M/I Homes Reports 2018 First Quarter Results
COLUMBUS, Ohio, April 25, 2018 /PRNewswire/ -- M/I Homes, Inc. (NYSE: MHO) announced results for the three months ended March 31, 2018.
2018 First Quarter Highlights:
- New contracts increased 20% to an all-time quarterly record of 1,739 contracts
- Backlog sales value increased 31% to a first quarter record of $1.1 billion, and backlog units increased 24% to 2,744 homes
- Revenue increased 8% to a first quarter record of $438 million
- Homes delivered increased 8% to a first quarter record of 1,122 homes
- Pre-tax income of $23.9 million; excluding $2.6 million of acquisition-related costs, pre-tax income was $26.5 million compared to $26.3 million in 2017
- Net income of $18.1 million ($0.60 per diluted share) compared to $16.9 million ($0.55 per diluted share) in 2017; effective tax rate of 24% compared to 36% in last year's first quarter
For the first quarter of 2018, the Company reported net income of $18.1 million, or $0.60 per diluted share. This compares to net income of $16.9 million, or $0.55 per diluted share, for the first quarter of 2017. On March 1, 2018, the Company closed on the acquisition of Pinnacle Homes, a homebuilder in the greater Detroit, Michigan market. Expenses of $2.6 million (including $0.9 million in housing cost of sales for purchase accounting adjustments) related to this transaction were included in our first quarter results.
New contracts for the first quarter reached an all-time quarterly record of 1,739, increasing 20% from the 1,454 contracts recorded in 2017's first quarter. Homes delivered in 2018's first quarter increased 8% to a first quarter record of 1,122. This compares to 1,038 homes delivered in 2017's first quarter. Homes in backlog at March 31, 2018 had a first quarter record total sales value of $1.1 billion, a 31% increase over a year ago, with backlog units increasing 24% to 2,744 and an average sales price of $398,000. At March 31, 2017, backlog sales value was $834 million, with backlog units of 2,220 and an average sales price of $376,000. M/I Homes had 205 active communities at March 31, 2018, an increase of 11% over our 184 communities at March 31, 2017. The Company's cancellation rate was 12% in the first quarter of 2018 compared to 14% in 2017's first quarter.
Robert H. Schottenstein, Chief Executive Officer and President, commented, "We had a strong first quarter highlighted by record new contracts of 1,739 - a 20% increase from last year's first quarter, and first quarter records in homes delivered and revenue. We also achieved record first quarter backlog, with sales value of $1.1 billion - a 31% increase over 2017's first quarter, and our units in backlog increased by 24%. Our overhead expense ratio improved 30 basis points and diluted earnings per share improved 9% from 2017's first quarter."
Mr. Schottenstein continued, "We are off to a very solid start in 2018. On March 1, we successfully closed on the acquisition of Detroit-based Pinnacle Homes, strengthening and expanding our geographic footprint. Our financial condition remains strong. We ended the quarter with shareholders' equity of $786 million and a homebuilding debt to capital ratio of 48%. Looking ahead, with our record first quarter backlog, planned new community openings and steady housing market conditions, we are poised to have a solid 2018. We will continue to focus on increasing profitability, 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 April 2019.
M/I Homes, Inc. is one of the nation's leading builders of single-family homes, having sold over 107,000 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 including, without limitation, with respect to the impact of the Pinnacle Homes acquisition on operations and results. 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, the risk that the business of Pinnacle Homes will not be successfully integrated as well as 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, 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 | |||||||
March 31, | |||||||
2018 | 2017 | ||||||
New contracts | 1,739 | 1,454 | |||||
Average community count | 197 | 181 | |||||
Cancellation rate | 12 | % | 14 | % | |||
Backlog units | 2,744 | 2,220 | |||||
Backlog sales value | $ | 1,091,194 | $ | 834,415 | |||
Homes delivered | 1,122 | 1,038 | |||||
Average home closing price | $ | 373 | $ | 373 | |||
Homebuilding revenue: | |||||||
Housing revenue | $ | 418,424 | $ | 387,458 | |||
Land revenue | 4,407 | 5,215 | |||||
Total homebuilding revenue | $ | 422,831 | $ | 392,673 | |||
Financial services revenue | 15,026 | 14,307 | |||||
Total revenue | $ | 437,857 | $ | 406,980 | |||
Cost of sales - operations | 347,806 | 320,281 | |||||
Cost of sales - purchase accounting adjustments | 896 | — | |||||
Gross margin | $ | 89,155 | $ | 86,699 | |||
General and administrative expense | 27,951 | 27,760 | |||||
Selling expense | 30,063 | 27,283 | |||||
Operating income | $ | 31,141 | $ | 31,656 | |||
Acquisition and integration costs | 1,700 | — | |||||
Equity in income from joint venture arrangements | (310) | (17) | |||||
Interest expense | 5,878 | 5,338 | |||||
Income before income taxes | $ | 23,873 | $ | 26,335 | |||
Provision for income taxes | 5,810 | 9,452 | |||||
Net income | $ | 18,063 | $ | 16,883 | |||
Preferred dividends | — | 1,219 | |||||
Net income to common shareholders | $ | 18,063 | $ | 15,664 | |||
Earnings per share: | |||||||
Basic | $ | 0.64 | $ | 0.63 | |||
Diluted | $ | 0.60 | $ | 0.55 | |||
Weighted average shares outstanding: | |||||||
Basic | 28,124 | 24,738 | |||||
Diluted | 30,544 | 30,329 | |||||
M/I Homes, Inc. and Subsidiaries | |||||||
Summary Balance Sheet and Other Information (unaudited) | |||||||
(Dollars in thousands, except per share amounts) | |||||||
As of | |||||||
March 31, | |||||||
2018 | 2017 | ||||||
Assets: | |||||||
Total cash, cash equivalents and restricted cash(1) | $ | 53,577 | $ | 38,898 | |||
Mortgage loans held for sale | 110,612 | 113,596 | |||||
Inventory: | |||||||
Lots, land and land development | 752,921 | 616,239 | |||||
Land held for sale | 3,571 | 10,475 | |||||
Homes under construction | 678,122 | 538,758 | |||||
Other inventory | 145,730 | 121,146 | |||||
Total Inventory | $ | 1,580,344 | $ | 1,286,618 | |||
Property and equipment - net | 25,872 | 22,338 | |||||
Investments in joint venture arrangements | 22,066 | 24,218 | |||||
Goodwill | 16,400 | — | |||||
Deferred income tax asset | 18,104 | 30,449 | |||||
Other assets | 67,398 | 56,148 | |||||
Total Assets | $ | 1,894,373 | $ | 1,572,265 | |||
Liabilities: | |||||||
Debt - Homebuilding Operations: | |||||||
Senior notes due 2021 - net | $ | 297,056 | $ | 295,953 | |||
Senior notes due 2025 - net | 246,181 | — | |||||
Convertible senior subordinated notes due 2017 - net | — | 57,237 | |||||
Convertible senior subordinated notes due 2018 - net | — | 85,600 | |||||
Notes payable - homebuilding | 162,300 | 110,900 | |||||
Notes payable - other | 10,011 | 7,022 | |||||
Total Debt - Homebuilding Operations | $ | 715,548 | $ | 556,712 | |||
Notes payable bank - financial services operations | 102,711 | 106,937 | |||||
Total Debt | $ | 818,259 | $ | 663,649 | |||
Accounts payable | 118,839 | 94,403 | |||||
Other liabilities | 170,910 | 142,501 | |||||
Total Liabilities | $ | 1,108,008 | $ | 900,553 | |||
Shareholders' Equity | 786,365 | 671,712 | |||||
Total Liabilities and Shareholders' Equity | $ | 1,894,373 | $ | 1,572,265 | |||
Book value per common share | $ | 27.52 | $ | 25.07 | |||
Homebuilding debt / capital ratio(2) | 48 | % | 45 | % | |||
(1) Includes $7.7 million and $1.0 million of restricted cash and cash held in escrow for the quarters ended March 31, 2018 and 2017, 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 | |||||||
M/I Homes, Inc. and Subsidiaries | |||||||
Selected Supplemental Financial and Operating Data | |||||||
(Dollars in thousands) | |||||||
Three Months Ended | |||||||
March 31, | |||||||
2018 | 2017 | ||||||
Adjusted EBITDA(1) | $ | 38,581 | $ | 39,324 | |||
Cash used in operating activities | $ | (31,190) | $ | (23,275) | |||
Cash (used in) provided by investing activities | $ | (97,672) | $ | 3,206 | |||
Cash provided by financing activities | $ | 30,736 | $ | 24,526 | |||
Land/lot purchases | $ | 85,045 | $ | 81,833 | |||
Land development spending | $ | 41,654 | $ | 39,572 | |||
Land sale revenue | $ | 4,407 | $ | 5,215 | |||
Land sale gross profit | $ | 404 | $ | 376 | |||
Financial services pre-tax income | $ | 8,771 | $ | 8,562 | |||
(1) See "Non-GAAP Financial Results" table below. | |||||||
M/I Homes, Inc. and Subsidiaries | |||||||
Non-GAAP Financial Results (2) | |||||||
(Dollars in thousands) | |||||||
Three Months Ended | |||||||
March 31, | |||||||
2018 | 2017 | ||||||
Net income | $ | 18,063 | $ | 16,883 | |||
Add: | |||||||
Provision for income taxes | 5,810 | 9,452 | |||||
Interest expense net of interest income | 5,156 | 4,612 | |||||
Interest amortized to cost of sales | 4,864 | 3,766 | |||||
Depreciation and amortization | 3,649 | 3,583 | |||||
Non-cash charges | 1,039 | 1,028 | |||||
Adjusted EBITDA | $ | 38,581 | $ | 39,324 | |||
M/I Homes, Inc. and Subsidiaries | |||||||
Non-GAAP Reconciliation (2) | |||||||
(Dollars and shares in thousands, except per share amounts) | |||||||
Three Months Ended | |||||||
March 31, | |||||||
2018 | 2017 | ||||||
Total revenue | $ | 437,857 | $ | 406,980 | |||
Income before income taxes | $ | 23,873 | $ | 26,335 | |||
Add: Purchase accounting adjustments | 896 | — | |||||
Add: Acquisition and integration costs | 1,700 | — | |||||
Adjusted income before income taxes | $ | 26,469 | $ | 26,335 | |||
Pre-tax operating margin percentage | 5.5 | % | 6.5 | % | |||
Adjusted pre-tax operating margin percentage | 6.0 | % | 6.5 | % | |||
Net income available to common shareholders | $ | 18,063 | $ | 15,664 | |||
Add: Purchase accounting adjustments - net of tax | 663 | — | |||||
Add: Acquisition and integrations costs - net of tax | 1,258 | — | |||||
Adjusted net income available to common shareholders | $ | 19,984 | $ | 15,664 | |||
Purchase accounting adjustments - net of tax | $ | 663 | $ | — | |||
Divided by: Diluted weighted average shares outstanding | 30,544 | 30,329 | |||||
Diluted earnings per share related to purchase accounting adjustments | $ | 0.02 | $ | — | |||
Acquisition and integration costs - net of tax | $ | 1,258 | $ | — | |||
Divided by: Diluted weighted average shares outstanding | 30,544 | 30,329 | |||||
Diluted earnings per share related to acquisition and integration costs | $ | 0.04 | $ | — | |||
Add: Diluted earnings per share | 0.60 | 0.55 | |||||
Adjusted diluted earnings per share | $ | 0.66 | $ | 0.55 | |||
(2) We believe these non-GAAP financial measures are relevant and useful to investors in understanding our operations, and may be helpful in | |||||||
M/I Homes, Inc. and Subsidiaries | ||||||||
Selected Supplemental Financial and Operating Data | ||||||||
NEW CONTRACTS | ||||||||
Three Months Ended | ||||||||
March 31, | ||||||||
% | ||||||||
Region | 2018 | 2017 | Change | |||||
Midwest | 698 | 556 | 26 | % | ||||
Southern | 797 | 590 | 35 | % | ||||
Mid-Atlantic | 244 | 308 | (21) | % | ||||
Total | 1,739 | 1,454 | 20 | % | ||||
HOMES DELIVERED | ||||||||
Three Months Ended | ||||||||
March 31, | ||||||||
% | ||||||||
Region | 2018 | 2017 | Change | |||||
Midwest | 411 | 379 | 8 | % | ||||
Southern | 541 | 419 | 29 | % | ||||
Mid-Atlantic | 170 | 240 | (29) | % | ||||
Total | 1,122 | 1,038 | 8 | % | ||||
BACKLOG | |||||||||||||||||||||
March 31, 2018 | March 31, 2017 | ||||||||||||||||||||
Dollars | Average | Dollars | Average | ||||||||||||||||||
Region | Units | (millions) | Sales Price | Units | (millions) | Sales Price | |||||||||||||||
Midwest | 1,228 | $ | 519 | $ | 423,000 | 934 | $ | 373 | $ | 400,000 | |||||||||||
Southern | 1,164 | $ | 425 | $ | 365,000 | 845 | $ | 295 | $ | 349,000 | |||||||||||
Mid-Atlantic | 352 | $ | 148 | $ | 419,000 | 441 | $ | 166 | $ | 377,000 | |||||||||||
Total | 2,744 | $ | 1,091 | $ | 398,000 | 2,220 | $ | 834 | $ | 376,000 | |||||||||||
LAND POSITION SUMMARY | ||||||||||||||
March 31, 2018 | March 31, 2017 | |||||||||||||
Lots | Lots Under | Lots | Lots Under | |||||||||||
Region | Owned | Contract | Total | Owned | Contract | Total | ||||||||
Midwest | 5,138 | 7,565 | 12,703 | 3,591 | 5,779 | 9,370 | ||||||||
Southern | 6,092 | 7,526 | 13,618 | 4,859 | 6,211 | 11,070 | ||||||||
Mid-Atlantic | 1,668 | 2,809 | 4,477 | 1,952 | 2,028 | 3,980 | ||||||||
Total | 12,898 | 17,900 | 30,798 | 10,402 | 14,018 | 24,420 | ||||||||
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SOURCE M/I Homes, Inc.
