M/I Homes Reports Third Quarter Results

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.



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