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Form 8-K Meritage Homes CORP For: Jul 28

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July 28, 2021 4:04 PM EDT

Exhibit 99.1
mhlogo1linetaga12a.jpg
 
 
Contacts:Emily Tadano, VP Investor Relations
(480) 515-8979 (office)
investors@meritagehomes.com

Meritage Homes reports second quarter 2021 results, including record gross margin of 27.3%, 11% sequential quarterly increase in community count to 226 and 83% increase in diluted EPS

SCOTTSDALE, Ariz., July 28, 2021 - Meritage Homes Corporation (NYSE: MTH), a leading U.S. homebuilder, reported second quarter results for the period ended June 30, 2021.

Summary Operating Results (unaudited)
(Dollars in thousands, except per share amounts)
 Three Months Ended June 30,Six Months Ended June 30,
 20212020% Chg20212020% Chg
Homes closed (units)3,273 2,770 18 %6,163 5,086 21 %
Home closing revenue$1,264,643 $1,031,591 23 %$2,344,625 $1,922,008 22 %
Average sales price - closings$386 $372 4 %$380 $378 1 %
Home orders (units)3,542 3,597 (2)%7,000 6,699 4 %
Home order value$1,499,672 $1,290,454 16 %$2,848,802 $2,470,391 15 %
Average sales price - orders$423 $359 18 %$407 $369 10 %
Ending backlog (units)5,509 4,395 25 %
Ending backlog value$2,317,534 $1,648,451 41 %
Average sales price - backlog$421 $375 12 %
Earnings before income taxes$215,651 $115,862 86 %$381,628 $202,695 88 %
Net earnings$167,389 $90,678 85 %$299,232 $161,830 85 %
Diluted EPS$4.36 $2.38 83 %$7.80 $4.20 86 %



1

MANAGEMENT COMMENTS
“Homebuying demand in the second quarter of 2021 remained strong and steady as macroeconomic conditions improved,” said Steven J. Hilton, executive chairman of Meritage Homes. "Our second quarter 2021 average absorption pace was 5.5 per month, up from 5.0 in the second quarter of 2020 even as we metered our orders pace. Although our orders pace was strong, a 10% decline in average community count resulted in a modest 2% decline in quarterly sales orders to 3,542 homes this quarter, compared to the exceptionally strong sales orders in the second quarter of 2020. Demonstrating our high level of execution and ability to navigate ongoing supply chain challenges, we closed 3,273 homes, the best second quarter of closings in company history which was also 18% greater than prior year, as well as generated the Company's all-time high quarterly gross margin of 27.3%.

Mr. Hilton continued, “As we get closer to attaining our mid-2022 goal of 300 communities, we exceeded our own expectations and had 226 active communities at June 30, 2021, reflecting an 11% sequential quarterly increase from 203 and, we believe, the start of meaningful growth. We opened 45 new communities this quarter and our strong pipeline of community openings over the next four quarters should position us well both to address market demand with a greater volume of affordable entry-level and first move-up homes and to drive continued profitability.”

“Our strategy continues to successfully leverage demographic trends in homebuying for millennials and baby boomers, as well as market conditions of constrained housing supply and sustained lower interest rates,” said Phillippe Lord, chief executive officer of Meritage Homes. “During the quarter, we invested significantly in growth by spending a record $551 million on land acquisition and development. Approximately 9,000 net new lots were secured, a 114% increase over prior year, bringing our total lot supply to over 63,000. Inclusive of this additional spend, our net debt to capital ratio was 15.4% this quarter, as we remain committed to sustained growth, a strong balance sheet, and maintaining liquidity.”

"For the second quarter of 2021, home closing revenue of $1.3 billion was 23% greater than last year," Mr. Lord remarked. "Leveraging strong operational efficiencies and favorable pricing power, our home closing gross margin expanded 590 bps year-over-year from 21.4% to 27.3% this quarter and our diluted EPS increased 83% year-over-year from $2.38 to $4.36 after the impact of $18.2 million of early debt extinguishment."

Mr. Lord added, “Based on our current forecast and confidence in delivering our backlog, we are projecting 2021 home closings of approximately 12,500-13,000 and 2021 home closing revenue in the range of $5.00-5.25 billion. In addition, we anticipate full year home closing gross margin of around 27.5% and an effective tax rate of 22.5-23.0%, which we expect will translate into approximately $18.55-19.45 of diluted EPS for 2021.”

"Housing demand remains strong and we are still able to sell our homes soon after they are released. Looking ahead, we will continue to adjust and maximize prices based on market conditions and to align our orders pace with our production schedule, which is affected by supply chain constraints. With notable lumber price declines over the last couple months, we expect our net construction costs will stay flat or decline over the next couple of quarters. We believe that this improvement coupled with our ongoing community count growth will contribute to strong financial results in the short- and medium-term," concluded Mr. Lord.

SECOND QUARTER RESULTS
•The total orders of 3,542 for the second quarter of 2021 reflected a decrease of 2% year-over-year, driven by a 9% increase in average absorption pace from 5.0 to 5.5 per month, which was offset by a 10% decrease in average communities. Entry-level represented 81% of second quarter 2021 orders, compared to 70% in the
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same quarter in 2020. Strong housing demand enabled Meritage to achieve higher average absorptions in the East and Central regions, which were up 25% and 8%, respectively. Average absorption pace in the West region was relatively flat year-over-year. The tight housing supply conditions combined with strong homebuying demand created considerable pricing power in the market, which generated year-over-year increases in average sales price ("ASP") for both orders and backlog. Even as our product mix continued to shift toward entry-level homes, ASP on orders in the second quarter of 2021 exceeded $420,000.

•The 23% year-over-year increase in home closing revenue to $1.3 billion for the second quarter of 2021 was due to 18% higher home closing volume and a 4% increase in closing ASP, which is primarily attributable to the sustained strength in housing demand and the significant price increases the market has allowed us to push through in recent quarters, despite the product mix shift toward entry-level homes.

•The 590 bps improvement in second quarter 2021 home closing gross margin to 27.3% from 21.4% a year ago mainly resulted from efficiencies gained from higher ASP and leveraging of our fixed costs on greater home closing volume, which more than offset higher lumber prices and increases in other commodity costs.

•Selling, general and administrative expenses ("SG&A") were 9.2% of second quarter 2021 home closing revenue, a 110 bps improvement over 10.3% in the prior year. This improvement was due to greater leverage of fixed expenses on higher home closing revenue, in addition to cost savings from technology enhancements, particularly related to our sales and marketing efforts.

•Loss on early extinguishment of debt of $18.2 million was recognized in the second quarter of 2021 in connection with the early redemption in April 2021 of the 7.00% senior notes due 2022 ("2022 Notes").

•The second quarter effective income tax rate was 22.4% in 2021 compared to 21.7% in 2020. The reduced rate in both years primarily stems from eligible energy tax credits on qualifying energy-efficient homes closed under the Taxpayer Certainty and Disaster Tax Relief Act enacted in December 2019.

•Second quarter 2021 pre-tax margin increased 560 bps to 16.8%, compared to 11.2% in the second quarter of 2020. Net earnings were $167.4 million ($4.36 per diluted share) for the second quarter of 2021, an 85% increase over $90.7 million ($2.38 per diluted share) for the second quarter of 2020. Strong earnings growth reflected higher closing volume, pricing power, expanded gross margin and improved overhead leverage, which led to an 83% year-over-year improvement in earnings per diluted share.

YEAR TO DATE RESULTS
•Total orders for the first half of 2021 increased 4% year-over-year, driven by a 21% increase in absorption pace, partially offset by a 14% decrease in average community count compared to the first half of 2020.

•Home closing revenue increased 22% in the first half of 2021 to $2.3 billion due to 21% higher home closing volume and a 1% increase in closing ASP given the favorable pricing environment.
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•The 530 bps improvement for home closing gross margin in the first half of 2021 to 26.1% from 20.8% primarily resulted from higher ASP and better leveraging of fixed costs on greater home closing volume.

•SG&A expenses improved 100 bps year-over-year to 9.5% of home closing revenue, compared to 10.5% in the first half of 2020, due to operating efficiencies and improved leverage of fixed expenses on higher home closing volume and revenue.

•Loss on early extinguishment of debt of $18.2 million was recognized in the first half of 2021 in connection with the early redemption of the 2022 Notes.

•The effective tax rate for the first half of 2021 was 21.6%, compared to 20.2% for the first half of 2020. The effective tax rate in both periods benefited from tax credits earned for qualifying energy-efficient homes under the Taxpayer Certainty and Disaster Tax Relief Act enacted in December 2019.

•Net earnings were $299.2 million ($7.80 per diluted share) for the first half of 2021, an 85% increase over $161.8 million ($4.20 per diluted share) for the first half of 2020, primarily reflecting higher closing volume, pricing power, expanded gross margin and greater overhead leverage in 2021.

BALANCE SHEET
•Cash and cash equivalents at June 30, 2021 totaled $684.4 million, compared to $745.6 million at December 31, 2020, reflecting investments in real estate and development and share repurchases. Real estate assets increased from $2.8 billion at December 31, 2020 to $3.3 billion at June 30, 2021, reflecting an increase in homes under contract under construction and finished homesites and homesites under development.

•A total of over 63,000 lots were owned or controlled as of June 30, 2021, compared to approximately 43,000 total lots at June 30, 2020. In the second quarter of 2021, about 9,000 net new lots were added, representing 54 future communities, of which 80% are for entry-level communities.

•Debt-to-capital and net debt-to-capital ratios were 30.6% and 15.4%, respectively, at June 30, 2021, compared to 30.3% and 10.5%, respectively, at December 31, 2020.
•In the first half of 2021, we repurchased 300,000 shares of stock for a total of $27.5 million, of which 200,000 shares totaling $19.1 million were repurchased during the second quarter of 2021.

•On April 15, 2021, the Company closed on its offering of $450 million 3.875% senior notes due 2029 and received approximately $444 million in net proceeds. On March 31, 2021, the company issued a notice of redemption for April 30, 2021 for all of its $300 million aggregate principal amount of the 2022 Notes. The redemption of the 2022 Notes resulted in $18.2 million of early extinguishment of debt charges in the second quarter of 2021.

4

CONFERENCE CALL
Management will host a conference call to discuss its second quarter results at 7:00 a.m. Pacific Time (10:00 a.m. Eastern Time) on Thursday, July 29, 2021. The call will be webcast live with an accompanying slideshow available on the "Investor Relations" page of the Company's website at https://investors.meritagehomes.com. Telephone participants will be able to join by dialing in to 1-877-407-6951 US toll free or 1-412-902-0046 on the day of the call.
A replay of the call will be available via webcast beginning at approximately 11:00 a.m. Pacific Time (2:00 p.m. Eastern Time) on July 29, 2021 and extending through August 12, 2021, at
https://investors.meritagehomes.com.
5


Meritage Homes Corporation and Subsidiaries
Consolidated Income Statements
(In thousands, except per share data)
(Unaudited)

 
 Three Months Ended June 30,
20212020Change $Change %
Homebuilding:
Home closing revenue$1,264,643 $1,031,591 $233,052 23 %
Land closing revenue12,956 1,488 11,468 771 %
Total closing revenue1,277,599 1,033,079 244,520 24 %
Cost of home closings(919,342)(810,895)108,447 13 %
Cost of land closings(13,288)(2,936)10,352 353 %
Total cost of closings(932,630)(813,831)118,799 15 %
Home closing gross profit345,301 220,696 124,605 56 %
Land closing gross loss(332)(1,448)1,116 (77)%
Total closing gross profit344,969 219,248 125,721 57 %
Financial Services:
Revenue5,665 4,478 1,187 27 %
Expense(2,367)(1,758)609 35 %
Earnings from financial services unconsolidated entities and other, net
1,317 1,069 248 23 %
Financial services profit4,615 3,789 826 22 %
Commissions and other sales costs(73,889)(70,408)3,481 5 %
General and administrative expenses(43,156)(36,176)6,980 19 %
Interest expense(77)(2,105)(2,028)(96)%
Other income, net1,377 1,514 (137)(9)%
Loss on early extinguishment of debt(18,188)— 18,188 n/a
Earnings before income taxes215,651 115,862 99,789 86 %
Provision for income taxes(48,262)(25,184)23,078 92 %
Net earnings$167,389 $90,678 $76,711 85 %
Earnings per common share:
BasicChange $ or sharesChange %
Earnings per common share$4.43 $2.41 $2.02 84 %
Weighted average shares outstanding37,818 37,599 219 1 %
Diluted
Earnings per common share$4.36 $2.38 $1.98 83 %
Weighted average shares outstanding38,377 38,169 208 1 %




6

 Six Months Ended June 30,
20212020Change $Change %
Homebuilding:
Home closing revenue$2,344,625 $1,922,008 $422,617 22 %
Land closing revenue16,755 12,084 4,671 39 %
Total closing revenue2,361,380 1,934,092 427,288 22 %
Cost of home closings(1,732,669)(1,522,952)209,717 14 %
Cost of land closings(16,540)(13,149)3,391 26 %
Total cost of closings(1,749,209)(1,536,101)213,108 14 %
Home closing gross profit611,956 399,056 212,900 53 %
Land closing gross profit/(loss)215 (1,065)1,280 120 %
Total closing gross profit612,171 397,991 214,180 54 %
Financial Services:
Revenue10,416 8,390 2,026 24 %
Expense(4,538)(3,493)1,045 30 %
Earnings from financial services unconsolidated entities and other, net
2,497 1,730 767 44 %
Financial services profit8,375 6,627 1,748 26 %
Commissions and other sales costs(141,633)(131,581)10,052 8 %
General and administrative expenses(81,105)(70,346)10,759 15 %
Interest expense(167)(2,121)(1,954)(92)%
Other income, net2,175 2,125 50 2 %
Loss on early extinguishment of debt(18,188)— 18,188 n/a
Earnings before income taxes381,628 202,695 178,933 88 %
Provision for income taxes(82,396)(40,865)41,531 102 %
Net earnings$299,232 $161,830 $137,402 85 %
Earnings per common share:
BasicChange $ or sharesChange %
Earnings per common share$7.93 $4.28 $3.65 85 %
Weighted average shares outstanding37,731 37,842 (111)— %
Diluted
Earnings per common share$7.80 $4.20 $3.60 86 %
Weighted average shares outstanding38,357 38,512 (155)— %


7

Meritage Homes Corporation and Subsidiaries
Consolidated Balance Sheets
(In thousands)
(Unaudited)
 
June 30, 2021December 31, 2020
Assets:
Cash and cash equivalents$684,374 $745,621 
Other receivables131,104 98,573 
Real estate (1)
3,251,787 2,778,039 
Deposits on real estate under option or contract74,397 59,534 
Investments in unconsolidated entities3,943 4,350 
Property and equipment, net36,224 38,933 
Deferred tax asset33,502 36,040 
Prepaids, other assets and goodwill106,222 103,308 
Total assets$4,321,553 $3,864,398 
Liabilities:
Accounts payable$215,221 $175,250 
Accrued liabilities282,762 296,121 
Home sale deposits33,958 25,074 
Loans payable and other borrowings19,534 23,094 
Senior notes, net1,141,934 996,991 
Total liabilities1,693,409 1,516,530 
Stockholders' Equity:
Preferred stock— — 
Common stock376 375 
Additional paid-in capital436,805 455,762 
Retained earnings2,190,963 1,891,731 
Total stockholders’ equity2,628,144 2,347,868 
Total liabilities and stockholders’ equity$4,321,553 $3,864,398 

(1) Real estate – Allocated costs:
Homes under contract under construction$1,069,511 $873,365 
Unsold homes, completed and under construction353,047 357,861 
Model homes73,846 82,502 
Finished home sites and home sites under development1,755,383 1,464,311 
Total real estate$3,251,787 $2,778,039 




8

Supplemental Information and Non-GAAP Financial Disclosures (Dollars in thousands – unaudited):
 
 Three Months Ended June 30,Six Months Ended June 30,
 2021202020212020
Depreciation and amortization$6,879 $7,540 $13,414 $14,551 
Summary of Capitalized Interest:
Capitalized interest, beginning of period$57,540 $78,162 $58,940 $82,014 
Interest incurred16,321 17,550 32,413 34,085 
Interest expensed(77)(2,105)(167)(2,121)
Interest amortized to cost of home and land closings(17,074)(20,725)(34,476)(41,096)
Capitalized interest, end of period$56,710 $72,882 $56,710 $72,882 
 June 30, 2021December 31, 2020
Senior notes, net, loans payable and other borrowings$1,161,468 $1,020,085 
Stockholders' equity2,628,144 2,347,868 
Total capital$3,789,612 $3,367,953 
Debt-to-capital30.6 %30.3 %
Senior notes, net, loans payable and other borrowings$1,161,468 $1,020,085 
Less: cash and cash equivalents(684,374)(745,621)
Net debt$477,094 $274,464 
Stockholders’ equity2,628,144 2,347,868 
Total net capital$3,105,238 $2,622,332 
Net debt-to-capital15.4 %10.5 %
 


9

Meritage Homes Corporation and Subsidiaries
Consolidated Statements of Cash Flows 
(In thousands)
(Unaudited)
Six Months Ended June 30,
 20212020
Cash flows from operating activities:
Net earnings$299,232 $161,830 
Adjustments to reconcile net earnings to net cash (used in)/provided by operating activities:
Depreciation and amortization13,414 14,551 
Stock-based compensation8,590 9,594 
Loss on early extinguishment of debt18,188 — 
Equity in earnings from unconsolidated entities(1,807)(1,691)
Distribution of earnings from unconsolidated entities2,215 1,491 
Other2,266 2,548 
Changes in assets and liabilities:
(Increase)/decrease in real estate(469,733)9,655 
(Increase)/decrease in deposits on real estate under option or contract(14,863)2,225 
(Increase)/decrease in other receivables, prepaids and other assets(36,390)3,469 
Increase in accounts payable and accrued liabilities26,532 34,772 
Increase/(decrease) in home sale deposits8,884 (999)
Net cash (used in)/provided by operating activities(143,472)237,445 
Cash flows from investing activities:
Investments in unconsolidated entities(1)(3)
Distributions of capital from unconsolidated entities— 1,000 
Purchases of property and equipment(10,970)(10,343)
Proceeds from sales of property and equipment292 259 
Maturities/sales of investments and securities2,697 632 
Payments to purchase investments and securities(2,697)(632)
Net cash used in investing activities(10,679)(9,087)
Cash flows from financing activities:
Repayment of loans payable and other borrowings(5,758)(2,389)
Repayment of senior notes(317,690)— 
Proceeds from issuance of senior notes450,000 — 
Payment of debt issuance costs(6,102)— 
Repurchase of shares(27,546)(60,813)
Net cash provided by/(used in) financing activities92,904 (63,202)
Net (decrease)/increase in cash and cash equivalents(61,247)165,156 
Beginning cash and cash equivalents745,621 319,466 
Ending cash and cash equivalents $684,374 $484,622 
 

10

Meritage Homes Corporation and Subsidiaries
Operating Data
(Dollars in thousands)
(Unaudited)
 Three Months Ended June 30,
 20212020
 HomesValueHomesValue
Homes Closed:
Arizona481 $165,990 427 $142,359 
California318 198,232 247 150,343 
Colorado145 74,987 184 89,087 
West Region944 439,209 858 381,789 
Texas1,154 403,838 914 295,975 
Central Region1,154 403,838 914 295,975 
Florida443 160,377 367 138,608 
Georgia171 62,477 166 58,698 
North Carolina330 119,838 288 98,738 
South Carolina81 28,209 98 30,206 
Tennessee150 50,695 79 27,577 
East Region1,175 421,596 998 353,827 
Total3,273 $1,264,643 2,770 $1,031,591 
Homes Ordered:
Arizona624 $256,804 737 $231,057 
California344 217,228 388 224,639 
Colorado181 104,134 153 70,831 
West Region1,149 578,166 1,278 526,527 
Texas1,101 428,375 1,215 392,502 
Central Region1,101 428,375 1,215 392,502 
Florida468 176,118 390 136,362 
Georgia193 77,309 190 65,434 
North Carolina390 153,032 326 106,383 
South Carolina88 32,595 95 29,262 
Tennessee153 54,077 103 33,984 
East Region1,292 493,131 1,104 371,425 
Total3,542 $1,499,672 3,597 $1,290,454 
11

 Six Months Ended June 30,
 20212020
 HomesValueHomesValue
Homes Closed:
Arizona891 $303,258 886 $293,603 
California595 370,131 455 285,145 
Colorado320 159,250 370 180,771 
West Region1,806 832,639 1,711 759,519 
Texas2,117 722,223 1,688 551,884 
Central Region2,117 722,223 1,688 551,884 
Florida860 301,205 603 232,397 
Georgia317 117,616 281 100,696 
North Carolina629 226,851 510 178,155 
South Carolina166 56,055 151 47,611 
Tennessee268 88,036 142 51,746 
East Region2,240 789,763 1,687 610,605 
Total6,163 $2,344,625 5,086 $1,922,008 
Homes Ordered:
Arizona1,226 $479,239 1,307 $414,428 
California630 390,619 740 449,571 
Colorado350 193,913 352 169,296 
West Region2,206 1,063,771 2,399 1,033,295 
Texas2,216 820,343 2,274 735,492 
Central Region2,216 820,343 2,274 735,492 
Florida947 355,227 707 255,804 
Georgia357 138,866 346 120,417 
North Carolina809 310,719 613 207,638 
South Carolina164 58,997 182 57,176 
Tennessee301 100,879 178 60,569 
East Region2,578 964,688 2,026 701,604 
Total7,000 $2,848,802 6,699 $2,470,391 
Order Backlog:
Arizona1,328 $520,034 932 $307,302 
California479 295,198 430 256,694 
Colorado238 139,437 178 86,158 
West Region2,045 954,669 1,540 650,154 
Texas1,729 670,583 1,634 556,787 
Central Region1,729 670,583 1,634 556,787 
Florida637 268,971 475 187,241 
Georgia196 79,207 198 69,559 
North Carolina634 247,292 322 109,026 
South Carolina118 44,175 102 34,054 
Tennessee150 52,637 124 41,630 
East Region1,735 692,282 1,221 441,510 
Total5,509 $2,317,534 4,395 $1,648,451 

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Meritage Homes Corporation and Subsidiaries
Operating Data
(Unaudited)

 
 Three Months Ended June 30,
 20212020
 EndingAverageEndingAverage
Active Communities:
Arizona38 35.5 38 35.5 
California20 19.5 28 28.5 
Colorado17 14.5 13 13.0 
West Region75 69.5 79 77.0 
Texas64 61.5 68 73.0 
Central Region64 61.5 68 73.0 
Florida34 32.0 36 35.0 
Georgia10 11.0 17 16.0 
North Carolina26 25.0 21 20.5 
South Carolina7 6.5 5 6.0 
Tennessee10 9.0 11 11.5 
East Region87 83.5 90 89.0 
Total226 214.5 237 239.0 
 Six Months Ended June 30,
 20212020
 EndingAverageEndingAverage
Active Communities:
Arizona38 34.6 38 34.5 
California20 18.3 28 26.0 
Colorado17 13.3 13 15.5 
West Region75 66.2 79 76.0 
Texas64 62.0 68 72.5 
Central Region64 62.0 68 72.5 
Florida34 31.6 36 34.5 
Georgia10 9.7 17 17.5 
North Carolina26 23.7 21 23.0 
South Carolina7 6.3 5 7.0 
Tennessee10 8.3 11 10.0 
East Region87 79.6 90 92.0 
Total226 207.8 237 240.5 


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About Meritage Homes Corporation
Meritage Homes is the sixth-largest public homebuilder in the United States, based on homes closed in 2020. The Company offers a variety of homes that are designed with a focus on entry-level and first move-up buyers in Arizona, California, Colorado, Texas, Florida, Georgia, North Carolina, South Carolina and Tennessee.
Meritage Homes has delivered over 145,000 homes in its 36-year history, and has a reputation for its distinctive style, quality construction, and award-winning customer experience. The Company is the industry leader in energy-efficient homebuilding and an eight-time recipient of the U.S. Environmental Protection Agency’s ENERGY STAR® Partner of the Year for Sustained Excellence Award since 2013 for innovation and industry leadership in energy efficient homebuilding.
For more information, visit www.meritagehomes.com.
The information included in this press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include expectations about the housing market in general; projected 2021 home closings, home closing revenue, gross margins, effective tax rate, diluted earnings per share and future community counts; trends in construction costs; and expectations about our future results.
Such statements are based on the current beliefs and expectations of Company management and current market conditions, which are subject to significant uncertainties and fluctuations. Actual results may differ from those set forth in the forward-looking statements. The Company makes no commitment, and disclaims any duty, except as required by law, to update or revise any forward-looking statements to reflect future events or changes in these expectations. Meritage's business is subject to a number of risks and uncertainties. As a result of those risks and uncertainties, the Company's stock and note prices may fluctuate dramatically. These risks and uncertainties include, but are not limited to, the following: changes in interest rates and the availability and pricing of residential mortgages; inflation in the cost of materials used to develop communities and construct homes; supply chain constraints; our ability to obtain performance and surety bonds in connection with our development work; the ability of our potential buyers to sell their existing homes; legislation related to tariffs; the adverse effect of slow absorption rates; impairments of our real estate inventory; cancellation rates; competition; home warranty and construction defect claims; failures in health and safety performance; fluctuations in quarterly operating results; our level of indebtedness; our ability to obtain financing if our credit ratings are downgraded; our potential exposure to and impacts from natural disasters or severe weather conditions; the availability and cost of finished lots and undeveloped land; the success of our strategy to offer and market entry-level and first move-up homes; a change to
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the feasibility of projects under option or contract that could result in the write-down or write-off of earnest or option deposits; our limited geographic diversification; the replication of our energy-efficient technologies by our competitors; shortages in the availability and cost of subcontract labor; our exposure to information technology failures and security breaches and the impact thereof; the loss of key personnel; changes in tax laws that adversely impact us or our homebuyers; our inability to prevail on contested tax positions; failure to comply with laws and regulations; our compliance with government regulations; negative publicity that affects our reputation; disruptions to our business by COVID-19, fear of a similar event, and measures that federal, state and local governments and/or health authorities implement to address it; 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, 2020 and our Form 10-Q for the quarter ended March 31, 2021 under the caption "Risk Factors," which can be found on our website at www.investors.meritagehomes.com.

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