What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-04-26 compared with 2023-11-01 · 118 added, 154 removed, 559 unchanged (33% of the section changed)

3 unchanged sentences

(in thousands, except share amounts)

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Cash and cash equivalents $ 905,298 $ 921,227

16 unchanged sentences

Authorized 10,000,000 shares;

none issued and outstanding at September 30, 2023 and December 31, 2022

none issued and outstanding at March 31, 2024 and December 31, 2023

Common stock, par value $ 0.01 .

Authorized 125,000,000 shares;

36,449,906 and 36,571,393 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively

36,319,014 and 36,425,037 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

Additional paid-in capital 240,852 290,955

6 unchanged sentences

(in thousands, except per share amounts)

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Three Months Ended March 31,

Homebuilding:

11 unchanged sentences

Expense ( 3,003 ) ( 3,067 )

Earnings/(loss) from financial services unconsolidated entities and other, net 2,462 1,338 ( 3,074 ) 4,033

Financial services profit 5,700 4,842 6,066 12,255

(Loss)/earnings from financial services unconsolidated entities and other, net ( 4,040 ) 259

Financial services (loss)/profit ( 690 ) 2,923

Commissions and other sales costs ( 101,550 ) ( 82,846 )

1 unchanged sentence

Interest expense — —

Other income/(expense), net 13,331 ( 74 ) 35,037 ( 849 )

Loss on early extinguishment of debt ( 907 ) — ( 907 ) —

Other income, net 9,022 8,844

Earnings before income taxes 234,015 165,303

11 unchanged sentences

(in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

Net earnings $ 186,016 $ 131,301

Adjustments to reconcile net earnings to net cash provided by/(used in) operating activities:

Adjustments to reconcile net earnings to net cash provided by operating activities:

Depreciation and amortization 6,038 5,208

Stock-based compensation 6,114 6,225

Loss on early extinguishment of debt 907 —

Equity in earnings from unconsolidated entities ( 972 ) ( 1,346 )

2 unchanged sentences

Changes in assets and liabilities:

Increase in real estate ( 137,543 ) ( 990,106 )

(Increase)/decrease in real estate ( 193,431 ) 2,999

(Increase)/decrease in deposits on real estate under option or contract ( 11,449 ) 10,886

Increase in other receivables, prepaids and other assets ( 9,447 ) ( 89,177 )

Increase in accounts payable and accrued liabilities 37,085 118,636

Decrease/(increase) in other receivables, prepaids and other assets 53,769 ( 11,749 )

Increase/(decrease) in accounts payable and accrued liabilities 27,668 ( 31,687 )

Increase in home sale deposits 6,191 9,931

Net cash provided by/(used in) operating activities 460,092 ( 169,809 )

Net cash provided by operating activities 81,930 124,472

Cash flows from investing activities:

3 unchanged sentences

Proceeds from sales of property and equipment 79 128

Maturities/sales of investments and securities 750 1,032

Payments to purchase investments and securities ( 750 ) ( 1,032 )

Net cash used in investing activities ( 7,765 ) ( 8,728 )

1 unchanged sentence

Repayment of loans payable and other borrowings ( 6,922 ) ( 168 )

Repayment of senior notes ( 150,884 ) —

Dividends paid ( 27,239 ) ( 9,927 )

1 unchanged sentence

Net cash used in financing activities ( 90,094 ) ( 20,095 )

Net increase/(decrease) in cash and cash equivalents 187,194 ( 318,948 )

Net (decrease)/increase in cash and cash equivalents ( 15,929 ) 95,649

Cash and cash equivalents, beginning of period 921,227 861,561

20 unchanged sentences

We commenced our homebuilding operations in 1985 through our predecessor company, Monterey Homes.

Meritage Homes Corporation was incorporated in the state of Maryland in 1988 under the name of Homeplex Mortgage Investments Corporation and merged with Monterey Homes in 1996, at which time our name was changed to Monterey Homes Corporation and later ultimately to Meritage Homes Corporation.

Meritage Homes Corporation was incorporated in the state of Maryland in 1988 under the name of Emerald Mortgage Investments Corporation.

We changed our name to Homeplex Mortgage Investments Corporation in 1990 and merged with Monterey Homes in 1996, at which time our name was changed to Monterey Homes Corporation and later ultimately to Meritage Homes Corporation.

Since that time, we have engaged in homebuilding and related activities.

Meritage Homes Corporation operates as a holding company and has no independent assets or operations.

Its homebuilding construction, development and sales activities are conducted through its subsidiaries.

Our homebuilding construction, development and sales activities are conducted through our subsidiaries.

Our homebuilding activities are conducted under the name of Meritage Homes in each of our homebuilding markets.

At September 30, 2023, we were actively selling homes in 272 communities, with base prices ranging from approximately $ 231,000 to $ 1,054,000 .

At March 31, 2024, we were actively selling homes in 275 communities, with base prices ranging from approximately $ 203,000 to $ 1,074,000 .

Basis of Presentation .

8 unchanged sentences

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 $ 81.1 million and $ 161.5 million are included in Cash and cash equivalents at September 30, 2023 and December 31, 2022, respectively.

Amounts in transit from title companies or closing agents for home closings of approximately $ 85.3 million and $ 95.7 million are included in Cash and cash equivalents at March 31, 2024 and December 31, 2023, respectively.

Real estate inventory is stated at cost unless the community or land is determined to be impaired, at which point the inventory is written down to fair value as required by Accounting Standards Codification (“ASC”) 360-10, Property, Plant and Equipment (“ASC 360-10”) .

1 unchanged sentence

Land and development costs are typically allocated and transferred to homes when home construction begins.

Home construction costs are accumulated on a per-home basis, while selling and marketing costs are expensed as incurred.

Home construction costs are accumulated on a per-home basis, while commissions and other sales 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.

28 unchanged sentences

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 any non-refundable deposits and any related capitalized costs.

Our Deposits on real estate under option or contract were $ 93.5 million and $ 76.7 million as of September 30, 2023 and December 31, 2022, respectively.

Our Deposits on real estate under option or contract were $ 122.8 million and $ 111.4 million as of March 31, 2024 and December 31, 2023, respectively.

See Note 3 for additional information related to Deposits on real estate under option or contract.

16 unchanged sentences

The table below outlines our ROU assets and lease liabilities (in thousands):

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

ROU assets $ 49,376 $ 51,275

14 unchanged sentences

The table below outlines our surety bond and letter of credit obligations (in thousands):

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Outstanding Estimated work

7 unchanged sentences

Accrued Liabilities .

Accrued liabilities at September 30, 2023 and December 31, 2022 consisted of the following (in thousands):

September 30, 2023 December 31, 2022

Accrued liabilities at March 31, 2024 and December 31, 2023 consisted of the following (in thousands):

March 31, 2024 December 31, 2023

Accruals related to real estate development and construction activities $ 150,229 $ 137,489

12 unchanged sentences

We regularly review our warranty reserves and adjust them, as necessary, to reflect changes in trends as information becomes available.

Based on such reviews of warranty costs incurred, we did not adjust the warranty reserve balance in the three or nine months ended September 30, 2023 or 2022.

Included in the warranty reserve balances at September 30, 2023 and December 31, 2022 are case-specific reserves for warranty matters, as discussed in Note 15.

Based on such reviews of warranty costs incurred, we did not adjust the warranty reserve balance in the three months ended March 31, 2024 or 2023.

Included in the warranty reserve balances at March 31, 2024 and December 31, 2023 are case-specific reserves for warranty matters, as discussed in Note 15.

A summary of changes in our warranty reserves follows (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Three Months Ended March 31,

Balance, beginning of period $ 37,360 $ 35,575

Additions to reserve from new home deliveries 4,833 4,406

Warranty claims and recoveries ( 3,514 ) ( 5,305 ) ( 13,262 ) ( 9,968 ) (1)

Warranty claims ( 5,829 ) ( 2,918 )

Adjustments to pre-existing reserves — —

Balance, end of period $ 36,364 $ 37,063

(1) Includes recoveries for costs incurred over several years on a foundation design and performance matter that affected a single community in Texas.

Warranty reserves are included in Accrued liabilities on the accompanying unaudited consolidated balance sheets, and additions and adjustments to the reserves are included in Cost of home closings within the accompanying unaudited consolidated income statements.

Warranty reserves are included in Accrued liabilities on the accompanying unaudited consolidated balance sheets, and additions and adjustments to the reserves are included in Cost of home closings on 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.

15 unchanged sentences

Revenue from financial services includes estimated future insurance policy renewal commissions as our performance obligations are satisfied upon issuance of the initial policy with a third party broker.

The related contract assets for these estimated future renewal commissions are no t material at

September 30, 2023 and December 31, 2022.

Our three sources of revenue are disaggregated by type in the accompanying unaudited consolidated income statements.

The related contract assets for these estimated future renewal commissions are no t material at March 31, 2024 and December 31, 2023.

Our three sources of revenue are disaggregated by type on the accompanying unaudited consolidated income statements.

Recent Accounting Pronouncements.

There are no recent accounting pronouncements that are expected to have a material impact on our financial statements or financial statement disclosures.

In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures ("ASU 2023-07"), which aligns interim segment disclosure requirements with existing annual requirements and includes updates to segment reporting, most notably through enhanced disclosures about significant segment expenses and various Chief Operating Decision Maker ("CODM")-related disclosures.

ASU 2023-07 is effective for our annual report covering the fiscal year beginning January 1, 2024, and for our interim reports beginning January 1, 2025.

ASU 2023-07 is required to be applied retrospectively to all prior periods presented in the financial statements.

We are currently evaluating the impact adopting this guidance will have on our financial statement disclosures.

In December 2023, the FASB issued ASU No.

2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures ("ASU 2023-09"), which modifies the disclosure requirements primarily related to the effective tax rate reconciliation and income taxes paid by requiring consistent categories and greater disaggregation of information in the rate reconciliation and income taxes paid disaggregated by jurisdiction.

ASU 2023-09 is effective for us beginning January 1, 2025 and may be applied either retrospectively or prospectively.

We are currently evaluating the impact adopting this guidance will have on our financial statement disclosures.

NOTE 2 — REAL ESTATE AND CAPITALIZED INTEREST

Real estate consists of the following (in thousands):

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Homes under contract under construction (1)

11 unchanged sentences

property taxes, homeowner association dues, etc.) are expensed as incurred.

(3) Includes land held for sale of $ 7.1 million and $ 66.8 million as of September 30, 2023 and December 31, 2022, respectively .

Subject to sufficient qualifying assets, we capitalize our development period interest costs incurred to applicable qualifying assets in connection with our real estate development and construction activities.

1 unchanged sentence

A summary of our capitalized interest is as follows (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Three Months Ended March 31,

Capitalized interest, beginning of period $ 54,516 $ 60,169

9 unchanged sentences

Although we do not have legal title to the underlying land, if we are the primary beneficiary we are required to consolidate the VIE in our financial statements and reflect its assets and liabilities as Real estate not owned and Liabilities related to real estate not owned, respectively.

As a result of our analyses, we determined that as of September 30, 2023 and December 31, 2022, we were not the primary beneficiary of any VIEs from which we have acquired rights to land or lots under option contracts.

The table below presents a summary of our lots under option at September 30, 2023 (dollars in thousands):

We determined that as of March 31, 2024 and December 31, 2023 we were not the primary beneficiary of any VIEs from which we have acquired rights to land or lots under option contracts.

The table below presents a summary of our lots under option at March 31, 2024 (dollars in thousands):

Projected Number

18 unchanged sentences

(3) Except for our specific performance contracts recorded on the accompanying unaudited consolidated balance sheets as Real estate not owned (if any), none of our purchase or option contracts require us to purchase lots.

(4) Amount is reflected on the accompanying unaudited consolidated balance sheets in Deposits on real estate under option or contract as of September 30, 2023.

(4) Amount is reflected on the accompanying unaudited consolidated balance sheets in Deposits on real estate under option or contract as of March 31, 2024.

Generally, our options to purchase lots remain effective so long as we purchase a pre-established minimum number of lots on a pre-determined schedule in accordance with each respective agreement.

7 unchanged sentences

Based on the structure of these joint ventures, they may or may not be consolidated into our results.

As of September 30, 2023, we had two active equity-method land joint ventures and one mortgage joint venture, which is engaged in mortgage activities and primarily provides services to our homebuyers.

As of March 31, 2024, we had two active equity-method land joint ventures and one mortgage joint venture, which is engaged in mortgage activities and primarily provides mortgage services to our homebuyers.

Summarized condensed combined financial information related to unconsolidated joint ventures that are accounted for using the equity method was as follows (in thousands):

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

$ 3,632 $ 3,546

6 unchanged sentences

Total liabilities and equity $ 41,385 $ 38,455

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Three Months Ended March 31,

Revenue $ 10,590 $ 9,516

Costs and expenses ( 9,137 ) ( 8,351 )

Net earnings of unconsolidated entities $ 2,778 $ 2,548 $ 6,554 $ 5,418

Pre-tax earnings of unconsolidated entities $ 1,453 $ 1,165

Meritage’s share of pre-tax earnings (1) (2)

2 unchanged sentences

This balance may differ from the balance reported in the accompanying unaudited consolidated financial statements due to the following reconciling items:

(i) timing differences for revenue and distributions recognition;

(ii) step-up basis and corresponding amortization;

(iii) capitalization of interest on qualified assets;

(iv) income deferrals as discussed in Note (2) below;

and (v) the cessation of allocation of losses from joint ventures in which we have previously written down our investment balance to zero and where we have no commitment to fund additional losses.

(2) Our share of pre-tax earnings/(loss) from our mortgage joint venture is recorded in Earnings/(loss) from financial services unconsolidated entities and other, net on the accompanying unaudited consolidated income statements.

Our share of pre-tax earnings/(loss) from all other joint ventures is recorded in Other income/(expense), net on the accompanying unaudited consolidated income statements and excludes joint venture profit related to lots we purchased from the joint ventures, if any.

(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/(loss) from our mortgage joint venture is recorded in (Loss)/earnings from financial services unconsolidated entities and other, net on the accompanying unaudited consolidated income statements.

Our share of pre-tax earnings/(loss) from all other joint ventures is recorded in Other income, net on the accompanying unaudited consolidated income statements and excludes joint venture profit related to lots we purchased from the joint ventures, if any.

Such profit is deferred until homes are delivered by us and title passes to a homebuyer.

1 unchanged sentence

Loans payable and other borrowings consist of the following (in thousands):

September 30, 2023 December 31, 2022

Other borrowings, real estate notes payable (1)

March 31, 2024 December 31, 2023

Other borrowings, secured real estate notes payable (1)

$ 6,604 $ 13,526

3 unchanged sentences

The Company entered into an amended and restated unsecured revolving credit facility agreement ("Credit Facility") in 2014 that has been amended from time to time.

In June 2023, the Credit Facility was amended to increase the facility size to $ 835.0 million, extend the maturity date to June 2, 2028, amend the accordion feature to permit the facility to increase by up to fifty percent of the facility size, increase the letter of credit sublimit up to the maximum size of the facility, eliminate the

liquidity and interest coverage covenant and adjust certain covenant basket amounts.

In June 2023, the Credit Facility was amended to increase the facility size to

$ 835.0 million, extend the maturity date to June 2, 2028, amend the accordion feature to permit the facility to increase by up to fifty percent of the facility size, increase the letter of credit sublimit up to the maximum size of the facility, eliminate the liquidity and interest coverage covenant and adjust certain covenant basket amounts.

The Credit Facility's aggregate commitment is $ 835.0 million with an accordion feature permitting the size of the facility to increase to a maximum of $ 1.3 billion, subject to certain conditions, including the availability of additional bank commitments.

Borrowings under the Credit Facility bear interest at the Company's option, at either (1) term SOFR (based on 1, 3, or 6 month interest periods, as selected by the Company) plus a 10 basis point adjustment plus an applicable margin (ranging from 125 basis points to 175 basis points (the "applicable margin")) based on the Company's leverage ratio as determined in accordance with a pricing grid, (2) the higher of (i) the prime lending rate ("Prime"), (ii) an overnight bank rate plus 50 basis points and (iii) term SOFR (based on a 1 month interest period) plus a 10 basis point adjustment plus 1 %, in each case plus a margin ranging from 25 basis points to 75 basis points based on the Company's leverage in accordance with a pricing grid, or (3) daily simple SOFR plus a 10 basis point adjustment plus the applicable margin.

At September 30, 2023, the interest rate on outstanding borrowings under the Credit Facility would have been 6.670 % per annum, calculated in accordance with option (1) noted above and using the 1-month term SOFR.

At March 31, 2024, the interest rate on outstanding borrowings under the Credit Facility would have been 6.68 % per annum, calculated in accordance with option (1) noted above and using the 1-month term SOFR.

We are obligated to pay a fee on the undrawn portion of the Credit Facility at a rate determined by a tiered fee matrix based on our leverage ratio.

The Credit Facility also contains certain financial covenants, including (a) a minimum tangible net worth requirement of $ 2.8 billion (which amount is subject to increase over time based on subsequent earnings and proceeds from equity offerings), and (b) a maximum leverage covenant that prohibits the leverage ratio (as defined therein) from exceeding 60 %.

We were in compliance with all Credit Facility covenants as of September 30, 2023.

We had no outstanding borrowings under the Credit Facility as of September 30, 2023 and December 31, 2022.

We had no borrowings or repayments under the Credit Facility during the three and nine months ended September 30, 2023, and $ 40.0 million in borrowings and repayments during the three and nine months ended September 30, 2022.

As of September 30, 2023, we had outstanding letters of credit issued under the Credit Facility totaling $ 40.6 million, leaving $ 794.4 million available under the Credit Facility to be drawn.

We were in compliance with all Credit Facility covenants as of March 31, 2024.

We had no outstanding borrowings under the Credit Facility as of March 31, 2024 and December 31, 2023.

There were no borrowings or repayments under the Credit Facility during the three months ended March 31, 2024 and 2023.

As of March 31, 2024, we had outstanding letters of credit issued under the Credit Facility totaling $ 69.7 million, leaving $ 765.3 million available under the Credit Facility to be drawn.

NOTE 6 — SENIOR NOTES, NET

Senior notes, net consist of the following (in thousands):

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

6.00 % senior notes due 2025.

At September 30, 2023 and December 31, 2022 there was approximately $ 1,169 and $ 1,977 in net unamortized premium, respectively.

At March 31, 2024 and December 31, 2023 there was approximately $ 818 and $ 994 in net unamortized premium, respectively.

$ 250,818 $ 250,994

6 unchanged sentences

The indentures for all of our senior notes contain non-financial covenants including, among others, limitations on the amount of secured debt we may incur, and limitations on sale and leaseback transactions and mergers.

We were in compliance with all such covenants as of September 30, 2023.

We were in compliance with all such covenants as of March 31, 2024.

Obligations to pay principal and interest on the senior notes are guaranteed by substantially all of our wholly-owned subsidiaries (each a “Guarantor” and, collectively, the “Guarantor Subsidiaries”), each of which is directly or indirectly 100 % owned by Meritage Homes Corporation.

4 unchanged sentences

Subsidiaries of Meritage Homes Corporation that are non-guarantor subsidiaries are, individually and in the aggregate, minor.

In September 2023, we partially redeemed $ 150.0 million of our 6.00 % Senior Notes due 2025 (the "2025 Notes"), incurring $ 0.9 million in early debt extinguishment charges in the three and nine months ended September 30, 2023, reflected as Loss on early extinguishment of debt in the accompanying unaudited consolidated income statements.

After the partial redemption, the 2025 Notes have $ 250.0 million in remaining principal outstanding.

NOTE 7 — FAIR VALUE DISCLOSURES

9 unchanged sentences

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):

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Principal Estimated Fair

7 unchanged sentences

$ 450,000 $ 410,625 $ 450,000 $ 411,750

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.

Other financial assets and liabilities, including our Loans payable and other borrowings, are generally shorter term in nature and the longer term balances are not material to our consolidated balance sheet.

Therefore, we consider the carrying amounts of our other financial assets and liabilities to approximate fair value.

Non-Financial Instruments:

3 unchanged sentences

Basic and diluted earnings per common share were calculated as follows (in thousands, except per share amounts):

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Three Months Ended March 31,

Basic weighted average number of shares outstanding 36,311 36,664

11 unchanged sentences

The purchase price for acquisitions was 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 in our unaudited consolidated balance sheets in Prepaids, other assets and goodwill.

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 unaudited consolidated balance sheets 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.

3 unchanged sentences

Additions — — — — — —

Balance at September 30, 2023 $ — $ — $ 32,962 $ — $ — $ 32,962

Balance at March 31, 2024 $ — $ — $ 32,962 $ — $ — $ 32,962

NOTE 10 — STOCKHOLDERS’ EQUITY

A summary of changes in stockholders’ equity is presented below (in thousands):

Nine Months Ended September 30, 2023

(In thousands)

Three Months Ended March 31, 2024

Shares Common

7 unchanged sentences

Dividends declared — — — ( 27,239 ) ( 27,239 )

Share repurchases ( 93 ) ( 1 ) ( 9,999 ) — ( 10,000 )

Repurchase of shares ( 362 ) ( 4 ) ( 56,214 ) — ( 56,218 )

Balance at March 31, 2024 36,319 $ 363 $ 240,852 $ 4,479,358 $ 4,720,573

Net earnings — — — 186,836 186,836

Stock-based compensation expense — — 4,176 — 4,176

Dividends declared — — — ( 9,927 ) ( 9,927 )

Balance at June 30, 2023 36,765 $ 368 $ 328,277 $ 3,919,650 $ 4,248,295

Net earnings — — — 221,760 221,760

Stock-based compensation expense — — 6,156 — 6,156

Dividends declared — — — ( 9,841 ) ( 9,841 )

Issuance of stock 4 — — — —

Share repurchases ( 319 ) ( 4 ) ( 45,324 ) — ( 45,328 )

Balance at September 30, 2023 36,450 $ 364 $ 289,109 $ 4,131,569 $ 4,421,042

Nine Months Ended September 30, 2022

(In thousands)

Three Months Ended March 31, 2023

Shares Common

6 unchanged sentences

Issuance of stock 287 3 ( 3 ) — —

Share repurchases ( 1,038 ) ( 10 ) ( 99,293 ) — ( 99,303 )

Dividends declared — — — ( 9,927 ) ( 9,927 )

Repurchase of shares ( 93 ) ( 1 ) ( 9,999 ) — ( 10,000 )

Balance at March 31, 2023 36,765 $ 368 $ 324,101 $ 3,742,741 $ 4,067,210

Net earnings — — — 250,084 250,084

Stock-based compensation expense — — 4,070 — 4,070

Share repurchases ( 128 ) ( 1 ) ( 9,999 ) — ( 10,000 )

Balance at June 30, 2022 36,567 $ 366 $ 315,590 $ 3,096,513 $ 3,412,469

Net earnings — — — 262,489 262,489

Stock-based compensation expense — — 6,852 — 6,852

Issuance of stock 4 — — — —

Balance at September 30, 2022 36,571 $ 366 $ 322,442 $ 3,359,002 $ 3,681,810

During the three months ended September 30, 2023, our Board of Directors approved, and we paid, a quarterly cash dividend on common stock of $ 0.27 per share.

Quarterly dividends declared and paid during the nine months ended September 30, 2023 totaled $ 0.81 per share.

There were no such transactions in the three and nine months ended September 30, 2022.

The Inflation Reduction Act of 2022 ("IRA"), which was enacted into law on August 16, 2022, imposed a nondeductible 1% excise tax on the net value of certain stock repurchases made after December 31, 2022.

During the three and nine months ended September 30, 2023, we reflected the applicable excise tax in Additional paid-in capital as part of the cost basis of the stock repurchased and recorded a corresponding liability for the excise taxes payable in Accrued liabilities on the accompanying unaudited consolidated balance sheets.

During the three months ended March 31, 2024 and 2023, our Board of Directors approved, and we paid, a quarterly cash dividend on common stock of $ 0.75 and $ 0.27 per share, respectively.

During the three months ended March 31, 2024 and 2023, we reflected the applicable excise tax on share repurchases in Additional paid-in capital as part of the cost basis of the stock repurchased and recorded a corresponding liability in Accrued liabilities on the accompanying unaudited consolidated balance sheets.

NOTE 11 — STOCK BASED AND DEFERRED COMPENSATION

4 unchanged sentences

The 2018 Plan authorizes awards to officers, key employees, non-employee directors and consultants.

The 2018 Plan authorizes 7,400,000 shares of stock to be awarded, of which 1,340,233 shares remain available for grant at September 30, 2023.

The 2018 Plan authorizes 7,400,000 shares of stock to be awarded, of which 1,146,248 shares remain available for grant at March 31, 2024.

We believe that such awards provide a means of long-term compensation to attract and retain qualified employees and better align the interests of our employees with those of our stockholders.

4 unchanged sentences

A portion of the performance-based restricted stock awards granted to our executive officers contain market conditions as defined by ASC 718.

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.

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 engage 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 expensed straight-line over the service period of the awards.

Below is a summary of stock-based compensation expense and stock award activity (dollars in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Three Months Ended March 31,

Stock-based compensation expense $ 6,114 $ 6,225

6 unchanged sentences

The following table includes additional information regarding our stock compensation plan (dollars in thousands):

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Unrecognized stock-based compensation cost $ 42,833 $ 27,791

2 unchanged sentences

641,004 703,415

(1) Includes unvested restricted stock awards, restricted stock units and performance-based awards (assuming 100 % target payout).

(1) Includes unvested restricted stock units and performance-based awards (assuming 100 %/target payout).

We also offer a non-qualified deferred compensation plan ("deferred compensation plan") to highly compensated employees in order to allow them additional pre-tax income deferrals above and beyond the limits that qualified plans, such as 401(k) 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 nine months ended September 30, 2023 or 2022, other than minor administrative costs.

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 months ended March 31, 2024 or 2023, other than minor administrative costs.

NOTE 12 — INCOME TAXES

Components of the income tax provision are as follows (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Components of the provision for income taxes are as follows (in thousands):

Three Months Ended March 31,

Federal $ 38,122 $ 26,440

1 unchanged sentence

Total $ 47,999 $ 34,002

The effective tax rate for the three and nine months ended September 30, 2023 was 22.4 % and 21.8 %, and for the three and nine months ended September 30, 2022 was 20.3 % and 22.9 %, respectively.

The higher tax rate for the three months ended September 30, 2023 compared to the 2022 period is due to the retroactive extension of the §45L energy-efficient homes federal tax credit on qualifying homes under the Internal Revenue Code ("IRC") enacted in the IRA in third quarter of 2022, which includes a nine-month catch up in the third quarter of 2022.

The lower effective tax rate for the nine months ended September 30, 2023 compared to the 2022 period reflects the increased per-home energy-efficiency credit amount starting in 2023.

At September 30, 2023 and December 31, 2022, we have no unrecognized tax benefits.

The effective tax rate for the three months ended March 31, 2024 and 2023 was 20.5 % and 20.6 %, respectively.

The lower tax rate for the three months ended March 31, 2024 reflects the increased §45L energy-efficient homes federal tax credit on qualifying homes under the Internal Revenue Code ("IRC") enacted in the Inflation Reduction Act ("IRA") in August 2022.

At March 31, 2024 and December 31, 2023, we have no unrecognized tax benefits.

We believe 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.

3 unchanged sentences

This evaluation 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 NOLs or credit carryovers, and determined that no valuation allowance on our deferred tax assets is necessary at September 30, 2023.

At September 30, 2023, we have $ 16.1 million in income taxes payable and no income taxes receivable.

The income taxes payable primarily consists of current federal and state tax accruals, net of current energy tax credits and estimated tax payments and is recorded in Accrued liabilities on the accompanying unaudited consolidated balance sheets at September 30, 2023.

We have no NOLs or credit carryovers, and determined that no valuation allowance on our deferred tax assets is necessary at March 31, 2024.

At March 31, 2024, we have $ 58.9 million in income taxes payable and no income taxes receivable.

We conduct business and are subject to tax in the U.S.

2 unchanged sentences

federal, state, or local income tax examinations by taxing authorities for years prior to 2019.

We have one state income tax examination covering various years pending resolution at this time.

We have no state income tax examinations being conducted at this time.

NOTE 13 — SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

The following table presents certain supplemental cash flow information (in thousands):

Nine Months Ended September 30,

Three Months Ended March 31,

Cash paid during the year for:

3 unchanged sentences

Real estate acquired through notes payable $ — $ —

ROU assets obtained in exchange for new operating lease obligations $ 36,266 $ 4,011

NOTE 14 — OPERATING AND REPORTING SEGMENTS

3 unchanged sentences

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.

We aggregate our homebuilding operating segments into reporting segments based on similar long-term economic

characteristics and geographical proximity.

Our three reportable homebuilding segments are as follows:

4 unchanged sentences

The following segment information is in thousands:

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Three Months Ended March 31,

Homebuilding revenue (1) :

8 unchanged sentences

Total homebuilding segment operating income 238,644 164,976

Financial services segment profit 5,700 4,842 6,066 12,255

Financial services segment (loss)/profit ( 690 ) 2,923

Corporate and unallocated costs (2)

1 unchanged sentence

Interest expense — —

Other income/(expense), net 13,331 ( 74 ) 35,037 ( 849 )

Loss on early extinguishment of debt ( 907 ) — ( 907 ) —

Other income, net 9,022 8,844

Earnings before income taxes $ 234,015 $ 165,303

(1) Homebuilding revenue includes the following land closing revenue, by segment:

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Three Months Ended March 31,

Land closing revenue:

1 unchanged sentence

Central — 570

East 1,242 — 13,953 2,600

Total $ 2,305 $ 17,385

(2) Balance consists primarily of corporate costs and shared service functions such as finance and treasury that are not allocated to the homebuilding or financial services reporting segments.

At September 30, 2023

At March 31, 2024

West Central East Financial Services Corporate and

5 unchanged sentences

Total assets $ 1,830,105 $ 1,577,430 $ 2,075,024 $ 2,767 $ 1,003,979 $ 6,489,305

(1) Balance consists primarily of cash and cash equivalents, other receivables and property and equipment, net.

(1) Balance consists primarily of cash and cash equivalents, prepaids and other assets and property and equipment, net .

(2) Balance consists primarily of cash and cash equivalents, development reimbursements from local municipalities and prepaids and other assets.

(3) Balance consists primarily of cash and cash equivalents, goodwill (see Note 9), prepaids and other assets and property and equipment, net.

(4) Balance consists primarily of cash and cash equivalents, deferred tax assets and prepaids and other assets.

(4) Balance consists primarily of cash and cash equivalents, deferred tax assets, net and prepaids and other assets.

At December 31, 2023

6 unchanged sentences

Total assets $ 1,861,803 $ 1,543,666 $ 1,920,099 $ 1,889 $ 1,025,677 $ 6,353,134

(1) Balance consists primarily of cash and cash equivalents, development reimbursements from local municipalities and property and equipment, net.

(1) Balance consists primarily of cash and cash equivalents, receivables from title companies or closing agents and property and equipment, net.

(2) Balance consists primarily of cash and cash equivalents, development reimbursements from local municipalities and prepaids and other assets.

(3) Balance consists primarily of cash and cash equivalents, goodwill, prepaids and other assets and property and equipment, net .

(4) Balance consists primarily of cash and cash equivalents, deferred tax assets and prepaids and other assets .

(3) Balance consists primarily of cash and cash equivalents, goodwill (see Note 9), prepaids and other assets and property and equipment, net.

(4) Balance consists primarily of cash and cash equivalents, deferred tax assets, net and prepaids and other assets.

NOTE 15 — COMMITMENTS AND CONTINGENCIES

4 unchanged sentences

Historically, most disputes regarding warranty claims are resolved prior to litigation.

We believe there are no pending legal or warranty matters as of September 30, 2023 that could have a material adverse impact upon our consolidated financial condition, results of operations or cash flows that have not been sufficiently reserved.

We believe there are no pending legal or warranty matters as of March 31, 2024 that could have a material adverse impact upon our consolidated financial condition, results of operations or cash flows that have not been sufficiently reserved.

As discussed in Note 1 under the heading “Warranty Reserves”, we have case specific reserves within our $ 36.4 million of total warranty reserves related to alleged stucco defects in certain homes we constructed predominantly between 2006 and 2017 and HVAC condensation issues in limited geographies for homes constructed and delivered in 2021 and the first half of 2022.

1 unchanged sentence

Due to the degree of judgment and the potential for variability in our underlying assumptions and data, as we obtain additional information, we may revise our estimate and thus our related reserves.

As of September 30, 2023, after considering potential recoveries from the consultants and contractors involved and their insurers and the potential recovery under our general liability insurance policies, we believe our reserves are sufficient to cover the above mentioned matter.

As of March 31, 2024, after considering potential recoveries from the consultants and contractors involved and their insurers and the potential recovery under our general liability insurance policies, we believe our reserves are sufficient to cover the above mentioned matter.

See Note 1 for information related to our warranty obligations.

Special Note of Caution Regarding Forward-Looking Statements

Special Note of Caution Regarding Forward-Looking Statement

In passing the Private Securities Litigation Reform Act of 1995 (“PSLRA”), Congress encouraged public companies to make “forward-looking statements” by creating a safe-harbor to protect companies from securities law liability in connection with forward-looking statements.

23 unchanged sentences

the impact of new accounting standards and changes in accounting estimates;

trends and expectations concerning future demand for homes, home construction cycle times, sales prices, sales orders, cancellations, construction and materials costs and availability, gross margins, land costs, inflation, community counts and profitability and future home supply and inventories;

trends and expectations concerning future demand for homes, home construction cycle times, sales prices, sales orders, cancellations, construction and materials costs and availability, general and administrative costs, gross margins, land costs, inflation, community counts and profitability and future home supply and inventories;

our future cash needs and sources, and the impact of seasonality.

Important factors that could cause actual results to differ materially from those in forward-looking statements, and that could negatively affect our business include, but are not limited to, the following:

increases in mortgage interest rates and the availability and pricing of residential mortgages;

increases in interest rates or decreases in mortgage availability, and the cost and use of rate locks and buy-downs;

inflation in the cost of materials used to develop communities and construct homes;

11 unchanged sentences

our ability to obtain financing if our credit ratings are downgraded;

our potential exposure to and impacts from natural disasters or severe weather conditions;

our exposure to and impacts from natural disasters or severe weather conditions;

the availability and cost of finished lots and undeveloped land;

2 unchanged sentences

our limited geographic diversification;

the replication of our energy-efficient technologies by our competitors;

shortages in the availability and cost of subcontract labor;

the replication of our energy-efficient technologies by our competitors;

our exposure to information technology failures and security breaches and the impact thereof;

3 unchanged sentences

failure of our employees and representatives to comply with laws and regulations;

our compliance with government regulations related to our financial services operations;

our compliance with government regulations;

liabilities or restrictions resulting from regulations applicable to our financial services operations;

negative publicity that affects our reputation;

potential disruptions to our business by an epidemic or pandemic (such as COVID-19), and measures that federal, state and local governments and/or health authorities implement to address it;

potential disruptions to our business by an epidemic or pandemic, 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, 2023 under the caption "Risk Factors."

4 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements