M/I Homes Reports First Quarter Results

News provided by

M/I Homes, Inc.

Apr 24, 2014, 08:30 ET

COLUMBUS, Ohio, April 24, 2014 /PRNewswire/ -- M/I Homes, Inc. (NYSE: MHO) announced results for the first quarter ended March 31, 2014.

2014 First Quarter Highlights:

  • Pre-tax income of $12.5 million - a 156% increase over 2013's first quarter
  • Net income of $12.6 million, including a $5.3 million benefit from the reversal of a portion of our state deferred tax asset valuation allowance
  • Diluted earnings per share of $0.41 ($0.23 per share excluding the impact of the state deferred tax valuation allowance reversal)
  • Homes delivered increased 18%; New contracts declined 6%
  • Backlog sales value and units increased 24% and 10%, respectively
  • Cash balance of $101 million
  • Net debt to net capital ratio of 39%

For the first quarter, the Company reported net income of $12.6 million, or $0.41 per diluted share.  Excluding the reversal of $5.3 million of our state deferred tax asset valuation allowance, the Company's net income totaled $7.3 million or $0.23 per diluted share.  This compares to $4.6 million, or $0.11 per share during the first quarter of 2013.

Homes delivered in the first quarter were 737, an increase of 18% from the 627 reported for the same period of 2013.  New contracts for the first quarter were 982, a 6% decrease from the 1,047 recorded in 2013's first quarter.  The backlog of homes at March 31, 2014 had a total sales value of $496 million, a 24% increase over a year-ago, with backlog units of 1,525 and an average sales price of $326,000.  At March 31, 2013 backlog sales value was $401 million, with backlog units of 1,385 and an average sales price of $290,000.  M/I Homes had 158 active communities at March 31, 2014 compared to 135 at March 31, 2013 and 157 at December 31, 2013.  The Company's cancellation rate was 16% in the first quarter of 2014 compared to 15% in 2013's first quarter.

Robert H. Schottenstein, Chief Executive Officer and President, commented, "We had a very solid first quarter highlighted by an 18% increase in homes delivered, 23% growth in revenue, 156% improvement in pre-tax income and our gross margin improving to 21.7%, a 180 basis point increase over the fourth quarter of 2013.  At the same time, our results were a bit mixed, with new contracts declining by 6%, in part due to unusually harsh winter weather conditions, but also due to a softer than expected start to the spring selling season."

Mr. Schottenstein continued, "Our financial condition is strong, with cash of $101 million at the end of the quarter, shareholders' equity of $507 million, net debt to net capital at 39%, and no outstanding borrowings under our $200 million credit facility.  Looking ahead, with the strength of our backlog and planned new community openings, we are poised to have a very solid 2014.  We remain focused on increasing our profitability, continuing to grow 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 April 2015.

M/I Homes, Inc. is one of the nation's leading builders of single-family homes, having delivered over 87,400 homes.  The Company's homes are marketed and sold under the trade names M/I Homes, Showcase Collection (exclusively by M/I), 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, 2013, 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

March 31,

2014

2013

New contracts

982

1,047

Average community count

158

133

Cancellation rate

16

%

15

%

Backlog units

1,525

1,385

Backlog value

$

496,428

$

401,186

Homes delivered

737

627

Average home closing price

$

299

$

284




Homebuilding revenue:


   Housing revenue

$

220,710

$

177,790

   Land revenue

6,266

4,527

Total homebuilding revenue

$

226,976

$

182,317




Financial services revenue

7,865

8,410




Total revenue

$

234,841

$

190,727




Cost of sales - operations

183,964

151,513

Cost of sales - impairment

—

900

Gross margin

50,877

38,314

General and administrative expense

18,315

15,979

Selling expense

15,969

13,109

Operating income

16,593

9,226

Income from unconsolidated joint ventures

(62)

—

Interest expense

4,170

4,340

Income before income taxes

12,485

4,886

(Benefit) provision for income taxes

(147)

299

Net income

$

12,632

$

4,587

Excess of fair value over book value of preferred shares redeemed

$

—

$

2,190

Preferred dividends

$

1,219

$

—

Net income to common shareholders

$

11,413

$

2,397




Earnings per share:


Basic

$

0.47

$

0.11

Diluted

$

0.41

$

0.11




Weighted average shares outstanding:


Basic

24,417

22,273

Diluted

29,870

22,688

 

M/I Homes, Inc. and Subsidiaries

Summary Balance Sheet and Other Information (unaudited)

(Dollars in thousands, except per share amounts)

 


As of

March 31,

2014

2013

Assets:


Total cash and cash equivalents(1)

$

100,911

$

272,551

Mortgage loans held for sale

55,750

57,721

Inventory:


Lots, land and land development

337,137

255,934

Land held for sale

3,623

8,591

Homes under construction

325,439

245,074

Other inventory

57,428

68,041

Total inventory

$

723,627

$

577,640




Property and equipment - net

10,506

9,994

Investments in unconsolidated joint ventures

44,847

22,275

Deferred income taxes, net of valuation allowance(2)

111,214

—

Other assets

38,048

28,471

Total Assets

$

1,084,903

$

968,652




Liabilities:


Debt - Homebuilding Operations:


Senior notes

$

228,169

$

227,770

Convertible senior subordinated notes due 2017

57,500

57,500

 Convertible senior subordinated notes due 2018

86,250

86,250

 Preferred stock - subject to redemption

—

50,352

Notes payable - other

7,757

10,316

Total Debt - Homebuilding Operations

$

379,676

$

432,188




Note payable bank - financial services operations

51,532

53,126

Total Debt

$

431,208

$

485,314




Accounts payable

71,376

57,071

Other liabilities

75,728

81,266

Total Liabilities

$

578,312

$

623,651




Shareholders' Equity

506,591

345,001

Total Liabilities and Shareholders' Equity

$

1,084,903

$

968,652




Book value per common share

$

18.66

$

12.20

Net debt/net capital ratio(3)

39

%

38

%

(1)

2014 and 2013 amounts include $11.6 million and $9.5 million of restricted cash and cash held in escrow, respectively.

(2)

2014 and 2013 amounts include gross deferred tax assets of $115.2 million and $134.0 million, respectively, net of valuation allowances of $4.0 million and $134.0 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

March 31,

2014

2013

Adjusted EBITDA(1)

$

22,176

$

16,026




Cash flow (used in) provided by operating activities

$

(2,103)

$

8,558

Cash used in investing activities

$

(8,879)

$

(12,702)

Cash (used in) provided by financing activities

$

(28,383)

$

121,703




Land/lot purchases

$         53,003

$

44,381

Land development spending

$         17,530

$

15,728

Land gross margin

$           1,321

$

991




Financial services pre-tax income

$

4,711

$

5,137




Deferred tax expense

$

5,024

$

1,788

Deferred tax asset valuation benefit

$

(5,327)

$

(1,788)

(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

March 31,

2014

2013

Net income

$

12,632

$

4,587

Add:


(Benefit) provision for income taxes

(147)

299

Interest expense net of interest income

3,777

4,055

Interest amortized to cost of sales

3,108

3,528

Depreciation and amortization

1,912

2,138

Non-cash charges

894

1,419

Adjusted EBITDA

$

22,176

$

16,026

M/I Homes, Inc. and Subsidiaries

Selected Supplemental Financial and Operating Data

 

NEW CONTRACTS

Three Months Ended

March 31,





%

Region

2014

2013

Change

Midwest

374

349

7

%

Southern

336

378

(11)%

Mid-Atlantic

272

320

(15)%

Total

982

1,047

(6)%


 

HOMES DELIVERED

Three Months Ended

March 31,





%

Region

2014

2013

Change

Midwest

259

232

12

%

Southern

275

191

44

%

Mid-Atlantic

203

204

—

%

Total

737

627

18

%

BACKLOG

March 31, 2014

March 31, 2013



Dollars

Average


Dollars

Average

Region

Units

(millions)

Sales Price

Units

(millions)

Sales Price

Midwest

660

$

209

$

317,000

535

$

144

$

270,000

Southern

510

$

169

$

331,000

528

$

148

$

280,000

Mid-Atlantic

355

$

118

$

334,000

322

$

109

$

339,000

Total

1,525

$

496

$

326,000

1,385

$

401

$

290,000

LAND POSITION SUMMARY

March 31, 2014

March 31, 2013

Lots

Lots Under


Lots

Lots Under

Region

Owned

Contract

Total

Owned

Contract

Total

Midwest

3,532

2,609

6,141


3,078

2,989

6,067

Southern

4,823

4,306

9,129


2,693

3,800

6,493

Mid-Atlantic

2,287

3,408

5,695


1,685

2,124

3,809

Total

10,642

10,323

20,965


7,456

8,913

16,369

SOURCE M/I Homes, Inc.