M/I Homes Reports 2018 Third Quarter Results
COLUMBUS, Ohio, Oct. 24, 2018 /PRNewswire/ -- M/I Homes, Inc. (NYSE: MHO) announced results for the three and nine months ended September 30, 2018.
2018 Third Quarter Highlights:
-- New contracts increased 6% to a third quarter record 1,302 contracts
-- Backlog sales value increased 25% to a third quarter record of $1.1
billion, and backlog units increased 20% to 2,846
-- Revenue increased 19% to a third quarter record of $568 million
-- Homes delivered increased 13% to a third quarter record 1,422 homes
-- Net income increased by 31% to a third quarter record of $29.3 million
from $22.3 million in 2017
-- Diluted earnings per share increased 58% to $1.01 from $0.64 in 2017,
which included a $2.3 million equity adjustment due to the redemption of
preferred shares
-- Shareholders' equity reached an all-time record of $835 million, a 16%
increase from a year ago, with book value per share of $29.69
For the third quarter of 2018, the Company reported net income of $29.3 million, or $1.01 per diluted share. This compares to net income of $22.3 million, or $0.64 per diluted share, for the third quarter of 2017. The third quarter of 2018 included a $0.7 million pre-tax purchase accounting charge ($0.02 per diluted share) related to our acquisition of Pinnacle Homes in Detroit, Michigan in the first quarter of 2018. The third quarter of 2017 included a $2.3 million after-tax equity adjustment ($0.07 per diluted share) related to the redemption of preferred shares in that period. For the nine months ended September 30, 2018, the Company reported net income to common shareholders of $75.3 million, or $2.56 per diluted share, compared to $50.3 million, or $1.73 per diluted share, for the same period of 2017. Year-to-date in 2018, the Company incurred $6.2 million of pre-tax acquisition-related charges ($0.16 per diluted share) and, in the same nine-month period in 2017, incurred $8.5 million ($0.18 per diluted share) for pre-tax stucco-related repair costs in certain of our Florida communities. Exclusive of these charges in both periods and the equity adjustment charge in 2017, year-to-date adjusted net income to common shareholders was $79.9 million in 2018 compared to $58.0 million in 2017's same period, a 38% increase.
Homes delivered in 2018's third quarter reached a third quarter record of 1,422, increasing 13% from the 1,256 deliveries in 2017's third quarter. Homes delivered for the nine months ended September 30, 2018 increased 13% to 3,953 from 2017's deliveries of 3,505. New contracts for 2018's third quarter were 1,302, an increase of 6% over 2017's third quarter. For the first nine months of 2018, new contracts increased 15% to a record 4,672 from 4,079 in 2017. Homes in backlog increased 20% at September 30, 2018 to 2,846 units, with a sales value record of $1.1 billion (a 25% increase over last year's third quarter), and an average sale price of $401,000. At September 30, 2017, the sales value of homes in backlog was $912 million, with an average sale price of $383,000 and backlog units of 2,378. M/I Homes had 212 active communities at September 30, 2018 compared to 179 at September 30, 2017. The Company's cancellation rate was 16% in the third quarter of 2018 and 15% in 2017.
Robert H. Schottenstein, Chief Executive Officer and President, commented, "We reported another strong quarter highlighted by all-time third quarter records for new contracts, homes delivered, revenue, and net income. Our backlog sales value reached $1.1 billion - a record for our third quarter and a 25% increase over 2017's third quarter. We delivered 1,422 homes in the third quarter, a 13% increase over last year, and our pre-tax income improved by 14% reaching a third quarter record of $39.5 million. We are particularly pleased that our adjusted gross margin improved 50 basis points from the second quarter, to 20.5%, and our overhead expense ratio improved 40 basis points from last year's third quarter to 12.7%. Our growth in pre-tax income, combined with a lower tax rate, resulted in a 31% increase in net income from $22.3 million in last year's third quarter to a third quarter record of $29.3 million in 2018."
Mr. Schottenstein continued, "Our financial condition remains strong. We ended the third quarter with record-high shareholders' equity of $835 million, an increase of 16% from 2017's third quarter, book value per share of $29.69, and a homebuilding debt to capital ratio of 48%. During the quarter, we also repurchased 437,490 of our common shares. As we begin the final quarter of 2018, we remain well positioned to have another solid year of steady growth and improved financial performance."
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 2019.
M/I Homes, Inc. is one of the nation's leading builders of single-family homes, having sold over 110,000 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 are sold under the name Hans Hagen Homes in the Minneapolis/St. Paul, Minnesota market and Pinnacle Homes in the Detroit, Michigan market. The Company has homebuilding operations in Columbus and Cincinnati, Ohio; Indianapolis, Indiana; Chicago, Illinois; Minneapolis/St. Paul, Minnesota; Detroit, Michigan; 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, integration of acquisitions, construction defects, 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, 2017, 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,
2018 2017 2018 2017
New contracts 1,302 1,225 4,672 4,079
Average community
count 211 183 204 182
Cancellation rate 16
% 15
% 14
% 14
%
Backlog units 2,846 2,378
Backlog sales value $
1,140,037 $
911,657
Homes delivered 1,422 1,256 3,953 3,505
Average home
closing price $
390 $
366 $
384 $
368
---
Homebuilding revenue:
Housing revenue $
554,820 $
459,342 $
1,518,278 $
1,289,893
Land revenue 829 5,318 6,424 12,438
---
Total homebuilding
revenue $
555,649 $
464,660 $
1,524,702 $
1,302,331
Financial services
revenue 12,193 11,763 39,095 37,938
---
Total revenue $
567,842 $
476,423 $
1,563,797 $
1,340,269
---
Cost of sales -
operations 451,337 374,673 1,245,518 1,054,052
Cost of sales -
purchase
accounting
adjustments 692 4,549
Cost of sales -
stucco-related
charges - 8,500
---
Gross margin $
115,813 $
101,750 $
313,730 $
277,717
General and
administrative
expense 36,897 31,337 99,514 89,209
Selling expense 35,054 31,136 100,708 88,666
---
Operating income $
43,862 $
39,277 $
113,508 $
99,842
Acquisition and
integration costs - 1,700
Equity in income
from joint venture
arrangements (44) (71) (268) (198)
Interest expense 4,426 4,675 15,192 13,847
Income before
income taxes $
39,480 $
34,673 $
96,884 $
86,193
Provision for
income taxes 10,198 12,346 21,628 29,994
---
Net income $
29,282 $
22,327 $
75,256 $
56,199
Excess of fair
value over book
value of preferred
shares subject to
redemption - 2,257 2,257
Preferred dividends - 1,218 3,656
---
Net income to
common
shareholders $
29,282 $
18,852 $
75,256 $
50,286
---
Earnings per share:
Basic $
1.03 $
0.74 $
2.65 $
2.00
Diluted $
1.01 $
0.64 $
2.56 $
1.73
---
Weighted average shares outstanding:
Basic 28,469 25,581 28,389 25,106
Diluted 28,906 30,675 29,511 30,539
---
M/I Homes, Inc. and Subsidiaries
Summary Balance Sheet and Other Information (unaudited)
(Dollars in thousands, except per share amounts)
As of
September 30,
2018 2017
---
Assets:
Total cash, cash
equivalents and
restricted cash(1) $
36,360 $
103,636
Mortgage loans held
for sale 115,189 91,987
Inventory:
Lots, land and land
development 754,322 663,170
Land held for sale 14,312 12,330
Homes under
construction 831,129 645,816
Other inventory 151,762 134,493
---
Total Inventory $
1,751,525 $
1,455,809
---
Property and
equipment -net 28,691 25,320
Investments in joint
venture arrangements 24,568 22,981
Goodwill 16,400
Deferred income tax
asset 16,925 29,569
Other assets 68,677 55,393
---
Total Assets $
2,058,335 $
1,784,695
===
Liabilities:
Debt -Homebuilding Operations:
Senior notes due 2021
-net $
297,608 $
296,505
Senior notes due 2025
-net 246,441 245,958
Convertible senior
subordinated notes
due 2018 -net - 85,955
Notes payable -
homebuilding 222,700
Notes payable -other 8,838 4,057
---
Total Debt -
Homebuilding
Operations $
775,587 $
632,475
Preferred shares
subject to
redemption - 50,420
Notes payable bank -
financial services
operations 104,026 91,275
---
Total Debt $
879,613 $
774,170
Accounts payable 148,421 120,598
Other liabilities 195,097 166,954
---
Total Liabilities $
1,223,131 $
1,061,722
---
Shareholders' Equity 835,204 722,973
---
Total Liabilities and
Shareholders' Equity $
2,058,335 $
1,784,695
===
Book value per common
share $
29.69 $
26.27
Homebuilding debt /
capital ratio(2) 48
% 47
%
--- ---
(1) Includes $0.9 million and $0.7
million of restricted cash and
cash held in escrow for the
quarters ended September 30, 2018
and 2017, respectively.
(2) 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,
2018 2017 2018 2017
---
Cash used in operating activities $
(54,194) $
(26,705) $
(73,895) $
(66,025)
Cash used in investing activities $
(17,417) $
(6,022) $
(121,526) $
(5,065)
Cash provided by financing activities $
40,154 $
106,423 $
80,078 $
140,285
Land/lot purchases $
81,222 $
65,511 $
256,498 $
250,141
Land development spending $
63,680 $
53,755 $
152,256 $
137,019
Land sale revenue $
829 $
5,318 $
6,424 $
12,438
Land sale gross profit $
66 $
365 $
552 $
883
Financial services pre-tax income $
4,846 $
5,231 $
18,860 $
19,988
---
M/I Homes, Inc. and Subsidiaries
Non-GAAP Financial Results
(1)
(Dollars in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
2018 2017 2018 2017
---
Net income $
29,282 $
22,327 $
75,256 $
56,199
Add:
Provision for income taxes 10,198 12,346 21,628 29,994
Interest expense net of interest income 3,516 4,003 12,765 11,719
Interest amortized to cost of sales 6,278 4,988 17,345 13,597
Depreciation and amortization 3,650 3,633 10,754 10,499
Non-cash charges 1,041 1,468 3,771 4,034
---
Adjusted EBITDA $
53,965 $
48,765 $
141,519 $
126,042
===
M/I Homes, Inc. and Subsidiaries
Non-GAAP Reconciliation
(1)
(Dollars and shares in thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
2018 2017 2018 2017
---
Income before income taxes $
39,480 $
34,673 $
96,884 $
86,193
Add: Purchase accounting adjustments 692 4,549
Add: Acquisition and integration costs - 1,700
Add: Stucco-related charges - 8,500
---
Adjusted income before income taxes $
40,172 $
34,673 $
103,133 $
94,693
===
Net income to common shareholders $
29,282 $
18,852 $
75,256 $
50,286
Add: Purchase accounting adjustments - net of tax 512 3,366
Add: Acquisition and integrations costs -net of tax - 1,258
Add: Excess of fair value over book value of preferred shares
subject to redemption - 2,257 2,257
Add: Stucco-related charges - net of tax - 5,440
---
Adjusted net income to common shareholders $
29,794 $
21,109 $
79,880 $
57,983
===
Purchase accounting adjustments - net of tax $
512
$ $
3,366
$
Divided by: Diluted weighted average shares outstanding 28,906 30,675 29,511 30,539
---
Diluted earnings per share related to purchase accounting
adjustments $
0.02
$ $
0.12
$
Acquisition and integration costs - net of tax
$
$ $
1,258
$
Divided by: Diluted weighted average shares outstanding 28,906 30,675 29,511 30,539
---
Diluted earnings per share related to acquisition and
integration costs
$
$ $
0.04
$
Stucco-related charges - net of tax
$
$
$ $
5,440
Divided by: Diluted weighted average shares outstanding 28,906 30,675 29,511 30,539
---
Diluted earnings per share related to stucco-related charges
$
$
$ $
0.18
Excess of fair value over book value of preferred shares
subject to redemption
$ $
2,257
$ $
2,257
Divided by: Diluted weighted average shares outstanding 28,906 30,675 29,511 30,539
---
Diluted earnings per share related to preferred dividends
$ $
0.07
$ $
0.07
Add: Diluted earnings per share 1.01 0.64 2.56 1.73
---
Adjusted diluted earnings per share $
1.03 $
0.71 $
2.72 $
1.98
===
(1) 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 2018 2017 Change 2018 2017 Change
--- ---
Midwest 537 458 17 1,891 1,545 22
% %
Southern 597 583 2 2,147 1,798 19
% %
Mid-Atlantic 168 184 (9) 634 736 (14)
% %
--- ---
Total 1,302 1,225 6 4,672 4,079 15
% %
=== ===
HOMES DELIVERED
Three Months Ended Nine Months Ended
September 30,
September 30,
---
% %
Region 2018 2017 Change 2018 2017 Change
--- ---
Midwest 583 461 26 1,548 1,277 21
% %
Southern 612 520 18 1,819 1,459 25
% %
Mid-Atlantic 227 275 (17) 586 769 (24)
% %
--- ---
Total 1,422 1,256 13 3,953 3,505 13
% %
=== ===
BACKLOG
September 30, 2018
September 30, 2017
---
Dollars Average Dollars Average
Region Units (millions) Sales Price Units (millions) Sales Price
--- ---
Midwest 1,284 $
549 $
427,000 1,025 $
416 $
406,000
Southern 1,236 $
454 $
367,000 1,013 $
360 $
355,000
Mid-Atlantic 326 $
137 $
421,000 340 $
136 $
399,000
---
Total 2,846 $
1,140 $
401,000 2,378 $
912 $
383,000
===
LAND POSITION SUMMARY
September 30, 2018 September 30, 2017
Lots Lots Under Lots Lots Under
Region Owned Contract Total Owned Contract Total
--- ---
Midwest 5,561 6,921 12,482 4,622 4,947 9,569
Southern 6,288 6,023 12,311 5,081 7,688 12,769
Mid-Atlantic 1,931 2,881 4,812 1,746 2,779 4,525
---
Total 13,780 15,825 29,605 11,449 15,414 26,863
===
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SOURCE M/I Homes, Inc.
