M/I Homes Reports 2015 Third Quarter Results

News provided by

M/I Homes, Inc.

Oct 22, 2015, 08:31 ET

COLUMBUS, Ohio, Oct. 22, 2015 /PRNewswire/ -- M/I Homes, Inc. (NYSE:MHO) announced results for the third quarter and nine months ended September 30, 2015.

2015 Third Quarter Highlights:

  • Pre-tax income of $26.5 million - a 19% increase over 2014's third quarter
  • Revenue increased 10% to $363.5 million; average closing price increased 9%
  • Gross margin of 21.5%, up 80 basis points from 2014's third quarter
  • Net income of $15.6 million ($0.51 per diluted share)
  • New contracts increased 11%; homes delivered increased 1%
  • Backlog sales value increased 27% to $657 million

For the third quarter of 2015, the Company reported net income of $15.6 million, or $0.51 per diluted share.  This compares to net income of $13.6 million, or $0.44 per diluted share, for the third quarter of 2014.  For the nine months ended September 30, 2015, the Company reported net income of $38.5 million, or $1.25 per diluted share, compared to net income of $30.5 million for the nine months ended September 30, 2014, which excludes a $9.3 million benefit from the reversal of our state deferred tax asset valuation allowance.

Homes delivered in 2015's third quarter were 994 compared to 985 deliveries in 2014's third quarter - a 1% increase.  Homes delivered for the nine months ended September 30, 2015 were 2,630 compared to 2014's deliveries of 2,616.  New contracts for 2015's third quarter were 988, an increase of 11% from 2014's third quarter.  For the first nine months of 2015, new contracts increased 11% from 2,890 in 2014 to 3,196 in 2015.  M/I Homes had 166 active communities at September 30, 2015 compared to 147 at September 30, 2014.  The Company's cancellation rate was 16% in both the third quarter of 2015 and 2014.  Homes in backlog increased 15% at September 30, 2015 to 1,788 units, with a sales value of $657 million (a 27% increase over last year's third quarter), and average sales price in backlog increased 10% to a record high of $367,000.  At September 30, 2014, the sales value of the 1,554 homes in backlog was $518 million, with an average sales price of $333,000.

Robert H. Schottenstein, Chief Executive Officer and President, commented, "We are pleased with our third quarter results highlighted by record high revenue of $363.5 million, 10% above 2014's third quarter, and $26.5 million of pre-tax income, 19% better than the third quarter of 2014.  A number of factors contributed to our improved profitability including a 9% increase in our average closing price, an 80 basis point improvement in gross margin, and improving returns as third quarter operating margin increased to 8.3% from 7.5% a year ago.  Our backlog sales value also increased 27% to $657 million and backlog units increased 15% to 1,788 homes.  In addition, we have opened 42 new communities this year and remain on track to increase our community count by 15% in 2015.

Mr. Schottenstein continued, "Our financial condition is strong with shareholders' equity of $583 million.   Looking ahead, with the strength of our backlog and planned new community openings, we are poised to have a very solid 2015.  We remain focused 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 October 2016.

M/I Homes, Inc. is one of the nation's leading builders of single-family homes, having delivered over 93,000 homes. The Company's homes are marketed and sold under the trade names M/I Homes and Showcase Collection (exclusively by M/I Homes).  The Company has homebuilding operations in Columbus and Cincinnati, Ohio; Indianapolis, Indiana; Chicago, Illinois; Tampa 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," "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 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, 2014, 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 in thousands, except per share amounts)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2015

2014

2015

2014

New contracts

988

892

3,196

2,890

Average community count

161

146

155

152

Cancellation rate

16

%

16

%

15

%

16

%

Backlog units



1,788

1,554

Backlog value



$

656,917

$

518,086

Homes delivered

994

985

2,630

2,616

Average home closing price

$

349

$

320

$

339

$

309








Homebuilding revenue:






   Housing revenue

$

346,562

$

315,357

$

891,674

$

809,441

   Land revenue

7,619

7,830

31,490

15,860

Total homebuilding revenue

$

354,181

$

323,187

$

923,164

$

825,301








Financial services revenue

9,276

7,580

26,308

21,915

Total revenue

$

363,457

$

330,767

$

949,472

$

847,216








Cost of sales - operations

285,416

261,636

744,194

666,817

Cost of sales - impairment

—

622

—

1,426

Gross margin

$

78,041

$

68,509

$

205,278

$

178,973

General and administrative expense

23,651

21,724

64,690

61,320

Selling expense

24,270

21,955

64,891

58,175

Operating income

$

30,120

$

24,830

$

75,697

$

59,478

Equity in income of unconsolidated joint ventures

(36)

(22)

(248)

(62)

Interest expense

3,658

2,649

11,870

9,549

Income before income taxes

$

26,498

$

22,203

$

64,075

$

49,991

Provision for income taxes

10,928

8,586

25,587

10,188

Net income

$

15,570

$

13,617

$

38,488

$

39,803

Preferred dividends

1,218

1,218

3,656

3,656

Net income to common shareholders

$

14,352

$

12,399

$

34,832

$

36,147








Earnings per share:






Basic

$

0.58

$

0.51

$

1.42

$

1.48

Diluted

$

0.51

$

0.44

$

1.25

$

1.30








Weighted average shares outstanding:






Basic

24,605

24,474

24,551

24,454

Diluted

30,067

29,921

30,021

29,900

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

As of

September 30,

2015

2014

Assets:


Total cash and cash equivalents(1)

$

28,126

$

26,066

Mortgage loans held for sale

77,550

76,983

Inventory:


Lots, land and land development

539,517

402,352

Land held for sale

5,803

2,898

Homes under construction

488,041

419,931

Other inventory

100,053

68,783

Total Inventory

$

1,133,414

$

893,964




Property and equipment - net

11,841

11,430

Investments in unconsolidated joint ventures

33,282

40,769

Deferred income taxes, net of valuation allowance

70,943

102,882

Other assets

50,846

41,060

Total Assets

$

1,406,002

$

1,193,154




Liabilities:


Debt - Homebuilding Operations:


Senior notes

$

228,769

$

228,369

Convertible senior subordinated notes due 2017

57,500

57,500

 Convertible senior subordinated notes due 2018

86,250

86,250

 Notes payable bank - homebuilding

156,100

14,400

Notes payable - other

9,363

8,530

Total Debt - Homebuilding Operations

$

537,982

$

395,049




Notes payable bank - financial services operations

73,239

73,778

Total Debt

$

611,221

$

468,827




Accounts payable

95,950

97,873

Other liabilities

115,493

93,161

Total Liabilities

$

822,664

$

659,861




Shareholders' Equity

583,338

533,293

Total Liabilities and Shareholders' Equity

$

1,406,002

$

1,193,154




Book value per common share

$

21.64

$

19.75

Net debt/net capital ratio(2)

50

%

45

%

(1)

2015 and 2014 amounts include $3.1 million and $8.9 million of restricted cash and cash held in escrow, respectively.

(2)

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,

2015

2014

2015

2014

Adjusted EBITDA(1)

$

37,694

$

32,317

$

97,223

$

80,094








Cash flow used in operating activities

$

(48,986)

$

(40,042)

$

(95,196)

$

(106,711)

Cash used in investing activities

$

(2,020)

$

(2,292)

$

(6,048)

$

(11,499)

Cash provided by financing activities

$

54,288

$

25,859

$

110,764

$

6,653








Land/lot purchases

$

82,639

$

58,788

$

177,456

$

183,671

Land development spending

$

63,187

$

41,276

$

145,414

$

93,213

Land gross margin

$

905

$

1,022

$

6,364

$

2,785








Financial services pre-tax income

$

4,444

$

3,402

$

14,287

$

11,185

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

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

Three Months Ended

Nine Months Ended

September 30,

September 30,

2015

2014

2015

2014

Net income

$

15,570

$

13,617

$

38,488

$

39,803

Add:






Provision for income taxes

10,928

8,586

25,587

10,188

Interest expense net of interest income

3,128

2,202

10,496

8,331

Interest amortized to cost of sales

4,318

4,281

11,637

11,232

Depreciation and amortization

2,478

2,113

7,213

6,062

Non-cash charges

1,272

1,518

3,802

4,478

Adjusted EBITDA

$

37,694

$

32,317

$

97,223

$

80,094

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

2015

2014

Change

2015

2014

Change

Midwest

341

325

5

%

1,158

1,093

6

%

Southern

399

327

22

%

1,220

1,026

19

%

Mid-Atlantic

248

240

3

%

818

771

6

%

Total

988

892

11

%

3,196

2,890

11

%

HOMES DELIVERED

Three Months Ended

Nine Months Ended

September 30,

September 30,





%




%

Region

2015

2014

Change

2015

2014

Change

Midwest

363

381

(5)

%

962

931

3

%

Southern

377

344

10

%

964

949

2

%

Mid-Atlantic

254

260

(2)

%

704

736

(4)

%

Total

994

985

1

%

2,630

2,616

1

%

BACKLOG

September 30, 2015

September 30, 2014



Dollars

Average


Dollars

Average

Region

Units

(millions)

Sales Price

Units

(millions)

Sales Price

Midwest

701

$

265

$

378,000

707

$

237

$

336,000

Southern

706

$

256

$

363,000

526

$

170

$

323,000

Mid-Atlantic

381

$

136

$

357,000

321

$

111

$

346,000

Total

1,788

$

657

$

367,000

1,554

$

518

$

333,000

LAND POSITION SUMMARY

September 30, 2015

September 30, 2014

Lots

Lots Under


Lots

Lots Under

Region

Owned

Contract

Total

Owned

Contract

Total

Midwest

3,619

3,632

7,251


3,510

2,626

6,136

Southern

4,683

5,114

9,797


5,071

4,591

9,662

Mid-Atlantic

2,771

1,743

4,514


2,637

2,647

5,284

Total

11,073

10,489

21,562


11,218

9,864

21,082

SOURCE M/I Homes, Inc.

Related Links

http://www.mihomes.com