Attached files
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| 8-K - 8-K - M/I HOMES, INC. | a8k3rdqtrearnings9-30x13.htm |
Exhibit 99.1
M/I Homes Reports
Third Quarter Results
Columbus, Ohio (October 24, 2013) - M/I Homes, Inc. (NYSE:MHO) announced results for the third quarter and nine months ended September 30, 2013.
2013 Third Quarter Highlights:
• | Pre-tax income of $13.8 million - a 63% increase over 2012’s third quarter |
• | Net income of $125.3 million, including a $111.6 million benefit from the |
reversal of a majority of our deferred tax asset valuation allowance
• | Diluted earnings per share of $4.22 ($0.47 per share excluding the impact of |
the tax valuation allowance reversal)
• | New contracts increased 15% |
• | Homes delivered increased 26% |
• | Backlog units and value increased 36% and 46%, respectively |
• | Cash balance of $158.3 million |
• | Net debt to net capital ratio of 37% |
For the third quarter of 2013, the Company reported net income of $125.3 million, or $4.22 per diluted share. Excluding the reversal of $111.6 million of our deferred tax asset valuation allowance, the Company’s net income totaled $13.8 million or $0.47 per diluted share. This compares to net income of $8.3 million for the third quarter of 2012, or $0.42 per diluted share, which included a $3.0 million recovery related to a drywall settlement ($0.15 per diluted share). Net income for the third quarter of 2013 includes $2.1 million of asset impairments and a $1.7 million non-cash charge related to early extinguishment of debt. Net income for the third quarter of 2012 included $1.3 million of asset impairments. For the nine months ended September 30, 2013, the Company had net income of $25.5 million, excluding the $111.6 million deferred tax asset valuation allowance reversal, compared to net income of $8.3 million, in the same period a year ago.
Homes delivered in 2013's third quarter were 937 compared to 746 in 2012's third quarter - up 26%. Homes delivered for the nine months ended September 30, 2013 increased 25% to 2,352 compared to 2012's nine month deliveries of 1,878. New contracts for 2013's third quarter were 869, up 15% from 2012's third quarter of 757. For the first nine months of 2013, new contracts increased 28% from 2,347 in 2012 to 2,994 in 2013. M/I Homes had 147 active communities at September 30, 2013 compared to 128 at September 30, 2012. The Company's cancellation rate was 17% in the third quarter of 2013 compared to 18% in 2012's third quarter. Backlog of homes at September 30, 2013 had a sales value of $488 million (a 46% increase over last year's third quarter), with an average sales price of $304,000 and backlog units of 1,607. At September 30, 2012 backlog sales value was $334 million, with an average sales price of $284,000 and backlog units of 1,179.
Robert H. Schottenstein, Chief Executive Officer and President, commented, “We are very pleased with our third quarter results highlighted by (i) 32% growth in revenue; (ii) 26% improvement in homes delivered; (iii) pre-tax income of $13.8 million - a 63% increase over last year’s third quarter; and (iv) a 15% increase in new contracts. Our results
reflect strong performances on many fronts - our backlog value is now up 46% compared to a year ago, and our gross margin for the quarter improved to 20.0%, a 30 basis point increase from the second quarter of 2013. Additionally, we continue to improve our operating leverage with our selling, general and administrative expenses for the quarter declining to 13.2% of revenue, our lowest quarterly level since the fourth quarter of 2007. Our third quarter results also included the benefit of reversing a majority of our deferred tax asset valuation allowance, further strengthening our balance sheet. During the quarter, we continued to position our Company for further growth and geographic diversification, increasing our community count to 147 at September 30, 2013 - a 15% increase over 2012’s level.”
Mr. Schottenstein continued, “Our financial condition is strong, with cash of $158 million, shareholder's equity of $480 million, net debt to net capital at 37%, and no outstanding borrowings under our credit facility. We are poised to have a very solid 2013 as we remain focused on increasing our profitability, growing our market share, expanding our community count, 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 2014.
M/I Homes, Inc. is one of the nation's leading builders of single-family homes, having delivered over 85,600 homes. The Company's homes are marketed and sold under the trade names M/I Homes, Showcase Homes, 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, 2012, 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.
Contact M/I Homes, Inc.
Phillip G. Creek, Executive Vice President, Chief Financial Officer, (614) 418-8011
Kevin C. Hake, Senior Vice President, Treasurer (614) 418-8227
Ann Marie W. Hunker, Vice President, Controller, (614) 418-8225
M/I Homes, Inc. and Subsidiaries
Summary Operating Results (Unaudited)
(Dollars in thousands, except per share amounts)
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
New contracts | 869 | 757 | 2,994 | 2,347 | |||||||||||
Average community count | 144 | 126 | 138 | 124 | |||||||||||
Cancellation rate | 17 | % | 18 | % | 15 | % | 16 | % | |||||||
Backlog units | 1,607 | 1,179 | |||||||||||||
Backlog value | $ | 488,089 | $ | 334,336 | |||||||||||
Homes delivered | 937 | 746 | 2,352 | 1,878 | |||||||||||
Average home closing price | $ | 284 | $ | 266 | $ | 283 | $ | 259 | |||||||
Homebuilding revenue: | |||||||||||||||
Housing revenue | $ | 265,886 | $ | 198,406 | $ | 665,376 | $ | 486,399 | |||||||
Land revenue | 2,628 | 4,086 | 12,756 | 8,972 | |||||||||||
Total homebuilding revenue | $ | 268,514 | $ | 202,492 | $ | 678,132 | $ | 495,371 | |||||||
Financial services revenue | 6,681 | 6,383 | 22,343 | 15,623 | |||||||||||
Total revenue | $ | 275,195 | $ | 208,875 | $ | 700,475 | $ | 510,994 | |||||||
Cost of sales - operations | 218,150 | 167,452 | 556,799 | 411,893 | |||||||||||
Cost of sales - impairment | 2,136 | 1,309 | 4,237 | 1,876 | |||||||||||
Cost of sales - other | — | (3,000 | ) | — | (3,000 | ) | |||||||||
Gross margin | 54,909 | 43,114 | 139,439 | 100,225 | |||||||||||
General and administrative expense | 18,261 | 16,016 | 52,389 | 42,299 | |||||||||||
Selling expense | 17,999 | 14,647 | 47,383 | 38,483 | |||||||||||
Operating income | 18,649 | 12,451 | 39,667 | 19,443 | |||||||||||
Income from unconsolidated joint ventures | (278 | ) | — | (278 | ) | — | |||||||||
Interest expense | 3,449 | 3,999 | 12,186 | 12,066 | |||||||||||
Loss on early extinguishment of debt | 1,726 | — | 1,726 | — | |||||||||||
Income before income taxes | 13,752 | 8,452 | 26,033 | 7,377 | |||||||||||
(Benefit) provision for income taxes | (111,559 | ) | 138 | (111,129 | ) | (955 | ) | ||||||||
Net income | $ | 125,311 | $ | 8,314 | $ | 137,162 | $ | 8,332 | |||||||
Excess of fair value over book value of preferred shares redeemed | $ | — | $ | — | $ | 2,190 | $ | — | |||||||
Preferred dividends | $ | 1,219 | $ | — | $ | 2,438 | $ | — | |||||||
Net income to common shareholders | $ | 124,092 | $ | 8,314 | $ | 132,534 | $ | 8,332 | |||||||
Earnings per share: | |||||||||||||||
Basic | $ | 5.09 | $ | 0.43 | $ | 5.61 | $ | 0.44 | |||||||
Diluted | $ | 4.22 | $ | 0.42 | $ | 4.79 | $ | 0.43 | |||||||
Weighted average shares outstanding: | |||||||||||||||
Basic | 24,358 | 19,434 | 23,642 | 19,014 | |||||||||||
Diluted | 29,745 | 20,273 | 28,410 | 19,238 | |||||||||||
M/I Homes, Inc. and Subsidiaries
Summary Balance Sheet and Other Information (unaudited)
(Dollars in thousands, except per share amounts)
As of | |||||||
September 30, | |||||||
2013 | 2012 | ||||||
Assets: | |||||||
Total cash and cash equivalents(1) | $ | 158,281 | $ | 168,745 | |||
Mortgage loans held for sale | 60,388 | 58,338 | |||||
Inventory: | |||||||
Lots, land and land development | 283,455 | 230,040 | |||||
Land held for sale | 6,899 | 8,448 | |||||
Homes under construction | 331,969 | 252,325 | |||||
Other inventory | 54,013 | 53,058 | |||||
Total inventory | $ | 676,336 | $ | 543,871 | |||
Property and equipment - net | 10,346 | 11,956 | |||||
Investments in unconsolidated joint ventures | 34,088 | 11,256 | |||||
Deferred income taxes, net of valuation allowance(2) | 112,682 | — | |||||
Other assets | 30,946 | 23,126 | |||||
Total Assets | $ | 1,083,067 | $ | 817,292 | |||
Liabilities: | |||||||
Debt - Homebuilding Operations: | |||||||
Senior notes | $ | 227,970 | $ | 227,570 | |||
Convertible senior subordinated notes due 2017 | 57,500 | 57,500 | |||||
Convertible senior subordinated notes due 2018 | 86,250 | — | |||||
Notes payable - other | 8,126 | 10,769 | |||||
Total Debt - Homebuilding Operations | $ | 379,846 | $ | 295,839 | |||
Note payable bank - financial services operations | 55,614 | 54,840 | |||||
Total Debt | $ | 435,460 | $ | 350,679 | |||
Accounts payable | 85,804 | 65,348 | |||||
Other liabilities | 82,223 | 74,773 | |||||
Total Liabilities | $ | 603,487 | $ | 490,800 | |||
Shareholders' Equity | 479,580 | 326,492 | |||||
Total Liabilities and Shareholders' Equity | $ | 1,083,067 | $ | 817,292 | |||
Book value per common share | $ | 17.64 | $ | 10.57 | |||
Net debt/net capital ratio(3) | 37 | % | 36 | % | |||
(1) | 2013 and 2012 amounts include $15.8 million and $9.0 million of restricted cash and cash held in escrow, respectively. |
(2) | 2013 and 2012 amounts include gross deferred tax assets of $127.6 million and $137.1 million, respectively, net of valuation allowances of $14.9 million and $137.1 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 | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Adjusted EBITDA(1) | $ | 27,262 | $ | 20,334 | $ | 62,667 | $ | 37,832 | |||||||
Cash flow (used in) provided by operating activities | $ | (15,258 | ) | $ | 7,208 | $ | (40,436 | ) | $ | (16,321 | ) | ||||
Cash (used in) provided by investing activities | $ | (9,695 | ) | $ | 2,643 | $ | (32,902 | ) | $ | 25,877 | |||||
Cash provided by financing activities | $ | 1,176 | $ | 105,617 | $ | 70,315 | $ | 90,416 | |||||||
Land/lot purchases | $ | 56,484 | $ | 23,474 | $ | 156,703 | $ | 80,652 | |||||||
Land development spending | $ | 31,108 | $ | 17,604 | $ | 67,456 | $ | 37,161 | |||||||
Land/lot sale proceeds | $ | 2,628 | $ | 4,086 | $ | 12,756 | $ | 8,972 | |||||||
Financial services pre-tax income | $ | 3,465 | $ | 3,545 | $ | 12,436 | $ | 7,512 | |||||||
Deferred tax expense | $ | 4,728 | $ | 3,578 | $ | 9,190 | $ | 3,721 | |||||||
Deferred tax asset valuation benefit | $ | (116,374 | ) | $ | (3,578 | ) | $ | (120,836 | ) | $ | (3,721 | ) | |||
(1) | See "Non-GAAP Financial Result / Reconciliation" table below. |
Impairment and Abandonments by Region
(Dollars in thousands)
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
Impairment by Region: | 2013 | 2012 | 2013 | 2012 | |||||||||||
Midwest | $ | 2,136 | $ | 1,309 | $ | 4,237 | $ | 1,876 | |||||||
Southern | — | — | — | — | |||||||||||
Mid-Atlantic | — | — | — | — | |||||||||||
Total | $ | 2,136 | $ | 1,309 | $ | 4,237 | $ | 1,876 | |||||||
Abandonments by Region: | |||||||||||||||
Midwest | $ | — | $ | — | $ | — | $ | 36 | |||||||
Southern | — | — | — | 110 | |||||||||||
Mid-Atlantic | — | — | — | 110 | |||||||||||
Total | $ | — | $ | — | $ | — | $ | 256 | |||||||
M/I Homes, Inc. and Subsidiaries
Non-GAAP Financial Result / Reconciliation
(Dollars in thousands)
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Net income | $ | 125,311 | $ | 8,314 | $ | 137,162 | $ | 8,332 | |||||||
Add: | |||||||||||||||
Income tax (benefit) expense | (111,559 | ) | 138 | (111,129 | ) | (955 | ) | ||||||||
Interest expense net of interest income | 3,042 | 3,609 | 11,209 | 10,952 | |||||||||||
Interest amortized to cost of sales | 4,074 | 3,755 | 11,295 | 9,211 | |||||||||||
Depreciation and amortization | 2,013 | 2,775 | 6,332 | 6,762 | |||||||||||
Non-cash charges | 4,381 | 1,743 | 7,798 | 3,530 | |||||||||||
Adjusted EBITDA | $ | 27,262 | $ | 20,334 | $ | 62,667 | $ | 37,832 | |||||||
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 | 2013 | 2012 | Change | 2013 | 2012 | Change | |||||||||||
Midwest | 318 | 274 | 16 | % | 1,062 | 913 | 16 | % | |||||||||
Southern | 289 | 224 | 29 | % | 1,043 | 707 | 48 | % | |||||||||
Mid-Atlantic | 262 | 259 | 1 | % | 889 | 727 | 22 | % | |||||||||
Total | 869 | 757 | 15 | % | 2,994 | 2,347 | 28 | % | |||||||||
HOMES DELIVERED | |||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
% | % | ||||||||||||||||
Region | 2013 | 2012 | Change | 2013 | 2012 | Change | |||||||||||
Midwest | 307 | 307 | — | % | 837 | 795 | 5 | % | |||||||||
Southern | 354 | 223 | 59 | % | 794 | 543 | 46 | % | |||||||||
Mid-Atlantic | 276 | 216 | 28 | % | 721 | 540 | 34 | % | |||||||||
Total | 937 | 746 | 26 | % | 2,352 | 1,878 | 25 | % | |||||||||
BACKLOG | |||||||||||||||||||||
September 30, 2013 | September 30, 2012 | ||||||||||||||||||||
Dollars | Average | Dollars | Average | ||||||||||||||||||
Region | Units | (millions) | Sales Price | Units | (millions) | Sales Price | |||||||||||||||
Midwest | 643 | $ | 191 | $ | 297,000 | 505 | $ | 135 | $ | 267,000 | |||||||||||
Southern | 590 | $ | 170 | $ | 287,000 | 362 | $ | 95 | $ | 263,000 | |||||||||||
Mid-Atlantic | 374 | $ | 128 | $ | 341,000 | 312 | $ | 104 | $ | 333,000 | |||||||||||
Total | 1,607 | $ | 488 | $ | 304,000 | 1,179 | $ | 334 | $ | 284,000 | |||||||||||
LAND POSITION SUMMARY | ||||||||||||||
September 30, 2013 | September 30, 2012 | |||||||||||||
Lots | Lots Under | Lots | Lots Under | |||||||||||
Region | Owned | Contract | Total | Owned | Contract | Total | ||||||||
Midwest | 3,384 | 2,407 | 5,791 | 3,119 | 1,748 | 4,867 | ||||||||
Southern | 3,633 | 3,992 | 7,625 | 1,452 | 1,977 | 3,429 | ||||||||
Mid-Atlantic | 2,125 | 2,592 | 4,717 | 1,635 | 1,268 | 2,903 | ||||||||
Total | 9,142 | 8,991 | 18,133 | 6,206 | 4,993 | 11,199 | ||||||||