M/I Homes Reports 2019 First Quarter Results
COLUMBUS, Ohio, April 24, 2019 /PRNewswire/ -- M/I Homes, Inc. (NYSE: MHO) announced results for the three months ended March 31, 2019.
2019 First Quarter Highlights:
- Revenue increased 10% to a first quarter record of $481 million
- Homes delivered increased 6% to a first quarter record of 1,186 homes
- Pre-tax income of $23.5 million compared to $23.9 million in 2018's first quarter
- Net income of $17.7 million ($0.63 per diluted share) compared to $18.1 million ($0.60 per diluted share) in 2018
- New contracts decreased 5% to 1,644 contracts
- Backlog sales value decreased 2%, and backlog units decreased 3% to 2,652 homes
For the first quarter of 2019, the Company reported pre-tax income of $23.5 million and net income of $17.7 million, or $0.63 per diluted share. This compares to pre-tax income of $23.9 million and net income of $18.1 million, or $0.60 per diluted share, for the first quarter of 2018. Pre-tax income in the first quarter of 2019 included $0.4 million of acquisition-related expense, compared with $2.6 million in the first quarter of 2018.
Homes delivered in 2019's first quarter increased 6% to a first quarter record of 1,186. This compares to 1,122 homes delivered in 2018's first quarter. New contracts for the first quarter of 2019 decreased 5% to 1,644 from the all-time quarterly record of 1,739 contracts achieved in 2018's first quarter. Homes in backlog at March 31, 2019 had a total sales value of $1.07 billion, a 2% decrease from a year ago, and backlog units decreased 3% to 2,652, with an average sales price of $403,000. At March 31, 2018, backlog sales value was $1.09 billion, with backlog units of 2,744 and an average sales price of $398,000. M/I Homes had 214 active communities at March 31, 2019, an increase of 4% over our 205 communities at March 31, 2018. The Company's cancellation rate was 12% in the first quarter of 2019 and 2018.
Robert H. Schottenstein, Chief Executive Officer and President, commented, "We had solid first quarter results considering the choppy market conditions experienced during the latter part of 2018 and leading into 2019. Though our first quarter new contracts declined by 5%, they represented the second highest quarterly sales in Company history. In addition, we were very pleased with our 6% increase in homes delivered to a first quarter record 1,186 homes; and our revenue increased by 10% to a first quarter record $481 million. We also continue to make progress in managing our overhead expense ratio which declined 30 basis points when compared to 2018's first quarter."
Mr. Schottenstein continued, "With a lower share count, our diluted earnings per share improved 5% from 2018's first quarter. We ended the quarter with shareholders' equity of $871 million and a homebuilding debt to capital ratio of 47%. Looking ahead, with our sales backlog of $1.1 billion, and planned new community openings, we are positioned to have a solid 2019."
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 April 2020.
M/I Homes, Inc. is one of the nation's leading builders of single-family homes, having sold over 113,100 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 are 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 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 | |||||||
March 31, | |||||||
2019 | 2018 | ||||||
New contracts | 1,644 | 1,739 | |||||
Average community count | 212 | 197 | |||||
Cancellation rate | 12 | % | 12 | % | |||
Backlog units | 2,652 | 2,744 | |||||
Backlog sales value | $ | 1,070,074 | $ | 1,091,194 | |||
Homes delivered | 1,186 | 1,122 | |||||
Average home closing price | $ | 393 | $ | 373 | |||
Homebuilding revenue: | |||||||
Housing revenue | $ | 466,308 | $ | 418,424 | |||
Land revenue | 3,018 | 4,407 | |||||
Total homebuilding revenue | $ | 469,326 | $ | 422,831 | |||
Financial services revenue | 11,783 | 15,026 | |||||
Total revenue | $ | 481,109 | $ | 437,857 | |||
Cost of sales - operations | 388,039 | 347,806 | |||||
Cost of sales - purchase accounting adjustments | 428 | 896 | |||||
Gross margin | $ | 92,642 | $ | 89,155 | |||
General and administrative expense | 30,699 | 27,951 | |||||
Selling expense | 31,551 | 30,063 | |||||
Operating income | $ | 30,392 | $ | 31,141 | |||
Acquisition and integration costs | — | 1,700 | |||||
Equity in loss (income) from joint venture arrangements | 121 | (310) | |||||
Interest expense | 6,792 | 5,878 | |||||
Income before income taxes | $ | 23,479 | $ | 23,873 | |||
Provision for income taxes | 5,756 | 5,810 | |||||
Net income | $ | 17,723 | $ | 18,063 | |||
Earnings per share: | |||||||
Basic | $ | 0.64 | $ | 0.64 | |||
Diluted | $ | 0.63 | $ | 0.60 | |||
Weighted average shares outstanding: | |||||||
Basic | 27,498 | 28,124 | |||||
Diluted | 27,970 | 30,544 | |||||
M/I Homes, Inc. and Subsidiaries Summary Balance Sheet and Other Information (unaudited) (Dollars in thousands, except per share amounts) | |||||||
As of | |||||||
March 31, | |||||||
2019 | 2018 | ||||||
Assets: | |||||||
Total cash, cash equivalents and restricted cash(1) | $ | 41,931 | $ | 53,577 | |||
Mortgage loans held for sale | 119,665 | 110,612 | |||||
Inventory: | |||||||
Lots, land and land development | 807,324 | 752,921 | |||||
Land held for sale | 8,732 | 3,571 | |||||
Homes under construction | 760,756 | 678,122 | |||||
Other inventory | 153,976 | 145,730 | |||||
Total Inventory | $ | 1,730,788 | $ | 1,580,344 | |||
Property and equipment - net | 28,392 | 25,872 | |||||
Investments in joint venture arrangements | 40,736 | 22,066 | |||||
Operating lease right-of-use assets | 20,603 | — | |||||
Goodwill | 16,400 | 16,400 | |||||
Deferred income tax asset | 13,146 | 18,104 | |||||
Other assets | 60,117 | 67,398 | |||||
Total Assets | $ | 2,071,778 | $ | 1,894,373 | |||
Liabilities: | |||||||
Debt - Homebuilding Operations: | |||||||
Senior notes due 2021 - net | $ | 298,160 | $ | 297,056 | |||
Senior notes due 2025 - net | 246,702 | 246,181 | |||||
Notes payable - homebuilding | 218,800 | 162,300 | |||||
Notes payable - other | 5,937 | 10,011 | |||||
Total Debt - Homebuilding Operations | $ | 769,599 | $ | 715,548 | |||
Notes payable bank - financial services operations | 104,026 | 102,711 | |||||
Total Debt | $ | 873,625 | $ | 818,259 | |||
Accounts payable | 132,935 | 118,839 | |||||
Operating lease liabilities | 20,603 | — | |||||
Other liabilities | 173,153 | 170,910 | |||||
Total Liabilities | $ | 1,200,316 | $ | 1,108,008 | |||
Shareholders' Equity | 871,462 | 786,365 | |||||
Total Liabilities and Shareholders' Equity | $ | 2,071,778 | $ | 1,894,373 | |||
Book value per common share | $ | 31.61 | $ | 27.52 | |||
Homebuilding debt / capital ratio(2) | 47 | % | 48 | % | |||
(1) | Includes $1.1 million and $7.7 million of restricted cash and cash held in escrow for the quarters ended March 31, 2019 and 2018, respectively. |
(2) | 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 | |||||||
March 31, | |||||||
2019 | 2018 | ||||||
Cash used in operating activities | $ | (22,633) | $ | (32,414) | |||
Cash used in investing activities | $ | (6,501) | $ | (96,448) | |||
Cash provided by financing activities | $ | 49,536 | $ | 30,736 | |||
Land/lot purchases | $ | 80,424 | $ | 85,045 | |||
Land development spending | $ | 54,365 | $ | 41,654 | |||
Land sale revenue | $ | 3,018 | $ | 4,407 | |||
Land sale gross profit | $ | 55 | $ | 404 | |||
Financial services pre-tax income | $ | 4,952 | $ | 8,771 | |||
M/I Homes, Inc. and Subsidiaries Non-GAAP Financial Results (1) (Dollars in thousands) | |||||||
Three Months Ended | |||||||
March 31, | |||||||
2019 | 2018 | ||||||
Net income | $ | 17,723 | $ | 18,063 | |||
Add: | |||||||
Provision for income taxes | 5,756 | 5,810 | |||||
Interest expense net of interest income | 5,938 | 5,156 | |||||
Interest amortized to cost of sales | 5,393 | 4,864 | |||||
Depreciation and amortization | 3,817 | 3,649 | |||||
Non-cash charges | 912 | 1,039 | |||||
Adjusted EBITDA | $ | 39,539 | $ | 38,581 | |||
M/I Homes, Inc. and Subsidiaries Non-GAAP Reconciliation (1) (Dollars and shares in thousands, except per share amounts) | |||||||
Three Months Ended | |||||||
March 31, | |||||||
2019 | 2018 | ||||||
Income before income taxes | $ | 23,479 | $ | 23,873 | |||
Add: Purchase accounting adjustments (2) | 428 | 896 | |||||
Add: Acquisition and integration costs (3) | — | 1,700 | |||||
Adjusted income before income taxes | $ | 23,907 | $ | 26,469 | |||
Net income | $ | 17,723 | $ | 18,063 | |||
Add: Purchase accounting adjustments - net of tax (2) | 317 | 663 | |||||
Add: Acquisition and integrations costs - net of tax (3) | — | 1,258 | |||||
Adjusted net income | $ | 18,040 | $ | 19,984 | |||
Purchase accounting adjustments - net of tax (2) | $ | 317 | $ | 663 | |||
Acquisition and integration costs - net of tax (3) | $ | — | $ | 1,258 | |||
Divided by: Diluted weighted average shares outstanding | 27,970 | 30,544 | |||||
Diluted earnings per share related to purchase accounting adjustments (2) | $ | 0.01 | $ | 0.02 | |||
Diluted earnings per share related to acquisition and integration costs (3) | $ | — | $ | 0.04 | |||
Add: Diluted earnings per share | 0.63 | 0.60 | |||||
Adjusted diluted earnings per share | $ | 0.64 | $ | 0.66 | |||
(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 purchase accounting adjustments related to our acquisition of Pinnacle Homes in Detroit, Michigan on March 1, 2018. |
(3) | 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 | |||||||||||||||||
March 31, | |||||||||||||||||
% | |||||||||||||||||
Region | 2019 | 2018 | Change | ||||||||||||||
Midwest | 702 | 698 | 1 | % | |||||||||||||
Southern | 727 | 797 | (9) | % | |||||||||||||
Mid-Atlantic | 215 | 244 | (12) | % | |||||||||||||
Total | 1,644 | 1,739 | (5) | % | |||||||||||||
HOMES DELIVERED | |||||||||||||||||
Three Months Ended | |||||||||||||||||
March 31, | |||||||||||||||||
% | |||||||||||||||||
Region | 2019 | 2018 | Change | ||||||||||||||
Midwest | 474 | 411 | 15 | % | |||||||||||||
Southern | 577 | 541 | 7 | % | |||||||||||||
Mid-Atlantic | 135 | 170 | (21) | % | |||||||||||||
Total | 1,186 | 1,122 | 6 | % | |||||||||||||
BACKLOG | |||||||||||||||||
March 31, 2019 | March 31, 2018 | ||||||||||||||||
Dollars | Average | Dollars | Average | ||||||||||||||
Region | Units | (millions) | Sales Price | Units | (millions) | Sales Price | |||||||||||
Midwest | 1,158 | $ | 498 | $ | 430,000 | 1,228 | $ | 519 | $ | 423,000 | |||||||
Southern | 1,176 | $ | 434 | $ | 369,000 | 1,164 | $ | 425 | $ | 365,000 | |||||||
Mid-Atlantic | 318 | $ | 138 | $ | 433,000 | 352 | $ | 148 | $ | 419,000 | |||||||
Total | 2,652 | $ | 1,070 | $ | 403,000 | 2,744 | $ | 1,091 | $ | 398,000 | |||||||
LAND POSITION SUMMARY | |||||||||||||||||
March 31, 2019 | March 31, 2018 | ||||||||||||||||
Lots | Lots Under | Lots | Lots Under | ||||||||||||||
Region | Owned | Contract | Total | Owned | Contract | Total | |||||||||||
Midwest | 5,889 | 6,034 | 11,923 | 5,138 | 7,565 | 12,703 | |||||||||||
Southern | 6,543 | 4,965 | 11,508 | 6,092 | 7,526 | 13,618 | |||||||||||
Mid-Atlantic | 2,078 | 2,470 | 4,548 | 1,668 | 2,809 | 4,477 | |||||||||||
Total | 14,510 | 13,469 | 27,979 | 12,898 | 17,900 | 30,798 | |||||||||||
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SOURCE M/I Homes, Inc.