Meritage Corporation (MTH)

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Meritage Homes Corporation (MTH)

Citi 2012 North American Credit Conference

November 15, 2012 1:00 pm ET

Executives

Steven J. Hilton – Chairman and Chief Executive Officer

Larry W. Seay – Executive Vice President and Chief Financial Officer

Presentation

Unidentified Analyst

We are going to get started with Meritage. It’s a pleasure to welcome Steve Hilton, Larry Seay, and Brent Anderson from Meritage. I think we’re going to try to keep this as conversational; it’s kind of a hybrid between a fireside chat and a formal presentation. I think maybe the place I want to start the conversation. Steve, can you talk a little bit about what differentiates Meritage from the other builders in your opinion. So I may go to the last slide and then we’ll just keep jumping around?

Steven J. Hilton

First, I want to thank you for inviting us again to this conference. I mean (inaudible) begin personal thanking of my wife, because she gets to go shopping every time we come here. We don’t have these great stores out in the….

Unidentified Analyst

(Inaudible)

Steven J. Hilton

No, the combination for shopping and our stock price going down over the last couple of weeks have been very painful. But we will persevere. I’m pretty proud of what we’ve accomplished at Meritage. We’ve been in business for 27 years and I’ve been with the company since day one, and we really I think done a good job, getting ourselves through this last downturn, and we’ve improved the business in a lot of areas.

Number one, we’ve got a really good footprint, I believe for recovery. We operate in 11 of the top 20 housing markets, 15 markets in total across the South and Western United States. These are the markets that I think are going to have the best job growth long-term, and also going to have the best recovery and we can see that already, what we’ve seen in California, Arizona, Florida, and some of these other markets have been facing a pretty dramatic recovery.

Secondly, what makes us different is our industry leadership. I think we’re a company of innovation, and I'm not talking about just innovation in Green, but I’m talking about innovation and what's other ways that we run our business whether it’s our product, whether it’s how we motivate and train our people, what we do on the sales force and our sales office sort of whole variety of ways, but let me spend a quick moment and talk about that Green.

I believe Meritage Homes’ segment standard for energy-efficient home building. And we're going to talk about that a little more, I think some of your questions David, but we build homes that are 50% more energy efficient in a typical resale home. And when it comes down to having a conversation with a buyer in the sales office about buying our home or buying our competitors home or buying a resale home, we think we win that conversation, because we don't charge extra necessarily as an option for these Green features, we include them in the price of the home. And that becomes very compelling proposition, and I think it shows up in our sales per community which are amongst the best, amongst all the move up builders out there.

Next, Brent to go back to last slide, talked about the, what we've done as far as processes, our underwriting today is better than it's ever been before, we are not operating or might exceed our plans like we may have been doing 10 or 15 or 20 years ago. Today, we do a lot to really in-depth formal analysis of the housing market and every submarket that we are interested in buying land, and we fine tune our product through exhausted consumer research, and we were very employ focused culture.

Our earnings growth I think will separate us from a lot of our competitors as those recoveries starts to take hold. In the period of 2001 to 2006, we have some of the strongest earnings growth of all the public homebuilders and expect that we will have a very strong earnings growth, again we and our peers going forward.

And lastly, it’s our strong balance sheet. We have a very conservative balance sheet, net debt-to-capital of 38%, all of our debt termed out very long with away maturities for at least five years, and I’m pretty proud of where we are with our liquidity, our $380 million of cash and with this balance sheet, it allow us to do as the market continues to recover. So hopefully it answers your question David.

Unidentified Analyst

Yeah. So it also brings up a bunch of question. It’s really interesting to talk about sales and sales training as an area where you see yourself differentiated. And the reason I say it is, the green product, you guys are clearly the leader, right, I mean you’ve developed the best product. But people are going to catch up to you, subcontractors maybe, maybe…?

Steven J. Hilton

Maybe, we think…

Unidentified Analyst

If somebody really wanted to, they could, right it’s hard to add intellectual property around that right?

Steven J. Hilton

Right.

Unidentified Analyst

But sales trading I think is very interesting, because it’s much harder to put a finger on and to see it. So can you talk about how do you train your salespeople, how do you send them correctly? What do you do without given away the secretes off? What do you do that makes it really different when everybody else is doing?

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