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M/I Homes Reports 2018 Second Quarter Results

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M/I Homes Reports 2018 Second Quarter Results

PR Newswire

COLUMBUS, Ohio, July 25, 2018 /PRNewswire/ -- M/I Homes, Inc. (NYSE:MHO) announced results for the three and six months ended June 30, 2018.

M/I Homes, Inc. Logo (PRNewsfoto/M/I Homes, Inc.)

2018 Second Quarter Highlights:

  • New contracts increased 17% to a second quarter record 1,631
  • Backlog sales value increased 29% to an all-time quarterly record of $1.2 billion, and backlog units increased 23% to 2,966
  • Revenue increased 22% to a second quarter record of $558 million
  • Homes delivered increased 16% to a second quarter record 1,409
  • Net income to common shareholders increased to $27.9 million ($0.96 per diluted share) from $15.8 million ($0.55 per diluted share) in 2017
  • Diluted earnings per share increased 42% to $1.04, excluding the impact of $3.0 million of purchase accounting adjustments. In 2017's second quarter, diluted earnings per share were $0.73, excluding the impact of $8.5 million of stucco-related charges
  • Shareholders' equity reached an all-time record of $816 million, an 18% increase from a year-ago, with book value per share of $28.56

For the second quarter of 2018, the Company reported net income to common shareholders of $27.9 million, or $0.96 per diluted share.  This compares to net income to common shareholders of $15.8 million, or $0.55 per diluted share, for the second quarter of 2017.  The second quarter of 2018 includes a $3.0 million pre-tax purchase accounting charge ($0.08 per diluted share) related to our acquisition of Pinnacle Homes in Michigan in the first quarter of 2018.  The second quarter of 2017 included an $8.5 million pre-tax charge ($0.18 per diluted share) for stucco-related repair costs in certain of our Florida communities.  For the six months ended June 30, 2018, the Company reported net income to common shareholders of $46.0 million, or $1.56 per diluted share, compared to $31.4 million, or $1.09 per diluted share, for the same period of 2017.  Year-to-date in 2018, the Company incurred $5.6 million of pre-tax acquisition-related charges ($0.14 per diluted share) and, in the same period of 2017, incurred $8.5 million ($0.18 per diluted share), for pre-tax stucco-related repair costs.  Exclusive of these charges in both periods, year-to-date net income to common shareholders was $50.1 million in 2018 compared to $36.9 million in 2017's same period, a 36% increase.

Homes delivered in 2018's second quarter reached a second quarter record of 1,409, increasing 16% from the 1,211 deliveries in 2017's second quarter.  Homes delivered for the six months ended June 30, 2018 increased 13% to 2,531 from 2017's deliveries of 2,249.  New contracts for 2018's second quarter were a record 1,631, an increase of 17% over 2017's second quarter. For the first six months of 2018, new contracts increased 18% to 3,370 from 2,854 in 2017.  Homes in backlog increased 23% at June 30, 2018 to 2,966 units, with a sales value of $1.2 billion (a 29% increase over last year's second quarter), and an average sales price of $396,000.  At June 30, 2017, the sales value of homes in backlog was $909 million, with an average sales price of $377,000 and backlog units of 2,409.  M/I Homes had 209 active communities at June 30, 2018 compared to 187 at June 30, 2017. The Company's cancellation rate was 14% in the second quarter of 2018 and 13% in 2017.

Robert H. Schottenstein, Chief Executive Officer and President, commented, "We reported another strong quarter highlighted by all-time second quarter records for new contracts, homes delivered, and revenue.  We also achieved an all-time quarterly record of backlog sales value, reaching $1.2 billion - a 29% increase over 2017's second quarter.  Our second quarter new contracts of 1,631 increased 17% over last year, and despite margin pressures, our pre-tax income for the second quarter increased to $33.5 million.  The increase in pre-tax income, combined with a significantly lower tax rate and improved operating expense leverage, resulted in a dramatic increase in net income to common shareholders from $15.8 million in last year's second quarter to $27.9 million."

Mr. Schottenstein continued, "We ended the quarter with record-high shareholders' equity of $816 million, an increase of 18% from 2017's second quarter, book value per share of $28.56, and a homebuilding debt to capital ratio of 47%. With the strength of our backlog and planned new community openings, we are positioned to have a very good 2018. 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 July 2019.

M/I Homes, Inc. is one of the nation's leading builders of single-family homes, having sold over 109,000 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


Six Months Ended


June 30,


June 30,


2018


2017


2018


2017

New contracts

1,631



1,400



3,370



2,854


Average community count

207



186



201



183


Cancellation rate

14

%


13

%


13

%


14

%

Backlog units





2,966



2,409


Backlog sales value





$

1,174,462



$

909,334


Homes delivered

1,409



1,211



2,531



2,249


Average home closing price

$

387



$

366



$

381



$

369










Homebuilding revenue:








   Housing revenue

$

545,034



$

443,093



$

963,458



$

830,551


   Land revenue

1,188



1,905



5,595



7,120


Total homebuilding revenue

$

546,222



$

444,998



$

969,053



$

837,671










Financial services revenue

11,876



11,868



26,902



26,175


Total revenue

$

558,098



$

456,866



$

995,955



$

863,846










Cost of sales - operations

446,375



359,098



794,181



679,379


Cost of sales - purchase accounting adjustments

2,961





3,857




Cost of sales - stucco-related charges



8,500





8,500


Gross margin

$

108,762



$

89,268



$

197,917



$

175,967


General and administrative expense

34,666



30,112



62,617



57,872


Selling expense

35,591



30,247



65,654



57,530


Operating income

$

38,505



$

28,909



$

69,646



$

60,565


Acquisition and integration costs





1,700




Equity in loss (income) from joint venture arrangements

86



(110)



(224)



(127)


Interest expense

4,888



3,834



10,766



9,172


Income before income taxes

$

33,531



$

25,185



$

57,404



$

51,520


Provision for income taxes

5,620



8,196



11,430



17,648


Net income

$

27,911



$

16,989



$

45,974



$

33,872


Preferred dividends



1,219





2,438


Net income to common shareholders

$

27,911



$

15,770



$

45,974



$

31,434










Earnings per share:








Basic

$

0.98



$

0.63



$

1.62



$

1.26


Diluted

$

0.96



$

0.55



$

1.56



$

1.09










Weighted average shares outstanding:








Basic

28,571



24,990



28,349



24,864


Diluted

29,101



30,619



29,818



30,471



 

 

M/I Homes, Inc. and Subsidiaries

Summary Balance Sheet and Other Information (unaudited)

(Dollars in thousands, except per share amounts)




As of


June 30,


2018


2017

Assets:




Total cash, cash equivalents and restricted cash(1)

$

67,817



$

29,940


Mortgage loans held for sale

108,000



91,986


Inventory:




Lots, land and land development

740,972



637,268


Land held for sale

12,715



17,051


Homes under construction

757,478



600,376


Other inventory

141,303



124,849


Total Inventory

$

1,652,468



$

1,379,544






Property and equipment - net

28,885



22,255


Investments in joint venture arrangements

13,753



22,877


Goodwill

16,400




Deferred income tax asset

17,528



30,078


Other assets

65,689



54,706


Total Assets

$

1,970,540



$

1,631,386






Liabilities:




Debt - Homebuilding Operations:




Senior notes due 2021 - net

$

297,332



$

296,229


Senior notes due 2025 - net

246,311




Convertible senior subordinated notes due 2017 - net



57,380


 Convertible senior subordinated notes due 2018 - net



85,777


 Notes payable - homebuilding

181,800



138,000


 Notes payable - other

9,362



3,663


Total Debt - Homebuilding Operations

$

734,805



$

581,049






Notes payable bank - financial services operations

93,163



89,518


Total Debt

$

827,968



$

670,567






Accounts payable

141,491



113,072


Other liabilities

185,115



154,430


Total Liabilities

$

1,154,574



$

938,069






Shareholders' Equity

815,966



693,317


Total Liabilities and Shareholders' Equity

$

1,970,540



$

1,631,386






Book value per common share

$

28.56



$

25.63


Homebuilding debt / capital ratio(2)

47

%


46

%

 

(1)

Includes $1.3 million and $0.9 million of restricted cash and cash held in escrow for the quarters ended June 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


Six Months Ended


June 30,


June 30,


2018


2017


2018


2017

Cash provided by (used in) operating activities

$

11,489



$

(16,045)



$

(19,701)



$

(39,320)


Cash (used in) provided by investing activities

$

(6,437)



$

(2,249)



$

(104,109)



$

957


Cash provided by financing activities

$

9,188



$

9,336



$

39,924



$

33,862










Land/lot purchases

$

90,231



$

102,797



$

175,276



$

184,630


Land development spending

$

46,922



$

43,692



$

88,576



$

83,264


Land sale revenue

$

1,188



$

1,905



$

5,595



$

7,120


Land sale gross profit

$

82



$

142



$

486



$

518










Financial services pre-tax income

$

5,243



$

6,195



$

14,014



$

14,757


 

 

M/I Homes, Inc. and Subsidiaries

Non-GAAP Financial Results (1)

(Dollars in thousands)






Three Months Ended


Six Months Ended


June 30,


June 30,


2018


2017


2018


2017

Net income

$

27,911



$

16,989



$

45,974



$

33,872


Add:








Provision for income taxes

5,620



8,196



11,430



17,648


Interest expense net of interest income

4,093



3,104



9,249



7,716


Interest amortized to cost of sales

6,203



4,843



11,067



8,609


Depreciation and amortization

3,455



3,283



7,104



6,866


Non-cash charges

1,691



1,538



2,730



2,566


Adjusted EBITDA

$

48,973



$

37,953



$

87,554



$

77,277


 

 

M/I Homes, Inc. and Subsidiaries

Non-GAAP Reconciliation (1)

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






Three Months Ended


Six Months Ended


June 30,


June 30,


2018


2017


2018


2017

Income before income taxes

$

33,531



$

25,185



$

57,404



$

51,520


Add: Purchase accounting adjustments

2,961





3,857




Add: Acquisition and integration costs





1,700




Add: Stucco-related charges



8,500





8,500


Adjusted income before income taxes

$

36,492



$

33,685



$

62,961



$

60,020










Net income to common shareholders

$

27,911



$

15,770



$

45,974



$

31,434


Add: Purchase accounting adjustments - net of tax

2,191





2,854




Add: Acquisition and integrations costs - net of tax





1,258




Add: Stucco-related charges - net of tax



5,440





5,440


Adjusted net income to common shareholders

$

30,102



$

21,210



$

50,086



$

36,874










Purchase accounting adjustments - net of tax

$

2,191



$



$

2,854



$


Divided by: Diluted weighted average shares outstanding

29,101



30,619



29,818



30,471


Diluted earnings per share related to purchase accounting adjustments

$

0.08



$



$

0.10



$










Acquisition and integration costs - net of tax

$



$



$

1,258



$


Divided by: Diluted weighted average shares outstanding

29,101



30,619



29,818



30,471


Diluted earnings per share related to acquisition and integration costs

$



$



$

0.04



$










Stucco-related charges - net of tax

$



$

5,440



$



$

5,440


Divided by: Diluted weighted average shares outstanding

29,101



30,619



29,818



30,471


Diluted earnings per share related to stucco-related charges

$



$

0.18



$



$

0.18










Add: Diluted earnings per share

0.96



0.55



1.56



1.09


Adjusted diluted earnings per share

$

1.04



$

0.73



$

1.70



$

1.27


 

(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


Six Months Ended


June 30,


June 30,






%






%

Region

2018


2017


Change


2018


2017


Change

Midwest

656


531


24

%


1,354


1,087


25

%

Southern

753


625


20

%


1,550


1,215


28

%

Mid-Atlantic

222


244


(9)

%


466


552


(16)

%

Total

1,631


1,400


17

%


3,370


2,854


18

%















HOMES DELIVERED


Three Months Ended


Six Months Ended


June 30,


June 30,






%






%

Region

2018


2017


Change


2018


2017


Change

Midwest

554


437


27

%


965


816


18

%

Southern

666


520


28

%


1,207


939


29

%

Mid-Atlantic

189


254


(26)

%


359


494


(27)

%

Total

1,409


1,211


16

%


2,531


2,249


13

%















BACKLOG


June 30, 2018



June 30, 2017




Dollars


Average





Dollars


Average

Region

Units


(millions)


Sales Price



Units


(millions)


Sales Price

Midwest

1,330


$

558


$

420,000



1,028


$

412


$

401,000


Southern

1,251


$

454


$

363,000



950


$

330


$

347,000


Mid-Atlantic

385


$

163


$

422,000



431


$

167


$

388,000


Total

2,966


$

1,174


$

396,000



2,409


$

909


$

377,000
















LAND POSITION SUMMARY


June 30, 2018




June 30, 2017


Lots


Lots Under





Lots


Lots Under




Region

Owned


Contract


Total



Owned


Contract


Total

Midwest

5,403


6,472


11,875



4,110


5,524


9,634


Southern

6,091


6,120


12,211



5,060


7,416


12,476


Mid-Atlantic

1,673


2,459


4,132



1,835


2,718


4,553


Total

13,167


15,051


28,218



11,005


15,658


26,663


 

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SOURCE M/I Homes, Inc.

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