markets. The three levels are defined as follows: • 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. |
Stock-Based Compensation | Compensation cost related to time-based restricted stock awards is measured as of the closing price on the date of grant and is expensed 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, Compensation – Stock Compensation ("ASC 718"), which requires an assessment of probability of attainment of the performance target. As our performance targets are dependent on performance over a specified measurement period, once we determine that the performance target outcome is probable, the cumulative expense is recorded immediately with the remaining expense recorded on a straight-line basis through the end of the award vesting period. Beginning with grants in 2014, a portion of the performance-based restricted stock awards granted contain market conditions as defined by ASC 718. The guidance in ASC 718 requires that compensation expense for stock awards with market conditions be expensed based on a derived grant date fair value and expensed over the service period. We engaged a third party to perform a valuation analysis on the awards containing market conditions and our associated expense with those awards is based on the derived fair value from that analysis and is being expensed straight-line over the service period of the awards. |
Income Tax Policy | We determine our deferred tax assets and liabilities in accordance with ASC 740-10, Income Taxes ("ASC 740" ) . 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, forecasts of future profitability, the length of statutory carry forward periods, experiences with operating losses and experiences of utilizing tax credit carry forwards and tax planning alternatives. |
Segment Reporting | We operate with two principal business segments: homebuilding and financial services. As defined in ASC 280-10, Segment Reporting , we have nine homebuilding operating segments. The homebuilding segments are engaged in the business of acquiring and developing land, constructing homes, marketing and selling those homes and providing warranty and customer services. We aggregate our homebuilding operating segments into reporting segments based on similar long-term economic characteristics and geographical proximity. Our current reportable homebuilding segments are as follows: West: Arizona, California and Colorado 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 homebuilding and land revenues less cost of home construction, commissions and other sales costs, land development and other land sales costs and other 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. |
ORGANIZATION AND BASIS OF PRE22
ORGANIZATION AND BASIS OF PRESENTATION (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Schedule of Surety Bond and Letter of Credit Obligations | The table below outlines our surety bond and letter of credit obligations (in thousands): As of June 30, 2017 December 31, 2016 Outstanding Estimated work remaining to complete Outstanding Estimated work remaining to complete Sureties: Sureties related to owned projects and lots under contract $ 262,702 $ 107,198 $ 239,246 $ 85,706 Total Sureties $ 262,702 $ 107,198 $ 239,246 $ 85,706 Letters of Credit (“LOCs”): LOCs in lieu of deposits for contracted lots $ 3,631 N/A $ 250 N/A LOCs for land development 51,261 N/A 39,839 N/A LOCs for general corporate operations 3,750 N/A 3,750 N/A Total LOCs $ 58,642 N/A $ 43,839 N/A |
Schedule of Accrued Liabilities | Accrued liabilities at June 30, 2017 and December 31, 2016 consisted of the following (in thousands): As of June 30, 2017 December 31, 2016 Accruals related to real estate development and construction activities $ 57,691 $ 53,778 Payroll and other benefits 38,608 52,941 Accrued taxes 13,525 9,637 Warranty reserves 23,620 22,660 Legal reserves (1) 615 673 Other accruals 32,021 31,163 Total $ 166,080 $ 170,852 (1) See Note 15 for additional information related to our legal reserves. |
Summary of Changes in Warranty Reserves | A summary of changes in our warranty reserves follows (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Balance, beginning of period $ 22,477 $ 22,308 $ 22,660 $ 21,615 Additions to reserve from new home deliveries 4,310 4,423 8,125 7,958 Warranty claims (3,167 ) (3,757 ) (7,165 ) (6,599 ) Adjustments to pre-existing reserves — (275 ) — (275 ) Balance, end of period $ 23,620 $ 22,699 $ 23,620 $ 22,699 |
REAL ESTATE AND CAPITALIZED I23
REAL ESTATE AND CAPITALIZED INTEREST (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Inventory Disclosure [Abstract] | |
Schedule of Real Estate | Real estate consists of the following (in thousands): As of June 30, 2017 December 31, 2016 Homes under contract under construction (1) $ 662,829 $ 508,927 Unsold homes, completed and under construction (1) 423,887 431,725 Model homes (1) 146,602 147,406 Finished home sites and home sites under development (2) 1,405,089 1,334,005 Total $ 2,638,407 $ 2,422,063 (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. Land held for development primarily reflects 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 may 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 inactive assets, and all ongoing costs of land ownership (i.e. property taxes, homeowner association dues, etc.) are expensed as incurred. |
Summary of Capitalized Interest | A summary of our capitalized interest is as follows (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Capitalized interest, beginning of period $ 70,885 $ 64,126 $ 68,196 $ 61,202 Interest incurred 19,280 17,713 37,175 35,272 Interest expensed (1,620 ) (1,672 ) (2,445 ) (4,960 ) Interest amortized to cost of home and land closings (16,218 ) (15,485 ) (30,599 ) (26,832 ) Capitalized interest, end of period $ 72,327 $ 64,682 $ 72,327 $ 64,682 |
VARIABLE INTEREST ENTITIES AN24
VARIABLE INTEREST ENTITIES AND CONSOLIDATED REAL ESTATE NOT OWNED (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Variable Interest Entities and Consolidated Real Estate Not Owned [Abstract] | |
Summary of Lots Under Option | The table below presents a summary of our lots under option at June 30, 2017 (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 65 $ 9,987 $ 1,498 Option contracts — non-refundable deposits, committed (1) 4,202 324,101 43,139 Purchase contracts — non-refundable deposits, committed (1) 6,974 354,503 25,645 Purchase and option contracts —refundable deposits, committed 1,935 68,966 1,366 Total committed 13,176 757,557 71,648 Purchase and option contracts — refundable deposits, uncommitted (2) 9,323 264,717 4,600 Total lots under contract or option 22,499 $ 1,022,274 $ 76,248 Total purchase and option contracts not recorded on balance sheet (3) 22,434 $ 1,012,287 $ 74,750 (4) (1) Deposits are non-refundable except if certain contractual conditions are not performed by the selling party. (2) 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. (3) Except for our specific performance contracts recorded on our balance sheet as Real estate not owned, none of our option agreements require us to purchase lots. (4) Amount is reflected on our consolidated balance sheet in Deposits on real estate under option or contract as of June 30, 2017 . |
INVESTMENTS IN UNCONSOLIDATED25
INVESTMENTS IN UNCONSOLIDATED ENTITIES (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Equity Method Investments and Joint Ventures [Abstract] | |
Summary of Condensed Financial Information Related to Unconsolidated Equity Method Joint Ventures | 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 June 30, 2017 December 31, 2016 Assets: Cash $ 7,807 $ 7,446 Real estate 53,172 54,319 Other assets 4,572 6,461 Total assets $ 65,551 $ 68,226 Liabilities and equity: Accounts payable and other liabilities $ 5,679 $ 7,339 Notes and mortgages payable 23,887 23,000 Equity of: Meritage (1) 14,430 14,245 Other 21,555 23,642 Total liabilities and equity $ 65,551 $ 68,226 Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Revenue $ 13,430 $ 10,430 $ 21,029 $ 21,501 Costs and expenses (6,106 ) (4,670 ) (10,586 ) (9,646 ) Net earnings of unconsolidated entities $ 7,324 $ 5,760 $ 10,443 $ 11,855 Meritage’s share of pre-tax earnings (1) (2) $ 4,068 $ 4,402 $ 7,250 $ 7,038 (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 our 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 is recorded in Earnings from financial services unconsolidated entities and other, net and Earnings/(loss) from other unconsolidated entities, net on our consolidated income statements and excludes joint venture profit related to lots we purchased from the joint ventures. Such profit is deferred until homes are delivered by us and title passes to a homebuyer. |
LOANS PAYABLE AND OTHER BORRO26
LOANS PAYABLE AND OTHER BORROWINGS (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Debt Disclosure [Abstract] | |
Schedule of Loans Payable and Other Borrowings | Loans payable and other borrowings consist of the following (in thousands): As of June 30, 2017 December 31, 2016 Other borrowings, real estate notes payable (1) $ 17,256 $ 17,195 $625 million unsecured revolving credit facility with interest approximating LIBOR (approximately 1.22% at June 30, 2017) plus 1.75% or Prime (4.25% at June 30, 2017) plus 0.75% — 15,000 Total $ 17,256 $ 32,195 (1) Reflects balance of non-recourse notes payable in connection with land purchases, with interest rates ranging from 0% to 8% . |
SENIOR AND CONVERTIBLE SENIOR27
SENIOR AND CONVERTIBLE SENIOR NOTES, NET (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Debt Disclosure [Abstract] | |
Schedule of Senior and Convertible Senior Notes, Net | Senior and convertible senior notes, net consist of the following (in thousands): As of June 30, 2017 December 31, 2016 4.50% senior notes due 2018 $ 175,000 $ 175,000 7.15% senior notes due 2020. At June 30, 2017 and December 31, 2016 there was approximately $1,564 and $1,849 in net unamortized premium, respectively 301,564 301,849 7.00% senior notes due 2022 300,000 300,000 6.00% senior notes due 2025 200,000 200,000 5.125% senior notes due 2027 300,000 — 1.875% convertible senior notes due 2032 74,593 126,500 Net debt issuance costs (10,883 ) (8,230 ) Total $ 1,340,274 $ 1,095,119 |
FAIR VALUE DISCLOSURES (Tables)
FAIR VALUE DISCLOSURES (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Fair Value Disclosures [Abstract] | |
Schedule of Fair Value of Fixed-Rate Debt | 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 June 30, 2017 December 31, 2016 Aggregate Principal Estimated Fair Value Aggregate Principal Estimated Fair Value 4.50% senior notes $ 175,000 $ 176,313 $ 175,000 $ 177,625 7.15% senior notes $ 300,000 $ 331,500 $ 300,000 $ 325,500 7.00% senior notes $ 300,000 $ 341,250 $ 300,000 $ 324,750 6.00% senior notes $ 200,000 $ 214,000 $ 200,000 $ 202,500 5.125% senior notes $ 300,000 $ 300,390 $ — $ — 1.875% convertible senior notes $ 74,593 $ 74,593 $ 126,500 $ 126,105 |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Earnings Per Share [Abstract] | |
Schedule of Basic and Diluted Earnings per Common 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, 2017 2016 2017 2016 Basic weighted average number of shares outstanding 40,317 40,012 40,248 39,926 Effect of dilutive securities: Convertible senior notes (1) 1,991 2,176 2,083 2,176 Unvested restricted stock 473 345 505 375 Diluted average shares outstanding 42,781 42,533 42,836 42,477 Net earnings as reported $ 41,580 $ 39,878 $ 65,152 $ 60,847 Interest attributable to convertible senior notes, net of income taxes 354 400 739 801 Net earnings for diluted earnings per share $ 41,934 $ 40,278 $ 65,891 $ 61,648 Basic earnings per share $ 1.03 $ 1.00 $ 1.62 $ 1.52 Diluted earnings per share (1) $ 0.98 $ 0.95 $ 1.54 $ 1.45 Antidilutive stock not included in the calculation of diluted earnings per share 59 289 2 19 (1) In accordance with ASC 260-10, Earnings Per Share , ("ASC 260-10") we calculate the dilutive effect of convertible securities using the "if-converted" method |
ACQUISITIONS AND GOODWILL (Tabl
ACQUISITIONS AND GOODWILL (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Business Acquisitions and Goodwill [Abstract] | |
Summary of Changes in the Carrying Amount of Goodwill | A summary of the carrying amount of goodwill follows (in thousands): West Central East Financial Services Corporate Total Balance at December 31, 2016 $ — $ — $ 32,962 $ — $ — $ 32,962 Additions — — — — — — Impairments — — — — — — Balance at June 30, 2017 $ — $ — $ 32,962 $ — $ — $ 32,962 |
STOCKHOLDERS' EQUITY (Tables)
STOCKHOLDERS' EQUITY (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Stockholders' Equity Note [Abstract] | |
Summary of Changes in Shareholders' Equity | A summary of changes in stockholders’ equity is presented below (in thousands): Six Months Ended June 30, 2017 (In thousands) Number of Shares Common Stock Additional Paid-In Capital Retained Earnings Total Balance at December 31, 2016 40,031 $ 400 $ 572,506 $ 848,589 $ 1,421,495 Net earnings — — — 65,152 65,152 Exercise/vesting of stock-based awards 289 3 (3 ) — — Stock-based compensation expense — — 5,792 — 5,792 Balance at June 30, 2017 40,320 $ 403 $ 578,295 $ 913,741 $ 1,492,439 Six Months Ended June 30, 2016 (In thousands) Number of Shares Common Stock Additional Paid-In Capital Retained Earnings Total Balance at December 31, 2015 39,669 $ 397 $ 559,492 $ 699,048 $ 1,258,937 Net earnings — — — 60,847 60,847 Exercise/vesting of stock-based awards 349 3 229 — 232 Excess income tax benefit from stock-based awards — — (526 ) — (526 ) Stock-based compensation expense — — 7,313 — 7,313 Balance at June 30, 2016 40,018 $ 400 $ 566,508 $ 759,895 $ 1,326,803 |
STOCK BASED AND DEFERRED COMP32
STOCK BASED AND DEFERRED COMPENSATION (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Summary of Compensation Expense and Stock Award Activity | Below is a summary of compensation expense and stock award activity (dollars in thousands): Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Stock-based compensation expense $ 2,490 $ 2,555 $ 5,785 $ 7,313 Non-vested shares granted — — 416,500 493,865 Performance-based non-vested shares granted — — 154,120 66,698 Stock options exercised (1) — 3,200 — 14,400 Restricted stock awards vested (includes performance-based awards) 6,190 29,465 289,764 334,550 (1) As of December 31, 2016, we have no remaining unexercised stock options. |
Summary of Additional Information Regarding Stock Plan | The following table includes additional information regarding our Plan (dollars in thousands): As of June 30, 2017 December 31, 2016 Unrecognized stock-based compensation cost $ 24,115 $ 18,528 Weighted average years expense recognition period 4.15 2.56 Total stock-based awards outstanding (1) 1,328,601 1,147,271 (1) Includes unvested restricted stock and performance-based awards (at target level) and restricted stock units. |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Income Tax Disclosure [Abstract] | |
Schedule of Components of Income Tax Provision | Components of the income tax provision are as follows (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Federal $ 19,215 $ 16,568 $ 30,788 $ 23,109 State 2,410 2,590 4,034 3,965 Total $ 21,625 $ 19,158 $ 34,822 $ 27,074 |
SUPPLEMENTAL DISCLOSURE OF CA34
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Supplemental Cash Flow Elements [Abstract] | |
Schedule of Supplemental Cash Flow Information | The following table presents certain supplemental cash flow information (in thousands): Six Months Ended June 30, 2017 2016 Interest capitalized, net $ 161 $ 2,672 Income taxes paid $ 34,426 $ 24,722 Non-cash operating activities: Real estate not owned increase $ 9,987 $ — Real estate acquired through notes payable $ 5,786 $ 11,101 |
OPERATING AND REPORTING SEGME35
OPERATING AND REPORTING SEGMENTS (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Segment Reporting [Abstract] | |
Schedule of Segment Information | The following segment information is in thousands: Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Homebuilding revenue (1) : West $ 369,574 $ 332,643 $ 681,378 $ 593,689 Central 225,679 208,701 400,510 370,590 East 206,725 256,552 392,862 431,383 Consolidated total $ 801,978 $ 797,896 $ 1,474,750 $ 1,395,662 Homebuilding segment operating income: West $ 35,131 $ 27,495 $ 59,143 $ 43,558 Central 23,230 19,784 37,120 33,678 East 5,285 12,322 7,721 18,181 Total homebuilding segment operating income 63,646 59,601 103,984 95,417 Financial services segment profit 5,557 5,763 9,847 9,809 Corporate and unallocated costs (2) (7,028 ) (6,774 ) (15,545 ) (14,589 ) Earnings/(loss) from other unconsolidated entities, net 570 573 943 416 Interest expense (1,620 ) (1,672 ) (2,445 ) (4,960 ) Other income, net 2,080 1,545 3,190 1,828 Net earnings before income taxes $ 63,205 $ 59,036 $ 99,974 $ 87,921 (1) Homebuilding revenue includes the following land closing revenue, by segment, as outlined in the table below. Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Land closing revenue: West $ — $ 65 $ 11,800 $ 65 Central — 1,794 122 3,712 East 4,198 192 4,431 423 Total $ 4,198 $ 2,051 $ 16,353 $ 4,200 (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. |
Schedule of Segment Assets | At June 30, 2017 West Central East Financial Services Corporate and Unallocated Total Deposits on real estate under option or contract $ 20,491 $ 23,788 $ 30,471 $ — $ — $ 74,750 Real estate 1,179,257 671,392 787,758 — — 2,638,407 Investments in unconsolidated entities 7,708 7,205 — — 1,765 16,678 Other assets 46,699 (1) 89,947 (2) 73,315 (3) 689 260,207 (4) 470,857 Total assets $ 1,254,155 $ 792,332 $ 891,544 $ 689 $ 261,972 $ 3,200,692 (1) Balance consists primarily of cash, real estate not owned and property and equipment. (2) Balance consists primarily of development reimbursements from local municipalities and cash. (3) Balance consists primarily of goodwill (see Note 9) and prepaid permits and fees to local municipalities. (4) Balance consists primarily of cash and our deferred tax asset. At December 31, 2016 West Central East Financial Services Corporate and Unallocated Total Deposits on real estate under option or contract $ 25,863 $ 27,669 $ 32,024 $ — $ — $ 85,556 Real estate 1,120,038 595,485 706,540 — — 2,422,063 Investments in unconsolidated entities 7,362 7,450 — — 2,285 17,097 Other assets 45,624 (1) 94,299 (2) 93,245 (3) 812 129,995 (4) 363,975 Total assets $ 1,198,887 $ 724,903 $ 831,809 $ 812 $ 132,280 $ 2,888,691 (1) Balance consists primarily of cash and property and equipment. (2) Balance consists primarily of development reimbursements from local municipalities and cash. (3) Balance consists primarily of goodwill (see Note 9), prepaid permits and fees to local municipalities and cash. (4) Balance consists primarily of cash and our deferred tax asset. |
ORGANIZATION AND BASIS OF PRE36
ORGANIZATION AND BASIS OF PRESENTATION - Narrative (Details) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2017USD ($)stateregioncommunity | Jun. 30, 2016USD ($) | Jun. 30, 2017USD ($)stateregioncommunity | Jun. 30, 2016USD ($) | Dec. 31, 2016USD ($) | |
Organization and Presentation [Line Items] | |||||
Entity operations in number of regions | region | 3 | 3 | |||
Number of states in regions | state | 9 | 9 | |||
Number of communities in which homes are sold | community | 257 | 257 | |||
Deposits on real estate under option or contract | $ 74,750,000 | $ 74,750,000 | $ 85,556,000 | ||
Adjustments to warranty reserve balance | 0 | $ (275,000) | 0 | $ (275,000) | |
Cash and cash equivalents [Member] | |||||
Organization and Presentation [Line Items] | |||||
Amounts in transit from title companies for home closings | 35,200,000 | 35,200,000 | $ 75,300,000 | ||
Minimum [Member] | |||||
Organization and Presentation [Line Items] | |||||
Base price per house for sale range | 170,000 | $ 170,000 | |||
Community life cycle range | 3 years | ||||
Minimum [Member] | Non-Structural Items [Member] | |||||
Organization and Presentation [Line Items] | |||||
Warranty period following home closings | 1 year | ||||
Maximum [Member] | |||||
Organization and Presentation [Line Items] | |||||
Base price per house for sale range | $ 1,380,000 | $ 1,380,000 | |||
Community life cycle range | 5 years | ||||
Maximum [Member] | Non-Structural Items [Member] | |||||
Organization and Presentation [Line Items] | |||||
Warranty period following home closings | 2 years | ||||
Maximum [Member] | Structural [Member] | |||||
Organization and Presentation [Line Items] | |||||
Warranty period following home closings | 10 years |
ORGANIZATION AND BASIS OF PRE37
ORGANIZATION AND BASIS OF PRESENTATION - Schedule of Surety Bond and Letter of Credit Obligations (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Sureties related to owned projects and lots under contract [Member] | ||
Loss Contingencies [Line Items] | ||
Outstanding | $ 262,702 | $ 239,246 |
Estimated work remaining to complete | 107,198 | 85,706 |
Sureties [Member] | ||
Loss Contingencies [Line Items] | ||
Outstanding | 262,702 | 239,246 |
Estimated work remaining to complete | 107,198 | 85,706 |
LOCs in lieu of deposits for contracted lots [Member] | ||
Loss Contingencies [Line Items] | ||
Letters of credit outstanding | 3,631 | 250 |
LOCs for land development [Member] | ||
Loss Contingencies [Line Items] | ||
Letters of credit outstanding | 51,261 | 39,839 |
LOCs for general corporate operations [Member] | ||
Loss Contingencies [Line Items] | ||
Letters of credit outstanding | 3,750 | 3,750 |
Revolving credit facility [Member] | Line of Credit [Member] | ||
Loss Contingencies [Line Items] | ||
Letters of credit outstanding | $ 58,642 | $ 43,839 |
ORGANIZATION AND BASIS OF PRE38
ORGANIZATION AND BASIS OF PRESENTATION - Schedule of Accrued Liabilities (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Dec. 31, 2015 | |
Accrued Liabilities | |||||||
Accruals related to real estate development and construction activities | $ 57,691 | $ 53,778 | |||||
Payroll and other benefits | 38,608 | 52,941 | |||||
Accrued taxes | 13,525 | 9,637 | |||||
Warranty reserves | 23,620 | $ 22,477 | 22,660 | $ 22,699 | $ 22,308 | $ 21,615 | |
Legal reserves | [1] | 615 | 673 | ||||
Other accruals | 32,021 | 31,163 | |||||
Total | $ 166,080 | $ 170,852 | |||||
[1] | See Note 15 for additional information related to our legal reserves. |
ORGANIZATION AND BASIS OF PRE39
ORGANIZATION AND BASIS OF PRESENTATION - Summary of Changes in Warranty Reserves (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Warranty Reserves | ||||
Balance, beginning of period | $ 22,477,000 | $ 22,308,000 | $ 22,660,000 | $ 21,615,000 |
Additions to reserve from new home deliveries | 4,310,000 | 4,423,000 | 8,125,000 | 7,958,000 |
Warranty claims | (3,167,000) | (3,757,000) | (7,165,000) | (6,599,000) |
Adjustments to pre-existing reserves | 0 | (275,000) | 0 | (275,000) |
Balance, end of period | $ 23,620,000 | $ 22,699,000 | $ 23,620,000 | $ 22,699,000 |
REAL ESTATE AND CAPITALIZED I40
REAL ESTATE AND CAPITALIZED INTEREST - Schedule of Real Estate (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 | |
Real Estate Properties | |||
Homes under contract under construction | [1] | $ 662,829 | $ 508,927 |
Unsold homes completed and under construction | [1] | 423,887 | 431,725 |
Model homes | [1] | 146,602 | 147,406 |
Finished home sites and home sites under development | [2] | 1,405,089 | 1,334,005 |
Real estate | $ 2,638,407 | $ 2,422,063 | |
[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. Land held for development primarily reflects 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 may 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 inactive assets, and all ongoing costs of land ownership (i.e. property taxes, homeowner association dues, etc.) are expensed as incurred. |
REAL ESTATE AND CAPITALIZED I41
REAL ESTATE AND CAPITALIZED INTEREST - Summary of Capitalized Interest (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Summary of capitalized interest | ||||
Capitalized interest, beginning of period | $ 70,885 | $ 64,126 | $ 68,196 | $ 61,202 |
Interest incurred | 19,280 | 17,713 | 37,175 | 35,272 |
Interest expensed | (1,620) | (1,672) | (2,445) | (4,960) |
Interest amortized to cost of home and land closings | (16,218) | (15,485) | (30,599) | (26,832) |
Capitalized interest, end of period | $ 72,327 | $ 64,682 | $ 72,327 | $ 64,682 |
VARIABLE INTEREST ENTITIES AN42
VARIABLE INTEREST ENTITIES AND CONSOLIDATED REAL ESTATE NOT OWNED - Summary of Lots Under Option (Details) $ in Thousands | Jun. 30, 2017USD ($)lot | |
Projected Number of Lots | ||
Purchase and option contracts recorded on balance sheet as Real estate not owned | lot | 65 | |
Option contracts not recorded on balance sheet — non-refundable deposits, committed | lot | 4,202 | [1] |
Purchase contracts not recorded on balance sheet — non-refundable deposits, committed | lot | 6,974 | [1] |
Purchase contracts not recorded on balance sheet —refundable deposits, committed | lot | 1,935 | |
Total committed (on and off balance sheet) | lot | 13,176 | |
Total purchase and option contracts not recorded on balance sheet — refundable deposits, uncommitted | lot | 9,323 | [2] |
Total lots under contract or option | lot | 22,499 | |
Total purchase and option contracts not recorded on balance sheet | lot | 22,434 | [3] |
Purchase Price | ||
Purchase and option contracts recorded on balance sheet as Real estate not owned | $ 9,987 | |
Option contracts not recorded on balance sheet — non-refundable deposits, committed | 324,101 | [1] |
Purchase contracts not recorded on balance sheet — non-refundable deposits, committed | 354,503 | [1] |
Purchase contracts not recorded on balance sheet —refundable deposits, committed | 68,966 | |
Total committed (on and off balance sheet) | 757,557 | |
Total purchase and option contracts not recorded on balance sheet — refundable deposits, uncommitted | 264,717 | [2] |
Total lots under contract or option | 1,022,274 | |
Total purchase and option contracts not recorded on balance sheet | 1,012,287 | [3] |
Option/ Earnest Money Deposits–Cash | ||
Purchase and option contracts recorded on balance sheet as Real estate not owned | 1,498 | |
Option contracts not recorded on balance sheet — non-refundable deposits, committed | 43,139 | [1] |
Purchase contracts not recorded on balance sheet — non-refundable deposits, committed | 25,645 | [1] |
Purchase contracts not recorded on balance sheet —refundable deposits, committed | 1,366 | |
Total committed (on and off balance sheet) | 71,648 | |
Total purchase and option contracts not recorded on balance sheet — refundable deposits, uncommitted | 4,600 | [2] |
Total lots under contract or option | 76,248 | |
Total purchase and option contracts not recorded on balance sheet | $ 74,750 | [3],[4] |
[1] | Deposits are non-refundable except if certain contractual conditions are not performed by the selling party. | |
[2] | 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. | |
[3] | Except for our specific performance contracts recorded on our balance sheet as Real estate not owned, none of our option agreements require us to purchase lots. | |
[4] | Amount is reflected on our consolidated balance sheet in Deposits on real estate under option or contract as of June 30, 2017. |
INVESTMENTS IN UNCONSOLIDATED43
INVESTMENTS IN UNCONSOLIDATED ENTITIES - Narrative (Details) $ in Thousands | Jun. 30, 2017USD ($)joint_venture | Dec. 31, 2016USD ($) |
Schedule of Equity Method Investments [Line Items] | ||
Investments in unconsolidated entities | $ | $ 16,678 | $ 17,097 |
Equity-method land ventures [Member] | ||
Schedule of Equity Method Investments [Line Items] | ||
Number of joint ventures | joint_venture | 3 | |
Mortgage joint ventures [Member] | ||
Schedule of Equity Method Investments [Line Items] | ||
Number of joint ventures | joint_venture | 1 | |
Investments in unconsolidated entities | $ | $ 1,800 | $ 2,300 |
INVESTMENTS IN UNCONSOLIDATED44
INVESTMENTS IN UNCONSOLIDATED ENTITIES - Summary of Condensed Financial Information Related to Unconsolidated Equity Method Joint Ventures, Assets Liabilities and Equity (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 | |
Assets: | |||
Cash | $ 7,807 | $ 7,446 | |
Real estate | 53,172 | 54,319 | |
Other assets | 4,572 | 6,461 | |
Total assets | 65,551 | 68,226 | |
Liabilities and equity: | |||
Accounts payable and other liabilities | 5,679 | 7,339 | |
Notes and mortgages payable | 23,887 | 23,000 | |
Equity of: | |||
Meritage | [1] | 14,430 | 14,245 |
Other | 21,555 | 23,642 | |
Total liabilities and equity | $ 65,551 | $ 68,226 | |
[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 our 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. |
INVESTMENTS IN UNCONSOLIDATED45
INVESTMENTS IN UNCONSOLIDATED ENTITIES - Summary of Condensed Financial Information Related to Unconsolidated Equity Method Joint Ventures, Revenues and Expenses (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | ||
Financial information related to unconsolidated joint ventures, Operations | |||||
Revenue | $ 13,430 | $ 10,430 | $ 21,029 | $ 21,501 | |
Costs and expenses | (6,106) | (4,670) | (10,586) | (9,646) | |
Net earnings of unconsolidated entities | 7,324 | 5,760 | 10,443 | 11,855 | |
Meritage’s share of pre-tax earnings | [1],[2] | $ 4,068 | $ 4,402 | $ 7,250 | $ 7,038 |
[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 our 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 is recorded in Earnings from financial services unconsolidated entities and other, net and Earnings/(loss) from other unconsolidated entities, net on our consolidated income statements and excludes joint venture profit related to lots we purchased from the joint ventures. Such profit is deferred until homes are delivered by us and title passes to a homebuyer. |
LOANS PAYABLE AND OTHER BORRO46
LOANS PAYABLE AND OTHER BORROWINGS - Schedule of Loans Payable and Other Borrowings (Details) - USD ($) | 6 Months Ended | ||
Jun. 30, 2017 | Dec. 31, 2016 | ||
Revolving credit facility [Member] | London Interbank Offered Rate (LIBOR) [Member] | |||
Line of Credit Facility [Line Items] | |||
Description of variable rate basis | LIBOR | ||
Base rate | 1.22% | ||
Basis spread on variable rate | 1.75% | ||
Revolving credit facility [Member] | Prime Rate [Member] | |||
Line of Credit Facility [Line Items] | |||
Description of variable rate basis | Prime | ||
Base rate | 4.25% | ||
Basis spread on variable rate | 0.75% | ||
Other borrowings, real estate notes payable [Member] | |||
Line of Credit Facility [Line Items] | |||
Loans payable and other borrowings | [1] | $ 17,256,000 | $ 17,195,000 |
Unsecured revolving credit facility [Member] | Revolving credit facility [Member] | |||
Line of Credit Facility [Line Items] | |||
Loans payable and other borrowings | 0 | 15,000,000 | |
Current borrowing capacity | 625,000,000 | ||
Loans payable and other borrowings total [Member] | |||
Line of Credit Facility [Line Items] | |||
Loans payable and other borrowings | $ 17,256,000 | $ 32,195,000 | |
Minimum [Member] | Other borrowings, real estate notes payable [Member] | |||
Line of Credit Facility [Line Items] | |||
Debt Instrument, Interest Rate, Stated Percentage | 0.00% | ||
Maximum [Member] | Other borrowings, real estate notes payable [Member] | |||
Line of Credit Facility [Line Items] | |||
Debt Instrument, Interest Rate, Stated Percentage | 8.00% | ||
[1] | Reflects balance of non-recourse notes payable in connection with land purchases, with interest rates ranging from 0% to 8%. |
LOANS PAYABLE AND OTHER BORRO47
LOANS PAYABLE AND OTHER BORROWINGS - Narrative (Details) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2017USD ($) | Jun. 30, 2016USD ($) | Jun. 30, 2017USD ($) | Jun. 30, 2016USD ($) | Dec. 31, 2016USD ($) | |
Line of Credit Facility [Line Items] | |||||
Gross borrowings | $ 85,000,000 | $ 56,000,000 | $ 245,000,000 | $ 56,000,000 | |
Gross repayments | 145,000,000 | $ 56,000,000 | 260,000,000 | $ 56,000,000 | |
Revolving credit facility [Member] | Line of Credit [Member] | |||||
Line of Credit Facility [Line Items] | |||||
Current borrowing capacity | 625,000,000 | 625,000,000 | |||
Maximum borrowing capacity | 725,000,000 | 725,000,000 | |||
Minimum tangible net worth | $ 987,400,000 | $ 987,400,000 | |||
Leverage ratio | 0.6 | 0.6 | |||
Interest coverage ratio | 1.5 | ||||
Outstanding borrowings under Credit Facility | $ 0 | $ 0 | $ 15,000,000 | ||
Total LOCs | 58,642,000 | 58,642,000 | $ 43,839,000 | ||
Remaining borrowing capacity | 566,400,000 | 566,400,000 | |||
Revolving credit facility [Member] | Line of Credit [Member] | Revolving Credit Facility Maturing July 2019 [Member] | |||||
Line of Credit Facility [Line Items] | |||||
Current borrowing capacity | $ 60,000,000 | $ 60,000,000 |
SENIOR AND CONVERTIBLE SENIOR48
SENIOR AND CONVERTIBLE SENIOR NOTES, NET - Schedule of Senior and Convertible Senior Notes, Net (Details) - Senior Notes [Member] - USD ($) $ in Thousands | Jun. 30, 2017 | Jun. 06, 2017 | Dec. 31, 2016 |
Debt Instrument [Line Items] | |||
Net debt issuance costs | $ (10,883) | $ (8,230) | |
Senior and convertible senior notes, net | 1,340,274 | 1,095,119 | |
4.50% senior notes due 2018 [Member] | |||
Debt Instrument [Line Items] | |||
Senior and convertible senior notes, gross | $ 175,000 | $ 175,000 | |
Debt Instrument, Interest Rate, Stated Percentage | 4.50% | 4.50% | |
7.15% senior notes due 2020 [Member] | |||
Debt Instrument [Line Items] | |||
Senior and convertible senior notes, gross | $ 301,564 | $ 301,849 | |
Debt Instrument, Interest Rate, Stated Percentage | 7.15% | 7.15% | |
Unamortized premium | $ 1,564 | $ 1,849 | |
7.00% senior notes due 2022 [Member] | |||
Debt Instrument [Line Items] | |||
Senior and convertible senior notes, gross | $ 300,000 | $ 300,000 | |
Debt Instrument, Interest Rate, Stated Percentage | 7.00% | 7.00% | |
6.00% senior notes due 2025 [Member] | |||
Debt Instrument [Line Items] | |||
Senior and convertible senior notes, gross | $ 200,000 | $ 200,000 | |
Debt Instrument, Interest Rate, Stated Percentage | 6.00% | 6.00% | |
5.125% senior notes due 2027 [Member] | |||
Debt Instrument [Line Items] | |||
Senior and convertible senior notes, gross | $ 300,000 | $ 0 | |
Debt Instrument, Interest Rate, Stated Percentage | 5.125% | 5.125% | |
1.875% convertible senior notes due 2032 [Member] | |||
Debt Instrument [Line Items] | |||
Senior and convertible senior notes, gross | $ 74,593 | $ 126,500 | |
Debt Instrument, Interest Rate, Stated Percentage | 1.875% | 1.875% |
SENIOR AND CONVERTIBLE SENIOR49
SENIOR AND CONVERTIBLE SENIOR NOTES, NET - Narrative (Details) - USD ($) | Sep. 18, 2012 | Jun. 30, 2017 | Jun. 06, 2017 | Dec. 31, 2016 |
Senior Notes [Member] | 5.125% senior notes due 2027 [Member] | ||||
Debt Instrument [Line Items] | ||||
Debt Instrument, Face Amount | $ 300,000,000 | |||
Debt Instrument, Interest Rate, Stated Percentage | 5.125% | 5.125% | ||
Senior and convertible senior notes, gross | $ 300,000,000 | $ 0 | ||
Senior Notes [Member] | 1.875% convertible senior notes due 2032 [Member] | ||||
Debt Instrument [Line Items] | ||||
Debt Instrument, Interest Rate, Stated Percentage | 1.875% | 1.875% | ||
Debt instrument, convertible, conversion ratio | 0.0171985000 | |||
Debt instrument, convertible, conversion price (in dollars per share) | $ 58.14 | |||
Debt instrument, convertible, conversion premium | 47.50% | |||
Debt instrument, percentage of principal amount due to note-holders | 100.00% | |||
Senior and convertible senior notes, gross | $ 74,593,000 | $ 126,500,000 | ||
Senior Notes [Member] | 1.875% convertible senior notes due 2032 [Member] | ||||
Debt Instrument [Line Items] | ||||
Debt Instrument, Repurchase Amount | 51,900,000 | |||
Gain (Loss) on Extinguishment of Debt | $ 300,000 |
FAIR VALUE DISCLOSURES - Schedu
FAIR VALUE DISCLOSURES - Schedule of Fair Value of Fixed-Rate Debt (Details) - Senior Notes [Member] - USD ($) | Jun. 30, 2017 | Jun. 06, 2017 | Dec. 31, 2016 |
4.50% senior notes due 2018 [Member] | |||
Fair value of fixed-rate debt | |||
Debt Instrument, Interest Rate, Stated Percentage | 4.50% | 4.50% | |
4.50% senior notes due 2018 [Member] | Level 2 [Member] | |||
Debt Instrument [Line Items] | |||
Aggregate Principal | $ 175,000,000 | $ 175,000,000 | |
Fair value of fixed-rate debt | |||
Estimated Fair Value | $ 176,313,000 | $ 177,625,000 | |
7.15% senior notes due 2020 [Member] | |||
Fair value of fixed-rate debt | |||
Debt Instrument, Interest Rate, Stated Percentage | 7.15% | 7.15% | |
7.15% senior notes due 2020 [Member] | Level 2 [Member] | |||
Debt Instrument [Line Items] | |||
Aggregate Principal | $ 300,000,000 | $ 300,000,000 | |
Fair value of fixed-rate debt | |||
Estimated Fair Value | $ 331,500,000 | $ 325,500,000 | |
7.00% senior notes due 2022 [Member] | |||
Fair value of fixed-rate debt | |||
Debt Instrument, Interest Rate, Stated Percentage | 7.00% | 7.00% | |
7.00% senior notes due 2022 [Member] | Level 2 [Member] | |||
Debt Instrument [Line Items] | |||
Aggregate Principal | $ 300,000,000 | $ 300,000,000 | |
Fair value of fixed-rate debt | |||
Estimated Fair Value | $ 341,250,000 | $ 324,750,000 | |
6.00% senior notes due 2025 [Member] | |||
Fair value of fixed-rate debt | |||
Debt Instrument, Interest Rate, Stated Percentage | 6.00% | 6.00% | |
6.00% senior notes due 2025 [Member] | Level 2 [Member] | |||
Debt Instrument [Line Items] | |||
Aggregate Principal | $ 200,000,000 | $ 200,000,000 | |
Fair value of fixed-rate debt | |||
Estimated Fair Value | $ 214,000,000 | 202,500,000 | |
5.125% senior notes due 2027 [Member] | |||
Debt Instrument [Line Items] | |||
Aggregate Principal | $ 300,000,000 | ||
Fair value of fixed-rate debt | |||
Debt Instrument, Interest Rate, Stated Percentage | 5.125% | 5.125% | |
5.125% senior notes due 2027 [Member] | Level 2 [Member] | |||
Debt Instrument [Line Items] | |||
Aggregate Principal | $ 300,000,000 | 0 | |
Fair value of fixed-rate debt | |||
Estimated Fair Value | $ 300,390,000 | $ 0 | |
1.875% convertible senior notes due 2032 [Member] | |||
Fair value of fixed-rate debt | |||
Debt Instrument, Interest Rate, Stated Percentage | 1.875% | 1.875% | |
1.875% convertible senior notes due 2032 [Member] | Level 2 [Member] | |||
Debt Instrument [Line Items] | |||
Aggregate Principal | $ 74,593,000 | $ 126,500,000 | |
Fair value of fixed-rate debt | |||
Estimated Fair Value | $ 74,593,000 | $ 126,105,000 |
EARNINGS PER SHARE - Schedule o
EARNINGS PER SHARE - Schedule of Basic and Diluted Earnings per Common Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | ||
Basic and Diluted (Loss)/Earnings Per Common Share | |||||
Basic weighted average number of shares outstanding | 40,317 | 40,012 | 40,248 | 39,926 | |
Effect of dilutive securities: | |||||
Convertible debt | [1] | 1,991 | 2,176 | 2,083 | 2,176 |
Stock options and unvested restricted stock | 473 | 345 | 505 | 375 | |
Diluted average shares outstanding | 42,781 | 42,533 | 42,836 | 42,477 | |
Net earnings as reported (in dollars) | $ 41,580 | $ 39,878 | $ 65,152 | $ 60,847 | |
Interest attributable to convertible senior notes, net of income taxes (in dollars) | 354 | 400 | 739 | 801 | |
Net earnings for diluted earnings per share (in dollars) | $ 41,934 | $ 40,278 | $ 65,891 | $ 61,648 | |
Basic earnings per share (in dollars per share) | $ 1.03 | $ 1 | $ 1.62 | $ 1.52 | |
Diluted earnings per share (in dollars per share) | [1] | $ 0.98 | $ 0.95 | $ 1.54 | $ 1.45 |
Antidilutive stock options not included in the calculation of diluted earnings per share | 59 | 289 | 2 | 19 | |
[1] | In accordance with ASC 260-10, Earnings Per Share, ("ASC 260-10") we calculate the dilutive effect of convertible securities using the "if-converted" method |
ACQUISITIONS AND GOODWILL - Nar
ACQUISITIONS AND GOODWILL - Narrative (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Business Acquisitions and Goodwill [Abstract] | ||
Goodwill | $ 32,962 | $ 32,962 |
ACQUISITIONS AND GOODWILL - Sum
ACQUISITIONS AND GOODWILL - Summary of Changes in the Carrying Amount of Goodwill (Details) $ in Thousands | 6 Months Ended |
Jun. 30, 2017USD ($) | |
Goodwill [Roll Forward] | |
Beginning balance | $ 32,962 |
Additions | 0 |
Impairments | 0 |
Ending balance | 32,962 |
Operating Segments [Member] | Financial Services [Member] | |
Goodwill [Roll Forward] | |
Beginning balance | 0 |
Additions | 0 |
Impairments | 0 |
Ending balance | 0 |
Operating Segments [Member] | Reportable Subsegments [Member] | Homebuilding [Member] | West [Member] | |
Goodwill [Roll Forward] | |
Beginning balance | 0 |
Additions | 0 |
Impairments | 0 |
Ending balance | 0 |
Operating Segments [Member] | Reportable Subsegments [Member] | Homebuilding [Member] | Central [Member] | |
Goodwill [Roll Forward] | |
Beginning balance | 0 |
Additions | 0 |
Impairments | 0 |
Ending balance | 0 |
Operating Segments [Member] | Reportable Subsegments [Member] | Homebuilding [Member] | East [Member] | |
Goodwill [Roll Forward] | |
Beginning balance | 32,962 |
Additions | 0 |
Impairments | 0 |
Ending balance | 32,962 |
Corporate [Member] | |
Goodwill [Roll Forward] | |
Beginning balance | 0 |
Additions | 0 |
Impairments | 0 |
Ending balance | $ 0 |
STOCKHOLDERS' EQUITY - Summary
STOCKHOLDERS' EQUITY - Summary of Changes in Shareholders' Equity (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Beginning balance (in shares) | 40,030,518 | |||
Beginning balance | $ 1,421,495 | $ 1,258,937 | ||
Net earnings | $ 41,580 | $ 39,878 | 65,152 | 60,847 |
Exercise/vesting of stock-based awards | 0 | 232 | ||
Excess income tax provision from stock-based awards | (526) | |||
Stock-based compensation expense | $ 5,792 | 7,313 | ||
Ending balance (in shares) | 40,320,282 | 40,320,282 | ||
Ending balance | $ 1,492,439 | $ 1,326,803 | $ 1,492,439 | $ 1,326,803 |
Common Stock [Member] | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Beginning balance (in shares) | 40,031,000 | 39,669,000 | ||
Beginning balance | $ 400 | $ 397 | ||
Exercise/vesting of stock-based awards (in shares) | 289,000 | 349,000 | ||
Exercise/vesting of stock-based awards | $ 3 | $ 3 | ||
Ending balance (in shares) | 40,320,000 | 40,018,000 | 40,320,000 | 40,018,000 |
Ending balance | $ 403 | $ 400 | $ 403 | $ 400 |
Additional Paid-in Capital [Member] | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Beginning balance | 572,506 | 559,492 | ||
Exercise/vesting of stock-based awards | (3) | 229 | ||
Excess income tax provision from stock-based awards | (526) | |||
Stock-based compensation expense | 5,792 | 7,313 | ||
Ending balance | 578,295 | 566,508 | 578,295 | 566,508 |
Retained Earnings [Member] | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Beginning balance | 848,589 | 699,048 | ||
Net earnings | 65,152 | 60,847 | ||
Ending balance | $ 913,741 | $ 759,895 | $ 913,741 | $ 759,895 |
STOCK BASED AND DEFERRED COMP55
STOCK BASED AND DEFERRED COMPENSATION - Narrative (Details) | 6 Months Ended |
Jun. 30, 2017shares | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Shares of common stock authorized under stock compensation plan (up to) (in shares) | 5,350,000 |
Remaining shares available for grant (in shares) | 1,102,665 |
Employees [Member] | Non-vested stock awards [Member] | Maximum [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Vesting period for non-vested stock awards and stock options | 5 years |
Senior executive officers and non-employee directors [Member] | Non-vested stock awards and performance-based awards [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Vesting period for non-vested stock awards and stock options | 3 years |
STOCK BASED AND DEFERRED COMP56
STOCK BASED AND DEFERRED COMPENSATION - Summary of Compensation Expense and Stock Award Activity (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |||
Summary of compensation expense and stock award activity | ||||||
Stock-based compensation expense (in dollars) | $ 2,490 | $ 2,555 | $ 5,785 | $ 7,313 | ||
Stock options exercised (in shares) | 0 | 3,200 | 0 | [1] | 14,400 | [1] |
Restricted Stock [Member] | ||||||
Summary of compensation expense and stock award activity | ||||||
Restricted stock awards vested (includes performance-based awards) (in shares) | 6,190 | 29,465 | 289,764 | 334,550 | ||
Non-vested shares [Member] | ||||||
Summary of compensation expense and stock award activity | ||||||
Non-vested shares granted (in shares) | 0 | 0 | 416,500 | 493,865 | ||
Performance-based non-vested shares [Member] | ||||||
Summary of compensation expense and stock award activity | ||||||
Non-vested shares granted (in shares) | 0 | 0 | 154,120 | 66,698 | ||
[1] | As of December 31, 2016, we have no remaining unexercised stock options. |
STOCK BASED AND DEFERRED COMP57
STOCK BASED AND DEFERRED COMPENSATION - Summary of Additional Information Regarding Stock Plan (Details) - USD ($) $ in Thousands | 6 Months Ended | 12 Months Ended | |
Jun. 30, 2017 | Dec. 31, 2016 | ||
Summary of stock based compensation agreements | |||
Unrecognized stock-based compensation cost | $ 24,115 | $ 18,528 | |
Weighted average years expense recognition period | 4 years 1 month 24 days | 2 years 6 months 22 days | |
Total stock-based awards outstanding (in shares) | [1] | 1,328,601 | 1,147,271 |
[1] | Includes unvested restricted stock and performance-based awards (at target level) and restricted stock units. |
INCOME TAXES - Schedule of Comp
INCOME TAXES - Schedule of Components of Income Tax Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Current Taxes: | ||||
Federal | $ 19,215 | $ 16,568 | $ 30,788 | $ 23,109 |
State | 2,410 | 2,590 | 4,034 | 3,965 |
Total | $ 21,625 | $ 19,158 | $ 34,822 | $ 27,074 |
INCOME TAXES - Narrative (Detai
INCOME TAXES - Narrative (Details) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2017USD ($)examination | Jun. 30, 2016 | Jun. 30, 2017USD ($)examination | Jun. 30, 2016 | Dec. 31, 2016USD ($) | |
Income Taxes (Textual) [Abstract] | |||||
Effective tax rate | 34.20% | 32.50% | 34.80% | 30.80% | |
Unrecognized tax benefits | $ 0 | $ 0 | $ 0 | ||
NOL carryover, valuation allowance | 0 | 0 | |||
Valuation allowance on deferred tax assets | 0 | 0 | |||
Accrued liabilities [Member] | |||||
Income Taxes (Textual) [Abstract] | |||||
Income taxes payable | 8,300,000 | 8,300,000 | |||
Federal [Member] | |||||
Income Taxes (Textual) [Abstract] | |||||
Tax credits | 0 | 0 | |||
NOL carryforwards | 0 | 0 | |||
State [Member] | |||||
Income Taxes (Textual) [Abstract] | |||||
NOL carryforwards | $ 1,400,000 | $ 1,400,000 | $ 1,400,000 | ||
Number of income tax examinations pending | examination | 1 | 1 |
SUPPLEMENTAL DISCLOSURE OF CA60
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION - Schedule of Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Cash paid during the period for: | ||
Interest capitalized, net | $ 161 | $ 2,672 |
Income taxes paid | 34,426 | 24,722 |
Non-cash operating activities: | ||
Real estate not owned increase | 9,987 | 0 |
Real estate acquired through notes payable | $ 5,786 | $ 11,101 |
OPERATING AND REPORTING SEGME61
OPERATING AND REPORTING SEGMENTS - Narrative (Details) | 6 Months Ended |
Jun. 30, 2017operating_segmentsegment | |
Segment Reporting [Abstract] | |
Number of business segments | segment | 2 |
Number of operating segments | operating_segment | 9 |
OPERATING AND REPORTING SEGME62
OPERATING AND REPORTING SEGMENTS - Schedule of Segment Information (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | ||
Homebuilding revenue: | |||||
Revenue | $ 801,978 | $ 797,896 | $ 1,474,750 | $ 1,395,662 | |
Homebuilding segment operating income: | |||||
Corporate and unallocated costs | (29,591) | (28,898) | (59,213) | (58,516) | |
Earnings from other unconsolidated entities, net | 570 | 573 | 943 | 416 | |
Interest expense | (1,620) | (1,672) | (2,445) | (4,960) | |
Other income, net | 2,080 | 1,545 | 3,190 | 1,828 | |
Earnings before income taxes | 63,205 | 59,036 | 99,974 | 87,921 | |
Operating Segments [Member] | Homebuilding [Member] | |||||
Homebuilding revenue: | |||||
Revenue | [1] | 801,978 | 797,896 | 1,474,750 | 1,395,662 |
Homebuilding segment operating income: | |||||
Operating Income | 63,646 | 59,601 | 103,984 | 95,417 | |
Operating Segments [Member] | Financial Services [Member] | |||||
Homebuilding segment operating income: | |||||
Operating Income | 5,557 | 5,763 | 9,847 | 9,809 | |
Operating Segments [Member] | Reportable Subsegments [Member] | Homebuilding [Member] | West [Member] | |||||
Homebuilding revenue: | |||||
Revenue | [1] | 369,574 | 332,643 | 681,378 | 593,689 |
Homebuilding segment operating income: | |||||
Operating Income | 35,131 | 27,495 | 59,143 | 43,558 | |
Operating Segments [Member] | Reportable Subsegments [Member] | Homebuilding [Member] | Central [Member] | |||||
Homebuilding revenue: | |||||
Revenue | [1] | 225,679 | 208,701 | 400,510 | 370,590 |
Homebuilding segment operating income: | |||||
Operating Income | 23,230 | 19,784 | 37,120 | 33,678 | |
Operating Segments [Member] | Reportable Subsegments [Member] | Homebuilding [Member] | East [Member] | |||||
Homebuilding revenue: | |||||
Revenue | [1] | 206,725 | 256,552 | 392,862 | 431,383 |
Homebuilding segment operating income: | |||||
Operating Income | 5,285 | 12,322 | 7,721 | 18,181 | |
Corporate and Unallocated [Member] | |||||
Homebuilding segment operating income: | |||||
Corporate and unallocated costs | [2] | (7,028) | (6,774) | (15,545) | (14,589) |
Segment Reconciling Items [Member] | |||||
Homebuilding segment operating income: | |||||
Earnings from other unconsolidated entities, net | 570 | 573 | 943 | 416 | |
Interest expense | (1,620) | (1,672) | (2,445) | (4,960) | |
Other income, net | $ 2,080 | $ 1,545 | $ 3,190 | $ 1,828 | |
[1] | Homebuilding revenue includes the following land closing revenue, by segment, as outlined in the table below. Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016Land closing revenue: West$— $65 $11,800 $65Central— 1,794 122 3,712East4,198 192 4,431 423Total$4,198 $2,051 $16,353 $4,200 | ||||
[2] | Balance consists primarily of corporate costs and numerous shared service functions such as finance and treasury that are not allocated to the homebuilding or financial services reporting segments. |
OPERATING AND REPORTING SEGME63
OPERATING AND REPORTING SEGMENTS - Schedule of Segment Information, Revenue (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Segment Reporting Information [Line Items] | ||||
Land closing revenue | $ 4,198 | $ 2,051 | $ 16,353 | $ 4,200 |
Operating Segments [Member] | Homebuilding [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Land closing revenue | 4,198 | 2,051 | 16,353 | 4,200 |
Operating Segments [Member] | Reportable Subsegments [Member] | Homebuilding [Member] | West [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Land closing revenue | 0 | 65 | 11,800 | 65 |
Operating Segments [Member] | Reportable Subsegments [Member] | Homebuilding [Member] | Central [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Land closing revenue | 0 | 1,794 | 122 | 3,712 |
Operating Segments [Member] | Reportable Subsegments [Member] | Homebuilding [Member] | East [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Land closing revenue | $ 4,198 | $ 192 | $ 4,431 | $ 423 |
OPERATING AND REPORTING SEGME64
OPERATING AND REPORTING SEGMENTS - Schedule of Segment Assets (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 | ||
Segment Reporting Information [Line Items] | ||||
Deposits on real estate under option or contract | $ 74,750 | $ 85,556 | ||
Real estate | 2,638,407 | 2,422,063 | ||
Investments in unconsolidated entities | 16,678 | 17,097 | ||
Other assets | 470,857 | 363,975 | ||
Total assets | 3,200,692 | 2,888,691 | ||
Operating Segments [Member] | Financial Services [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Deposits on real estate under option or contract | 0 | 0 | ||
Real estate | 0 | 0 | ||
Investments in unconsolidated entities | 0 | 0 | ||
Other assets | 689 | 812 | ||
Total assets | 689 | 812 | ||
Operating Segments [Member] | Reportable Subsegments [Member] | Homebuilding [Member] | West [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Deposits on real estate under option or contract | 20,491 | 25,863 | ||
Real estate | 1,179,257 | 1,120,038 | ||
Investments in unconsolidated entities | 7,708 | 7,362 | ||
Other assets | 46,699 | [1] | 45,624 | [2] |
Total assets | 1,254,155 | 1,198,887 | ||
Operating Segments [Member] | Reportable Subsegments [Member] | Homebuilding [Member] | Central [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Deposits on real estate under option or contract | 23,788 | 27,669 | ||
Real estate | 671,392 | 595,485 | ||
Investments in unconsolidated entities | 7,205 | 7,450 | ||
Other assets | 89,947 | [3] | 94,299 | [4] |
Total assets | 792,332 | 724,903 | ||
Operating Segments [Member] | Reportable Subsegments [Member] | Homebuilding [Member] | East [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Deposits on real estate under option or contract | 30,471 | 32,024 | ||
Real estate | 787,758 | 706,540 | ||
Investments in unconsolidated entities | 0 | 0 | ||
Other assets | 73,315 | [5] | 93,245 | [6] |
Total assets | 891,544 | 831,809 | ||
Corporate and Unallocated [Member] | ||||
Segment Reporting Information [Line Items] | ||||
Deposits on real estate under option or contract | 0 | 0 | ||
Real estate | 0 | 0 | ||
Investments in unconsolidated entities | 1,765 | 2,285 | ||
Other assets | 260,207 | [7] | 129,995 | [8] |
Total assets | $ 261,972 | $ 132,280 | ||
[1] | Balance consists primarily of cash, real estate not owned and property and equipment. | |||
[2] | Balance consists primarily of cash and property and equipment | |||
[3] | Balance consists primarily of development reimbursements from local municipalities and cash. | |||
[4] | Balance consists primarily of development reimbursements from local municipalities and cash. | |||
[5] | Balance consists primarily of goodwill (see Note 9) and prepaid permits and fees to local municipalities. | |||
[6] | Balance consists primarily of goodwill (see Note 9), prepaid permits and fees to local municipalities and cash. | |||
[7] | Balance consists primarily of cash and our deferred tax asset. | |||
[8] | Balance consists primarily of cash and our deferred tax asset. |