SOURCE: Meritage Homes Corp.

October 23, 2013 08:00 ET

Meritage Homes Reports Results for the Third Quarter of 2013

Diluted EPS of $0.99 on 44% Increase in Home Closing Revenue

SCOTTSDALE, AZ--(Marketwired - Oct 23, 2013) - Meritage Homes Corporation (NYSE: MTH), a leading U.S. homebuilder, today announced its third quarter results for the period ended September 30, 2013.

   
Summary Operating Results (unaudited)  
(Dollars in thousands, except per share amounts)  
   
    Three Months Ended September 30     Nine Months Ended September 30  
    2013   2012   %Chg     2013   2012   %Chg  
Homes closed (units)     1,418     1,197   18 %     3,791     2,998   26 %
Home closing revenue   $ 483,147   $ 334,880   44 %   $ 1,249,897   $ 820,242   52 %
Average sales price - closings   $ 341   $ 280   22 %   $ 330   $ 274   20 %
Home orders (units)     1,300     1,204   8 %     4,484     3,701   21 %
Home order value   $ 473,924   $ 366,752   29 %   $ 1,567,719   $ 1,060,910   48 %
Average sales price - orders   $ 365   $ 305   20 %   $ 350   $ 287   22 %
Ending backlog (units)                       2,190     1,618   35 %
Ending backlog value                     $ 805,580   $ 489,522   65 %
Average sales price - backlog                     $ 368   $ 303   22 %
Net earnings   $ 38,191   $ 6,784   463 %   $ 78,375   $ 10,035   681 %
Diluted EPS   $ 0.99   $ 0.19   421 %   $ 2.05   $ 0.30   583 %
                                     

MANAGEMENT COMMENTS

"We are pleased with the strong operating results we achieved again this quarter, including our highest level of home closings and closing revenue in the last five years, and our highest gross margin in more than seven years, with a 44% increase in home closing revenue and a 420 basis point improvement in home closing gross margin," said Steven J. Hilton, chairman and chief executive officer of Meritage Homes. "We are focused on delivering earnings growth by leveraging our operating structure in addition to growing our top line. This was our seventh consecutive quarter in which we increased net earnings year-over-year.

"The pace of sales per community slowed somewhat in the third quarter, reflecting the effects of home price inflation over the past year and the increase in interest rates we experienced just before and during the seasonally slower summer months, resulting in an 8% year-over-year increase in orders," explained Mr. Hilton. "Since the underlying demand drivers remain solidly positive amidst a shortage of homes on the market, we are confident that the housing market can continue to grow for the foreseeable future, though maybe not at the same rate we enjoyed last year and earlier this year.

"We strategically expanded into another new market this quarter with our acquisition of Phillips Builders in the Nashville market, which we plan to grow significantly over the next several years. We acquired 500 lots with that acquisition and also contracted for an additional 3,700 new lots during the quarter to add new communities and support sales growth," continued Mr. Hilton. "Evidencing our confidence in the long-term demand for housing, we are continuing to evaluate additional opportunities to enter new markets while we expand within our existing markets."

STRONG EARNINGS GROWTH

  • Net earnings increased $31.4 million or 463% over 2012 to $38.2 million ($0.99 per diluted share) in the third quarter of 2013, as compared to net earnings of $6.8 million ($0.19 per diluted share) in the third quarter of 2012. The increase in 2013 earnings was primarily due to higher home closing revenue and gross margins, coupled with overhead expense leverage. Prior year results also included an $8.7 million charge related to litigation surrounding a Nevada joint venture. The 2013 results included a tax provision of $18.6 million, compared to $0.2 million in the prior year.
  • Home closing revenue increased 44% due to the combination of an 18% increase in home closings and a 22% increase in average sales price over the prior year period. All regions grew home closings, revenue and average prices over the prior year. This was the eighth consecutive quarter of year-over-year growth in home closing revenue, and the highest level of home closings by Meritage since the fourth quarter of 2008.
  • Home closing gross margin increased to 22.8% in the third quarter of 2013, a year-over-year improvement of 420 basis points compared to 18.6% in the third quarter of 2012, and a sequential improvement of 130 basis points compared to a 21.5% home closing gross margin in the second quarter of 2013. It is the highest gross margin Meritage has produced since the second quarter of 2006. The significant margin growth reflects both home price appreciation and effective management of construction costs.
  • Commissions and other sales costs in the third quarter improved 80 basis points on higher closing volumes, decreasing to 6.9% of home closing revenue in 2013 from 7.7% in 2012.
  • General and administrative expenses declined to 5.0% of total third quarter closing revenue in 2013, from 5.6% in 2012, due to operating leverage. The majority of the $5.2 million increase over last year was the result of additional hiring and compensation expense.
  • Interest expense decreased to $3.5 million or 0.7% of closing revenue in the third quarter of 2013, compared to $5.0 million or 1.5% of closing revenue in the third quarter of 2012, as a greater portion of interest incurred was capitalized.
  • Pre-tax earnings margin increased 950 basis points to 11.5% in the third quarter of 2013, compared to 2.0% in the prior year.

CONTINUED ORDER GROWTH

  • Total order value grew 29% over the third quarter of 2012 due to the combination of an 8% increase in orders and a 20% increase in the average selling price of homes ordered. Total order value and backlog grew in each of Meritage's active markets except California, where the pace of orders moderated as prices were increased. The average sales price on orders of approximately $365,000 was the highest for Meritage in more than eight years, reflecting the combination of a greater portion of orders in higher-priced communities and states, in addition to home price appreciation.
  • Meritage added 14 net new communities during the third quarter of 2013, including three from the Nashville acquisition, and ended the quarter with 179 total active communities, a 17% increase year over year from 153 at September 30, 2012.
  • Average orders per active community during the third quarter was 7.6 in 2013 compared to 7.9 in 2012. The average reflects an increase of 21% in Texas over the third quarter of 2012, while California, Florida and Colorado sold the most homes per average community, at 10.6, 9.1 and 8.0, respectively.
  • Order cancellation rates remained historically low at 14% for the third quarter of 2013 compared to 13% in the third quarter of 2012.
  • Ending backlog value increased 65% over the third quarter of 2012, combining a 22% increase in average price with 35% growth of orders in backlog. The Carolinas and Colorado grew backlog value by 177% and 158%, respectively, while Florida and Texas each grew backlog value by 76% over the prior year.

YEAR TO DATE RESULTS

  • Net earnings of $78.4 million for the first nine months of 2013 included a $3.8 million loss on early extinguishment of debt and a tax provision of $33.4 million, compared to net earnings of $10.0 million for the first nine months of 2012, which included a $5.8 million loss on early extinguishment of debt and a $4.8 million tax benefit, in addition to the $8.7 million charge related to the Nevada joint venture litigation.
  • Home closings and closing revenue for the first nine months of the year increased 26% and 52%, respectively, for 2013 over 2012, reflecting a 20% increase in the average sales price of closings.
  • Year-to-date home closing gross margin improved by 330 basis points to 21.5% for 2013, compared to 18.2% for 2012.
  • Total year-to-date selling, general and administrative expenses decreased 200 basis points to 12.3% of total closing revenue in 2013 compared to 14.3% in 2012, reflecting increased operating leverage.
  • Year-to-date net orders through September 30 increased 21% in 2013 over 2012, and in combination with a 22% increase in average sales price, drove a 48% increase in total order value year over year.

BALANCE SHEET STRENGTH

  • Cash and cash equivalents, restricted cash and securities at September 30, 2013 increased to a total of $311.3 million, compared to $295.5 million at December 31, 2012.
  • Meritage spent approximately $166.7 million on land acquisition and development in the third quarter of 2013, and contracted for approximately 3,700 new lots in addition to 500 lots added with the Phillips Builders acquisition.
  • Total lot supply at September 30, 2013 was approximately 25,000 lots, equating to approximately 5.0 years supply based on trailing twelve months' closings, compared to approximately 17,800 lots at September 30, 2012, the equivalent of 4.6 years supply. Approximately 71% of the September 30, 2013 lot supply was owned.
  • Of the 29% of lots controlled under option and purchase contracts as of September 30, 2013, approximately 1,350 lots were secured through land bank arrangements in 2013. The total finished lot purchase price of these lots owned by land bankers is approximately $127 million. Meritage has the option to purchase these lots over time, which reduces the Company's initial cash outlays for these lot positions. 
  • Total real estate assets increased to $1.3 billion at September 30, 2013, compared to $1.0 billion a year ago and $1.1 billion at the beginning of 2013.
  • Stockholders' equity increased by 14% or $98.1 million year-to-date in 2013, ending at $792.3 million as of September 30, 2013, compared to $694.2 million at December 31, 2012.
  • Net debt-to-capital ratio remained at 38.1% as of September 30, 2013, consistent with December 31, 2012, and the Company had no borrowings against its $135 million revolving credit facility.

SUMMARY
"The recovery in the housing market that began last year drove strong sales growth and price appreciation through the middle of this year, until buyers reacted to successive price increases and higher interest rates by pausing their purchasing decisions, thereby moderating the demand for new homes," explained Steve Hilton. "In some ways, the slower pace of sales seen in the third quarter is healthy for the market, allowing subcontractors and suppliers to catch up before the next spring selling season, and taking some upward pressure off costs.

"Meritage is well positioned with highly desirable locations and distinctive, energy-efficient homes in many of the best housing markets in the country, which have produced some of the best sales and earnings strength during the recovery to date," he continued. "We now control all of the lots we need to satisfy our projected closings through 2014 and approximately 85% of our projected 2015 closings. Our growth strategy and operating leverage should enable us to continue to drive earnings growth throughout this next housing cycle.

"Based on our reported results year to date and assuming continued strength in our markets, we have revised our models and are projecting home closing revenue of approximately $1.8 billion for 2013, with projected earnings per diluted share in the range of $2.95-$3.05 for the year."

CONFERENCE CALL
Management will host a conference call today to discuss the Company's third quarter results at 10:30 a.m. Eastern Time (7:30 a.m. Pacific Time). The call will be webcast with an accompanying slideshow available on the "Investor Relations" page of the Company's web site at http://investors.meritagehomes.com. Telephone participants may avoid any delays by pre-registering for the call using the following link to receive a special dial-in number and PIN.

Conference Call registration link: http://dpregister.com/10034963.

Telephone participants who are unable to pre-register may dial in to 888-317-6016 on the day of the call. International dial-in number is 1-412-317-6016.

A replay of the call will be available for fifteen days, beginning at 12:30 p.m. ET on October 23, 2013 on the website noted above, or by dialing 877-344-7529, and referencing conference number 10030804. For more information, visit meritagehomes.com.

   
Meritage Homes Corporation and Subsidiaries  
Operating Results  
(Unaudited)  
(In thousands, except per share data)  
   
    Three Months Ended September 30     Nine Months Ended September 30  
    2013     2012     2013     2012  
Homebuilding:                                
  Home closing revenue   $ 483,147     $ 334,880     $ 1,249,897     $ 820,242  
  Land closing revenue     8,933       7,763       28,568       8,846  
    Total closing revenue     492,080       342,643       1,278,465       829,088  
  Cost of home closings     (372,772 )     (272,726 )     (981,557 )     (671,029 )
  Cost of land closings     (6,126 )     (7,493 )     (24,139 )     (8,833 )
    Total cost of closings     (378,898 )     (280,219 )     (1,005,696 )     (679,862 )
  Home closing gross profit     110,375       62,154       268,340       149,213  
  Land closing gross profit     2,807       270       4,429       13  
    Total closing gross profit     113,182       62,424       272,769       149,226  
Financial Services:                                
  Revenue     1,684       253       3,960       253  
  Expense     (901 )     (317 )     (2,229 )     (484 )
  Earnings from financial services unconsolidated entities and other, net     3,511       3,049       9,784       6,974  
    Financial services profit     4,294       2,985       11,515       6,743  
Commissions and other sales costs     (33,467 )     (25,855 )     (90,526 )     (67,950 )
General and administrative expenses     (24,412 )     (19,209 )     (66,587 )     (50,446 )
Earnings/(loss) from other unconsolidated entities, net     46       (74 )     (229 )     (348 )
Interest expense     (3,462 )     (5,009 )     (13,113 )     (18,718 )
Other income/(expense), net     605       (8,276 )     1,760       (7,481 )
Loss on early extinguishment of debt     -       -       (3,796 )     (5,772 )
Earnings before income taxes     56,786       6,986       111,793       5,254  
(Provision for)/benefit from income taxes     (18,595 )     (202 )     (33,418 )     4,781  
Net earnings   $ 38,191     $ 6,784     $ 78,375     $ 10,035  
                                 
Earnings per share:                                
Basic                                
      Earnings per share   $ 1.05     $ 0.19     $ 2.17     $ 0.30  
      Weighted average shares outstanding     36,226       35,216       36,060       33,541  
Diluted                                
      Earnings per share   $ 0.99     $ 0.19     $ 2.05     $ 0.30  
      Weighted average shares outstanding     38,865       35,761       38,771       34,010  
                                       
 
Meritage Homes Corporation and Subsidiaries
Consolidated Balance Sheets
(In thousands)
(unaudited)
 
    September 30, 2013   December 31, 2012
Assets:            
  Cash and cash equivalents   $ 177,584   $ 170,457
  Investments and securities     92,846     86,074
  Restricted cash     40,904     38,938
  Other receivables     35,711     20,290
  Real estate (1)     1,345,214     1,113,187
  Real estate not owned     481     -
  Deposits on real estate under option or contract     34,911     14,351
  Investments in unconsolidated entities     10,662     12,085
  Property and equipment, net     18,690     15,718
  Deferred tax asset     80,390     77,974
  Prepaid expenses and other assets     36,693     26,488
    Total assets   $ 1,874,086   $ 1,575,562
Liabilities:            
  Accounts payable   $ 76,647   $ 49,801
  Accrued liabilities     178,247     96,377
  Home sale deposits     28,183     12,377
  Liabilities related to real estate not owned     346     -
  Senior, senior subordinated, convertible senior notes and other borrowings     798,337     722,797
      Total liabilities     1,081,760     881,352
Stockholders' Equity:            
  Preferred stock, par value $0.01     -     -
  Common stock, par value $0.01     362     356
  Additional paid-in capital     409,984     390,249
  Retained earnings     381,980     303,605
      Total stockholders' equity     792,326     694,210
    Total liabilities and stockholders' equity   $ 1,874,086   $ 1,575,562
(1)Real estate -Allocated costs:            
  Homes under contract under construction   $ 316,508   $ 192,948
  Unsold homes, completed and under construction     123,602     107,466
  Model homes     78,017     62,411
  Finished home sites and home sites under development     721,492     634,106
  Land held for development     53,053     56,118
  Land held for sale     19,630     21,650
  Communities in mothball status     32,912     38,488
      Total real estate   $ 1,345,214   $ 1,113,187
                   
   
Supplemental Information and Non-GAAP Financial Disclosures (In thousands - unaudited):  
   
    Three Months Ended September 30     Nine Months Ended September 30  
    2013     2012     2013     2012  
Depreciation and amortization   $ 2,511     $ 2,299     $ 7,169     $ 5,913  
                                 
Summary of Capitalized Interest:                                
Capitalized interest, beginning of period   $ 26,294     $ 17,836     $ 21,600     $ 14,810  
Interest incurred     12,508       11,654       37,876       33,819  
Interest expensed     (3,462 )     (5,009 )     (13,113 )     (18,718 )
Interest amortized to cost of home, land closings and impairments     (6,342 )     (4,296 )     (17,365 )     (9,726 )
Capitalized interest, end of period   $ 28,998     $ 20,185     $ 28,998     $ 20,185  
                                 
    September 30, 2013     December 31, 2012              
Notes payable and other borrowings   $ 798,337     $ 722,797                  
  Less: cash and cash equivalents, restricted cash, and investments and securities     (311,334 )     (295,469 )                
Net debt     487,003       427,328                  
Stockholders' equity     792,326       694,210                  
Total capital   $ 1,279,329     $ 1,121,538                  
Net debt-to-capital     38.1 %     38.1 %                
                                 
   
Meritage Homes Corporation and Subsidiaries  
Consolidated Statements of Cash Flows  
(In thousands) (unaudited)  
   
    Nine Months Ended September 30  
    2013     2012  
Cash flows from operating activities:                
  Net earnings   $ 78,375     $ 10,035  
  Adjustments to reconcile net earnings to net cash used in operating activities:                
    Depreciation and amortization     7,169       5,913  
    Stock-based compensation     7,040       6,095  
    Loss on early extinguishment of debt     3,796       5,772  
    Excess income tax benefit from stock-based awards     (1,733 )     -  
    Equity in earnings from unconsolidated entities     (9,555 )     (6,626 )
    Deferred tax asset valuation benefit     (4,614 )     (7,709 )
    Distribution of earnings from unconsolidated entities     10,796       6,118  
    Other     3,071       1,976  
  Changes in assets and liabilities:                
    Increase in real estate     (221,668 )     (190,509 )
    (Increase)/decrease in deposits on real estate under option or contract     (20,425 )     2,192  
    Increase in receivables and prepaid expenses and other assets     (14,224 )     (1,882 )
    Increase in accounts payable and accrued liabilities     106,862       31,204  
    Increase in home sale deposits     15,584       5,169  
    Net cash used in operating activities     (39,526 )     (132,252 )
Cash flows from investing activities:                
  Purchases of property and equipment     (9,717 )     (7,139 )
  Maturities of investments and securities     132,900       190,701  
  Payments to purchase investments and securities     (139,672 )     (109,798 )
  Other     (20,334 )     (3,020 )
    Net cash (used in)/provided by investing activities     (36,823 )     70,744  
Cash flows from financing activities:                
  Repayments of senior and senior subordinated notes     (102,822 )     (315,080 )
  Proceeds from issuance of senior notes     175,000       426,500  
  Proceeds from sale of common stock, net     -       87,125  
  Other     11,298       (5,600 )
    Net cash provided by financing activities     83,476       192,945  
Net increase in cash and cash equivalents     7,127       131,437  
Beginning cash and cash equivalents     170,457       173,612  
Ending cash and cash equivalents (2)   $ 177,584     $ 305,049  
                 

(2) Ending cash and cash equivalents as of September 30, 2013 and September 30, 2012 excludes investments and securities and restricted cash totaling $134 million and $82 million, respectively.

 
Meritage Homes Corporation and Subsidiaries
Operating Data
(Dollars in thousands)
(unaudited)
 
    Three Months Ended
    September 30, 2013   September 30, 2012
    Homes   Value   Homes   Value
Homes Closed:                    
  Arizona   301   $ 96,562   243   $ 59,519
  California   259     113,954   244     88,748
  Colorado   104     43,033   83     27,639
  Nevada   1     245   22     4,113
  West Region   665     253,794   592     180,019
  Texas   509     136,249   434     104,041
  Central Region   509     136,249   434     104,041
  Carolinas   62     24,361   40     14,459
  Florida   176     66,464   131     36,361
  Tennessee   6     2,279   -     -
  East Region   244     93,104   171     50,820
  Total   1,418   $ 483,147   1,197   $ 334,880
Homes Ordered:                    
  Arizona   234   $ 80,748   229   $ 70,315
  California   165     84,741   248     94,974
  Colorado   96     44,178   88     28,925
  Nevada   -     -   22     4,384
  West Region   495     209,667   587     198,598
  Texas   545     157,868   425     106,116
  Central Region   545     157,868   425     106,116
  Carolinas   72     28,971   36     12,709
  Florida   177     74,312   156     49,329
  Tennessee   11     3,106   -     -
  East Region   260     106,389   192     62,038
  Total   1,300   $ 473,924   1,204   $ 366,752
                       
     
    Nine Months Ended
    September 30, 2013   September 30, 2012
    Homes   Value   Homes   Value
Homes Closed:                    
  Arizona   744   $ 233,447   593   $ 153,190
  California   784     329,414   489     172,575
  Colorado   298     112,238   227     75,816
  Nevada   38     8,900   39     7,402
  West Region   1,864     683,999   1,348     408,983
  Texas   1,312     343,924   1,190     277,436
  Central Region   1,312     343,924   1,190     277,436
  Carolinas   153     57,849   84     30,513
  Florida   456     161,846   376     103,310
  Tennessee   6     2,279   -     -
  East Region   615     221,974   460     133,823
  Total   3,791   $ 1,249,897   2,998   $ 820,242
Homes Ordered:                    
  Arizona   886   $ 284,139   738   $ 200,258
  California   730     331,933   714     258,053
  Colorado   358     154,251   266     88,012
  Nevada   24     5,795   61     11,455
  West Region   1,998     776,118   1,779     557,778
  Texas   1,689     472,507   1,370     332,007
  Central Region   1,689     472,507   1,370     332,007
  Carolinas   218     87,461   109     38,841
  Florida   568     228,527   443     132,284
  Tennessee   11     3,106   -     -
  East Region   797     319,094   552     171,125
  Total   4,484   $ 1,567,719   3,701   $ 1,060,910
                     
Order Backlog:                    
  Arizona   391   $ 131,508   303   $ 92,300
  California   261     127,107   307     113,126
  Colorado   202     92,102   109     35,689
  Nevada   -     -   27     5,129
  West Region   854     350,717   746     246,244
  Texas   877     260,900   576     148,065
  Central Region   877     260,900   576     148,065
  Carolinas   114     46,953   49     16,944
  Florida   315     137,691   247     78,269
  Tennessee   30     9,319   -     -
  East Region   459     193,963   296     95,213
  Total   2,190   $ 805,580   1,618   $ 489,522
                     
 
Meritage Homes Corporation and Subsidiaries
Operating Data
(unaudited)
 
    Three Months Ended
    September 30, 2013   September 30, 2012
    Beg.   End   Beg.   End
Active Communities:                
  Arizona   36   39   32   34
  California   13   18   20   19
  Colorado   12   12   8   8
  Nevada   -   -   2   2
  West Region   61   69   62   63
  Texas   71   73   68   68
  Central Region   71   73   68   68
  Carolinas   13   15   5   7
  Florida   20   19   16   15
  Tennessee   -   3   -   -
  East Region   33   37   21   22
  Total   165   179   151   153
                 
                 
    Nine Months Ended
    September 30, 2013   September 30, 2012
    Beg.   End   Beg.   End
Active Communities:                
  Arizona   38   39   37   34
  California   17   18   20   19
  Colorado   12   12   10   8
  Nevada   1   -   2   2
  West Region   68   69   69   63
  Texas   65   73   67   68
  Central Region   65   73   67   68
  Carolinas   7   15   3   7
  Florida   18   19   18   15
  Tennessee   -   3   -   -
  East Region   25   37   21   22
  Total   158   179   157   153
                 

About Meritage Homes Corporation
Meritage Homes is the ninth-largest public homebuilder in the United States, based on 4,238 homes closed in 2012. Meritage builds and sells single-family homes for first-time, move-up, luxury and active adult buyers across the Western, Southern and Southeastern United States. As of September 30, 2013, the company had 179 actively selling communities in markets including Sacramento, San Francisco's East Bay, the Central Valley and Southern California; Houston, Dallas-Ft. Worth, Austin and San Antonio, Texas; Phoenix/Scottsdale and Tucson, Arizona; Denver, Colorado; Orlando and Tampa, Florida; Raleigh and Charlotte, North Carolina and Nashville, Tennessee.

Meritage has designed and built more than 75,000 homes in its 27-year history, and has a reputation for its distinctive style, quality construction, and positive customer experience. Meritage is the industry leader in energy efficient homebuilding and in 2013, Meritage received the U.S. Environmental Protection Agency's ENERGY STAR Partner of the Year for Sustained Excellence Award, for its innovation and industry leadership in energy efficient homebuilding. Meritage was the first national homebuilder to be 100 percent ENERGY STAR® qualified in every home it builds, and far exceeds ENERGY STAR standards today.

For more information, visit meritagehomes.com.

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include management's expectations for continued growth of the housing market, plans to enter new markets and expand in its existing markets, and management's projected home closings, home closing revenue and earnings per diluted share for 2013.

Such statements are based upon the current beliefs and expectations of Company management, and current market conditions, which are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. The Company makes no commitment, and disclaims any duty, to update or revise any forward-looking statements to reflect future events or changes in these expectations.

Meritage's business is subject to a number of risks and uncertainties. As a result of those risks and uncertainties, the Company's stock and note prices may fluctuate dramatically. The risks and uncertainties include but are not limited to the following: weakness in the homebuilding market resulting from an unexpected setback in the current economic recovery; the availability of finished lots and undeveloped land; interest rates and changes in the availability and pricing of residential mortgages; the availability and cost of materials and labor; adverse changes in tax laws that benefit our homebuyers; the ability of our potential buyers to sell their existing homes; cancellation rates and home prices in our markets; inflation in the cost of materials used to construct homes; the adverse effect of slower order absorption rates; potential write-downs or write-offs of assets, including pre-acquisition costs and deposits; our potential exposure to natural disasters; competition; the adverse impacts of cancellations resulting from small deposits relating to our sales contracts; construction defect and home warranty claims; our success in prevailing on contested tax positions; our ability to preserve our deferred tax assets and use them within the statutory time limits; delays and risks associated with land development; our ability to obtain performance bonds in connection with our development work; the liquidity of our joint ventures and the ability of our joint venture partners to meet their obligations to us and the joint venture; the loss of key personnel; changes in or our failure to comply with laws and regulations; our lack of geographic diversification; fluctuations in quarterly operating results; our financial leverage and level of indebtedness; our ability to take certain actions because of restrictions contained in the indentures for our senior and senior subordinated notes and our ability to raise additional capital when and if needed; our credit ratings; successful integration of future acquisitions; government regulations and legislative or other initiatives that seek to restrain growth or new housing construction or similar measures; acts of war; the replication of our "Green" technologies by our competitors; our exposure to information technology failures and security breaches; and other factors identified in documents filed by the company with the Securities and Exchange Commission, including those set forth in our Form 10-K for the year ended December 31, 2012 under the caption "Risk Factors," which can be found on our website.

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