M/I Homes Reports 2016 Third Quarter Results

October 27, 2016 8:27 AM | 45 min read | Make a Comment
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COLUMBUS, Ohio, Oct. 27, 2016 /PRNewswire/ -- M/I Homes, Inc. MHO announced results for the three months and nine months ended September 30, 2016.

2016 Third Quarter Highlights:

  • Net income of $10.9 million ($0.35 per diluted share) which includes a $14.5 million pre-tax charge ($0.30 per diluted share) for stucco-related repairs
  • Net income, excluding the stucco-related charge, increased 28% to $19.9 million or $0.65 per diluted share
  • Revenue increased 22% to a record $442 million
  • New contracts increased 10%; community count up 5%
  • Homes delivered increased 15%; average closing price increased 5%
  • Backlog sales value increased 25% to $821 million; backlog units increased 24% to 2,221

For the third quarter of 2016, the Company reported net income of $10.9 million, or $0.35 per diluted share.  This compares to net income of $15.6 million, or $0.51 per diluted share, for the third quarter of 2015.  The third quarter of 2016 includes a $14.5 million pre-tax charge ($0.30 per diluted share) for known and estimated future stucco-related repair costs in certain of our Florida communities. For the nine months ended September 30, 2016, the Company reported net income of $36.0 million, or $1.17 per diluted share, compared to net income of $38.5 million, or $1.25 per diluted share, for the same period of 2015.  Year-to-date in 2016, the Company has incurred $19.4 million of pre-tax charges ($0.40 per diluted share) related to stucco-related repair costs.  Exclusive of these charges, year-to-date net income is $48.1 million compared to $38.5 million in 2015's same period, a 25% increase.

New contracts for 2016's third quarter were 1,088, an increase of 10% over 2015's third quarter.  For the first nine months of 2016, new contracts increased 18% to 3,756 from 3,196 in 2015.  M/I Homes had 174 active communities at September 30, 2016 compared to 166 at September 30, 2015.  The Company's cancellation rate was 15% in the third quarter of 2016 and 16% in 2015.  Homes in backlog increased 24% at September 30, 2016 to 2,221 units, with a sales value of $821 million (a 25% increase over last year's third quarter), and an average sales price of $370,000.  At September 30, 2015, the sales value of homes in backlog was $657 million, with an average sales price of $367,000 and backlog units of 1,788.  Homes delivered in 2016's third quarter were 1,148 compared to 994 deliveries in 2015's third quarter - a 15% increase.  Homes delivered for the nine months ended September 30, 2016 increased 17% to 3,066 from 2015's deliveries of 2,630.

Robert H. Schottenstein, Chief Executive Officer and President, commented, "We are very pleased with our third quarter results highlighted by record revenue of $442 million - 22% above 2015's third quarter, a 10% increase in new contracts, and a 15% increase in homes delivered. We also reached our highest third quarter backlog level in 10 years, with a sales value of $821 million - a 25% increase over 2015's third quarter.  Excluding the $14.5 million stucco-related charge, net income improved by 28%, and our pre-tax operating margin increased to 7.4%.  The stucco-related charge we incurred in the third quarter, along with the charges we incurred in the first half of 2016, cover repair costs that we have incurred to date along with our estimate of repair costs that we may incur in the future. "

Mr. Schottenstein continued, "Looking ahead, 2016, our 40th year in business, is shaping up to be a very good year for M/I Homes. We have a strong backlog going into the last quarter of the year and housing market conditions remain favorable throughout most of our markets.  Our financial condition is strong with shareholders' equity of $632 million and homebuilding debt to capital of 46%. We will continue to focus on increasing profitability, growing our market share, and investing in 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 2017.

M/I Homes, Inc. is one of the nation's leading builders of single-family homes, having delivered over 97,000 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 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," "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, 2015, 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,

2016

2015

2016

2015

New contracts

1,088

988

3,756

3,196

Average community count

174

161

176

155

Cancellation rate

15

%

16

%

13

%

15

%

Backlog units



2,221

1,788

Backlog value



$

821,494

$

656,917

Homes delivered

1,148

994

3,066

2,630

Average home closing price

$

365

$

349

$

361

$

339








Homebuilding revenue:






   Housing revenue

$

419,228

$

346,562

$

1,105,701

$

891,674

   Land revenue

12,674

7,619

31,816

31,490

Total homebuilding revenue

$

431,902

$

354,181

$

1,137,517

$

923,164








Financial services revenue

10,562

9,276

30,564

26,308

Total revenue

$

442,464

$

363,457

$

1,168,081

$

949,472








Cost of sales - operations

349,135

285,416

924,106

744,194

Cost of sales - stucco-related charges

14,500

—

19,409

—

Gross margin

$

78,829

$

78,041

$

224,566

$

205,278

General and administrative expense

29,160

23,651

78,249

64,690

Selling expense

27,663

24,270

75,462

64,891

Operating income

$

22,006

$

30,120

$

70,855

$

75,697

Equity in income of unconsolidated joint ventures

(24)

(36)

(413)

(248)

Interest expense

3,587

3,658

13,160

11,870

Income before income taxes

$

18,443

$

26,498

$

58,108

$

64,075

Provision for income taxes

7,501

10,928

22,061

25,587

Net income

$

10,942

$

15,570

$

36,047

$

38,488

Preferred dividends

1,218

1,218

3,656

3,656

Net income to common shareholders

$

9,724

$

14,352

$

32,391

$

34,832








Earnings per share:






Basic

$

0.39

$

0.58

$

1.31

$

1.42

Diluted

$

0.35

$

0.51

$

1.17

$

1.25








Weighted average shares outstanding:






Basic

24,669

24,605

24,665

24,551

Diluted

30,139

30,067

30,093

30,021

 

 

M/I Homes, Inc. and Subsidiaries

Summary Balance Sheet and Other Information (unaudited)

(Dollars in thousands, except per share amounts)

As of

September 30,

2016

2015

Assets:


Total cash and cash equivalents(1)

$

23,308

$

28,126

Mortgage loans held for sale

95,545

77,550

Inventory:


Lots, land and land development

554,150

539,517

Land held for sale

15,956

5,803

Homes under construction

544,350

488,041

Other inventory

110,697

100,053

Total Inventory

$

1,225,153

$

1,133,414




Property and equipment - net

21,792

11,841

Investments in unconsolidated joint ventures

26,528

33,282

Deferred income taxes, net of valuation allowance

39,944

70,943

Other assets

64,967

46,102

Total Assets

$

1,497,237

$

1,401,258




Liabilities:


Debt - Homebuilding Operations:


Senior notes

$

295,401

$

226,863

Convertible senior subordinated notes due 2017

56,949

56,375

 Convertible senior subordinated notes due 2018

85,246

84,537

 Notes payable bank - homebuilding

85,000

156,100

Notes payable - other

8,566

9,363

Total Debt - Homebuilding Operations

$

531,162

$

533,238




Notes payable bank - financial services operations

91,483

73,239

Total Debt

$

622,645

$

606,477




Accounts payable

110,179

95,950

Other liabilities

132,821

115,493

Total Liabilities

$

865,645

$

817,920




Shareholders' Equity

631,592

583,338

Total Liabilities and Shareholders' Equity

$

1,497,237

$

1,401,258




Book value per common share

$

23.58

$

21.64

Homebuilding debt / capital ratio(2)

46

%

48

%

 


(1)

2016 and 2015 amounts include $1.0 million and $3.1 million of restricted cash and cash held in escrow, 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,

2016

2015

2016

2015

Adjusted EBITDA(1)

$

31,284

$

37,694

$

96,402

$

97,223






Cash flow provided by (used in) operating activities

$

(13,952)

$

(48,986)

$

26,520

$

(95,196)

Cash used in investing activities

$

(4,023)

$

(2,020)

$

(19,799)

$

(6,048)

Cash provided by financing activities

$

12,613

$

54,288

$

5,384

$

110,764






Land/lot purchases

$

49,612

$

82,639

$

146,998

$

177,456

Land development spending

$

48,230

$

63,187

$

121,763

$

145,414

Land sale revenue

$

12,674

$

7,619

$

31,816

$

31,490

Land sale gross profit

$

1,063

$

905

$

3,095

$

6,364






Financial services pre-tax income

$

5,393

$

4,444

$

16,136

$

14,287

 

(1)

See "Non-GAAP Financial Results" table below.

 

M/I Homes, Inc. and Subsidiaries

Non-GAAP Financial Results (2)

(Dollars in thousands)



Three Months Ended

Nine Months Ended

September 30,

September 30,

2016

2015

2016

2015

Net income

$

10,942

15,570

$

36,047

38,488

Add:






Provision for income taxes

7,501

10,928

22,061

25,587

Interest expense net of interest income

2,980

3,128

11,531

10,496

Interest amortized to cost of sales

4,963

4,318

13,138

11,637

Depreciation and amortization

3,030

2,478

8,880

7,213

Non-cash charges

1,868

1,272

4,745

3,802

Adjusted EBITDA

$

31,284

$

37,694

$

96,402

$

97,223













 

 

M/I Homes, Inc. and Subsidiaries

Non-GAAP Reconciliation (2)

(Dollars and shares in thousands, except per share amounts)



Three Months Ended

Nine Months Ended

September 30,

September 30,

2016

2015

2016

2015

Total revenue

$

442,464

$

363,457

$

1,168,081

$

949,472








Gross margin

$

78,829

$

78,041

$

224,566

$

205,278

Add: Stucco-related charges

14,500

—

19,409

—

Adjusted gross margin

$

93,329

$

78,041

$

243,975

$

205,278








Gross margin percentage

17.8

%

21.5

%

19.2

%

21.6

%

Adjusted gross margin percentage

21.1

%

21.5

%

20.9

%

21.6

%






Income before income taxes

$

18,443

$

26,498

$

58,108

$

64,075

Add: Stucco-related charges

14,500

—

19,409

—

Adjusted income before income taxes

$

32,943

$

26,498

$

77,517

$

64,075








Net income

$

10,942

$

15,570

$

36,047

$

38,488

Add: Stucco-related charges - net of tax

8,990

—

12,034

—

Adjusted income before income taxes

$

19,932

$

15,570

$

48,081

$

38,488








Stucco-related charges - net of tax

$

8,990

$

—

$

12,034

$

—

Divided by: Diluted weighted average shares outstanding

30,139

30,067

30,093

30,021

Diluted earnings per share related to stucco-related charges

$

0.30

$

—

$

0.40

$

—

Add: Diluted earnings per share

0.35

0.51

1.17

1.25

Adjusted diluted earnings per share

$

0.65

$

0.51

$

1.57

$

1.25

 

(2)

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

2016

2015

Change

2016

2015

Change

Midwest

407

341

19

%

1,409

1,158

22

%

Southern

437

399

10

%

1,444

1,220

18

%

Mid-Atlantic

244

248

(2)

%

903

818

10

%

Total

1,088

988

10

%

3,756

3,196

18

%


































HOMES DELIVERED

Three Months Ended

Nine Months Ended

September 30,

September 30,



%




%

Region

2016

2015

Change

2016

2015

Change

Midwest

443

363

22

%

1,163

962

21

%

Southern

410

377

9

%

1,158

964

20

%

Mid-Atlantic

295

254

16

%

745

704

6

%

Total

1,148

994

15

%

3,066

2,630

17

%
















 



















BACKLOG

September 30, 2016

September 30, 2015

Dollars

Average


Dollars

Average

Region

Units

(millions)

Sales Price

Units

(millions)

Sales Price

Midwest

918

$

356

$

388,000

701

$

265

$

378,000

Southern

846

$

296

$

350,000

706

$

256

$

363,000

Mid-Atlantic

457

$

170

$

371,000

381

$

136

$

357,000

Total

2,221

$

821

$

370,000

1,788

$

657

$

367,000

 

LAND POSITION SUMMARY

September 30, 2016

September 30, 2015

Lots

Lots Under


Lots

Lots Under

Region

Owned

Contract

Total

Owned

Contract

Total

Midwest

3,846

5,378

9,224

3,619

3,632

7,251

Southern

4,213

5,333

9,546

4,683

5,114

9,797

Mid-Atlantic

2,068

2,381

4,449

2,771

1,743

4,514

Total

10,127

13,092

23,219

11,073

10,489

21,562

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/mi-homes-reports-2016-third-quarter-results-300352548.html

SOURCE M/I Homes, Inc.

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