M/I Homes Reports Fourth Quarter and Year-End Results
COLUMBUS, Ohio, Feb. 5, 2020 /PRNewswire/ -- M/I Homes, Inc. (NYSE: MHO) announced results for its fourth quarter and year ended December 31, 2019.
2019 Fourth-Quarter Results:
- New contracts increased 43% to a fourth quarter record of 1,677 contracts
- Backlog sales value increased 18% to a fourth quarter record $1.1 billion, and backlog units increased 22%
- Revenue increased 3% to a fourth quarter record of $742 million
- Homes delivered increased 5% to an all-time quarterly record 1,921 homes
- Pre-tax income increased 16% to $51.3 million from $44.4 million in 2018
- Net income increased 29% to a fourth quarter record $41.8 million from $32.4 million in 2018, and diluted earnings per share increased to $1.44 compared with $1.15 per diluted share.
2019 Full-Year Results:
- Record revenue of $2.5 billion, an increase of 9%
- Record homes delivered of 6,296, a 9% increase
- Record new contracts of 6,773, an increase of 16%
- Record pre-tax income of $166.0 million, an 18% increase compared to $141.3 million in 2018
- Net income increased to $127.6 million compared to $107.7 million in 2018 and diluted earnings per share increased to $4.48 from $3.70 per diluted share
- Shareholders' equity reached an all-time record of $1.0 billion, a 17% increase from a year ago, with book value per share of $35.
For the fourth quarter of 2019, the Company reported record fourth quarter net income of $41.8 million, or $1.44 per diluted share. This compares to net income of $32.4 million, or $1.15 per diluted share, for the fourth quarter of 2018. Net income in the fourth quarter of 2019 included $3.8 million of after-tax impairment charges ($0.13 per diluted share), while 2018's fourth quarter net income included $4.4 million of after-tax impairment charges ($0.15 per diluted share) and $0.5 million of after-tax acquisition-related charges ($0.02 per diluted share). Excluding these charges, adjusted net income increased 22% to $45.6 million, and adjusted diluted earnings per share increased 19% to $1.57 per share from $1.32 per share in 2018.
For the year ended December 31, 2019, the Company reported net income of $127.6 million, or $4.48 per diluted share, compared to net income of $107.7 million, or $3.70 per diluted share, in 2018. Net income in 2019 included $3.8 million of after-tax impairment charges ($0.13 per diluted share) and $0.5 million of after-tax acquisition-related charges ($0.02 per diluted share). Net income 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). Exclusive of these charges, net income increased 12% to $131.9 million compared to $117.3 million in 2018, and adjusted diluted earnings per share increased 15% to $4.63 per share compared to $4.03 per share in 2018.
Homes delivered in 2019's fourth quarter reached an all-time quarterly record of 1,921, increasing 5% compared to 1,825 deliveries in 2018's fourth quarter. Homes delivered for the twelve months ended December 31, 2019 increased 9% to a record 6,296 from 2018's deliveries of 5,778. New contracts for 2019's fourth quarter increased 43% to a fourth quarter record of 1,677 from 1,173 new contracts in 2018's fourth quarter. For 2019, new contracts reached a record of 6,773, a 16% increase over 2018's new contracts of 5,845. Homes in backlog increased 22% at December 31, 2019 to 2,671 units, with a record year-end sales value of $1.1 billion, an 18% increase over last year, and the average sales price in backlog decreased 3% to $396,000. At December 31, 2018, the sales value of the 2,194 homes in backlog was $897 million, with an average sales price of $409,000. M/I Homes had a record 225 active communities at December 31, 2019 compared to 209 a year ago. The Company's cancellation rate was 13% in 2019's fourth quarter and for the year.
Robert H. Schottenstein, Chief Executive Officer and President, commented, "2019 was a banner year for M/I Homes with record revenue, record new contracts, record homes delivered and record pre-tax income. Revenue increased 9% to $2.5 billion, new contracts increased 16% to 6,773 homes, homes delivered increased 9% to 6,296 homes, and pre-tax income, aided by improved operating leverage, increased 18% to $166 million. The strong performance of many of our homebuilding divisions along with another very good year from our financial services business contributed to our record results. We also reached the highest year-end sales backlog in Company history with a value of $1.1 billion, an 18% increase over 2018."
Mr. Schottenstein continued, "Our financial condition remains strong. Our shareholders' equity reached a record level of $1.0 billion at year-end, with a book value per share above $35, and we reduced our ratio of homebuilding debt to capital to 38%. In addition, in January of this year we extended our debt maturity and improved our average borrowing rate by issuing $400 million of 8-year senior notes at 4.95% and redeemed $300 million of our 6.75% senior notes which were due in 2021. Housing market conditions remain strong and, given the strength of our record backlog and our solid competitive position across each of our 15 markets, we are well positioned for a very good 2020."
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 2021.
M/I Homes, Inc. is one of the nation's leading builders of single-family homes, having sold over 118,200 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. 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; and Charlotte and Raleigh, North Carolina.
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 SubsidiariesSummary Statement of Income (Unaudited)(Dollars and shares in thousands, except per share amounts) | |||||||||||||||
Three Months Ended | Twelve Months Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
New contracts | 1,677 | 1,173 | 6,773 | 5,845 | |||||||||||
Average community count | 223 | 211 | 218 | 205 | |||||||||||
Cancellation rate | 13 | % | 18 | % | 13 | % | 15 | % | |||||||
Backlog units | 2,671 | 2,194 | 2,671 | 2,194 | |||||||||||
Backlog sales value | $ | 1,057,528 | $ | 896,714 | $ | 1,057,528 | $ | 896,714 | |||||||
Homes delivered | 1,921 | 1,825 | 6,296 | 5,778 | |||||||||||
Average home closing price | $ | 377 | $ | 383 | $ | 384 | $ | 384 | |||||||
Homebuilding revenue: | |||||||||||||||
Housing revenue | $ | 724,790 | $ | 698,919 | $ | 2,420,348 | $ | 2,217,197 | |||||||
Land revenue | 1,577 | 10,465 | 24,619 | 16,889 | |||||||||||
Total homebuilding revenue | $ | 726,367 | $ | 709,384 | $ | 2,444,967 | $ | 2,234,086 | |||||||
Financial services revenue | 15,783 | 13,101 | 55,323 | 52,196 | |||||||||||
Total revenue | $ | 742,150 | $ | 722,485 | $ | 2,500,290 | $ | 2,286,282 | |||||||
Cost of sales - operations | 594,373 | 586,039 | 2,005,222 | 1,831,557 | |||||||||||
Cost of sales - acquisition-related charges | — | 598 | 639 | 5,147 | |||||||||||
Cost of sales - impairment | 5,002 | 5,809 | 5,002 | 5,809 | |||||||||||
Gross margin | 142,775 | 130,039 | 489,427 | 443,769 | |||||||||||
General and administrative expense | 41,706 | 38,265 | 147,954 | 137,779 | |||||||||||
Selling expense | 45,234 | 42,121 | 154,384 | 142,829 | |||||||||||
Operating income | 55,835 | 49,653 | 187,089 | 163,161 | |||||||||||
Acquisition and integration costs | — | — | — | 1,700 | |||||||||||
Equity in income from joint venture arrangements | (193) | (44) | (311) | (312) | |||||||||||
Interest expense | 4,749 | 5,292 | 21,375 | 20,484 | |||||||||||
Income before income taxes | 51,279 | 44,405 | 166,025 | 141,289 | |||||||||||
Provision for income taxes | 9,499 | 11,998 | 38,438 | 33,626 | |||||||||||
Net income | $ | 41,780 | $ | 32,407 | $ | 127,587 | $ | 107,663 | |||||||
Earnings per share: | |||||||||||||||
Basic | $ | 1.48 | $ | 1.17 | $ | 4.58 | $ | 3.81 | |||||||
Diluted | $ | 1.44 | $ | 1.15 | $ | 4.48 | $ | 3.70 | |||||||
Weighted average shares outstanding: | |||||||||||||||
Basic | 28,297 | 27,774 | 27,846 | 28,234 | |||||||||||
Diluted | 29,049 | 28,181 | 28,475 | 29,178 | |||||||||||
M/I Homes, Inc. and SubsidiariesSummary Balance Sheet and Other Information (unaudited)(Dollars in thousands, except per share amounts) | |||||||
As of | |||||||
December 31, | |||||||
2019 | 2018 | ||||||
Assets: | |||||||
Total cash, cash equivalents and restricted cash | $ | 6,083 | $ | 21,529 | |||
Mortgage loans held for sale | 155,244 | 169,651 | |||||
Inventory: | |||||||
Lots, land and land development | 858,065 | 778,943 | |||||
Land held for sale | 5,670 | 12,633 | |||||
Homes under construction | 756,998 | 730,390 | |||||
Other inventory | 148,774 | 152,494 | |||||
Total Inventory | $ | 1,769,507 | $ | 1,674,460 | |||
Property and equipment - net | 22,118 | 29,395 | |||||
Operating lease right-of-use assets | 18,415 | — | |||||
Goodwill | 16,400 | 16,400 | |||||
Investments in joint venture arrangements | 37,885 | 35,870 | |||||
Deferred income tax asset | 9,631 | 13,482 | |||||
Other assets | 70,311 | 60,794 | |||||
Total Assets | $ | 2,105,594 | $ | 2,021,581 | |||
Liabilities: | |||||||
Debt - Homebuilding Operations: | |||||||
Senior notes due 2021 - net | $ | 298,988 | $ | 297,884 | |||
Senior notes due 2025 - net | 247,092 | 246,571 | |||||
Notes payable - homebuilding | 66,000 | 117,400 | |||||
Notes payable - other | 5,828 | 5,938 | |||||
Total Debt - Homebuilding Operations | $ | 617,908 | $ | 667,793 | |||
Notes payable bank - financial services operations | 136,904 | 153,168 | |||||
Total Debt | $ | 754,812 | $ | 820,961 | |||
Accounts payable | 125,026 | 131,511 | |||||
Operating lease liabilities | 18,415 | — | |||||
Other liabilities | 203,864 | 213,806 | |||||
Total Liabilities | $ | 1,102,117 | $ | 1,166,278 | |||
Shareholders' Equity | 1,003,477 | 855,303 | |||||
Total Liabilities and Shareholders' Equity | $ | 2,105,594 | $ | 2,021,581 | |||
Book value per common share | $ | 35.35 | $ | 31.08 | |||
Homebuilding debt / capital ratio(1) | 38 | % | 44 | % | |||
(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 SubsidiariesSelected Supplemental Financial and Operating Data(Dollars in thousands) | |||||||||||||||
Three Months Ended | Twelve Months Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Cash provided by (used in) operating activities | $ | 64,654 | $ | 72,527 | $ | 65,631 | $ | (2,592) | |||||||
Cash used in investing activities | $ | (1,884) | $ | (13,655) | $ | (27,594) | $ | (133,957) | |||||||
Cash (used in) provided by financing activities | $ | (90,138) | $ | (73,703) | $ | (53,483) | $ | 6,375 | |||||||
Land/lot purchases | $ | 73,619 | $ | 74,050 | $ | 332,057 | $ | 330,548 | |||||||
Land development spending | $ | 82,839 | $ | 69,667 | $ | 268,347 | $ | 221,923 | |||||||
Land sale revenue | $ | 1,577 | $ | 10,465 | $ | 24,619 | $ | 16,889 | |||||||
Land sale gross profit | $ | (32) | $ | 1,493 | $ | 498 | $ | 2,045 | |||||||
Financial services pre-tax income | $ | 6,420 | $ | 5,353 | $ | 23,699 | $ | 24,213 | |||||||
M/I Homes, Inc. and SubsidiariesNon-GAAP Financial Results (1)(Dollars in thousands) | |||||||||||||||
Three Months Ended | Twelve Months Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Net income | $ | 41,780 | $ | 32,407 | $ | 127,587 | $ | 107,663 | |||||||
Add: | |||||||||||||||
Provision for income taxes | 9,499 | 11,998 | 38,438 | 33,626 | |||||||||||
Interest expense, net of interest income | 3,727 | 4,225 | 17,515 | 16,990 | |||||||||||
Interest amortized to cost of sales | 8,802 | 8,112 | 29,411 | 25,457 | |||||||||||
Depreciation and amortization | 4,154 | 3,777 | 15,950 | 14,531 | |||||||||||
Non-cash charges | 6,762 | 8,012 | 10,848 | 11,783 | |||||||||||
Adjusted EBITDA | $ | 74,724 | $ | 68,531 | $ | 239,749 | $ | 210,050 | |||||||
M/I Homes, Inc. and SubsidiariesNon-GAAP Reconciliation (1)(Dollars and shares in thousands, except per share amounts) | |||||||||||||||
Three Months Ended | Twelve months ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Income before income taxes | $ | 51,279 | $ | 44,405 | $ | 166,025 | $ | 141,289 | |||||||
Add: Impairment (2) | 5,002 | 5,809 | 5,002 | 5,809 | |||||||||||
Add: Acquisition-related charges (3) | — | 598 | 639 | 5,147 | |||||||||||
Add: Acquisition and integration costs (4) | — | — | — | 1,700 | |||||||||||
Adjusted income before income taxes | $ | 56,281 | $ | 50,812 | $ | 171,666 | $ | 153,945 | |||||||
Net income | $ | 41,780 | $ | 32,407 | $ | 127,587 | $ | 107,663 | |||||||
Add: Impairment - net of tax (2) | 3,802 | 4,415 | 3,802 | 4,415 | |||||||||||
Add: Acquisition-related charges - net of tax (3) | — | 454 | 486 | 3,912 | |||||||||||
Add: Acquisition and integration costs - net of tax (4) | — | — | — | 1,292 | |||||||||||
Adjusted net income | $ | 45,582 | $ | 37,276 | $ | 131,875 | $ | 117,282 | |||||||
Impairment - net of tax (2) | $ | 3,802 | $ | 4,415 | $ | 3,802 | $ | 4,415 | |||||||
Acquisition-related charges - net of tax (3) | $ | — | $ | 454 | $ | 486 | $ | 3,912 | |||||||
Acquisition and integration costs - net of tax (4) | $ | — | $ | — | $ | — | $ | 1,292 | |||||||
Divided by: Diluted weighted average shares outstanding | 29,049 | 28,181 | 28,475 | 29,178 | |||||||||||
Diluted earnings per share related to impairment (2) | $ | 0.13 | $ | 0.15 | $ | 0.13 | $ | 0.15 | |||||||
Diluted earnings per share related to acquisition-related charges (3) | — | 0.02 | 0.02 | 0.13 | |||||||||||
Diluted earnings per share related to acquisition and integration costs (4) | — | — | — | 0.05 | |||||||||||
Add: Diluted earnings per share | 1.44 | 1.15 | 4.48 | 3.70 | |||||||||||
Adjusted diluted earnings per share | $ | 1.57 | $ | 1.32 | $ | 4.63 | $ | 4.03 | |||||||
(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. |
(3) | Represents purchase accounting adjustments related to our acquisition of Pinnacle Homes in Detroit, Michigan on March 1, 2018. |
(4) | 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 SubsidiariesSelected Supplemental Financial and Operating Data | ||||||||||||||||||
NEW CONTRACTS | ||||||||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||||||||
December 31, | December 31, | |||||||||||||||||
% | % | |||||||||||||||||
Region | 2019 | 2018 | Change | 2019 | 2018 | Change | ||||||||||||
Northern | 655 | 415 | 58 | % | 2,695 | 2,306 | 17 | % | ||||||||||
Southern | 1,022 | 758 | 35 | % | 4,078 | 3,539 | 15 | % | ||||||||||
Total | 1,677 | 1,173 | 43 | % | 6,773 | 5,845 | 16 | % | ||||||||||
HOMES DELIVERED | ||||||||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||||||||
December 31, | December 31, | |||||||||||||||||
% | % | |||||||||||||||||
Region | 2019 | 2018 | Change | 2019 | 2018 | Change | ||||||||||||
Northern
| 743 | 769 | (3) | % | 2,482 | 2,317 | 7 | % | ||||||||||
Southern | 1,178 | 1,056 | 12 | % | 3,814 | 3,461 | 10 | % | ||||||||||
Total | 1,921 | 1,825 | 5 | % | 6,296 | 5,778 | 9 | % | ||||||||||
BACKLOG | ||||||||||||||||||||||
December 31, 2019 | December 31, 2018 | |||||||||||||||||||||
Dollars | Average | Dollars | Average | |||||||||||||||||||
Region | Units | (millions) | Sales Price | Units | (millions) | Sales Price | ||||||||||||||||
Northern
| 1,143 | $ | 495 | $ | 433,000 | 930 | $ | 410 | $ | 441,000 | ||||||||||||
Southern | 1,528 | $ | 563 | $ | 368,000 | 1,264 | $ | 486 | $ | 385,000 | ||||||||||||
Total | 2,671 | $ | 1,058 | $ | 396,000 | 2,194 | $ | 897 | $ | 409,000 | ||||||||||||
LAND POSITION SUMMARY | ||||||||||||||
December 31, 2019 | December 31, 2018 | |||||||||||||
Lots | Lots Under | Lots | Lots Under | |||||||||||
Region | Owned | Contract | Total | Owned | Contract | Total | ||||||||
Northern
| 6,857 | 6,207 | 13,064 | 5,644 | 6,460 | 12,104 | ||||||||
Southern | 7,809 | 12,386 | 20,195 | 8,419 | 8,200 | 16,619 | ||||||||
Total | 14,666 | 18,593 | 33,259 | 14,063 | 14,660 | 28,723 | ||||||||
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SOURCE M/I Homes, Inc.