M/I HOMES, INC. COLUMBUS, Ohio, Oct. 25, 2017 /PRNewswire/ -- M/I Homes, Inc. (NYSE: MHO) announced results for the three months and nine months ended September 30, 2017.
2017 Third Quarter Highlights:
-- Net income increased to $22.3 million ($0.64 per diluted share) from
$10.9 million ($0.35 per diluted share) in 2016
-- Diluted earnings per share increased to $0.71, excluding the $0.07 per
share impact of a $2.3 million equity adjustment due to the redemption
of preferred shares. In 2016's third quarter, diluted earnings per share
was $0.65, excluding the impact of stucco-related charges
-- New contracts increased 13% to 1,225, a record level for the third
quarter
-- Homes delivered increased 9% to a third quarter record 1,256
-- Revenue increased 8% to a third quarter record $476 million
-- Backlog sales value increased 11% to $912 million; backlog units
increased 7% to 2,378
-- Estimated impact of hurricanes - 20 delayed closings and $700,000 of
community and model home repair costs
For the third quarter of 2017, the Company reported net income of $22.3 million, or $0.64 per diluted share. This compares to net income of $10.9 million, or $0.35 per diluted share, for the third quarter of 2016. The current quarter diluted earnings per share was reduced by a $2.3 million after-tax fair value equity adjustment ($0.07 per diluted share) related to the previously announced redemption of our outstanding preferred shares which was completed on October 16, 2017. The third quarter of 2016 included a $14.5 million pre-tax charge ($0.30 per diluted share) for stucco-related repair costs in certain of our Florida communities. For the nine months ended September 30, 2017, the Company reported net income of $56.2 million, or $1.73 per diluted share, compared to net income of $36.0 million, or $1.17 per diluted share, for the same period of 2016. Year-to-date in 2017 and 2016, the Company incurred $8.5 million ($0.18 per diluted share) and $19.4 million ($0.40 per diluted share) of pre-tax charges, respectively, related to stucco-related repairs. Exclusive of these stucco-related charges in both periods, year-to-date net income was $61.6 million compared to $48.1 million in 2016's same period, a 28% increase.
Homes delivered in 2017's third quarter were 1,256 compared to 1,148 deliveries in 2016's third quarter - a 9% increase. Homes delivered for the nine months ended September 30, 2017 increased 14% to 3,505 from 2016's deliveries of 3,066. New contracts for 2017's third quarter were 1,225, an increase of 13% over 2016's third quarter. For the first nine months of 2017, new contracts increased 9% to 4,079 from 3,756 in 2016. M/I Homes had 179 active communities at September 30, 2017 compared to 174 at September 30, 2016, a 3% increase. The Company's cancellation rate was 15% in the third quarter of 2017 and 2016. Homes in backlog increased 7% at September 30, 2017 to 2,378 units, with a sales value of $912 million (an 11% increase over last year's third quarter), and an average sales price of $383,000. At September 30, 2016, the sales value of homes in backlog was $821 million, with an average sales price of $370,000 and backlog units of 2,221.
Robert H. Schottenstein, Chief Executive Officer and President, commented, "We are very pleased with our third quarter results highlighted by record revenue, record new contracts and record homes delivered. We reached our highest third quarter backlog level in more than 10 years, with a sales value of $912 million - an 11% increase over 2016's third quarter. Gross margins improved 30 basis points to 21.4% and net income improved 12% over 2016's third quarter, excluding the impact of 2016's stucco-related charges. We achieved this strong performance despite the impact of hurricanes in our Florida and Houston markets which delayed approximately 20 third quarter deliveries, slowed down sales and resulted in approximately $700,000 of community and model home repair costs."
Mr. Schottenstein continued, "Our financial condition remains strong. During the quarter, we issued $250 million of 8-year senior notes, converted $58 million of our convertible notes into equity and completed the redemption of $50 million of our preferred shares in October. These steps both strengthened and simplified our balance sheet. We ended the quarter with $104 million of cash, no outstanding borrowings under our $475 million unsecured credit facility, shareholders' equity of $723 million and a healthy homebuilding debt to capital ratio of 47%. As we begin the final quarter of 2017, we are well positioned for another solid year. We have a strong backlog and housing market conditions remain favorable throughout most of our markets. We will continue to focus on increasing profitability while growing our market share and investing in well-located attractive land opportunities."
The Company will broadcast live its earnings conference call today at 4:00 p.m. Eastern Time. To listen to the call live, log on to the M/I Homes' website at mihomes.com, click on the "Investors" section of the site, and select "Listen to the Conference Call." A replay of the call will continue to be available on our website through October 2018.
M/I Homes, Inc. is one of the nation's leading builders of single-family homes, having sold over 104,400 homes. The Company's homes are marketed and sold primarily under the trade names M/I Homes and Showcase Collection (exclusively by M/I Homes), and also currently operates under the name Hans Hagen Homes in its Minneapolis/St. Paul, Minnesota market. The Company has homebuilding operations in Columbus and Cincinnati, Ohio; Indianapolis, Indiana; Chicago, Illinois; Minneapolis/St. Paul, Minnesota; Tampa, Sarasota and Orlando, Florida; Austin, Dallas/Fort Worth, Houston and San Antonio, Texas; Charlotte and Raleigh, North Carolina; and the Virginia and Maryland suburbs of Washington, D.C.
Certain statements in this press release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "expects," "anticipates," "targets," "envisions", "goals," "projects," "intends," "plans," "believes," "seeks," "estimates," variations of such words and similar expressions are intended to identify such forward-looking statements. These statements involve a number of risks and uncertainties. Any forward-looking statements that we make herein and in any future reports and statements are not guarantees of future performance, and actual results may differ materially from those in such forward-looking statements as a result of various factors, including, without limitation, factors relating to the economic environment, interest rates, availability of resources, competition, market concentration, land development activities, construction defect, product liability and warranty claims and various governmental rules and regulations, as more fully discussed in the "Risk Factors" section of the Company's Annual Report on Form 10-K for the year ended December 31, 2016, as the same may be updated from time to time in our subsequent filings with the Securities and Exchange Commission. All forward-looking statements made in this press release are made as of the date hereof, and the risk that actual results will differ materially from expectations expressed herein will increase with the passage of time. We undertake no duty to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. However, any further disclosures made on related subjects in our subsequent filings, releases or presentations should be consulted.
M/I Homes, Inc. and Subsidiaries
Summary Statement of Income (Unaudited)
(Dollars and shares in thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
---- ---- ----
New contracts 1,225 1,088 4,079 3,756
Average community count 183 174 182 176
Cancellation rate 15% 15% 14% 13%
Backlog units 2,378 2,221
Backlog sales value $911,657 $821,494
Homes delivered 1,256 1,148 3,505 3,066
Average home closing price $366 $365 $368 $361
-------------------------- ---- ---- ---- ----
Homebuilding revenue:
Housing revenue $459,342 $419,228 $1,289,893 $1,105,701
Land revenue 5,318 12,674 12,438 31,816
------------ ----- ------ ------ ------
Total homebuilding revenue $464,660 $431,902 $1,302,331 $1,137,517
Financial services revenue 11,763 10,562 37,938 30,564
-------------------------- ------ ------ ------ ------
Total revenue $476,423 $442,464 $1,340,269 $1,168,081
------------- -------- -------- ---------- ----------
Cost of sales - operations 374,673 349,135 1,054,052 924,106
Cost of sales - stucco-related charges - 14,500 8,500 19,409
-------------------------------------- --- ------ ----- ------
Gross margin $101,750 $78,829 $277,717 $224,566
General and administrative expense 31,337 29,160 89,209 78,249
Selling expense 31,136 27,663 88,666 75,462
--------------- ------ ------ ------ ------
Operating income $39,277 $22,006 $99,842 $70,855
Equity in income from joint venture arrangements (71) (24) (198) (413)
Interest expense 4,675 3,587 13,847 13,160
Income before income taxes $34,673 $18,443 $86,193 $58,108
Provision for income taxes 12,346 7,501 29,994 22,061
-------------------------- ------ ----- ------ ------
Net income $22,327 $10,942 $56,199 $36,047
Excess of fair value over book value of preferred shares subject to redemption 2,257 - 2,257 -
Preferred dividends 1,218 1,218 3,656 3,656
------------------- ----- ----- ----- -----
Net income to common shareholders $18,852 $9,724 $50,286 $32,391
--------------------------------- ------- ------ ------- -------
Earnings per share:
Basic $0.74 $0.39 $2.00 $1.31
Diluted $0.64 $0.35 $1.73 $1.17
------- ----- ----- ----- -----
Weighted average shares outstanding:
Basic 25,581 24,669 25,106 24,665
Diluted 30,675 30,139 30,539 30,093
------- ------ ------ ------ ------
M/I Homes, Inc. and Subsidiaries
Summary Balance Sheet and Other Information (unaudited)
(Dollars in thousands, except per share amounts)
As of
September 30,
2017 2016
---- ----
Assets:
Total
cash,
cash
equivalents
and
restricted
cash $103,636 $23,308
Mortgage
loans
held for
sale 91,987 95,545
Inventory:
Lots,
land
and
land
development 663,170 554,150
Land
held
for
sale 12,330 15,956
Homes
under
construction 645,816 544,350
Other
inventory 134,493 110,697
---------- ------- -------
Total
Inventory $1,455,809 $1,225,153
---------- ---------- ----------
Property
and
equipment
-net 25,320 21,792
Investments
in
joint
venture
arrangements 22,981 26,528
Deferred
income
taxes,
net of
valuation
allowance 29,569 39,944
Other
assets 55,393 64,967
------- ------ ------
Total
Assets $1,784,695 $1,497,237
======= ========== ==========
Liabilities:
Debt -Homebuilding
Operations:
Senior
notes
due
2021 -
net $296,505 $295,401
Senior
notes
due
2025 -
net 245,958 -
Convertible
senior
subordinated
notes
due
2017 -
net - 56,949
Convertible
senior
subordinated
notes
due
2018 -
net 85,955 85,246
Notes
payable
-
homebuilding - 85,000
Notes
payable
-other 4,057 8,566
-------- ----- -----
Total
Debt -
Homebuilding
Operations $632,475 $531,162
Preferred
shares
subject
to
redemption 50,420 -
Notes
payable
bank -
financial
services
operations 91,275 91,483
----------- ------ ------
Total
Debt $774,170 $622,645
Accounts
payable 120,598 110,179
Other
liabilities 166,954 132,821
------------ ------- -------
Total
Liabilities $1,061,722 $865,645
------------ ---------- --------
Shareholders'
Equity 722,973 631,592
------------- ------- -------
Total
Liabilities
and
Shareholders'
Equity $1,784,695 $1,497,237
============== ========== ==========
Book
value
per
common
share $26.27 $23.58
Homebuilding
debt /
capital
ratio(1) 47% 46%
------------ --- ---
(1) The ratio of homebuilding debt to
capital is calculated as the
carrying value of our
homebuilding debt outstanding
divided by the sum of the
carrying value of our
homebuilding debt outstanding
plus shareholders' equity.
M/I Homes, Inc. and Subsidiaries
Selected Supplemental Financial and Operating Data
(Dollars in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
---- ---- ---- ----
Adjusted EBITDA(1) $48,765 $31,284 $126,042 $96,402
Cash (used in) provided by operating activities $(26,705) $(14,437) (2) $(66,025) $26,502 (2)
Cash used in investing activities $(6,022) $(4,868) (2) $(5,065) $(21,679) (2)
Cash provided by financing activities $106,423 $12,613 $140,285 $5,384
Land/lot purchases $65,511 $49,612 $250,141 $146,998
Land development spending $53,755 $48,230 $137,019 $121,763
Land sale revenue $5,318 $12,674 $12,438 $31,816
Land sale gross profit $365 $1,063 $883 $3,095
Financial services pre-tax income $5,231 $5,393 $19,988 $16,136
--------------------------------- ------ ------ ------- -------
(1) See "Non-GAAP Financial Results"
table below.
(2) During the fourth quarter of 2016, we
elected to early-adopt Accounting
Standards Update 2016-18, Statement
of Cash Flows: Restricted Cash.
Certain amounts above have been
adjusted to apply the new method
retrospectively.
M/I Homes, Inc. and Subsidiaries
Non-GAAP Financial Results (3)
(Dollars in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
---- ---- ---- ----
Net income $22,327 $10,942 $56,199 $36,047
Add:
Provision for income taxes 12,346 7,501 29,994 22,061
Interest expense net of interest income 4,003 2,980 11,719 11,531
Interest amortized to cost of sales 4,988 4,963 13,597 13,138
Depreciation and amortization 3,633 3,541 10,499 10,142
Non-cash charges 1,468 1,357 4,034 3,483
---------------- ----- ----- ----- -----
Adjusted EBITDA $48,765 $31,284 $126,042 $96,402
=============== ======= ======= ======== =======
M/I Homes, Inc. and Subsidiaries
Non-GAAP Reconciliation (3)
(Dollars and shares in thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
---- ---- ---- ----
Total revenue $476,423 $442,464 $1,340,269 $1,168,081
Income before income taxes $34,673 $18,443 $86,193 $58,108
Add: Stucco-related charges - 14,500 8,500 19,409
--- ------ ----- ------
Adjusted income before income taxes $34,673 $32,943 $94,693 $77,517
=================================== ======= ======= ======= =======
Pre-tax operating margin percentage 7.3% 4.2% 6.4% 5.0%
Adjusted pre-tax operating margin percentage 7.3% 7.4% 7.1% 6.6%
Net income $22,327 $10,942 $56,199 $36,047
Add: Stucco-related charges - net of tax - 8,990 5,440 12,034
---------------------------------------- --- ----- ----- ------
Adjusted net income $22,327 $19,932 $61,639 $48,081
=================== ======= ======= ======= =======
Stucco-related charges - net of tax $ - $8,990 $5,440 $12,034
Divided by: Diluted weighted average shares outstanding 30,675 30,139 30,539 30,093
------------------------------------------------------- ------
Diluted earnings per share related to stucco-related charges $ - $0.30 $0.18 $0.40
Excess of fair value over book value of preferred shares $2,257 $ - $2,257 $ -
subject to redemption
Divided by: Diluted weighted average shares outstanding 30,675 30,139 30,539 30,093
------------------------------------------------------- ------ ------ ------ ------
Diluted earnings per share related to preferred shares $0.07 $ - $0.07 $ -
subject to redemption
Add: Diluted earnings per share 0.64 0.35 1.73 1.17
------------------------------- ----
Adjusted diluted earnings per share $0.71 $0.65 $1.98 $1.57
=================================== ===== ===== ===== =====
(3) We believe these non-GAAP
financial measures are relevant
and useful to investors in
understanding our operations, and
may be helpful in comparing us
with other companies in the
homebuilding industry to the
extent they provide similar
information. These non-GAAP
financial measures should be used
to supplement our GAAP results in
order to provide a greater
understanding of the factors and
trends affecting our operations.
M/I Homes, Inc. and Subsidiaries
Selected Supplemental Financial and Operating Data
NEW CONTRACTS
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
% %
Region 2017 2016 Change 2017 2016 Change
------ ---- ---- ------ ---- ---- ------
Midwest 458 407 13% 1,545 1,409 10%
Southern 583 437 33% 1,798 1,444 25%
Mid-Atlantic 184 244 (25)% 736 903 (18)%
------------ --- --- ---- --- --- ----
Total 1,225 1,088 13% 4,079 3,756 9%
===== ===== ===== === ===== ===== ===
HOMES DELIVERED
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
% %
Region 2017 2016 Change 2017 2016 Change
------ ---- ---- ------ ---- ---- ------
Midwest 461 443 4% 1,277 1,163 10%
Southern 520 410 27% 1,459 1,158 26%
Mid-Atlantic 275 295 (7)% 769 745 3%
------------ --- --- --- --- --- ---
Total 1,256 1,148 9% 3,505 3,066 14%
===== ===== ===== === ===== ===== ===
BACKLOG
-------
September 30, 2017 September 30, 2016
------------------ ------------------
Region Units Dollars Average Units Dollars Average
(millions) Sales Price (millions) Sales Price
---
Midwest 1,025 $416 $406,000 918 $356 $388,000
Southern 1,013 $360 $355,000 846 $296 $350,000
Mid-Atlantic 340 $136 $399,000 457 $170 $371,000
------------ --- ---- -------- --- ---- --------
Total 2,378 $912 $383,000 2,221 $821 $370,000
===== ===== ==== ======== ===== ==== ========
LAND POSITION SUMMARY
---------------------
September 30, 2017 September 30, 2016
------------------ ------------------
Region Lots Lots Under Total Lots Lots Under Total
Owned Contract Owned Contract
--- ----- -------- ----- --------
Midwest 4,622 4,947 9,569 3,846 5,378 9,224
Southern 5,081 7,688 12,769 4,213 5,333 9,546
Mid-Atlantic 1,746 2,779 4,525 2,068 2,381 4,449
------------ ----- ----- ----- ----- ----- -----
Total 11,449 15,414 26,863 10,127 13,092 23,219
===== ====== ====== ====== ====== ====== ======
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SOURCE M/I Homes, Inc.
