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| 8-K - 8-K 3RD QTR.17 EARNINGS RELEASE 10-25-17 - M/I HOMES, INC. | a8k3rdqtr17earningsrelease.htm |
Exhibit 99.1
M/I Homes Reports
2017 Third Quarter Results
Columbus, Ohio (October 25, 2017) - M/I Homes, Inc. (NYSE:MHO) announced results for the three months and nine months ended September 30, 2017.
2017 Third Quarter Highlights:
• | Net income increased to $22.3 million ($0.64 per diluted share) from $10.9 million ($0.35 per diluted share) in 2016 |
• | Diluted earnings per share increased to $0.71, excluding the $0.07 per share impact of a $2.3 million equity adjustment due to the redemption of preferred shares. In 2016’s third quarter, diluted earnings per share was $0.65, excluding the impact of stucco-related charges |
• | New contracts increased 13% to 1,225, a record level for the third quarter |
• | Homes delivered increased 9% to a third quarter record 1,256 |
• | Revenue increased 8% to a third quarter record $476 million |
• | Backlog sales value increased 11% to $912 million; backlog units increased 7% to 2,378 |
• | Estimated impact of hurricanes - 20 delayed closings and $700,000 of expense |
For the third quarter of 2017, the Company reported net income of $22.3 million, or $0.64 per diluted share. This compares to net income of $10.9 million, or $0.35 per diluted share, for the third quarter of 2016. The current quarter diluted earnings per share was reduced by a $2.3 million after-tax fair value equity adjustment ($0.07 per diluted share) related to the previously announced redemption of our outstanding preferred shares which was completed on October 16, 2017. The third quarter of 2016 included a $14.5 million pre-tax charge ($0.30 per diluted share) for stucco-related repair costs in certain of our Florida communities. For the nine months ended September 30, 2017, the Company reported net income of $56.2 million, or $1.73 per diluted share, compared to net income of $36.0 million, or $1.17 per diluted share, for the same period of 2016. Year-to-date in 2017 and 2016, the Company incurred $8.5 million ($0.18 per diluted share) and $19.4 million ($0.40 per diluted share) of pre-tax charges, respectively, related to stucco-related repairs. Exclusive of these stucco-related charges in both periods, year-to-date net income was $61.6 million compared to $48.1 million in 2016’s same period, a 28% increase.
Homes delivered in 2017's third quarter were 1,256 compared to 1,148 deliveries in 2016's third quarter - a 9% increase. Homes delivered for the nine months ended September 30, 2017 increased 14% to 3,505 from 2016's deliveries of 3,066. New contracts for 2017's third quarter were 1,225, an increase of 13% over 2016's third quarter. For the first nine months of 2017, new contracts increased 9% to 4,079 from 3,756 in 2016. M/I Homes had 179 active communities at September 30, 2017 compared to 174 at September 30, 2016, a 3% increase. The Company's cancellation rate was 15% in the third quarter of 2017 and 2016. Homes in backlog increased 7% at September 30, 2017 to 2,378 units, with a sales value of $912 million (an 11% increase over last year’s third quarter), and an average sales price of $383,000. At September 30, 2016, the sales value of homes in backlog was $821 million, with an average sales price of $370,000 and backlog units of 2,221.
Robert H. Schottenstein, Chief Executive Officer and President, commented, “We are very pleased with our third quarter results highlighted by record revenue, record new contracts and record homes delivered. We reached our highest third quarter backlog level in more than 10 years, with a sales value of $912 million - an 11% increase over 2016’s third quarter. Gross margins improved 30 basis points to 21.4% and net income improved 12% over 2016’s third quarter, excluding the impact of 2016’s stucco-related charges. We achieved this strong performance despite the impact of hurricanes in our Florida and Houston markets which delayed approximately 20 third quarter deliveries, slowed down sales and resulted in approximately $700,000 of community and model home repair costs.”
Mr. Schottenstein continued, “Our financial condition remains strong. During the quarter, we issued $250 million of 8-year senior notes, converted $58 million of our convertible notes into equity and completed the redemption of $50 million of our preferred shares in October. These steps both strengthened and simplified our balance sheet. We ended the quarter with $104 million of cash, no outstanding borrowings under our $475 million unsecured credit facility, shareholders’ equity of $723 million and a healthy homebuilding debt to capital ratio of 47%. As we begin the final quarter of 2017, we are well positioned for another solid year. We have a strong backlog and housing market conditions remain favorable throughout most of our markets. We will continue to focus on increasing profitability while growing our market share and investing in well-located 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 2018.
M/I Homes, Inc. is one of the nation’s leading builders of single-family homes, having sold over 104,400 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 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,” “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, 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 | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
New contracts | 1,225 | 1,088 | 4,079 | 3,756 | |||||||||||
Average community count | 183 | 174 | 182 | 176 | |||||||||||
Cancellation rate | 15 | % | 15 | % | 14 | % | 13 | % | |||||||
Backlog units | 2,378 | 2,221 | |||||||||||||
Backlog sales value | $ | 911,657 | $ | 821,494 | |||||||||||
Homes delivered | 1,256 | 1,148 | 3,505 | 3,066 | |||||||||||
Average home closing price | $ | 366 | $ | 365 | $ | 368 | $ | 361 | |||||||
Homebuilding revenue: | |||||||||||||||
Housing revenue | $ | 459,342 | $ | 419,228 | $ | 1,289,893 | $ | 1,105,701 | |||||||
Land revenue | 5,318 | 12,674 | 12,438 | 31,816 | |||||||||||
Total homebuilding revenue | $ | 464,660 | $ | 431,902 | $ | 1,302,331 | $ | 1,137,517 | |||||||
Financial services revenue | 11,763 | 10,562 | 37,938 | 30,564 | |||||||||||
Total revenue | $ | 476,423 | $ | 442,464 | $ | 1,340,269 | $ | 1,168,081 | |||||||
Cost of sales - operations | 374,673 | 349,135 | 1,054,052 | 924,106 | |||||||||||
Cost of sales - stucco-related charges | — | 14,500 | 8,500 | 19,409 | |||||||||||
Gross margin | $ | 101,750 | $ | 78,829 | $ | 277,717 | $ | 224,566 | |||||||
General and administrative expense | 31,337 | 29,160 | 89,209 | 78,249 | |||||||||||
Selling expense | 31,136 | 27,663 | 88,666 | 75,462 | |||||||||||
Operating income | $ | 39,277 | $ | 22,006 | $ | 99,842 | $ | 70,855 | |||||||
Equity in income from joint venture arrangements | (71 | ) | (24 | ) | (198 | ) | (413 | ) | |||||||
Interest expense | 4,675 | 3,587 | 13,847 | 13,160 | |||||||||||
Income before income taxes | $ | 34,673 | $ | 18,443 | $ | 86,193 | $ | 58,108 | |||||||
Provision for income taxes | 12,346 | 7,501 | 29,994 | 22,061 | |||||||||||
Net income | $ | 22,327 | $ | 10,942 | $ | 56,199 | $ | 36,047 | |||||||
Excess of fair value over book value of preferred shares subject to redemption | 2,257 | — | 2,257 | — | |||||||||||
Preferred dividends | 1,218 | 1,218 | 3,656 | 3,656 | |||||||||||
Net income to common shareholders | $ | 18,852 | $ | 9,724 | $ | 50,286 | $ | 32,391 | |||||||
Earnings per share: | |||||||||||||||
Basic | $ | 0.74 | $ | 0.39 | $ | 2.00 | $ | 1.31 | |||||||
Diluted | $ | 0.64 | $ | 0.35 | $ | 1.73 | $ | 1.17 | |||||||
Weighted average shares outstanding: | |||||||||||||||
Basic | 25,581 | 24,669 | 25,106 | 24,665 | |||||||||||
Diluted | 30,675 | 30,139 | 30,539 | 30,093 | |||||||||||
M/I Homes, Inc. and Subsidiaries
Summary Balance Sheet and Other Information (unaudited)
(Dollars in thousands, except per share amounts)
As of | |||||||
September 30, | |||||||
2017 | 2016 | ||||||
Assets: | |||||||
Total cash, cash equivalents and restricted cash | $ | 103,636 | $ | 23,308 | |||
Mortgage loans held for sale | 91,987 | 95,545 | |||||
Inventory: | |||||||
Lots, land and land development | 663,170 | 554,150 | |||||
Land held for sale | 12,330 | 15,956 | |||||
Homes under construction | 645,816 | 544,350 | |||||
Other inventory | 134,493 | 110,697 | |||||
Total Inventory | $ | 1,455,809 | $ | 1,225,153 | |||
Property and equipment - net | 25,320 | 21,792 | |||||
Investments in joint venture arrangements | 22,981 | 26,528 | |||||
Deferred income taxes, net of valuation allowance | 29,569 | 39,944 | |||||
Other assets | 55,393 | 64,967 | |||||
Total Assets | $ | 1,784,695 | $ | 1,497,237 | |||
Liabilities: | |||||||
Debt - Homebuilding Operations: | |||||||
Senior notes due 2021 - net | $ | 296,505 | $ | 295,401 | |||
Senior notes due 2025 - net | 245,958 | — | |||||
Convertible senior subordinated notes due 2017 - net | — | 56,949 | |||||
Convertible senior subordinated notes due 2018 - net | 85,955 | 85,246 | |||||
Notes payable - homebuilding | — | 85,000 | |||||
Notes payable - other | 4,057 | 8,566 | |||||
Total Debt - Homebuilding Operations | $ | 632,475 | $ | 531,162 | |||
Preferred shares subject to redemption | 50,420 | — | |||||
Notes payable bank - financial services operations | 91,275 | 91,483 | |||||
Total Debt | $ | 774,170 | $ | 622,645 | |||
Accounts payable | 120,598 | 110,179 | |||||
Other liabilities | 166,954 | 132,821 | |||||
Total Liabilities | $ | 1,061,722 | $ | 865,645 | |||
Shareholders’ Equity | 722,973 | 631,592 | |||||
Total Liabilities and Shareholders’ Equity | $ | 1,784,695 | $ | 1,497,237 | |||
Book value per common share | $ | 26.27 | $ | 23.58 | |||
Homebuilding debt / capital ratio(1) | 47 | % | 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 | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Adjusted EBITDA(1) | $ | 48,765 | $ | 31,284 | $ | 126,042 | $ | 96,402 | ||||||||
Cash (used in) provided by operating activities | $ | (26,705 | ) | $ | (14,437 | ) | (2) | $ | (66,025 | ) | $ | 26,502 | (2) | |||
Cash used in investing activities | $ | (6,022 | ) | $ | (4,868 | ) | (2) | $ | (5,065 | ) | $ | (21,679 | ) | (2) | ||
Cash provided by financing activities | $ | 106,423 | $ | 12,613 | $ | 140,285 | $ | 5,384 | ||||||||
Land/lot purchases | $ | 65,511 | $ | 49,612 | $ | 250,141 | $ | 146,998 | ||||||||
Land development spending | $ | 53,755 | $ | 48,230 | $ | 137,019 | $ | 121,763 | ||||||||
Land sale revenue | $ | 5,318 | $ | 12,674 | $ | 12,438 | $ | 31,816 | ||||||||
Land sale gross profit | $ | 365 | $ | 1,063 | $ | 883 | $ | 3,095 | ||||||||
Financial services pre-tax income | $ | 5,231 | $ | 5,393 | $ | 19,988 | $ | 16,136 | ||||||||
(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 | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net income | $ | 22,327 | $ | 10,942 | $ | 56,199 | $ | 36,047 | |||||||
Add: | |||||||||||||||
Provision for income taxes | 12,346 | 7,501 | 29,994 | 22,061 | |||||||||||
Interest expense net of interest income | 4,003 | 2,980 | 11,719 | 11,531 | |||||||||||
Interest amortized to cost of sales | 4,988 | 4,963 | 13,597 | 13,138 | |||||||||||
Depreciation and amortization | 3,633 | 3,541 | 10,499 | 10,142 | |||||||||||
Non-cash charges | 1,468 | 1,357 | 4,034 | 3,483 | |||||||||||
Adjusted EBITDA | $ | 48,765 | $ | 31,284 | $ | 126,042 | $ | 96,402 | |||||||
M/I Homes, Inc. and Subsidiaries
Non-GAAP Reconciliation (3)
(Dollars and shares in thousands, except per share amounts)
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Total revenue | $ | 476,423 | $ | 442,464 | $ | 1,340,269 | $ | 1,168,081 | |||||||
Income before income taxes | $ | 34,673 | $ | 18,443 | $ | 86,193 | $ | 58,108 | |||||||
Add: Stucco-related charges | — | 14,500 | 8,500 | 19,409 | |||||||||||
Adjusted income before income taxes | $ | 34,673 | $ | 32,943 | $ | 94,693 | $ | 77,517 | |||||||
Pre-tax operating margin percentage | 7.3 | % | 4.2 | % | 6.4 | % | 5.0 | % | |||||||
Adjusted pre-tax operating margin percentage | 7.3 | % | 7.4 | % | 7.1 | % | 6.6 | % | |||||||
Net income | $ | 22,327 | $ | 10,942 | $ | 56,199 | $ | 36,047 | |||||||
Add: Stucco-related charges - net of tax | — | 8,990 | 5,440 | 12,034 | |||||||||||
Adjusted net income | $ | 22,327 | $ | 19,932 | $ | 61,639 | $ | 48,081 | |||||||
Stucco-related charges - net of tax | $ | — | $ | 8,990 | $ | 5,440 | $ | 12,034 | |||||||
Divided by: Diluted weighted average shares outstanding | 30,675 | 30,139 | 30,539 | 30,093 | |||||||||||
Diluted earnings per share related to stucco-related charges | $ | — | $ | 0.30 | $ | 0.18 | $ | 0.40 | |||||||
Excess of fair value over book value of preferred shares subject to redemption | $ | 2,257 | $ | — | $ | 2,257 | $ | — | |||||||
Divided by: Diluted weighted average shares outstanding | 30,675 | 30,139 | 30,539 | 30,093 | |||||||||||
Diluted earnings per share related to preferred shares subject to redemption | $ | 0.07 | $ | — | $ | 0.07 | $ | — | |||||||
Add: Diluted earnings per share | 0.64 | 0.35 | 1.73 | 1.17 | |||||||||||
Adjusted diluted earnings per share | $ | 0.71 | $ | 0.65 | $ | 1.98 | $ | 1.57 | |||||||
(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 | Nine Months Ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
% | % | ||||||||||||||||
Region | 2017 | 2016 | Change | 2017 | 2016 | Change | |||||||||||
Midwest | 458 | 407 | 13 | % | 1,545 | 1,409 | 10 | % | |||||||||
Southern | 583 | 437 | 33 | % | 1,798 | 1,444 | 25 | % | |||||||||
Mid-Atlantic | 184 | 244 | (25 | )% | 736 | 903 | (18 | )% | |||||||||
Total | 1,225 | 1,088 | 13 | % | 4,079 | 3,756 | 9 | % | |||||||||
HOMES DELIVERED | |||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
% | % | ||||||||||||||||
Region | 2017 | 2016 | Change | 2017 | 2016 | Change | |||||||||||
Midwest | 461 | 443 | 4 | % | 1,277 | 1,163 | 10 | % | |||||||||
Southern | 520 | 410 | 27 | % | 1,459 | 1,158 | 26 | % | |||||||||
Mid-Atlantic | 275 | 295 | (7 | )% | 769 | 745 | 3 | % | |||||||||
Total | 1,256 | 1,148 | 9 | % | 3,505 | 3,066 | 14 | % | |||||||||
BACKLOG | |||||||||||||||||||||
September 30, 2017 | September 30, 2016 | ||||||||||||||||||||
Dollars | Average | Dollars | Average | ||||||||||||||||||
Region | Units | (millions) | Sales Price | Units | (millions) | Sales Price | |||||||||||||||
Midwest | 1,025 | $ | 416 | $ | 406,000 | 918 | $ | 356 | $ | 388,000 | |||||||||||
Southern | 1,013 | $ | 360 | $ | 355,000 | 846 | $ | 296 | $ | 350,000 | |||||||||||
Mid-Atlantic | 340 | $ | 136 | $ | 399,000 | 457 | $ | 170 | $ | 371,000 | |||||||||||
Total | 2,378 | $ | 912 | $ | 383,000 | 2,221 | $ | 821 | $ | 370,000 | |||||||||||
LAND POSITION SUMMARY | ||||||||||||||
September 30, 2017 | September 30, 2016 | |||||||||||||
Lots | Lots Under | Lots | Lots Under | |||||||||||
Region | Owned | Contract | Total | Owned | Contract | Total | ||||||||
Midwest | 4,622 | 4,947 | 9,569 | 3,846 | 5,378 | 9,224 | ||||||||
Southern | 5,081 | 7,688 | 12,769 | 4,213 | 5,333 | 9,546 | ||||||||
Mid-Atlantic | 1,746 | 2,779 | 4,525 | 2,068 | 2,381 | 4,449 | ||||||||
Total | 11,449 | 15,414 | 26,863 | 10,127 | 13,092 | 23,219 | ||||||||