M/I Homes Reports Fourth Quarter and Year-End Results
COLUMBUS, Ohio, Feb. 5, 2019 /PRNewswire/ -- M/I Homes, Inc. (NYSE: MHO) announced results for its fourth quarter and year ended December 31, 2018.
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 | ||||||||
View original content to download multimedia:http://www.prnewswire.com/news-releases/mi-homes-reports-fourth-quarter-and-year-end-results-300789795.html
SOURCE M/I Homes, Inc.