M/I Homes Reports 2019 Second Quarter Results
COLUMBUS, Ohio, July 24, 2019 /PRNewswire/ -- M/I Homes, Inc. (NYSE: MHO) announced results for the three and six months ended June 30, 2019.
2019 Second Quarter Highlights:
- Homes delivered increased 9% to a second quarter record of 1,538
- Revenue increased 12% to a second quarter record of $624 million
- Pre-tax income increased 23% to $41.2 million, a second quarter record
- Record second quarter net income of $30.2 million ($1.08 per diluted share) compared to $27.9 million ($0.96 per diluted share) in 2018
- New contracts increased 6% to a second quarter record of 1,731
- Backlog units decreased 4% to 2,845 homes
- Shareholders' equity reached an all-time record of $904 million, an 11% increase from a year-ago, with book value per share of $33
For the second quarter of 2019, the Company reported record pre-tax income of $41.2 million and record net income of $30.2 million, or $1.08 per diluted share. This compares to pre-tax income of $33.5 million and net income of $27.9 million, or $0.96 per diluted share, for the second quarter of 2018. The second quarter of 2018 included $3.0 million of pre-tax acquisition-related expense. For the six months ended June 30, 2019, the Company reported record net income of $48.0 million, or $1.71 per diluted share, compared to $46.0 million, or $1.56 per diluted share, for the same period of 2018. The Company incurred $0.6 million of pre-tax acquisition-related expense year-to-date in 2019 compared to $5.6 million in the same period of 2018.
Homes delivered in 2019's second quarter reached a second quarter record of 1,538, increasing 9% from the 1,409 deliveries in 2018's second quarter. Homes delivered for the six months ended June 30, 2019 increased 8% to a record 2,724 from 2018's deliveries of 2,531. New contracts for 2019's second quarter were a record 1,731, an increase of 6% over 2018's second quarter. For the first six months of 2019, new contracts were a record 3,375 compared to 3,370 in 2018. Homes in backlog decreased 4% at June 30, 2019 to 2,845 units with an average sales price of $395,000, and a total sales value of $1.12 billion. At June 30, 2018, the sales value of homes in backlog was $1.17 billion, with an average sales price of $396,000 and backlog units of 2,966. M/I Homes had 220 active communities at June 30, 2019 compared to 209 at June 30, 2018. The Company's cancellation rate was 14% in the second quarter of 2019 and 2018.
Robert H. Schottenstein, Chief Executive Officer and President, commented, "We reported another strong quarter highlighted by second quarter records for revenue, pre-tax income, net income, homes delivered and new contracts. Our new contracts increased 6% when compared to 2018's second quarter with buyer demand remaining steady as a result of continued low mortgage rates and favorable consumer confidence. Revenue increased 12% for the quarter and our pre-tax income increased 23% to $41.2 million. We also continue to make noticeable progress in managing our overhead expense ratio which was 11.8% for the quarter, an 80-basis point improvement when compared to 2018's second quarter.
Mr. Schottenstein continued, "We ended the quarter with record-high shareholders' equity of $904 million, an increase of 11% from 2018's second quarter and book value of $33 per share along with a healthy ratio of homebuilding debt to capital of 45%. We are well positioned to have a solid 2019 and will continue to focus on 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 2020.
M/I Homes, Inc. is one of the nation's leading builders of single-family homes, having sold over 114,800 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 | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
New contracts | 1,731 | 1,631 | 3,375 | 3,370 | |||||||||||
Average community count | 217 | 207 | 214 | 201 | |||||||||||
Cancellation rate | 14 | % | 14 | % | 13 | % | 13 | % | |||||||
Backlog units | 2,845 | 2,966 | |||||||||||||
Backlog sales value | $ | 1,124,756 | $ | 1,174,462 | |||||||||||
Homes delivered | 1,538 | 1,409 | 2,724 | 2,531 | |||||||||||
Average home closing price | $ | 389 | $ | 387 | $ | 391 | $ | 381 | |||||||
Homebuilding revenue: | |||||||||||||||
Housing revenue | $ | 597,870 | $ | 545,034 | $ | 1,064,178 | $ | 963,458 | |||||||
Land revenue | 11,513 | 1,188 | 14,531 | 5,595 | |||||||||||
Total homebuilding revenue | $ | 609,383 | $ | 546,222 | $ | 1,078,709 | $ | 969,053 | |||||||
Financial services revenue | 14,303 | 11,876 | 26,086 | 26,902 | |||||||||||
Total revenue | $ | 623,686 | $ | 558,098 | $ | 1,104,795 | $ | 995,955 | |||||||
Cost of sales - operations | 503,728 | 446,375 | 891,767 | 794,181 | |||||||||||
Cost of sales – acquisition-related charges | 129 | 2,961 | 557 | 3,857 | |||||||||||
Gross margin | $ | 119,829 | $ | 108,762 | $ | 212,471 | $ | 197,917 | |||||||
General and administrative expense | 36,164 | 34,666 | 66,863 | 62,617 | |||||||||||
Selling expense | 37,452 | 35,591 | 69,003 | 65,654 | |||||||||||
Operating income | $ | 46,213 | $ | 38,505 | $ | 76,605 | $ | 69,646 | |||||||
Acquisition and integration costs | — | — | — | 1,700 | |||||||||||
Equity in (income) loss from joint venture arrangements | (187) | 86 | (66) | (224) | |||||||||||
Interest expense | 5,197 | 4,888 | 11,989 | 10,766 | |||||||||||
Income before income taxes | $ | 41,203 | $ | 33,531 | $ | 64,682 | $ | 57,404 | |||||||
Provision for income taxes | 10,957 | 5,620 | 16,713 | 11,430 | |||||||||||
Net income | $ | 30,246 | $ | 27,911 | $ | 47,969 | $ | 45,974 | |||||||
Earnings per share: | |||||||||||||||
Basic | $ | 1.10 | $ | 0.98 | $ | 1.74 | $ | 1.62 | |||||||
Diluted | $ | 1.08 | $ | 0.96 | $ | 1.71 | $ | 1.56 | |||||||
Weighted average shares outstanding: | |||||||||||||||
Basic | 27,599 | 28,571 | 27,549 | 28,349 | |||||||||||
Diluted | 28,090 | 29,101 | 28,027 | 29,818 | |||||||||||
M/I Homes, Inc. and Subsidiaries | |||||||
Summary Balance Sheet and Other Information (unaudited) | |||||||
(Dollars in thousands, except per share amounts) | |||||||
As of | |||||||
June 30, | |||||||
2019 | 2018 | ||||||
Assets: | |||||||
Total cash, cash equivalents and restricted cash(1) | $ | 20,393 | $ | 67,817 | |||
Mortgage loans held for sale | 123,909 | 108,000 | |||||
Inventory: | |||||||
Lots, land and land development | 804,453 | 740,972 | |||||
Land held for sale | 13,018 | 12,715 | |||||
Homes under construction | 796,479 | 757,478 | |||||
Other inventory | 149,529 | 141,303 | |||||
Total Inventory | $ | 1,763,479 | $ | 1,652,468 | |||
Property and equipment - net | 28,094 | 28,885 | |||||
Investments in joint venture arrangements | 41,344 | 13,753 | |||||
Operating lease right-of-use assets | 19,397 | — | |||||
Goodwill | 16,400 | 16,400 | |||||
Deferred income tax asset | 12,594 | 17,528 | |||||
Other assets | 63,596 | 65,689 | |||||
Total Assets | $ | 2,089,206 | $ | 1,970,540 | |||
Liabilities: | |||||||
Debt - Homebuilding Operations: | |||||||
Senior notes due 2021 - net | $ | 298,436 | $ | 297,332 | |||
Senior notes due 2025 - net | 246,832 | 246,311 | |||||
Notes payable - homebuilding | 174,300 | 181,800 | |||||
Notes payable - other | 5,092 | 9,362 | |||||
Total Debt - Homebuilding Operations | $ | 724,660 | $ | 734,805 | |||
Notes payable bank - financial services operations | 104,003 | 93,163 | |||||
Total Debt | $ | 828,663 | $ | 827,968 | |||
Accounts payable | 154,070 | 141,491 | |||||
Operating lease liabilities | 19,397 | — | |||||
Other liabilities | 182,836 | 185,115 | |||||
Total Liabilities | $ | 1,184,966 | $ | 1,154,574 | |||
Shareholders' Equity | 904,240 | 815,966 | |||||
Total Liabilities and Shareholders' Equity | $ | 2,089,206 | $ | 1,970,540 | |||
Book value per common share | $ | 32.74 | $ | 28.56 | |||
Homebuilding debt / capital ratio(2) | 45 | % | 47 | % | |||
(1) | Includes $1.0 million and $1.3 million of restricted cash and cash held in escrow for the quarters ended June 30, 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 | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Cash provided by (used in) operating activities | $ | 33,250 | $ | 11,489 | $ | 10,617 | $ | (20,925) | |||||||
Cash used in investing activities | $ | (10,229) | $ | (6,437) | $ | (16,730) | $ | (102,885) | |||||||
Cash (used in) provided by financing activities | $ | (44,559) | $ | 9,188 | $ | 4,977 | $ | 39,924 | |||||||
Land/lot purchases | $ | 85,918 | $ | 90,231 | $ | 166,342 | $ | 175,276 | |||||||
Land development spending | $ | 62,363 | $ | 46,922 | $ | 116,728 | $ | 88,576 | |||||||
Land sale revenue | $ | 11,513 | $ | 1,188 | $ | 14,531 | $ | 5,595 | |||||||
Land sale gross profit | $ | 400 | $ | 82 | $ | 455 | $ | 486 | |||||||
Financial services pre-tax income | $ | 6,704 | $ | 5,243 | $ | 11,656 | $ | 14,014 | |||||||
M/I Homes, Inc. and Subsidiaries | |||||||||||||||
Non-GAAP Financial Results (1) | |||||||||||||||
(Dollars in thousands) | |||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Net income | $ | 30,246 | $ | 27,911 | $ | 47,969 | $ | 45,974 | |||||||
Add: | |||||||||||||||
Provision for income taxes | 10,957 | 5,620 | 16,713 | 11,430 | |||||||||||
Interest expense net of interest income | 4,225 | 4,093 | 10,163 | 9,249 | |||||||||||
Interest amortized to cost of sales | 7,380 | 6,203 | 12,773 | 11,067 | |||||||||||
Depreciation and amortization | 3,890 | 3,455 | 7,707 | 7,104 | |||||||||||
Non-cash charges | 1,682 | 1,691 | 2,594 | 2,730 | |||||||||||
Adjusted EBITDA | $ | 58,380 | $ | 48,973 | $ | 97,919 | $ | 87,554 | |||||||
M/I Homes, Inc. and Subsidiaries | |||||||||||||||
Non-GAAP Reconciliation (1) | |||||||||||||||
(Dollars and shares in thousands, except per share amounts) | |||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Income before income taxes | $ | 41,203 | $ | 33,531 | $ | 64,682 | $ | 57,404 | |||||||
Add: Acquisition-related charges (2) | 129 | 2,961 | 557 | 3,857 | |||||||||||
Add: Acquisition and integration costs (3) | — | — | — | 1,700 | |||||||||||
Adjusted income before income taxes | $ | 41,332 | $ | 36,492 | $ | 65,239 | $ | 62,961 | |||||||
Net income | $ | 30,246 | $ | 27,911 | $ | 47,969 | $ | 45,974 | |||||||
Add: Acquisition-related charges - net of tax (2) | 95 | 2,191 | 412 | 2,854 | |||||||||||
Add: Acquisition and integrations costs - net of tax (3) | — | — | — | 1,258 | |||||||||||
Adjusted net income | $ | 30,341 | $ | 30,102 | $ | 48,381 | $ | 50,086 | |||||||
Acquisition-related charges - net of tax (2) | $ | 95 | $ | 2,191 | $ | 412 | $ | 2,854 | |||||||
Acquisition and integration costs - net of tax (3) | $ | — | $ | — | $ | — | $ | 1,258 | |||||||
Divided by: Diluted weighted average shares outstanding | 28,090 | 29,101 | 28,027 | 29,818 | |||||||||||
Diluted earnings per share related to acquisition-related charges (2) | $ | — | $ | 0.08 | $ | 0.01 | $ | 0.10 | |||||||
Diluted earnings per share related to acquisition and integration costs (3) | $ | — | $ | — | $ | — | $ | 0.04 | |||||||
Add: Diluted earnings per share | 1.08 | 0.96 | 1.71 | 1.56 | |||||||||||
Adjusted diluted earnings per share | $ | 1.08 | $ | 1.04 | $ | 1.72 | $ | 1.70 | |||||||
(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 acquisition-related charges 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 (a) | |||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||
June 30, | June 30, | ||||||||||||||||
% | % | ||||||||||||||||
Region | 2019 | 2018 | Change | 2019 | 2018 | Change | |||||||||||
Northern | 703 | 656 | 7 | % | 1,405 | 1,354 | 4 | % | |||||||||
Southern | 1,028 | 975 | 5 | % | 1,970 | 2,016 | (2) | % | |||||||||
Total | 1,731 | 1,631 | 6 | % | 3,375 | 3,370 | — | % | |||||||||
HOMES DELIVERED (a) | |||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||
June 30, | June 30, | ||||||||||||||||
% | % | ||||||||||||||||
Region | 2019 | 2018 | Change | 2019 | 2018 | Change | |||||||||||
Northern | 614 | 554 | 11 | % | 1,088 | 965 | 13 | % | |||||||||
Southern | 924 | 855 | 8 | % | 1,636 | 1,566 | 4 | % | |||||||||
Total | 1,538 | 1,409 | 9 | % | 2,724 | 2,531 | 8 | % | |||||||||
BACKLOG (a) | |||||||||||||||||||||
June 30, 2019 | June 30, 2018 | ||||||||||||||||||||
Dollars | Average | Dollars | Average | ||||||||||||||||||
Region | Units | (millions) | Sales Price | Units | (millions) | Sales Price | |||||||||||||||
Northern | 1,247 | $ | 528 | $ | 424,000 | 1,330 | $ | 558 | $ | 420,000 | |||||||||||
Southern | 1,598 | $ | 596 | $ | 373,000 | 1,636 | $ | 616 | $ | 377,000 | |||||||||||
Total | 2,845 | $ | 1,125 | $ | 395,000 | 2,966 | $ | 1,174 | $ | 396,000 | |||||||||||
LAND POSITION SUMMARY (a) | ||||||||||||||
June 30, 2019 | June 30, 2018 | |||||||||||||
Lots | Lots Under | Lots | Lots Under | |||||||||||
Region | Owned | Contract | Total | Owned | Contract | Total | ||||||||
Northern | 6,456 | 5,471 | 11,927 | 5,403 | 6,472 | 11,875 | ||||||||
Southern | 8,403 | 8,746 | 17,149 | 7,764 | 8,579 | 16,343 | ||||||||
Total | 14,859 | 14,217 | 29,076 | 13,167 | 15,051 | 28,218 | ||||||||
(a) | Beginning in the second quarter of 2019, we changed from three reportable segments to two reportable segments: Northern and Southern. Prior year information has been restated for corresponding items of our segment information. |
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SOURCE M/I Homes, Inc.