M/I Homes Reports Third Quarter Results

24 Oct, 2013, 08:29 ET from M/I Homes, Inc.

COLUMBUS, Ohio, Oct. 24, 2013 /PRNewswire/ -- M/I Homes, Inc. (NYSE: MHO) announced results for the third quarter and nine months ended September 30, 2013.

2013 Third Quarter Highlights:

  • Pre-tax income of $13.8 million – a 63% increase over 2012's third quarter 
  • Net income of $125.3 million, including a $111.6 million benefit from the reversal of a majority of our deferred tax asset valuation allowance
  • Diluted earnings per share of $4.22 ($0.47 per share excluding the impact of the tax valuation allowance reversal)
  • New contracts increased 15%
  • Homes delivered increased 26%
  • Backlog units and value increased 36% and 46%, respectively
  • Cash balance of $158.3 million
  • Net debt to net capital ratio of 37%

For the third quarter of 2013, the Company reported net income of $125.3 million, or $4.22 per diluted share.  Excluding the reversal of $111.6 million of our deferred tax asset valuation allowance, the Company's net income totaled $13.8 million or $0.47 per diluted share.  This compares to net income of $8.3 million for the third quarter of 2012, or $0.42 per diluted share, which included a $3.0 million recovery related to a drywall settlement ($0.15 per diluted share). Net income for the third quarter of 2013 includes $2.1 million of asset impairments and a $1.7 million non-cash charge related to early extinguishment of debt. Net income for the third quarter of 2012 included $1.3 million of asset impairments. For the nine months ended September 30, 2013, the Company had net income of $25.5 million, excluding the $111.6 million deferred tax asset valuation allowance reversal, compared to net income of $8.3 million, in the same period a year ago. 

Homes delivered in 2013's third quarter were 937 compared to 746 in 2012's third quarter - up 26%.  Homes delivered for the nine months ended September 30, 2013 increased 25% to 2,352 compared to 2012's nine month deliveries of 1,878. New contracts for 2013's third quarter were 869, up 15% from 2012's third quarter of 757.  For the first nine months of 2013, new contracts increased 28% from 2,347 in 2012 to 2,994 in 2013.  M/I Homes had 147 active communities at September 30, 2013 compared to 128 at September 30, 2012.  The Company's cancellation rate was 17% in the third quarter of 2013 compared to 18% in 2012's third quarter.  Backlog of homes at September 30, 2013 had a sales value of $488 million (a 46% increase over last year's third quarter), with an average sales price of $304,000 and backlog units of 1,607.  At September 30, 2012 backlog sales value was $334 million, with an average sales price of $284,000 and backlog units of 1,179.

Robert H. Schottenstein, Chief Executive Officer and President, commented, "We are very pleased with our third quarter results highlighted by (i) 32% growth in revenue; (ii) 26% improvement in homes delivered; (iii) pre-tax income of $13.8 million – a 63% increase over last year's third quarter; and (iv) a 15% increase in new contracts.  Our results reflect strong performances on many fronts – our backlog value is now up 46% compared to a year ago, and our gross margin for the quarter improved to 20.0%, a 30 basis point increase from the second quarter of 2013.  Additionally, we continue to improve our operating leverage with our selling, general and administrative expenses for the quarter declining to 13.2% of revenue, our lowest quarterly level since the fourth quarter of 2007.  Our third quarter results also included the benefit of reversing a majority of our deferred tax asset valuation allowance, further strengthening our balance sheet.  During the quarter, we continued to position our Company for further growth and geographic diversification, increasing our community count to 147 at September 30, 2013 – a 15% increase over 2012's level."

Mr. Schottenstein continued, "Our financial condition is strong, with cash of $158 million, shareholder's equity of $480 million, net debt to net capital at 37%, and no outstanding borrowings under our credit facility.  We are poised to have a very solid 2013 as we remain focused on increasing our profitability, growing our market share, expanding our community count, 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 2014.

M/I Homes, Inc. is one of the nation's leading builders of single-family homes, having delivered over 85,600 homes.  The Company's homes are marketed and sold under the trade names M/I Homes, Showcase Homes, and Triumph Homes.  The Company has homebuilding operations in Columbus and Cincinnati, Ohio; Chicago, Illinois; Indianapolis, Indiana; Tampa and Orlando, Florida; Austin, Dallas/Ft 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 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, 2012, 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 adjusted EBITDA, a non-GAAP financial measure.  Please see the "Non-GAAP Financial Results / Reconciliation" 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,

2013

2012

2013

2012

New contracts

869

757

2,994

2,347

Average community count

144

126

138

124

Cancellation rate

17%

18%

15%

16%

Backlog units

1,607

1,179

Backlog value

$

488,089

$

334,336

Homes delivered

937

746

2,352

1,878

Average home closing price

$

284

$

266

$

283

$

259

Homebuilding revenue:

Housing revenue

$

265,886

$

198,406

$

665,376

$

486,399

Land revenue

2,628

4,086

12,756

8,972

Total homebuilding revenue

$

268,514

$

202,492

$

678,132

$

495,371

Financial services revenue

6,681

6,383

22,343

15,623

Total revenue

$

275,195

$

208,875

$

700,475

$

510,994

Cost of sales - operations

218,150

167,452

556,799

411,893

Cost of sales - impairment

2,136

1,309

4,237

1,876

Cost of sales - other

(3,000)

(3,000)

Gross margin

54,909

43,114

139,439

100,225

General and administrative expense

18,261

16,016

52,389

42,299

Selling expense

17,999

14,647

47,383

38,483

Operating income

18,649

12,451

39,667

19,443

Income from unconsolidated joint ventures

(278)

(278)

Interest expense

3,449

3,999

12,186

12,066

Loss on early extinguishment of debt

1,726

1,726

Income before income taxes

13,752

8,452

26,033

7,377

(Benefit) provision for income taxes

(111,559)

138

(111,129)

(955)

Net income

$

125,311

$

8,314

$

137,162

$

8,332

Excess of fair value over book value of preferred

   shares redeemed

$

$

$

2,190

$

Preferred dividends

$

1,219

$

$

2,438

$

Net income to common shareholders

$

124,092

$

8,314

$

132,534

$

8,332

Earnings per share:

Basic

$

5.09

$

0.43

$

5.61

$

0.44

Diluted

$

4.22

$

0.42

$

4.79

$

0.43

Weighted average shares outstanding:

Basic

24,358

19,434

23,642

19,014

Diluted

29,745

20,273

28,410

19,238

 

 

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

As of

September 30,

2013

2012

Assets:

Total cash and cash equivalents(1)

$

158,281

$

168,745

Mortgage loans held for sale

60,388

58,338

Inventory:

Lots, land and land development

283,455

230,040

Land held for sale

6,899

8,448

Homes under construction

331,969

252,325

Other inventory

54,013

53,058

Total inventory

$

676,336

$

543,871

Property and equipment - net

10,346

11,956

Investments in unconsolidated joint ventures

34,088

11,256

Deferred income taxes, net of valuation allowance(2)

112,682

Other assets

30,946

23,126

Total Assets

$

1,083,067

$

817,292

Liabilities:

Debt - Homebuilding Operations:

Senior notes

$

227,970

$

227,570

Convertible senior subordinated notes due 2017

57,500

57,500

  Convertible senior subordinated notes due 2018

86,250

Notes payable - other

8,126

10,769

Total Debt - Homebuilding Operations

$

379,846

$

295,839

Note payable bank - financial services operations

55,614

54,840

Total Debt

$

435,460

$

350,679

Accounts payable

85,804

65,348

Other liabilities

82,223

74,773

Total Liabilities

$

603,487

$

490,800

Shareholders' Equity

479,580

326,492

Total Liabilities and Shareholders' Equity

$

1,083,067

$

817,292

Book value per common share

$

17.64

$

10.57

Net debt/net capital ratio(3)

37%

36%

(1)     2013 and 2012 amounts include $15.8 million and $9.0 million of restricted cash and cash held in escrow, respectively.

(2)     2013 and 2012 amounts include gross deferred tax assets of $127.6 million and $137.1 million, respectively, net of valuation allowances of $14.9 million and $137.1 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,

2013

2012

2013

2012

Adjusted EBITDA(1)

$

27,262

$

20,334

$

62,667

$

37,832

Cash flow (used in) provided by operating activities

$

(15,258)

$

7,208

$

(40,436)

$

(16,321)

Cash (used in) provided by investing activities

$

(9,695)

$

2,643

$

(32,902)

$

25,877

Cash provided by financing activities

$

1,176

$

105,617

$

70,315

$

90,416

Land/lot purchases

$

56,484

$

23,474

$

156,703

$

80,652

Land development spending

$

31,108

$

17,604

$

67,456

$

37,161

Land/lot sale proceeds

$

2,628

$

4,086

$

12,756

$

8,972

Financial services pre-tax income

$

3,465

$

3,545

$

12,436

$

7,512

Deferred tax expense

$

4,728

$

3,578

$

9,190

$

3,721

Deferred tax asset valuation benefit

$

(116,374)

$

(3,578)

$

(120,836)

$

(3,721)

(1)   See "Non-GAAP Financial Result / Reconciliation" table below.

 

 

Impairment and Abandonments by Region (Dollars in thousands)

Three Months Ended  

Nine Months Ended  

September 30,  

September 30,  

Impairment by Region:

2013

2012

2013

2012

Midwest

$

2,136

$

1,309

$

4,237

$

1,876

Southern

Mid-Atlantic

Total

$

2,136

$

1,309

$

4,237

$

1,876

Abandonments by Region:

Midwest

$

$

$

$

36

Southern

110

Mid-Atlantic

110

Total

$

$

$

$

256

 

 

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

Three Months Ended

Nine Months Ended

September 30,

September 30,

2013

2012

2013

2012

Net income

$

125,311

$

8,314

$

137,162

$

8,332

Add:

Income tax (benefit) expense

(111,559)

138

(111,129)

(955)

Interest expense net of interest income

3,042

3,609

11,209

10,952

Interest amortized to cost of sales

4,074

3,755

11,295

9,211

Depreciation and amortization

2,013

2,775

6,332

6,762

Non-cash charges

4,381

1,743

7,798

3,530

Adjusted EBITDA

$

27,262

$

20,334

$

62,667

$

37,832

 

 

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

2013

2012

Change

2013

2012

Change

Midwest

318

274

16%

1,062

913

16%

Southern

289

224

29%

1,043

707

48%

Mid-Atlantic

262

259

1%

889

727

22%

Total

869

757

15%

2,994

2,347

28%

 

HOMES DELIVERED

Three Months Ended

Nine Months Ended

September 30,

September 30,

%

%

Region

2013

2012

Change

2013

2012

Change

Midwest

307

307

—%

837

795

5%

Southern

354

223

59%

794

543

46%

Mid-Atlantic

276

216

28%

721

540

34%

Total

937

746

26%

2,352

1,878

25%

 

BACKLOG

September 30, 2013

September 30, 2012

Dollars

Average

Dollars

Average

Region

Units

(millions)

Sales Price

Units

(millions)

Sales Price

Midwest

643

$

191

$

297,000

505

$

135

$

267,000

Southern

590

$

170

$

287,000

362

$

95

$

263,000

Mid-Atlantic

374

$

128

$

341,000

312

$

104

$

333,000

Total

1,607

$

488

$

304,000

1,179

$

334

$

284,000

 

LAND POSITION SUMMARY

September 30, 2013

September 30, 2012

Lots

Lots Under

Lots

Lots Under

Region

Owned

Contract

Total

Owned

Contract

Total

Midwest

3,384

2,407

5,791

3,119

1,748

4,867

Southern

3,633

3,992

7,625

1,452

1,977

3,429

Mid-Atlantic

2,125

2,592

4,717

1,635

1,268

2,903

Total

9,142

8,991

18,133

6,206

4,993

11,199

 

SOURCE M/I Homes, Inc.



RELATED LINKS

http://www.mihomes.com