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M/I Homes Reports 2019 Second Quarter Results

COLUMBUS, Ohio, July 24, 2019 /PRNewswire/ -- M/I Homes, Inc. (MHO) announced results for the three and six months ended June 30, 2019.

M/I Homes, Inc. Logo (PRNewsfoto/M/I Homes, Inc.)

2019 Second Quarter Highlights:

  • Homes delivered increased 9% to a second quarter record of 1,538
  • Revenue increased 12% to a second quarter record of $624 million
  • Pre-tax income increased 23% to $41.2 million, a second quarter record
  • Record second quarter net income of $30.2 million ($1.08 per diluted share) compared to $27.9 million
            ($0.96 per diluted share) in 2018
  • New contracts increased 6% to a second quarter record of 1,731
  • Backlog units decreased 4% to 2,845 homes
  • Shareholders' equity reached an all-time record of $904 million, an 11% increase from a year-ago,
            with book value per share of $33

For the second quarter of 2019, the Company reported record pre-tax income of $41.2 million and record net income of $30.2 million, or $1.08 per diluted share.  This compares to pre-tax income of $33.5 million and net income of $27.9 million, or $0.96 per diluted share, for the second quarter of 2018. The second quarter of 2018 included $3.0 million of pre-tax acquisition-related expense. For the six months ended June 30, 2019, the Company reported record net income of $48.0 million, or $1.71 per diluted share, compared to $46.0 million, or $1.56 per diluted share, for the same period of 2018.  The Company incurred $0.6 million of pre-tax acquisition-related expense year-to-date in 2019 compared to $5.6 million in the same period of 2018.

Homes delivered in 2019's second quarter reached a second quarter record of 1,538, increasing 9% from the 1,409 deliveries in 2018's second quarter.  Homes delivered for the six months ended June 30, 2019 increased 8% to a record 2,724 from 2018's deliveries of 2,531.  New contracts for 2019's second quarter were a record 1,731, an increase of 6% over 2018's second quarter. For the first six months of 2019, new contracts were a record 3,375 compared to 3,370 in 2018. Homes in backlog decreased 4% at June 30, 2019 to 2,845 units with an average sales price of $395,000, and a total sales value of $1.12 billion.  At June 30, 2018, the sales value of homes in backlog was $1.17 billion, with an average sales price of $396,000 and backlog units of 2,966.  M/I Homes had 220 active communities at June 30, 2019 compared to 209 at June 30, 2018. The Company's cancellation rate was 14% in the second quarter of 2019 and 2018.

Robert H. Schottenstein, Chief Executive Officer and President, commented, "We reported another strong quarter highlighted by second quarter records for revenue, pre-tax income, net income, homes delivered and new contracts. Our new contracts increased 6% when compared to 2018's second quarter with buyer demand remaining steady as a result of continued low mortgage rates and favorable consumer confidence.  Revenue increased 12% for the quarter and our pre-tax income increased 23% to $41.2 million. We also continue to make noticeable progress in managing our overhead expense ratio which was 11.8% for the quarter, an 80-basis point improvement when compared to 2018's second quarter.

Mr. Schottenstein continued, "We ended the quarter with record-high shareholders' equity of $904 million, an increase of 11% from 2018's second quarter and book value of $33 per share along with a healthy ratio of homebuilding debt to capital of 45%. We are well positioned to have a solid 2019 and will continue to focus on 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 July 2020.

M/I Homes, Inc. is one of the nation's leading builders of single-family homes, having sold over 114,800 homes. The Company's homes are marketed and sold primarily under the trade names M/I Homes and Showcase Collection (exclusively by M/I Homes), and also currently are sold under the name Hans Hagen Homes in the Minneapolis/St. Paul, Minnesota market and Pinnacle Homes in the Detroit, Michigan market.  The Company has homebuilding operations in Columbus and Cincinnati, Ohio; Indianapolis, Indiana; Chicago, Illinois; Minneapolis/St. Paul, Minnesota; Detroit, Michigan; Tampa, Sarasota 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," "envisions", "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, integration of acquisitions, construction defects, product liability and warranty claims 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, 2018, 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 and shares in thousands, except per share amounts)



Three Months Ended


Six Months Ended


June 30,


June 30,


2019


2018


2019


2018

New contracts

1,731



1,631



3,375



3,370


Average community count

217



207



214



201


Cancellation rate

14

%


14

%


13

%


13

%

Backlog units





2,845



2,966


Backlog sales value





$

1,124,756



$

1,174,462


Homes delivered

1,538



1,409



2,724



2,531


Average home closing price

$

389



$

387



$

391



$

381










Homebuilding revenue:








   Housing revenue

$

597,870



$

545,034



$

1,064,178



$

963,458


   Land revenue

11,513



1,188



14,531



5,595


Total homebuilding revenue

$

609,383



$

546,222



$

1,078,709



$

969,053










Financial services revenue

14,303



11,876



26,086



26,902


Total revenue

$

623,686



$

558,098



$

1,104,795



$

995,955










Cost of sales - operations

503,728



446,375



891,767



794,181


Cost of sales – acquisition-related charges

129



2,961



557



3,857


Gross margin

$

119,829



$

108,762



$

212,471



$

197,917


General and administrative expense

36,164



34,666



66,863



62,617


Selling expense

37,452



35,591



69,003



65,654


Operating income

$

46,213



$

38,505



$

76,605



$

69,646


Acquisition and integration costs







1,700


Equity in (income) loss from joint venture arrangements

(187)



86



(66)



(224)


Interest expense

5,197



4,888



11,989



10,766


Income before income taxes

$

41,203



$

33,531



$

64,682



$

57,404


Provision for income taxes

10,957



5,620



16,713



11,430


Net income

$

30,246



$

27,911



$

47,969



$

45,974










Earnings per share:








Basic

$

1.10



$

0.98



$

1.74



$

1.62


Diluted

$

1.08



$

0.96



$

1.71



$

1.56










Weighted average shares outstanding:








Basic

27,599



28,571



27,549



28,349


Diluted

28,090



29,101



28,027



29,818


 

M/I Homes, Inc. and Subsidiaries

Summary Balance Sheet and Other Information (unaudited)

(Dollars in thousands, except per share amounts)



As of


June 30,


2019


2018

Assets:




Total cash, cash equivalents and restricted cash(1)

$

20,393



$

67,817


Mortgage loans held for sale

123,909



108,000


Inventory:




Lots, land and land development

804,453



740,972


Land held for sale

13,018



12,715


Homes under construction

796,479



757,478


Other inventory

149,529



141,303


Total Inventory

$

1,763,479



$

1,652,468






Property and equipment - net

28,094



28,885


Investments in joint venture arrangements

41,344



13,753


Operating lease right-of-use assets

19,397




Goodwill

16,400



16,400


Deferred income tax asset

12,594



17,528


Other assets

63,596



65,689


Total Assets

$

2,089,206



$

1,970,540






Liabilities:




Debt - Homebuilding Operations:




Senior notes due 2021 - net

$

298,436



$

297,332


Senior notes due 2025 - net

246,832



246,311


 Notes payable - homebuilding

174,300



181,800


 Notes payable - other

5,092



9,362


Total Debt - Homebuilding Operations

$

724,660



$

734,805






Notes payable bank - financial services operations

104,003



93,163


Total Debt

$

828,663



$

827,968






Accounts payable

154,070



141,491


Operating lease liabilities

19,397




Other liabilities

182,836



185,115


Total Liabilities

$

1,184,966



$

1,154,574






Shareholders' Equity

904,240



815,966


Total Liabilities and Shareholders' Equity

$

2,089,206



$

1,970,540






Book value per common share

$

32.74



$

28.56


Homebuilding debt / capital ratio(2)

45

%


47

%



(1)

Includes $1.0 million and $1.3 million of restricted cash and cash held in escrow for the quarters ended June 30, 2019 and 2018, respectively.

(2)

The ratio of homebuilding debt to capital is calculated as the carrying value of our homebuilding debt outstanding divided by the sum of the carrying value of our homebuilding debt outstanding plus shareholders' equity.

 

M/I Homes, Inc. and Subsidiaries

Selected Supplemental Financial and Operating Data

(Dollars in thousands)



Three Months Ended


Six Months Ended


June 30,


June 30,


2019


2018


2019


2018

Cash provided by (used in) operating activities

$

33,250



$

11,489



$

10,617



$

(20,925)


Cash used in investing activities

$

(10,229)



$

(6,437)



$

(16,730)



$

(102,885)


Cash (used in) provided by financing activities

$

(44,559)



$

9,188



$

4,977



$

39,924










Land/lot purchases

$

85,918



$

90,231



$

166,342



$

175,276


Land development spending

$

62,363



$

46,922



$

116,728



$

88,576


Land sale revenue

$

11,513



$

1,188



$

14,531



$

5,595


Land sale gross profit

$

400



$

82



$

455



$

486










Financial services pre-tax income

$

6,704



$

5,243



$

11,656



$

14,014


 

M/I Homes, Inc. and Subsidiaries

Non-GAAP Financial Results (1)

(Dollars in thousands)



Three Months Ended


Six Months Ended


June 30,


June 30,


2019


2018


2019


2018

Net income

$

30,246



$

27,911



$

47,969



$

45,974


Add:








Provision for income taxes

10,957



5,620



16,713



11,430


Interest expense net of interest income

4,225



4,093



10,163



9,249


Interest amortized to cost of sales

7,380



6,203



12,773



11,067


Depreciation and amortization

3,890



3,455



7,707



7,104


Non-cash charges

1,682



1,691



2,594



2,730


Adjusted EBITDA

$

58,380



$

48,973



$

97,919



$

87,554


 

M/I Homes, Inc. and Subsidiaries

Non-GAAP Reconciliation (1)

(Dollars and shares in thousands, except per share amounts)



Three Months Ended


Six Months Ended


June 30,


June 30,


2019


2018


2019


2018

Income before income taxes

$

41,203



$

33,531



$

64,682



$

57,404


Add: Acquisition-related charges (2)

129



2,961



557



3,857


Add: Acquisition and integration costs (3)







1,700


Adjusted income before income taxes

$

41,332



$

36,492



$

65,239



$

62,961










Net income

$

30,246



$

27,911



$

47,969



$

45,974


Add: Acquisition-related charges - net of tax (2)

95



2,191



412



2,854


Add: Acquisition and integrations costs - net of tax (3)







1,258


Adjusted net income

$

30,341



$

30,102



$

48,381



$

50,086










Acquisition-related charges - net of tax (2)

$

95



$

2,191



$

412



$

2,854


Acquisition and integration costs - net of tax (3)

$



$



$



$

1,258










Divided by: Diluted weighted average shares outstanding

28,090



29,101



28,027



29,818










Diluted earnings per share related to

  acquisition-related charges (2)

$



$

0.08



$

0.01



$

0.10


Diluted earnings per share related to acquisition and integration costs (3)

$



$



$



$

0.04










Add: Diluted earnings per share

1.08



0.96



1.71



1.56


Adjusted diluted earnings per share

$

1.08



$

1.04



$

1.72



$

1.70




(1)

We believe these non-GAAP financial measures are relevant and useful to investors in understanding our operations and may be helpful in comparing us with other companies in the homebuilding industry to the extent they provide similar information. These non-GAAP financial measures should be used to supplement our GAAP results in order to provide a greater understanding of the factors and trends affecting our operations.

(2)

Represents acquisition-related charges related to our acquisition of Pinnacle Homes in Detroit, Michigan on March 1, 2018.

(3)

Represents costs which include, but are not limited to, legal fees and expenses, travel and communication expenses, cost of appraisals, accounting fees and expenses, and miscellaneous expenses related to our acquisition of Pinnacle Homes. As these costs are not eligible for capitalization as initial direct costs, such amounts are expensed as incurred.

 


 

M/I Homes, Inc. and Subsidiaries

Selected Supplemental Financial and Operating Data


NEW CONTRACTS (a)


Three Months Ended


Six Months Ended


June 30,


June 30,






%






%

Region

2019


2018


Change


2019


2018


Change

Northern

703



656



7

%


1,405



1,354



4

%

Southern

1,028



975



5

%


1,970



2,016



(2)

%

Total

1,731



1,631



6

%


3,375



3,370



%



HOMES DELIVERED (a)


Three Months Ended


Six Months Ended


June 30,


June 30,






%






%

Region

2019


2018


Change


2019


2018


Change

Northern

614



554



11

%


1,088



965



13

%

Southern

924



855



8

%


1,636



1,566



4

%

Total

1,538



1,409



9

%


2,724



2,531



8

%

 

BACKLOG (a)


June 30, 2019


June 30, 2018




Dollars


Average




Dollars


Average

Region

Units


(millions)


Sales Price


Units


(millions)


Sales Price

Northern

1,247



$

528



$

424,000



1,330



$

558



$

420,000


Southern

1,598



$

596



$

373,000



1,636



$

616



$

377,000


Total

2,845



$

1,125



$

395,000



2,966



$

1,174



$

396,000


 

LAND POSITION SUMMARY (a)


June 30, 2019



June 30, 2018


Lots

Lots Under




Lots

Lots Under


Region

Owned

Contract

Total



Owned

Contract

Total

Northern

6,456


5,471


11,927




5,403


6,472


11,875


Southern

8,403


8,746


17,149




7,764


8,579


16,343


Total

14,859


14,217


29,076




13,167


15,051


28,218




(a)

Beginning in the second quarter of 2019, we changed from three reportable segments to two reportable segments: Northern and Southern. Prior year information has been restated for corresponding items of our segment information.

 

 

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