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

·15 min read

COLUMBUS, Ohio, Feb. 5, 2020 /PRNewswire/ -- M/I Homes, Inc. (NYSE:MHO) announced results for its fourth quarter and year ended December 31, 2019.

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

2019 Fourth-Quarter Results:

  • New contracts increased 43% to a fourth quarter record of 1,677 contracts

  • Backlog sales value increased 18% to a fourth quarter record $1.1 billion, and backlog units increased 22%

  • Revenue increased 3% to a fourth quarter record of $742 million

  • Homes delivered increased 5% to an all-time quarterly record 1,921 homes

  • Pre-tax income increased 16% to $51.3 million from $44.4 million in 2018

  • Net income increased 29% to a fourth quarter record $41.8 million from $32.4 million in 2018, and diluted earnings per share increased to $1.44 compared with $1.15 per diluted share.

2019 Full-Year Results:

  • Record revenue of $2.5 billion, an increase of 9%

  • Record homes delivered of 6,296, a 9% increase

  • Record new contracts of 6,773, an increase of 16%

  • Record pre-tax income of $166.0 million, an 18% increase compared to $141.3 million in 2018

  • Net income increased to $127.6 million compared to $107.7 million in 2018 and diluted earnings per share increased to $4.48 from $3.70 per diluted share

  • Shareholders' equity reached an all-time record of $1.0 billion, a 17% increase from a year ago, with book value per share of $35.

For the fourth quarter of 2019, the Company reported record fourth quarter net income of $41.8 million, or $1.44 per diluted share. This compares to net income of $32.4 million, or $1.15 per diluted share, for the fourth quarter of 2018. Net income in the fourth quarter of 2019 included $3.8 million of after-tax impairment charges ($0.13 per diluted share), while 2018's fourth quarter net income included $4.4 million of after-tax impairment charges ($0.15 per diluted share) and $0.5 million of after-tax acquisition-related charges ($0.02 per diluted share). Excluding these charges, adjusted net income increased 22% to $45.6 million, and adjusted diluted earnings per share increased 19% to $1.57 per share from $1.32 per share in 2018.

For the year ended December 31, 2019, the Company reported net income of $127.6 million, or $4.48 per diluted share, compared to net income of $107.7 million, or $3.70 per diluted share, in 2018. Net income in 2019 included $3.8 million of after-tax impairment charges ($0.13 per diluted share) and $0.5 million of after-tax acquisition-related charges ($0.02 per diluted share). Net income 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). Exclusive of these charges, net income increased 12% to $131.9 million compared to $117.3 million in 2018, and adjusted diluted earnings per share increased 15% to $4.63 per share compared to $4.03 per share in 2018.

Homes delivered in 2019's fourth quarter reached an all-time quarterly record of 1,921, increasing 5% compared to 1,825 deliveries in 2018's fourth quarter. Homes delivered for the twelve months ended December 31, 2019 increased 9% to a record 6,296 from 2018's deliveries of 5,778. New contracts for 2019's fourth quarter increased 43% to a fourth quarter record of 1,677 from 1,173 new contracts in 2018's fourth quarter. For 2019, new contracts reached a record of 6,773, a 16% increase over 2018's new contracts of 5,845. Homes in backlog increased 22% at December 31, 2019 to 2,671 units, with a record year-end sales value of $1.1 billion, an 18% increase over last year, and the average sales price in backlog decreased 3% to $396,000. At December 31, 2018, the sales value of the 2,194 homes in backlog was $897 million, with an average sales price of $409,000. M/I Homes had a record 225 active communities at December 31, 2019 compared to 209 a year ago. The Company's cancellation rate was 13% in 2019's fourth quarter and for the year.

Robert H. Schottenstein, Chief Executive Officer and President, commented, "2019 was a banner year for M/I Homes with record revenue, record new contracts, record homes delivered and record pre-tax income. Revenue increased 9% to $2.5 billion, new contracts increased 16% to 6,773 homes, homes delivered increased 9% to 6,296 homes, and pre-tax income, aided by improved operating leverage, increased 18% to $166 million. The strong performance of many of our homebuilding divisions along with another very good year from our financial services business contributed to our record results. We also reached the highest year-end sales backlog in Company history with a value of $1.1 billion, an 18% increase over 2018."

Mr. Schottenstein continued, "Our financial condition remains strong. Our shareholders' equity reached a record level of $1.0 billion at year-end, with a book value per share above $35, and we reduced our ratio of homebuilding debt to capital to 38%. In addition, in January of this year we extended our debt maturity and improved our average borrowing rate by issuing $400 million of 8-year senior notes at 4.95% and redeemed $300 million of our 6.75% senior notes which were due in 2021. Housing market conditions remain strong and, given the strength of our record backlog and our solid competitive position across each of our 15 markets, we are well positioned for a very good 2020."

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 2021.

M/I Homes, Inc. is one of the nation's leading builders of single-family homes, having sold over 118,200 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. 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; and Charlotte and Raleigh, North Carolina.

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


Twelve Months Ended


December 31,


December 31,


2019


2018


2019


2018

New contracts

1,677



1,173



6,773



5,845


Average community count

223



211



218



205


Cancellation rate

13

%


18

%


13

%


15

%

Backlog units

2,671



2,194



2,671



2,194


Backlog sales value

$

1,057,528



$

896,714



$

1,057,528



$

896,714


Homes delivered

1,921



1,825



6,296



5,778


Average home closing price

$

377



$

383



$

384



$

384










Homebuilding revenue:








Housing revenue

$

724,790



$

698,919



$

2,420,348



$

2,217,197


Land revenue

1,577



10,465



24,619



16,889


Total homebuilding revenue

$

726,367



$

709,384



$

2,444,967



$

2,234,086










Financial services revenue

15,783



13,101



55,323



52,196










Total revenue

$

742,150



$

722,485



$

2,500,290



$

2,286,282










Cost of sales - operations

594,373



586,039



2,005,222



1,831,557


Cost of sales - acquisition-related charges



598



639



5,147


Cost of sales - impairment

5,002



5,809



5,002



5,809


Gross margin

142,775



130,039



489,427



443,769


General and administrative expense

41,706



38,265



147,954



137,779


Selling expense

45,234



42,121



154,384



142,829


Operating income

55,835



49,653



187,089



163,161


Acquisition and integration costs







1,700


Equity in income from joint venture arrangements

(193)



(44)



(311)



(312)


Interest expense

4,749



5,292



21,375



20,484


Income before income taxes

51,279



44,405



166,025



141,289


Provision for income taxes

9,499



11,998



38,438



33,626


Net income

$

41,780



$

32,407



$

127,587



$

107,663










Earnings per share:








Basic

$

1.48



$

1.17



$

4.58



$

3.81


Diluted

$

1.44



$

1.15



$

4.48



$

3.70










Weighted average shares outstanding:








Basic

28,297



27,774



27,846



28,234


Diluted

29,049



28,181



28,475



29,178



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



As of


December 31,


2019


2018

Assets:




Total cash, cash equivalents and restricted cash

$

6,083



$

21,529


Mortgage loans held for sale

155,244



169,651


Inventory:




Lots, land and land development

858,065



778,943


Land held for sale

5,670



12,633


Homes under construction

756,998



730,390


Other inventory

148,774



152,494


Total Inventory

$

1,769,507



$

1,674,460






Property and equipment - net

22,118



29,395


Operating lease right-of-use assets

18,415




Goodwill

16,400



16,400


Investments in joint venture arrangements

37,885



35,870


Deferred income tax asset

9,631



13,482


Other assets

70,311



60,794


Total Assets

$

2,105,594



$

2,021,581






Liabilities:




Debt - Homebuilding Operations:




Senior notes due 2021 - net

$

298,988



$

297,884


Senior notes due 2025 - net

247,092



246,571


Notes payable - homebuilding

66,000



117,400


Notes payable - other

5,828



5,938


Total Debt - Homebuilding Operations

$

617,908



$

667,793






Notes payable bank - financial services operations

136,904



153,168


Total Debt

$

754,812



$

820,961






Accounts payable

125,026



131,511


Operating lease liabilities

18,415




Other liabilities

203,864



213,806


Total Liabilities

$

1,102,117



$

1,166,278






Shareholders' Equity

1,003,477



855,303


Total Liabilities and Shareholders' Equity

$

2,105,594



$

2,021,581






Book value per common share

$

35.35



$

31.08


Homebuilding debt / capital ratio(1)

38

%


44

%



(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,


2019


2018


2019


2018

Cash provided by (used in) operating activities

$

64,654



$

72,527



$

65,631



$

(2,592)


Cash used in investing activities

$

(1,884)



$

(13,655)



$

(27,594)



$

(133,957)


Cash (used in) provided by financing activities

$

(90,138)



$

(73,703)



$

(53,483)



$

6,375










Land/lot purchases

$

73,619



$

74,050



$

332,057



$

330,548


Land development spending

$

82,839



$

69,667



$

268,347



$

221,923


Land sale revenue

$

1,577



$

10,465



$

24,619



$

16,889


Land sale gross profit

$

(32)



$

1,493



$

498



$

2,045










Financial services pre-tax income

$

6,420



$

5,353



$

23,699



$

24,213


M/I Homes, Inc. and Subsidiaries
Non-GAAP Financial Results (1)
(Dollars in thousands)



Three Months Ended


Twelve Months Ended


December 31,


December 31,


2019


2018


2019


2018

Net income

$

41,780



$

32,407



$

127,587



$

107,663


Add:








Provision for income taxes

9,499



11,998



38,438



33,626


Interest expense, net of interest income

3,727



4,225



17,515



16,990


Interest amortized to cost of sales

8,802



8,112



29,411



25,457


Depreciation and amortization

4,154



3,777



15,950



14,531


Non-cash charges

6,762



8,012



10,848



11,783


Adjusted EBITDA

$

74,724



$

68,531



$

239,749



$

210,050


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,


2019


2018


2019


2018

Income before income taxes

$

51,279



$

44,405



$

166,025



$

141,289


Add: Impairment (2)

5,002



5,809



5,002



5,809


Add: Acquisition-related charges (3)



598



639



5,147


Add: Acquisition and integration costs (4)







1,700


Adjusted income before income taxes

$

56,281



$

50,812



$

171,666



$

153,945










Net income

$

41,780



$

32,407



$

127,587



$

107,663


Add: Impairment - net of tax (2)

3,802



4,415



3,802



4,415


Add: Acquisition-related charges - net of tax (3)



454



486



3,912


Add: Acquisition and integration costs - net of tax (4)







1,292


Adjusted net income

$

45,582



$

37,276



$

131,875



$

117,282










Impairment - net of tax (2)

$

3,802



$

4,415



$

3,802



$

4,415


Acquisition-related charges - net of tax (3)

$



$

454



$

486



$

3,912


Acquisition and integration costs - net of tax (4)

$



$



$



$

1,292










Divided by: Diluted weighted average shares outstanding

29,049



28,181



28,475



29,178










Diluted earnings per share related to impairment (2)

$

0.13



$

0.15



$

0.13



$

0.15


Diluted earnings per share related to acquisition-related charges (3)



0.02



0.02



0.13


Diluted earnings per share related to acquisition and integration costs (4)







0.05










Add: Diluted earnings per share

1.44



1.15



4.48



3.70










Adjusted diluted earnings per share

$

1.57



$

1.32



$

4.63



$

4.03




(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.

(3)

Represents purchase accounting adjustments related to our acquisition of Pinnacle Homes in Detroit, Michigan on March 1, 2018.

(4)

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


Three Months Ended



Twelve Months Ended


December 31,



December 31,






%







%

Region

2019


2018


Change



2019


2018


Change

Northern

655



415



58

%



2,695



2,306



17

%

Southern

1,022



758



35

%



4,078



3,539



15

%

Total

1,677



1,173



43

%



6,773



5,845



16

%




HOMES DELIVERED


Three Months Ended



Twelve Months Ended


December 31,



December 31,






%







%

Region

2019


2018


Change



2019


2018


Change

Northern

743



769



(3)

%



2,482



2,317



7

%

Southern

1,178



1,056



12

%



3,814



3,461



10

%

Total

1,921



1,825



5

%



6,296



5,778



9

%


BACKLOG


December 31, 2019



December 31, 2018




Dollars


Average





Dollars


Average

Region

Units


(millions)


Sales Price



Units


(millions)


Sales Price

Northern

1,143



$

495



$

433,000




930



$

410



$

441,000


Southern

1,528



$

563



$

368,000




1,264



$

486



$

385,000


Total

2,671



$

1,058



$

396,000




2,194



$

897



$

409,000





LAND POSITION SUMMARY


December 31, 2019



December 31, 2018


Lots

Lots Under




Lots

Lots Under


Region

Owned

Contract

Total



Owned

Contract

Total

Northern

6,857


6,207


13,064




5,644


6,460


12,104


Southern

7,809


12,386


20,195




8,419


8,200


16,619


Total

14,666


18,593


33,259




14,063


14,660


28,723


Cision
Cision

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SOURCE M/I Homes, Inc.