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| 8-K - 8-K2ND QTR.17 EARNINGS RELEASE 7-26-17 - M/I HOMES, INC. | a8k2ndqtr17earningsrelease.htm |
Exhibit 99.1
M/I Homes Reports
2017 Second Quarter Results
Columbus, Ohio (July 26, 2017) - M/I Homes, Inc. (NYSE:MHO) announced results for the three months and six months ended June 30, 2017.
2017 Second Quarter Highlights:
• | Net income of $17.0 million ($0.55 per diluted share) which includes an $8.5 million pre-tax charge ($0.18 per diluted share) for stucco-related repairs |
• | Net income, excluding stucco-related charges, increased 27% to $22.4 million or $0.73 per diluted share |
• | Revenue increased 14% to a second quarter record $457 million |
• | Homes delivered increased 16% to a second quarter record 1,211 |
• | New contracts increased 3% to 1,400, a record level for the second quarter |
• | Backlog sales value increased 8% to $909 million; backlog units increased 6% to 2,409 |
For the second quarter of 2017, the Company reported net income of $17.0 million, or $0.55 per diluted share. This compares to net income of $15.9 million, or $0.52 per diluted share, for the second quarter of 2016. The second quarter of 2017 includes an $8.5 million pre-tax charge ($0.18 per diluted share) for additional estimated future stucco-related repair costs in certain of our Florida communities. The second quarter of 2016 included a charge of $2.8 million for such repairs. For the six months ended June 30, 2017, the Company reported net income of $33.9 million, or $1.09 per diluted share, compared to net income of $25.1 million, or $0.81 per diluted share, for the same period of 2016. Year-to-date in 2017 and 2016, the Company incurred $8.5 million of pre-tax charges ($0.18 per diluted share) and $4.9 million ($0.10 per diluted share), respectively, related to stucco-related repair charges. Exclusive of these charges in both periods, year-to-date net income is $39.3 million compared to $28.1 million in 2016’s same period, a 40% increase.
Homes delivered in 2017's second quarter were 1,211 compared to 1,042 deliveries in 2016's second quarter - a 16% increase. Homes delivered for the six months ended June 30, 2017 increased 17% to 2,249 from 2016's deliveries of 1,918. New contracts for 2017's second quarter were 1,400, an increase of 3% over 2016's second quarter. For the first six months of 2017, new contracts increased 7% to 2,854 from 2,668 in 2016. M/I Homes had 187 active communities at June 30, 2017 compared to 174 at June 30, 2016. The Company's cancellation rate was 13% in the second quarter of 2017 and 14% in 2016. Homes in backlog increased 6% at June 30, 2017 to 2,409 units, with a sales value of $909 million (an 8% increase over last year’s second quarter), and an average sales price of $377,000. At June 30, 2016, the sales value of homes in backlog was $842 million, with an average sales price of $369,000 and backlog units of 2,281.
Robert H. Schottenstein, Chief Executive Officer and President, commented, “We reported another strong quarter highlighted by record second quarter new contracts, record second quarter homes delivered, and record second quarter revenue. We also achieved significant improvement in our profitability with our pre-tax operating margin increasing 90 basis points from the first quarter of 2017 and 50 basis points year over year to 7.4%. Excluding the stucco-related charges, net income improved by 27%. ”
Mr. Schottenstein continued, “2017 is shaping up to be a very good year for M/I Homes. We have a strong backlog of $909 million and a growing number of planned new community openings. Housing market conditions are generally favorable throughout most of our markets and our financial condition remains strong with shareholders’ equity of $693 million and homebuilding debt to capital of 46% and, as reported last week, we have extended the maturity date of our credit facility by four years and increased our borrowing availability to $475 million, giving us additional flexibility and capital for continued growth. We will continue to focus on increasing profitability, 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 2018.
M/I Homes, Inc. is one of the nation’s leading builders of single-family homes, having sold over 103,000 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 operates under the name Hans Hagen Homes in its Minneapolis/St. Paul, Minnesota market. The Company has homebuilding operations in Columbus and Cincinnati, Ohio; Indianapolis, Indiana; Chicago, Illinois; Minneapolis/St. Paul, Minnesota; 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,” “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, construction defect, 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, 2016, 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.
Contact M/I Homes, Inc.
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 Statement of Income (Unaudited)
(Dollars and shares in thousands, except per share amounts)
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
New contracts | 1,400 | 1,354 | 2,854 | 2,668 | |||||||||||
Average community count | 186 | 178 | 183 | 177 | |||||||||||
Cancellation rate | 13 | % | 14 | % | 14 | % | 13 | % | |||||||
Backlog units | 2,409 | 2,281 | |||||||||||||
Backlog sales value | $ | 909,334 | $ | 842,442 | |||||||||||
Homes delivered | 1,211 | 1,042 | 2,249 | 1,918 | |||||||||||
Average home closing price | $ | 366 | $ | 362 | $ | 369 | $ | 358 | |||||||
Homebuilding revenue: | |||||||||||||||
Housing revenue | $ | 443,093 | $ | 377,226 | $ | 830,551 | $ | 686,473 | |||||||
Land revenue | 1,905 | 14,072 | 7,120 | 19,142 | |||||||||||
Total homebuilding revenue | $ | 444,998 | $ | 391,298 | $ | 837,671 | $ | 705,615 | |||||||
Financial services revenue | 11,868 | 9,949 | 26,175 | 20,002 | |||||||||||
Total revenue | $ | 456,866 | $ | 401,247 | $ | 863,846 | $ | 725,617 | |||||||
Cost of sales - operations | 359,098 | 316,954 | 679,379 | 574,971 | |||||||||||
Cost of sales - stucco-related charges | 8,500 | 2,754 | 8,500 | 4,909 | |||||||||||
Gross margin | $ | 89,268 | $ | 81,539 | $ | 175,967 | $ | 145,737 | |||||||
General and administrative expense | 30,112 | 26,830 | 57,872 | 49,089 | |||||||||||
Selling expense | 30,247 | 25,533 | 57,530 | 47,799 | |||||||||||
Operating income | $ | 28,909 | $ | 29,176 | $ | 60,565 | $ | 48,849 | |||||||
Equity in income from joint venture arrangements | (110 | ) | (82 | ) | (127 | ) | (389 | ) | |||||||
Interest expense | 3,834 | 4,308 | 9,172 | 9,573 | |||||||||||
Income before income taxes | $ | 25,185 | $ | 24,950 | $ | 51,520 | $ | 39,665 | |||||||
Provision for income taxes | 8,196 | 9,034 | 17,648 | 14,560 | |||||||||||
Net income | $ | 16,989 | $ | 15,916 | $ | 33,872 | $ | 25,105 | |||||||
Preferred dividends | 1,219 | 1,219 | 2,438 | 2,438 | |||||||||||
Net income to common shareholders | $ | 15,770 | $ | 14,697 | $ | 31,434 | $ | 22,667 | |||||||
Earnings per share: | |||||||||||||||
Basic | $ | 0.63 | $ | 0.60 | $ | 1.26 | $ | 0.92 | |||||||
Diluted | $ | 0.55 | $ | 0.52 | $ | 1.09 | $ | 0.81 | |||||||
Weighted average shares outstanding: | |||||||||||||||
Basic | 24,990 | 24,669 | 24,864 | 24,663 | |||||||||||
Diluted | 30,619 | 30,077 | 30,471 | 30,055 | |||||||||||
M/I Homes, Inc. and Subsidiaries
Summary Balance Sheet and Other Information (unaudited)
(Dollars in thousands, except per share amounts)
As of | |||||||
June 30, | |||||||
2017 | 2016 | ||||||
Assets: | |||||||
Total cash, cash equivalents and restricted cash | $ | 29,940 | $ | 30,000 | |||
Mortgage loans held for sale | 91,986 | 100,379 | |||||
Inventory: | |||||||
Lots, land and land development | 637,268 | 563,112 | |||||
Land held for sale | 17,051 | 11,597 | |||||
Homes under construction | 600,376 | 487,895 | |||||
Other inventory | 124,849 | 107,721 | |||||
Total Inventory | $ | 1,379,544 | $ | 1,170,325 | |||
Property and equipment - net | 22,255 | 22,154 | |||||
Investments in joint venture arrangements | 22,877 | 28,160 | |||||
Deferred income taxes, net of valuation allowance | 30,078 | 47,023 | |||||
Other assets | 54,706 | 55,113 | |||||
Total Assets | $ | 1,631,386 | $ | 1,453,154 | |||
Liabilities: | |||||||
Debt - Homebuilding Operations: | |||||||
Senior notes due 2021 - net | $ | 296,229 | $ | 295,125 | |||
Convertible senior subordinated notes due 2017 - net | 57,380 | 56,806 | |||||
Convertible senior subordinated notes due 2018 - net | 85,777 | 85,069 | |||||
Notes payable - homebuilding | 138,000 | 70,000 | |||||
Notes payable - other | 3,663 | 8,552 | |||||
Total Debt - Homebuilding Operations | $ | 581,049 | $ | 515,552 | |||
Notes payable bank - financial services operations | 89,518 | 92,666 | |||||
Total Debt | $ | 670,567 | $ | 608,218 | |||
Accounts payable | 113,072 | 105,669 | |||||
Other liabilities | 154,430 | 118,755 | |||||
Total Liabilities | $ | 938,069 | $ | 832,642 | |||
Shareholders’ Equity | 693,317 | 620,512 | |||||
Total Liabilities and Shareholders’ Equity | $ | 1,631,386 | $ | 1,453,154 | |||
Book value per common share | $ | 25.63 | $ | 23.13 | |||
Homebuilding debt / capital ratio(1) | 46 | % | 45 | % | |||
(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 | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Adjusted EBITDA(1) | $ | 37,953 | $ | 37,885 | $ | 77,277 | $ | 65,118 | ||||||||
Cash (used in) provided by operating activities | $ | (16,045 | ) | $ | 39,524 | (2) | $ | (39,320 | ) | $ | 40,939 | (2) | ||||
Cash (used in) provided by investing activities | $ | (2,249 | ) | $ | (3,259 | ) | (2) | $ | 957 | $ | (16,811 | ) | (2) | |||
Cash provided by (used in) financing activities | $ | 9,336 | $ | (40,586 | ) | $ | 33,862 | $ | (7,229 | ) | ||||||
Land/lot purchases | $ | 102,797 | $ | 45,413 | $ | 184,630 | $ | 97,386 | ||||||||
Land development spending | $ | 43,692 | $ | 41,339 | $ | 83,264 | $ | 73,533 | ||||||||
Land sale revenue | $ | 1,905 | $ | 14,072 | $ | 7,120 | $ | 19,142 | ||||||||
Land sale gross profit | $ | 142 | $ | 1,303 | $ | 518 | $ | 2,032 | ||||||||
Financial services pre-tax income | $ | 6,195 | $ | 4,852 | $ | 14,757 | $ | 10,743 | ||||||||
(1) | See “Non-GAAP Financial Results” table below. |
(2) | During the fourth quarter of 2016, we elected to early-adopt Accounting Standards Update 2016-18, Statement of Cash Flows: Restricted Cash. Certain amounts above have been adjusted to apply the new method retrospectively. |
M/I Homes, Inc. and Subsidiaries
Non-GAAP Financial Results (3)
(Dollars in thousands)
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net income | $ | 16,989 | $ | 15,916 | $ | 33,872 | $ | 25,105 | |||||||
Add: | |||||||||||||||
Provision for income taxes | 8,196 | 9,034 | 17,648 | 14,560 | |||||||||||
Interest expense net of interest income | 3,104 | 3,716 | 7,716 | 8,551 | |||||||||||
Interest amortized to cost of sales | 4,843 | 4,631 | 8,609 | 8,175 | |||||||||||
Depreciation and amortization | 3,283 | 3,378 | 6,866 | 6,601 | |||||||||||
Non-cash charges | 1,538 | 1,210 | 2,566 | 2,126 | |||||||||||
Adjusted EBITDA | $ | 37,953 | $ | 37,885 | $ | 77,277 | $ | 65,118 | |||||||
M/I Homes, Inc. and Subsidiaries
Non-GAAP Reconciliation (3)
(Dollars and shares in thousands, except per share amounts)
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Total revenue | $ | 456,866 | $ | 401,247 | $ | 863,846 | $ | 725,617 | |||||||
Income before income taxes | $ | 25,185 | $ | 24,950 | $ | 51,520 | $ | 39,665 | |||||||
Add: Stucco-related charges | 8,500 | 2,754 | 8,500 | 4,909 | |||||||||||
Adjusted income before income taxes | $ | 33,685 | $ | 27,704 | $ | 60,020 | $ | 44,574 | |||||||
Pre-tax operating margin percentage | 5.5 | % | 6.2 | % | 6.0 | % | 5.5 | % | |||||||
Adjusted pre-tax operating margin percentage | 7.4 | % | 6.9 | % | 6.9 | % | 6.1 | % | |||||||
Net income | $ | 16,989 | $ | 15,916 | $ | 33,872 | $ | 25,105 | |||||||
Add: Stucco-related charges - net of tax | 5,440 | 1,707 | 5,440 | 3,044 | |||||||||||
Adjusted net income | $ | 22,429 | $ | 17,623 | $ | 39,312 | $ | 28,149 | |||||||
Stucco-related charges - net of tax | $ | 5,440 | $ | 1,707 | $ | 5,440 | $ | 3,044 | |||||||
Divided by: Diluted weighted average shares outstanding | 30,619 | 30,077 | 30,471 | 30,055 | |||||||||||
Diluted earnings per share related to stucco-related charges | $ | 0.18 | $ | 0.06 | $ | 0.18 | $ | 0.10 | |||||||
Add: Diluted earnings per share | 0.55 | 0.52 | 1.09 | 0.81 | |||||||||||
Adjusted diluted earnings per share | $ | 0.73 | $ | 0.58 | $ | 1.27 | $ | 0.91 | |||||||
(3) | 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. |
M/I Homes, Inc. and Subsidiaries
Selected Supplemental Financial and Operating Data
NEW CONTRACTS | |||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||
June 30, | June 30, | ||||||||||||||||
% | % | ||||||||||||||||
Region | 2017 | 2016 | Change | 2017 | 2016 | Change | |||||||||||
Midwest | 531 | 507 | 5 | % | 1,087 | 1,002 | 8 | % | |||||||||
Southern | 625 | 515 | 21 | % | 1,215 | 1,007 | 21 | % | |||||||||
Mid-Atlantic | 244 | 332 | (27 | )% | 552 | 659 | (16 | )% | |||||||||
Total | 1,400 | 1,354 | 3 | % | 2,854 | 2,668 | 7 | % | |||||||||
HOMES DELIVERED | |||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||
June 30, | June 30, | ||||||||||||||||
% | % | ||||||||||||||||
Region | 2017 | 2016 | Change | 2017 | 2016 | Change | |||||||||||
Midwest | 437 | 398 | 10 | % | 816 | 720 | 13 | % | |||||||||
Southern | 520 | 398 | 31 | % | 939 | 748 | 26 | % | |||||||||
Mid-Atlantic | 254 | 246 | 3 | % | 494 | 450 | 10 | % | |||||||||
Total | 1,211 | 1,042 | 16 | % | 2,249 | 1,918 | 17 | % | |||||||||
BACKLOG | |||||||||||||||||||||
June 30, 2017 | June 30, 2016 | ||||||||||||||||||||
Dollars | Average | Dollars | Average | ||||||||||||||||||
Region | Units | (millions) | Sales Price | Units | (millions) | Sales Price | |||||||||||||||
Midwest | 1,028 | $ | 412 | $ | 401,000 | 954 | $ | 364 | $ | 382,000 | |||||||||||
Southern | 950 | $ | 330 | $ | 347,000 | 819 | $ | 288 | $ | 352,000 | |||||||||||
Mid-Atlantic | 431 | $ | 167 | $ | 388,000 | 508 | $ | 190 | $ | 374,000 | |||||||||||
Total | 2,409 | $ | 909 | $ | 377,000 | 2,281 | $ | 842 | $ | 369,000 | |||||||||||
LAND POSITION SUMMARY | ||||||||||||||
June 30, 2017 | June 30, 2016 | |||||||||||||
Lots | Lots Under | Lots | Lots Under | |||||||||||
Region | Owned | Contract | Total | Owned | Contract | Total | ||||||||
Midwest | 4,110 | 5,524 | 9,634 | 3,640 | 4,570 | 8,210 | ||||||||
Southern | 5,060 | 7,416 | 12,476 | 4,435 | 5,119 | 9,554 | ||||||||
Mid-Atlantic | 1,835 | 2,718 | 4,553 | 2,395 | 1,789 | 4,184 | ||||||||
Total | 11,005 | 15,658 | 26,663 | 10,470 | 11,478 | 21,948 | ||||||||