SCOTTSDALE, AZ -- Meritage Homes Corporation, a leading U.S. homebuilder, announced net earnings of $35.1 million in the second quarter of 2013, driven by higher home closing revenue and gross margins, assisted by additional operating leverage.
Home closing revenue increased 15% over the prior year, combining a 4% increase in home closings and a 12% increase in the average price of homes closed during the quarter, partially due to a greater proportion of larger homes in higher-priced communities. Respective increases of 36% and 54% in the Central and East regions more than offset a 6% decline in home closing revenue for the West region, which reflects a 24% decline in California, partially offset by a 41% increase in Colorado.
"We are quite pleased to show year-over-year growth in 2014 across nearly every key operating metric, given that market conditions were generally not as strong in the second quarter this year as they were a year ago," said Steven J. Hilton, chairman and chief executive officer of Meritage Homes. "We increased net earnings by 25% through a combination of higher revenue, margins and operating leverage. Home closings increased 4% and home closing revenue by 15%. We coupled that with a 40 basis point improvement in home closing gross margin and additional operating leverage to produce a pretax margin of 10.9%, compared to 8.5% in last year's second quarter.
"We also grew new home orders and backlog in both units and total value, benefiting from increases in our average sales prices, while also increasing our average sales per community over 2013 in five of seven states," said Mr. Hilton. "Texas and the Carolinas generated strong order growth in the second quarter - up 12% and 32% over 2013 respectively - which resulted in 67% and 45% respective increases in their backlog value at June 30. Colorado's second quarter orders and backlog also grew in 2014, and Tennessee supplemented our total year-over-year increases as an additional market in 2014 that delivered well above our average sales pace.
"Our ending community count of 175 was 6% higher than one year ago and we had 9% more average communities open during the quarter than we did in the second quarter of 2013. We increased the average number of actively selling communities over last year in every state except Florida," he continued. "We plan to open many new communities this quarter within our existing markets, expanding the total to approximately 190 by September 30 and 205-215 active communities by year-end, not including our pending acquisition of Legendary Communities. Considering our June 30 backlog value is up 18% year over year, we are expecting strong revenue and earnings growth in the second half of 2014."
Mr. Hilton added, "We are enthusiastic about our agreement to acquire Legendary Communities, which will put us into two additional markets with Atlanta and Greenville-Spartanburg, as well as bolster our presence in Charlotte. The acquisition is expected to close in the third quarter and we anticipate it will add approximately 40 actively selling communities to our total. Legendary closed approximately 500 homes in 2013 and generated $156 million in home closing revenue, and we believe that they can grow these by at least twenty percent in 2014 and 2015, with meaningful earnings accretion in 2015. That growth represents a significant potential increase in our long-term earnings power, in addition to the other markets we've entered in the last few years."