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M/I Homes Reports Fourth Quarter and Year-End Results

COLUMBUS, Ohio, Feb. 5, 2019 /PRNewswire/ -- M/I Homes, Inc. (MHO) announced results for its fourth quarter and year ended December 31, 2018.

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

2018 Fourth-Quarter Results:

  • New contracts decreased 4% to 1,173 contracts
  • Backlog sales value increased 13% to $897 million, and backlog units increased 9%
  • Revenue increased 16% to a fourth quarter record of $722 million
  • Homes delivered increased 15% to a fourth quarter record 1,825 homes
  • Pre-tax income increased 30% to $44.4 million from $34.1 million in 2017; excluding impairment charges and purchase accounting charges, pre-tax income improved 22% to $50.8 million.
  • Net income increased 104% to $32.4 million from $15.9 million in 2017, and diluted earnings per share increased to $1.15 compared with $0.53 per diluted share.

2018 Full-Year Results:

  • Record revenue of $2.3 billion, an increase of 17%
  • Record homes delivered of 5,778, a 14% increase
  • Record new contracts of 5,845, an increase of 10%
  • Pre-tax income of $141.3 million, a 17% increase compared to $120.3 million in 2017; excluding impairment, stucco-related charges and acquisition-related costs, pre-tax income improved 13% to $153.9 million
  • Net income to common shareholders increased to a record $107.7 million compared to $66.2 million in 2017 and diluted earnings per share increased to $3.70 from $2.26 per diluted share, partly due to an effective tax rate in 2018 of 24% compared to 40% in 2017
  • Shareholders' equity reached an all-time record of $855 million, a 14% increase from a year ago, with book value per share of $31.

For the fourth quarter of 2018, the Company reported net income of $32.4 million, or $1.15 per diluted share. This compares to net income of $15.9 million, or $0.53 per diluted share, for the fourth quarter of 2017.  Net income in the fourth quarter of 2018 included $4.4 million of after-tax impairment charges ($0.15 per diluted share) and $0.5 million of after-tax purchase accounting charges ($0.02 per diluted share), while 2017's fourth quarter net income included $4.9 million of after-tax impairment charges ($0.16 per diluted share).   In addition, 2017's fourth quarter net income included a tax charge of $6.5 million ($0.21 per share) related to the Tax Cuts and Jobs Act.  Excluding the impairment charges, purchase accounting charges and the tax charge in 2017's fourth quarter, adjusted net income increased 36% to $37.3 million, and diluted earnings per share increased 47% to $1.32 per share from $0.90 per share in 2017.

For the year ended December 31, 2018, the Company reported net income to common shareholders of $107.7 million, or $3.70 per diluted share, compared to net income to common shareholders of $66.2 million or $2.26 per diluted share in 2017.  Net income to common shareholders in 2018 included $4.4 million of after-tax impairment charges ($0.15 per diluted share) and $5.2 million of after-tax acquisition-related charges ($0.18 per diluted share).  Net income to common shareholders in 2017 includes the impact of a deferred tax asset re-measurement of $6.5 million ($0.21 per diluted share), a $2.3 million equity adjustment ($0.07 per diluted share) related to the redemption of preferred shares in the third quarter of 2017, $5.4 million of after-tax stucco-related repair costs ($0.18 per diluted share) and $4.9 million of after-tax impairment charges ($0.16 per diluted share). Exclusive of these charges, net income to common shareholders increased 37% to $117.3 million compared to $85.3 million in 2017, and diluted earnings per share increased 40% to $4.03 compared to $2.88 per share in 2017.

Homes delivered in 2018's fourth quarter reached an all-time quarterly record of 1,825, increasing 15% compared to 1,584 deliveries in 2017's fourth quarter.  Homes delivered for the twelve months ended December 31, 2018 increased 14% to a record-high 5,778 from 2017's deliveries of 5,089.  New contracts for 2018's fourth quarter decreased 4% to 1,173 from 1,220 new contracts in 2017's fourth quarter. For 2018, new contracts reached a record-high of 5,845 a 10% increase over 2017's new contracts of 5,299.  Homes in backlog increased 9% at December 31, 2018 to 2,194 units, with a sales value of $897 million, a 13% increase over last year, and the average sales price in backlog increased 4% to a record-high of $409,000.  At December 31, 2017, the sales value of the 2,014 homes in backlog was $791 million, with an average sales price of $393,000. M/I Homes had 209 active communities at December 31, 2018 compared to 188 a year ago. The Company's cancellation rate was 18% in 2018's fourth quarter and 15% for the year.

Robert H. Schottenstein, Chief Executive Officer and President, commented, "2018 was a strong year for M/I Homes, highlighted by record levels of revenue, homes delivered, and new contracts, along with a 17% increase in pre-tax income and a 49% increase in net income.  While our fourth quarter results also featured a record number of homes delivered and record revenue, the 4% decline we experienced in our new contracts reflected more challenging housing conditions and affordability pressures.  These conditions also impacted our gross margins, though we are pleased with the 70 basis point improvement in our annual overhead expense ratio."

Mr. Schottenstein continued, "Our homebuilding debt to capital ratio at year-end was 44%. During the second half of the year, we repurchased 1.07 million of our common shares.  Though housing conditions continue to be choppy, we enter 2019 with a very strong backlog and balance sheet, and are well positioned for the year with a significant number of planned new community openings."

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 February 2020.

M/I Homes, Inc. is one of the nation's leading builders of single-family homes, having sold over 111,400 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 are also currently 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 several 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, 2017, 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


Twelve Months Ended


December 31,


December 31,


2018


2017


2018


2017

New contracts

1,173



1,220



5,845



5,299


Average community count

211



184



205



183


Cancellation rate

18

%


13

%


15

%


14

%

Backlog units





2,194



2,014


Backlog sales value





$

896,714



$

791,253


Homes delivered

1,825



1,584



5,778



5,089


Average home closing price

$

383



$

372



$

384



$

369










Homebuilding revenue:








   Housing revenue

$

698,919



$

588,679



$

2,217,197



$

1,878,572


   Land revenue

10,465



21,268



16,889



33,706


Total homebuilding revenue

$

709,384



$

609,947



$

2,234,086



$

1,912,278










   Financial services revenue

13,101



11,755



52,196



49,693










Total revenue

$

722,485



$

621,702



$

2,286,282



$

1,961,971










Cost of sales - operations

586,039



498,470



1,831,557



1,552,522


Cost of sales - purchase accounting charges

598





5,147




Cost of sales - impairment

5,809



7,681



5,809



7,681


Cost of sales - stucco related charges







8,500


Gross margin

130,039



115,551



443,769



393,268


General and administrative expense

38,265



37,073



137,779



126,282


Selling expense

42,121



39,661



142,829



128,327


Operating income

49,653



38,817



163,161



138,659


Acquisition and integration costs





1,700




Equity in income from joint venture arrangements

(44)



(341)



(312)



(539)


Interest expense

5,292



5,027



20,484



18,874


Income before income taxes

44,405



34,131



141,289



120,324


Provision for income taxes

11,998



18,249



33,626



48,243


Net income

$

32,407



$

15,882



$

107,663



$

72,081


Excess of fair value over book value of preferred
shares subject to redemption







2,257


Preferred dividends







3,656


Net income available to common shareholders

$

32,407



$

15,882



$

107,663



$

66,168










Earnings per share:








Basic

$

1.17



$

0.57



$

3.81



$

2.57


Diluted

$

1.15



$

0.53



$

3.70



$

2.26










Weighted average shares outstanding:








Basic

27,774



27,736



28,224



25,769


Diluted

28,181



31,172



29,178



30,688



 

 

M/I Homes, Inc. and Subsidiaries

Summary Balance Sheet and Other Information (unaudited)

(Dollars in thousands, except per share amounts)



As of


December 31,


2018


2017

Assets:




Total cash, cash equivalents and restricted cash

$

21,529



$

151,703


Mortgage loans held for sale

169,651



171,580


Inventory:




Lots, land and land development

778,943



687,260


Land held for sale

12,633



6,491


Homes under construction

730,390



579,051


Other inventory

152,494



141,772


Total Inventory

$

1,674,460



$

1,414,574






Property and equipment - net

29,395



26,816


Goodwill

16,400




Investments in joint venture arrangements

35,870



20,525


Deferred income tax asset

13,482



18,438


Other assets

60,794



61,135


Total Assets

$

2,021,581



$

1,864,771






Liabilities:




Debt - Homebuilding Operations:




Senior notes due 2021 - net

$

297,884



$

296,780


Senior notes due 2025 - net

246,571



246,051


Convertible senior subordinated notes due 2018 - net



86,132


Notes payable - homebuilding

117,400




Notes payable - other

5,938



10,576


Total Debt - Homebuilding Operations

$

667,793



$

639,539






Notes payable bank - financial services operations

153,168



168,195


Total Debt

$

820,961



$

807,734






Accounts payable

131,511



117,233


Other liabilities

213,806



192,506


Total Liabilities

$

1,166,278



$

1,117,473






Shareholders' Equity

855,303



747,298


Total Liabilities and Shareholders' Equity

$

2,021,581



$

1,864,771






Book value per common share

$

31.08



$

26.83


Homebuilding debt / capital ratio(1)

44

%


46

%

 

(1)

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


Twelve Months Ended


December 31,


December 31,


2018


2017


2018


2017

Cash provided by (used in) operating activities

$

72,527



$

13,495



$

(2,592)



$

(53,184)


Cash used in investing activities

$

(13,655)



$

(4,746)



$

(133,957)



$

(9,157)


Cash (used in) provided by in financing activities

$

(73,703)



$

39,318



$

6,375



$

179,603










Land/lot purchases

$

74,050



$

78,085



$

330,548



$

328,226


Land development spending

$

69,667



$

63,683



$

221,923



$

200,702


Land sale revenue

$

10,465



$

21,268



$

16,889



$

33,706


Land sale gross profit

$

1,493



$

1,966



$

2,045



$

2,849










Financial services pre-tax income

$

5,353



$

4,543



$

24,213



$

24,531


 

 

M/I Homes, Inc. and Subsidiaries

Non-GAAP Financial Results (1)

(Dollars in thousands)



Three Months Ended


Twelve Months Ended


December 31,


December 31,


2018


2017


2018


2017

Net income

$

32,407



$

15,882



$

107,663



$

72,081


Add:








Provision for income taxes

11,998



18,249



33,626



48,243


Interest expense, net of interest income

4,225



4,305



16,990



16,024


Interest amortized to cost of sales

8,112



6,730



25,457



20,327


Depreciation and amortization

3,777



3,675



14,531



14,174


Non-cash charges

8,012



9,691



11,783



13,725


Adjusted EBITDA

$

68,531



$

58,532



$

210,050



$

184,574


 

 

M/I Homes, Inc. and Subsidiaries

Non-GAAP Reconciliation (1)

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



Three Months Ended


Twelve months ended


December 31,


December 31,


2018


2017


2018


2017

Income before income taxes

$

44,405



$

34,131



$

141,289



$

120,324


Add: Impairment

5,809



7,681



5,809



7,681


Add: Purchase accounting charges

598





5,147




Add: Acquisition and integration costs





1,700




Add: Stucco-related charges







8,500


Adjusted income before income taxes

$

50,812



$

41,812



$

153,945



$

136,505










Net income

$

32,407



$

15,882



$

107,663



$

72,081


Add: Impairment - net of tax

4,415



4,916



4,415



4,916


Add: Purchase accounting charges - net of tax

454





3,912




Add: Acquisition and integration costs - net of tax





1,292




Add: Stucco-related charges - net of tax







5,440


Add: Deferred tax re-measurement due to tax reform



6,520





6,520


Adjusted net income

$

37,276



$

27,318



$

117,282



$

88,957










Net income available to common shareholders

$

32,407



$

15,882



$

107,663



$

66,168


Add: Impairment - net of tax

4,415



4,916



4,415



4,916


Add: Purchase accounting charges - net of tax

454





3,912




Add: Acquisition and integration costs - net of tax





1,292




Add: Stucco-related charges - net of tax







5,440


Add: Deferred tax re-measurement due to tax reform



6,520





6,520


Add: Excess of fair value over book value charge







2,257


Adjusted net income available to common shareholders

$

37,276



$

27,318



$

117,282



$

85,301










Diluted earnings per share

$

1.15



$

0.53



$

3.70



$

2.26


Add: Impairment per share impact(2)

0.15



0.16



0.15



0.16


Add: Purchase accounting charges per share impact(2)

0.02





0.13




Add: Acquisition and integration costs per share impact(2)





0.05




Add: Stucco-related charges per share impact(2)







0.18


Add: Deferred tax re-measurement due to tax reform per share impact(2)



0.21





0.21


Add: Preferred shares redeemed per share impact(2)







0.07


Adjusted diluted earnings per share

$

1.32



$

0.90



$

4.03



$

2.88


 

(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 the related charges divided by diluted weighted average shares outstanding during the respective period as presented in the Summary Statement of Income.

 

 

M/I Homes, Inc. and Subsidiaries

Selected Supplemental Financial and Operating Data


NEW CONTRACTS


Three Months Ended


Twelve Months Ended


December 31,


December 31,






%






%

Region

2018



2017



Change


2018



2017



Change

Midwest

415



433



(4)

%


2,306



1,978



17

%

Southern

550



544



1

%


2,697



2,342



15

%

Mid-Atlantic

208



243



(14)

%


842



979



(14)

%

Total

1,173



1,220



(4)

%


5,845



5,299



10

%

 

HOMES DELIVERED


Three Months Ended


Twelve Months Ended


December 31,


December 31,






%






%

Region

2018



2017



Change


2018



2017



Change

Midwest

769



630



22

%


2,317



1,907



21

%

Southern

760



649



17

%


2,579



2,108



22

%

Mid-Atlantic

296



305



(3)

%


882



1,074



(18)

%

Total

1,825



1,584



15

%


5,778



5,089



14

%

 

BACKLOG


December 31, 2018


December 31, 2017




Dollars


Average




Dollars


Average

Region

Units


(millions)


Sales Price


Units


(millions)


Sales Price

Midwest

930



$

410



$

441,000



828



$

344



$

415,000


Southern

1,026



$

382



$

373,000



908



$

332



$

365,000


Mid-Atlantic

238



$

104



$

437,000



278



$

116



$

416,000


Total

2,194



$

897



$

409,000



2,014



$

791



$

393,000


 

LAND POSITION SUMMARY


December 31, 2018



December 31, 2017


Lots

Lots Under




Lots

Lots Under


Region

Owned

Contract

Total



Owned

Contract

Total

Midwest

5,644


6,460


12,104




4,456


6,220


10,676


Southern

6,507


5,636


12,143




5,470


7,668


13,138


Mid-Atlantic

1,912


2,564


4,476




1,696


3,021


4,717


Total

14,063


14,660


28,723




11,622


16,909


28,531


 

Cision

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