M/I Homes Reports Third Quarter Results

COLUMBUS, Ohio, Oct. 25, 2012 /PRNewswire/ -- M/I Homes, Inc. (NYSE: MHO) announced results for the third quarter and nine months ended September 30, 2012.

2012 Third Quarter Results:

  • Net income of $8.3 million; diluted earnings per share of $0.42
  • Adjusted pre-tax income from operations of $6.8 million
  • New contracts increased 29%
  • Homes delivered increased 28%
  • Backlog units and value increased 41% and 50%, respectively
  • Adjusted EBITDA of $20.3 million
  • Cash balance of $168.7 million
  • Net debt to net capital ratio of 36%

For the third quarter of 2012, the Company reported net income of $8.3 million, or $0.42 per diluted share, compared to a net loss of $4.7 million, or $0.25 per share for the third quarter of 2011.  Net income for the quarter consists primarily of $6.8 million adjusted pre-tax income from operations, a $3.0 million recovery related to a drywall settlement, and $1.3 million of asset impairments.  The prior year third quarter loss consisted primarily of a $3.0 million adjusted pre-tax loss from operations and $1.8 million of asset impairments.  The Company reported net income of $8.3 million for the first nine months of 2012, or $0.43 per diluted share, compared to a net loss of $30.9 million, or $1.65 per share, for the same period a year ago. 

New contracts for 2012's third quarter were 757, up 29% from 2011's third quarter of 587.  For the nine months ended September 30, 2012, new contracts increased 25% from 1,876 in 2011 to 2,347.  M/I Homes had 128 active communities at September 30, 2012 compared to 120 at September 30, 2011 and 124 at June 30, 2012.  The Company's cancellation rate was 18% in the third quarter of 2012 compared to 19% in 2011's third quarter.  Homes delivered in 2012's third quarter were 746 compared to 582 in 2011's third quarter.  Homes delivered for the nine months ended September 30, 2012 were 1,878 compared to 2011's deliveries of 1,611 – up 17%.  Backlog of homes at September 30, 2012 had a sales value of $334 million, with an average sales price of $284,000 and backlog units of 1,179.  At September 30, 2011 backlog sales value was $223 million, with an average sales price of $266,000 and backlog units of 838.

Robert H. Schottenstein, Chief Executive Officer and President, commented, "We are pleased with our third quarter results as they represent our best quarterly performance in 5 years, and position us to return to full year profitability. We are making meaningful progress on a number of important fronts as housing conditions throughout most of our markets have improved. Net income improved by more than $13 million for the quarter and by more than $39 million for the first nine months. This was our 6th consecutive quarter of year over year improvement in new contracts as we continue to strengthen our market share in virtually every one of our markets. Our gross margin for the quarter equaled 19.8%, representing a 190 basis point improvement over last year's third quarter; and we continue to gain operating leverage as our selling, general and administrative expense ratio also improved. We were also pleased with our 28% increase in closings, as well as a 12% year over year improvement in our average closing price."

Mr. Schottenstein, continued, "With the combination of improving operating conditions and our return to profitability, we took important steps during the quarter to further strengthen our balance sheet by issuing $58 million of convertible debt and raising $42 million of additional equity. We ended the quarter with $169 million of cash, no borrowings under our $140 million homebuilding credit facility, and a 36% net debt to capital ratio.  During the quarter, we also announced our decision to expand into the Austin, Texas market.  Looking ahead, we believe we are well positioned to continue expanding our community count and growing the Company."

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 2013.

M/I Homes, Inc. is one of the nation's leading builders of single-family homes, having delivered over 82,000 homes.  The Company's homes are marketed and sold under the trade names M/I Homes, Showcase Homes, TriStone Homes and Triumph Homes.  The Company has homebuilding operations in Columbus and Cincinnati, Ohio; Chicago, Illinois; Indianapolis, Indiana; Tampa and Orlando, Florida; Austin, 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 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 and various governmental rules and regulations, as more fully discussed in the Risk Factors section in the Company's Annual Report on Form 10-K for the year ended December 31, 2011, 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 in this press release will increase with the passage of time. The Company undertakes 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.

In this press release, we use the following non-GAAP financial measures:  adjusted operating gross margin, adjusted operating gross margin percentage, adjusted pre-tax income (loss) from operations, and adjusted EBITDA. For these measures, we have provided reconciliations to the most comparable GAAP measures along with an explanation of the usefulness of the non-GAAP measures. Please see the "Non-GAAP Financial Results / Reconciliations" table below.

M/I Homes, Inc. and Subsidiaries
Summary Operating Results (Unaudited)
(Dollars in thousands, except per share amounts)


Three Months Ended


Nine Months Ended


September 30,


September 30,


2012


2011


2012


2011

New contracts

757



587



2,347



1,876


Average community count

126



118



124



113


Cancellation rate

18

%


19

%


16

%


18

%

Backlog units





1,179



838


Backlog value





$

334,336



$

222,738










Homes delivered

746



582



1,878



1,611


Average home closing price

$

266



$

238



$

259



$

235










Homebuilding revenue:








Housing revenue

$

198,406



$

138,597



$

486,399



$

379,161


Land revenue

4,086



155



8,972



1,110


Total homebuilding revenue

$

202,492



$

138,752



$

495,371



$

380,271










Financial services revenue

6,383



2,872



15,623



9,367










Total revenue

$

208,875



$

141,624



$

510,994



$

389,638










Cost of sales - operations

167,452



116,269



411,893



322,886


Cost of sales - impairment

1,309



1,697



1,876



18,013


Cost of sales - other

(3,000)





(3,000)




Gross margin

43,114



23,658



100,225



48,739


General and administrative expense

16,016



13,896



42,299



38,064


Selling expense

14,647



11,213



38,483



30,621


Operating profit (loss)

12,451



(1,451)



19,443



(19,946)


Interest expense

3,999



3,384



12,066



10,884


Income (loss) before income taxes

8,452



(4,835)



7,377



(30,830)


Expense (benefit) from income taxes

138



(117)



(955)



71


Net income (loss)

$

8,314



$

(4,718)



$

8,332



$

(30,901)










Earnings (loss) per share:








Basic

$

0.43



$

(0.25)



$

0.44



$

(1.65)


Diluted

$

0.42



$

(0.25)



$

0.43



$

(1.65)










Weighted average shares outstanding:








Basic

19,434



18,728



19,014



18,685


Diluted

20,273



18,728



19,415



18,685



M/I Homes, Inc. and Subsidiaries
Summary Balance Sheet and Other Information (unaudited)
(Dollars in thousands, except per share amounts)


As of


September 30,


2012


2011

Assets:




Total cash and cash equivalents(1)

$

168,745



$

93,047


Mortgage loans held for sale

58,338



36,666


Inventory:




Lots, land and land development

230,040



240,916


Land held for sale

8,448




Homes under construction

252,325



204,338


Other inventory

53,058



46,107


Total inventory

$

543,871



$

491,361






Property and equipment - net

11,956



14,741


Investments in unconsolidated joint ventures

11,256



10,256


Income tax receivable

592



1,267


Other assets(2)

22,534



14,387


Total Assets

$

817,292



$

661,725






Liabilities:




Debt - Homebuilding Operations:




Senior notes

$

227,570



$

238,914


Convertible senior subordinated notes


57,500





Notes payable - other

10,769



5,857


Total Debt - Homebuilding Operations

$

295,839



$

244,771






Note payable bank - financial services operations

54,840



31,658


Total Debt

$

350,679



$

276,429






Accounts payable

65,348



45,842


Other liabilities

74,772



63,562


Total Liabilities

$

490,800



$

385,833






Shareholders' Equity

326,492



275,892


Total Liabilities and Shareholders' Equity

$

817,292



$

661,725






Book value per common share

$

10.57



$

9.39


Net debt/net capital ratio(3)

36

%


40

%

(1)     2012 and 2011 amounts include $9.0 million and $46.2 million of restricted cash and cash held in escrow, respectively.
(2)     2012 and 2011 amounts include gross deferred tax assets of $137.1 million and $139.5 million, respectively, net of valuation allowances of $137.1 million and $139.5 million, respectively.
(3)     Net debt/net capital ratio is calculated as total debt minus total cash and cash equivalents, divided by the sum of total debt minus total cash and cash equivalents 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,


2012


2011


2012


2011









Adjusted operating gross margin(1)

$

41,423



$

25,355



$

99,101



$

66,752


Adjusted operating gross margin %(1)

19.8

%


17.9

%


19.4

%


17.1

%









Adjusted pre-tax income (loss) from operations(1)

$

6,761



$

(2,998)



$

6,509



$

(12,377)










Adjusted EBITDA(1)

$

20,253



$

5,021



$

37,751



$

12,642










Cash flow provided by (used in) operating activities

$

7,208



$

(16,047)



$

(16,321)



$

(24,566)


Cash provided by (used in) investing activities

$

2,643



$

18,321



$

25,877



$

(10,723)


Cash provided by (used in) financing activities

$

105,617



$

(345)



$

90,416



$

910










Land/lot purchases

$

23,474



$

20,160



$

80,652



$

56,616


Land development spending

$

17,604



$

13,268



$

37,161



$

33,482


Land/lot sale proceeds

$

4,086



$

155



$

8,972



$

1,110










Financial services pre-tax income

$

3,545



$

766



$

7,512



$

3,559










Deferred tax valuation (benefit) expense

$

(3,578)



$

1,345



$

(3,721)



$

11,657


Impairment and Abandonments by Region
(Dollars in thousands)


Three Months Ended


Nine Months Ended


September 30,


September 30,

Impairment by Region:

2012


2011


2012


2011

Midwest

$

1,309



$

1,103



$

1,876



$

11,442


Southern



594





6,554


Mid-Atlantic







17


Total

$

1,309



$

1,697



$

1,876



$

18,013










Abandonments by Region:








Midwest

$



$

121



$

36



$

143


Southern



19



110



56


Mid-Atlantic





110



241


Total

$



$

140



$

256



$

440


(1)           See "Non-GAAP Financial Results / Reconciliations" table below.

 

M/I Homes, Inc. and Subsidiaries
Non-GAAP Financial Results / Reconciliations
(Dollars in thousands)


Three Months Ended


Nine Months Ended


September 30,


September 30,


2012


2011


2012


2011

Gross margin

$

43,114



$

23,658



$

100,225



$

48,739


Add: Impairments

1,309



1,697



1,876



18,013


Imported drywall

(3,000)





(3,000)




Adjusted operating gross margin

$

41,423



$

25,355



$

99,101



$

66,752










Income (loss) before income taxes

$

8,452



$

(4,835)



$

7,377



$

(30,830)


Add: Impairments and abandonments

1,309



1,837



2,132



18,453


Imported drywall

(3,000)





(3,000)




Adjusted pre-tax income (loss) from operations

$

6,761



$

(2,998)



$

6,509



$

(12,377)










Net income (loss)

$

8,314



$

(4,718)



$

8,332



$

(30,901)


Add:








Income tax expense (benefit)

138



(117)



(955)



71


Interest expense net of interest income

3,609



3,124



10,952



10,137


Interest amortized to cost of sales

3,674



2,515



9,130



7,672


Depreciation and amortization

2,775



1,896



6,762



5,685


Non-cash charges

1,743



2,321



3,530



19,978


Adjusted EBITDA

$

20,253



$

5,021



$

37,751



$

12,642


Adjusted operating gross margin, adjusted operating gross margin percentage, adjusted pre-tax income (loss) from operations and adjusted EBITDA are non-GAAP financial measures. Management finds these measures to be useful in evaluating the Company's performance because they disclose the financial results generated from homes the Company actually delivered during the period, as the asset impairments and certain other write-offs relate, in part, to inventory that was not delivered during the period. They also assist the Company's management in making strategic decisions regarding the Company's future operations. The Company believes investors will also find these measures to be important and useful because they disclose financial measures that can be compared to a prior period without regard to the variability of asset impairments and certain other write-offs and unusual charges. In addition, to the extent that the Company's competitors provide similar information, disclosure of these measures helps readers of the Company's financial statements compare the Company's financial results to the results of its competitors with regard to the homes they deliver in the same period. Because these measures are not calculated in accordance with GAAP, they may not be completely comparable to similarly titled measures of the Company's competitors due to potential differences in methods of calculation and charges being excluded.  Due to the significance of the GAAP components excluded, such measures should not be considered in isolation or as an alternative to operating performance measures prescribed by GAAP.  Adjusted EBITDA is also presented in accordance with the terms of our revolving credit facility.

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

2012


2011


Change


2012


2011


Change













Midwest

274


251


9

%


913


846


8

%













Southern

224


149


50

%


707


451


57

%













Mid-Atlantic

259


187


39

%


727


579


26

%













Total

757


587


29

%


2,347


1,876


25

%

 


HOMES DELIVERED


Three Months Ended


Nine Months Ended


September 30,


September 30,






%






%

Region

2012


2011


Change


2012


2011


Change













Midwest

307


254


21

%


795


741


7

%













Southern

223


162


38

%


543


395


37

%













Mid-Atlantic

216


166


30

%


540


475


14

%













Total

746


582


28

%


1,878


1,611


17

%

 


BACKLOG


September 30, 2012


September 30, 2011



Dollars


Average



Dollars


Average

Region

Units

(millions)


Sales Price


Units

(millions)


Sales Price











Midwest

505

$

135


$

267,000


441

$

112


$

253,000











Southern

362

$

95


$

263,000


184

$

42


$

230,000











Mid-Atlantic

312

$

104


$

333,000


213

$

69


$

324,000











Total

1,179

$

334


$

284,000


838

$

223


$

266,000

 


LAND POSITION SUMMARY


September 30, 2012


September 30, 2011


Lots

Lots Under



Lots

Lots Under


Region

Owned

Contract

Total


Owned

Contract

Total









Midwest

3,119

1,748

4,867


4,006

772

4,778









Southern

1,452

1,977

3,429


1,431

1,029

2,460









Mid-Atlantic

1,635

1,268

2,903


1,750

1,205

2,955









Total

6,206

4,993

11,199


7,187

3,006

10,193









 

SOURCE M/I Homes, Inc.



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