M/I Homes Reports Fourth Quarter and Year-End Results
COLUMBUS, Ohio, Feb. 5, 2019 /PRNewswire/ -- M/I Homes, Inc. (NYSE: MHO) announced results for its fourth quarter and year ended December 31, 2018.
2018 Fourth-Quarter Results:
-- New contracts decreased 4% to 1,173 contracts
-- Backlog sales value increased 13% to $897 million, and backlog units
increased 9%
-- Revenue increased 16% to a fourth quarter record of $722 million
-- Homes delivered increased 15% to a fourth quarter record 1,825 homes
-- Pre-tax income increased 30% to $44.4 million from $34.1 million in
2017; excluding impairment charges and purchase accounting charges,
pre-tax income improved 22% to $50.8 million.
-- Net income increased 104% to $32.4 million from $15.9 million in 2017,
and diluted earnings per share increased to $1.15 compared with $0.53
per diluted share.
2018 Full-Year Results:
-- Record revenue of $2.3 billion, an increase of 17%
-- Record homes delivered of 5,778, a 14% increase
-- Record new contracts of 5,845, an increase of 10%
-- Pre-tax income of $141.3 million, a 17% increase compared to $120.3
million in 2017; excluding impairment, stucco-related charges and
acquisition-related costs, pre-tax income improved 13% to $153.9 million
-- Net income to common shareholders increased to a record $107.7 million
compared to $66.2 million in 2017 and diluted earnings per share
increased to $3.70 from $2.26 per diluted share, partly due to an
effective tax rate in 2018 of 24% compared to 40% in 2017
-- Shareholders' equity reached an all-time record of $855 million, a 14%
increase from a year ago, with book value per share of $31.
For the fourth quarter of 2018, the Company reported net income of $32.4 million, or $1.15 per diluted share. This compares to net income of $15.9 million, or $0.53 per diluted share, for the fourth quarter of 2017. Net income in the fourth quarter of 2018 included $4.4 million of after-tax impairment charges ($0.15 per diluted share) and $0.5 million of after-tax purchase accounting charges ($0.02 per diluted share), while 2017's fourth quarter net income included $4.9 million of after-tax impairment charges ($0.16 per diluted share). In addition, 2017's fourth quarter net income included a tax charge of $6.5 million ($0.21 per share) related to the Tax Cuts and Jobs Act. Excluding the impairment charges, purchase accounting charges and the tax charge in 2017's fourth quarter, adjusted net income increased 36% to $37.3 million, and diluted earnings per share increased 47% to $1.32 per share from $0.90 per share in 2017.
For the year ended December 31, 2018, the Company reported net income to common shareholders of $107.7 million, or $3.70 per diluted share, compared to net income to common shareholders of $66.2 million or $2.26 per diluted share in 2017. Net income to common shareholders in 2018 included $4.4 million of after-tax impairment charges ($0.15 per diluted share) and $5.2 million of after-tax acquisition-related charges ($0.18 per diluted share). Net income to common shareholders in 2017 includes the impact of a deferred tax asset re-measurement of $6.5 million ($0.21 per diluted share), a $2.3 million equity adjustment ($0.07 per diluted share) related to the redemption of preferred shares in the third quarter of 2017, $5.4 million of after-tax stucco-related repair costs ($0.18 per diluted share) and $4.9 million of after-tax impairment charges ($0.16 per diluted share). Exclusive of these charges, net income to common shareholders increased 37% to $117.3 million compared to $85.3 million in 2017, and diluted earnings per share increased 40% to $4.03 compared to $2.88 per share in 2017.
Homes delivered in 2018's fourth quarter reached an all-time quarterly record of 1,825, increasing 15% compared to 1,584 deliveries in 2017's fourth quarter. Homes delivered for the twelve months ended December 31, 2018 increased 14% to a record-high 5,778 from 2017's deliveries of 5,089. New contracts for 2018's fourth quarter decreased 4% to 1,173 from 1,220 new contracts in 2017's fourth quarter. For 2018, new contracts reached a record-high of 5,845 a 10% increase over 2017's new contracts of 5,299. Homes in backlog increased 9% at December 31, 2018 to 2,194 units, with a sales value of $897 million, a 13% increase over last year, and the average sales price in backlog increased 4% to a record-high of $409,000. At December 31, 2017, the sales value of the 2,014 homes in backlog was $791 million, with an average sales price of $393,000. M/I Homes had 209 active communities at December 31, 2018 compared to 188 a year ago. The Company's cancellation rate was 18% in 2018's fourth quarter and 15% for the year.
Robert H. Schottenstein, Chief Executive Officer and President, commented, "2018 was a strong year for M/I Homes, highlighted by record levels of revenue, homes delivered, and new contracts, along with a 17% increase in pre-tax income and a 49% increase in net income. While our fourth quarter results also featured a record number of homes delivered and record revenue, the 4% decline we experienced in our new contracts reflected more challenging housing conditions and affordability pressures. These conditions also impacted our gross margins, though we are pleased with the 70 basis point improvement in our annual overhead expense ratio."
Mr. Schottenstein continued, "Our homebuilding debt to capital ratio at year-end was 44%. During the second half of the year, we repurchased 1.07 million of our common shares. Though housing conditions continue to be choppy, we enter 2019 with a very strong backlog and balance sheet, and are well positioned for the year with a significant number of planned new community openings."
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 February 2020.
M/I Homes, Inc. is one of the nation's leading builders of single-family homes, having sold over 111,400 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 are also currently 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 several 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
Twelve Months Ended
December 31,
December 31,
2018 2017 2018 2017
---
New contracts 1,173 1,220 5,845 5,299
Average community count 211 184 205 183
Cancellation rate 18
% 13
% 15
% 14
%
Backlog units 2,194 2,014
Backlog sales value $
896,714 $
791,253
Homes delivered 1,825 1,584 5,778 5,089
Average home closing price $
383 $
372 $
384 $
369
---
Homebuilding revenue:
Housing revenue $
698,919 $
588,679 $
2,217,197 $
1,878,572
Land revenue 10,465 21,268 16,889 33,706
---
Total homebuilding revenue $
709,384 $
609,947 $
2,234,086 $
1,912,278
Financial services revenue 13,101 11,755 52,196 49,693
---
Total revenue $
722,485 $
621,702 $
2,286,282 $
1,961,971
---
Cost of sales - operations 586,039 498,470 1,831,557 1,552,522
Cost of sales - purchase accounting charges 598 5,147
Cost of sales - impairment 5,809 7,681 5,809 7,681
Cost of sales - stucco related charges - 8,500
---
Gross margin 130,039 115,551 443,769 393,268
General and administrative expense 38,265 37,073 137,779 126,282
Selling expense 42,121 39,661 142,829 128,327
---
Operating income 49,653 38,817 163,161 138,659
Acquisition and integration costs - 1,700
Equity in income from joint venture arrangements (44) (341) (312) (539)
Interest expense 5,292 5,027 20,484 18,874
---
Income before income taxes 44,405 34,131 141,289 120,324
Provision for income taxes 11,998 18,249 33,626 48,243
---
Net income $
32,407 $
15,882 $
107,663 $
72,081
Excess of fair value over book value of preferred - 2,257
shares subject to redemption
Preferred dividends - 3,656
---
Net income available to common shareholders $
32,407 $
15,882 $
107,663 $
66,168
---
Earnings per share:
Basic $
1.17 $
0.57 $
3.81 $
2.57
Diluted $
1.15 $
0.53 $
3.70 $
2.26
---
Weighted average shares outstanding:
Basic 27,774 27,736 28,224 25,769
Diluted 28,181 31,172 29,178 30,688
---
M/I Homes, Inc. and Subsidiaries
Summary Balance Sheet and Other Information (unaudited)
(Dollars in thousands, except per share amounts)
As of
December 31,
2018 2017
---
Assets:
Total cash, cash equivalents and restricted cash $
21,529 $
151,703
Mortgage loans held for sale 169,651 171,580
Inventory:
Lots, land and land development 778,943 687,260
Land held for sale 12,633 6,491
Homes under construction 730,390 579,051
Other inventory 152,494 141,772
---
Total Inventory $
1,674,460 $
1,414,574
---
Property and equipment - net 29,395 26,816
Goodwill 16,400
Investments in joint venture arrangements 35,870 20,525
Deferred income tax asset 13,482 18,438
Other assets 60,794 61,135
---
Total Assets $
2,021,581 $
1,864,771
===
Liabilities:
Debt - Homebuilding Operations:
Senior notes due 2021 - net $
297,884 $
296,780
Senior notes due 2025 - net 246,571 246,051
Convertible senior subordinated notes due 2018 - net - 86,132
Notes payable - homebuilding 117,400
Notes payable - other 5,938 10,576
---
Total Debt - Homebuilding Operations $
667,793 $
639,539
Notes payable bank - financial services operations 153,168 168,195
---
Total Debt $
820,961 $
807,734
Accounts payable 131,511 117,233
Other liabilities 213,806 192,506
---
Total Liabilities $
1,166,278 $
1,117,473
---
Shareholders' Equity 855,303 747,298
---
Total Liabilities and Shareholders' Equity $
2,021,581 $
1,864,771
===
Book value per common share $
31.08 $
26.83
Homebuilding debt / capital ratio(1) 44
% 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 Twelve Months Ended
December 31,
December 31,
2018 2017 2018 2017
---
Cash provided by (used in) operating activities $
72,527 $
13,495 $
(2,592) $
(53,184)
Cash used in investing activities $
(13,655) $
(4,746) $
(133,957) $
(9,157)
Cash (used in) provided by in financing activities $
(73,703) $
39,318 $
6,375 $
179,603
Land/lot purchases $
74,050 $
78,085 $
330,548 $
328,226
Land development spending $
69,667 $
63,683 $
221,923 $
200,702
Land sale revenue $
10,465 $
21,268 $
16,889 $
33,706
Land sale gross profit $
1,493 $
1,966 $
2,045 $
2,849
Financial services pre-tax income $
5,353 $
4,543 $
24,213 $
24,531
---
M/I Homes, Inc. and Subsidiaries
Non-GAAP Financial Results
(1)
(Dollars in thousands)
Three Months Ended Twelve Months Ended
December 31, December 31,
2018 2017 2018 2017
---
Net income $
32,407 $
15,882 $
107,663 $
72,081
Add:
Provision for
income taxes 11,998 18,249 33,626 48,243
Interest expense,
net of interest
income 4,225 4,305 16,990 16,024
Interest amortized
to cost of sales 8,112 6,730 25,457 20,327
Depreciation and
amortization 3,777 3,675 14,531 14,174
Non-cash charges 8,012 9,691 11,783 13,725
---
Adjusted EBITDA $
68,531 $
58,532 $
210,050 $
184,574
===
M/I Homes, Inc. and Subsidiaries
Non-GAAP Reconciliation
(1)
(Dollars and shares in thousands, except per share amounts)
Three Months Ended Twelve months ended
December 31, December 31,
2018 2017 2018 2017
---
Income before income taxes $
44,405 $
34,131 $
141,289 $
120,324
Add: Impairment 5,809 7,681 5,809 7,681
Add: Purchase accounting charges 598 5,147
Add: Acquisition and integration costs - 1,700
Add: Stucco-related charges - 8,500
Adjusted income before income taxes $
50,812 $
41,812 $
153,945 $
136,505
===
Net income $
32,407 $
15,882 $
107,663 $
72,081
Add: Impairment - net of tax 4,415 4,916 4,415 4,916
Add: Purchase accounting charges - net of tax 454 3,912
Add: Acquisition and integration costs - net of tax - 1,292
Add: Stucco-related charges - net of tax - 5,440
Add: Deferred tax re-measurement due to tax reform - 6,520 6,520
Adjusted net income $
37,276 $
27,318 $
117,282 $
88,957
===
Net income available to common shareholders $
32,407 $
15,882 $
107,663 $
66,168
Add: Impairment - net of tax 4,415 4,916 4,415 4,916
Add: Purchase accounting charges - net of tax 454 3,912
Add: Acquisition and integration costs - net of tax - 1,292
Add: Stucco-related charges - net of tax - 5,440
Add: Deferred tax re-measurement due to tax reform - 6,520 6,520
Add: Excess of fair value over book value charge - 2,257
Adjusted net income available to common shareholders $
37,276 $
27,318 $
117,282 $
85,301
===
Diluted earnings per share $
1.15 $
0.53 $
3.70 $
2.26
Add: Impairment per share impact(2) 0.15 0.16 0.15 0.16
Add: Purchase accounting charges per share impact(2) 0.02 0.13
Add: Acquisition and integration costs per share impact(2) - 0.05
Add: Stucco-related charges per share impact(2) - 0.18
Add: Deferred tax re-measurement due to tax reform per share impact(2) - 0.21 0.21
Add: Preferred shares redeemed per share impact(2) - 0.07
Adjusted diluted earnings per share $
1.32 $
0.90 $
4.03 $
2.88
===
(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.
(2) Represents the related charges
divided by diluted weighted
average shares outstanding during
the respective period as presented
in the Summary Statement of
Income.
M/I Homes, Inc. and Subsidiaries
Selected Supplemental Financial and Operating Data
NEW CONTRACTS
Three Months Ended Twelve Months Ended
December 31,
December 31,
---
% %
Region 2018 2017 Change 2018 2017 Change
--- ---
Midwest 415 433 (4) 2,306 1,978 17
% %
Southern 550 544 1 2,697 2,342 15
% %
Mid-Atlantic 208 243 (14) 842 979 (14)
% %
--- ---
Total 1,173 1,220 (4) 5,845 5,299 10
% %
=== ===
HOMES DELIVERED
Three Months Ended Twelve Months Ended
December 31,
December 31,
% %
Region 2018 2017 Change 2018 2017 Change
---
Midwest 769 630 22
%
% 2,317 1,907 21
Southern 760 649 17
%
% 2,579 2,108 22
Mid-Atlantic 296 305 (3) 882 1,074 (18)
% %
---
Total 1,825 1,584 15
%
% 5,778 5,089 14
===
BACKLOG
December 31, 2018
December 31, 2017
Dollars Average Dollars Average
Region Units (millions) Sales Price Units (millions) Sales Price
---
Midwest 930 $
410 $
441,000 828 $
344 $
415,000
Southern 1,026 $
382 $
373,000 908 $
332 $
365,000
Mid-Atlantic 238 $
104 $
437,000 278 $
116 $
416,000
---
Total 2,194 $
897 $
409,000 2,014 $
791 $
393,000
===
LAND POSITION SUMMARY
December 31, 2018 December 31, 2017
Lots Lots Under Lots Lots Under
Region Owned Contract Total Owned Contract Total
---
Midwest 5,644 6,460 12,104 4,456 6,220 10,676
Southern 6,507 5,636 12,143 5,470 7,668 13,138
Mid-Atlantic 1,912 2,564 4,476 1,696 3,021 4,717
---
Total 14,063 14,660 28,723 11,622 16,909 28,531
===
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SOURCE M/I Homes, Inc.
