M/I Homes Reports Third Quarter Results

Oct 25, 2012, 08:23 ET from M/I Homes, Inc.

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.



RELATED LINKS

http://www.mihomes.com