M/I Homes reports Q1 net income of US$12.6M, up from US$4.6M a year earlier, on revenues up 23.1% to US$234.8M; home deliveries up 17.5% to 737, number of active communities up 17% to 158
Allison Oesterle
COLUMBUS, Ohio
,
April 24, 2014
(press release)
–
M/I Homes, Inc. (NYSE: MHO) announced results for the first quarter ended March 31, 2014.
M/I Homes, Inc. and Subsidiaries Summary Operating Results (Unaudited) (Dollars in thousands, except per share amounts) Three Months Ended March 31, 2014 2013 New contracts 982 1,047 Average community count 158 133 Cancellation rate 16 % 15 % Backlog units 1,525 1,385 Backlog value $ 496,428 $ 401,186 Homes delivered 737 627 Average home closing price $ 299 $ 284 Homebuilding revenue: Housing revenue $ 220,710 $ 177,790 Land revenue 6,266 4,527 Total homebuilding revenue $ 226,976 $ 182,317 Financial services revenue 7,865 8,410 Total revenue $ 234,841 $ 190,727 Cost of sales - operations 183,964 151,513 Cost of sales - impairment — 900 Gross margin 50,877 38,314 General and administrative expense 18,315 15,979 Selling expense 15,969 13,109 Operating income 16,593 9,226 Income from unconsolidated joint ventures (62) — Interest expense 4,170 4,340 Income before income taxes 12,485 4,886 (Benefit) provision for income taxes (147) 299 Net income $ 12,632 $ 4,587 Excess of fair value over book value of preferred shares redeemed $ — $ 2,190 Preferred dividends $ 1,219 $ — Net income to common shareholders $ 11,413 $ 2,397 Earnings per share: Basic $ 0.47 $ 0.11 Diluted $ 0.41 $ 0.11 Weighted average shares outstanding: Basic 24,417 22,273 Diluted 29,870 22,688 M/I Homes, Inc. and Subsidiaries Summary Balance Sheet and Other Information (unaudited) (Dollars in thousands, except per share amounts) As of March 31, 2014 2013 Assets: Total cash and cash equivalents(1) $ 100,911 $ 272,551 Mortgage loans held for sale 55,750 57,721 Inventory: Lots, land and land development 337,137 255,934 Land held for sale 3,623 8,591 Homes under construction 325,439 245,074 Other inventory 57,428 68,041 Total inventory $ 723,627 $ 577,640 Property and equipment - net 10,506 9,994 Investments in unconsolidated joint ventures 44,847 22,275 Deferred income taxes, net of valuation allowance(2) 111,214 — Other assets 38,048 28,471 Total Assets $ 1,084,903 $ 968,652 Liabilities: Debt - Homebuilding Operations: Senior notes $ 228,169 $ 227,770 Convertible senior subordinated notes due 2017 57,500 57,500 Convertible senior subordinated notes due 2018 86,250 86,250 Preferred stock - subject to redemption — 50,352 Notes payable - other 7,757 10,316 Total Debt - Homebuilding Operations $ 379,676 $ 432,188 Note payable bank - financial services operations 51,532 53,126 Total Debt $ 431,208 $ 485,314 Accounts payable 71,376 57,071 Other liabilities 75,728 81,266 Total Liabilities $ 578,312 $ 623,651 Shareholders' Equity 506,591 345,001 Total Liabilities and Shareholders' Equity $ 1,084,903 $ 968,652 Book value per common share $ 18.66 $ 12.20 Net debt/net capital ratio(3) 39 % 38 % (1) 2014 and 2013 amounts include $11.6 million and $9.5 million of restricted cash and cash held in escrow, respectively. (2) 2014 and 2013 amounts include gross deferred tax assets of $115.2 million and $134.0 million, respectively, net of valuation allowances of $4.0 million and $134.0 million, respectively. (3) Net debt/net capital ratio is calculated as total debt minus total cash and cash equivalents, divided by the sum of total debt minus total cash and cash equivalents plus shareholders' equity. M/I Homes, Inc. and Subsidiaries Selected Supplemental Financial and Operating Data (Dollars in thousands) Three Months Ended March 31, 2014 2013 Adjusted EBITDA(1) $ 22,176 $ 16,026 Cash flow (used in) provided by operating activities $ (2,103) $ 8,558 Cash used in investing activities $ (8,879) $ (12,702) Cash (used in) provided by financing activities $ (28,383) $ 121,703 Land/lot purchases $ 53,003 $ 44,381 Land development spending $ 17,530 $ 15,728 Land gross margin $ 1,321 $ 991 Financial services pre-tax income $ 4,711 $ 5,137 Deferred tax expense $ 5,024 $ 1,788 Deferred tax asset valuation benefit $ (5,327) $ (1,788) (1) See "Non-GAAP Financial Results / Reconciliation" table below. M/I Homes, Inc. and Subsidiaries Non-GAAP Financial Results / Reconciliation (Dollars in thousands) Three Months Ended March 31, 2014 2013 Net income $ 12,632 $ 4,587 Add: (Benefit) provision for income taxes (147) 299 Interest expense net of interest income 3,777 4,055 Interest amortized to cost of sales 3,108 3,528 Depreciation and amortization 1,912 2,138 Non-cash charges 894 1,419 Adjusted EBITDA $ 22,176 $ 16,026 M/I Homes, Inc. and Subsidiaries Selected Supplemental Financial and Operating Data NEW CONTRACTS Three Months Ended March 31, % Region 2014 2013 Change Midwest 374 349 7 % Southern 336 378 (11)% Mid-Atlantic 272 320 (15)% Total 982 1,047 (6)% HOMES DELIVERED Three Months Ended March 31, % Region 2014 2013 Change Midwest 259 232 12 % Southern 275 191 44 % Mid-Atlantic 203 204 — % Total 737 627 18 % BACKLOG March 31, 2014 March 31, 2013 Dollars Average Dollars Average Region Units (millions) Sales Price Units (millions) Sales Price Midwest 660 $ 209 $ 317,000 535 $ 144 $ 270,000 Southern 510 $ 169 $ 331,000 528 $ 148 $ 280,000 Mid-Atlantic 355 $ 118 $ 334,000 322 $ 109 $ 339,000 Total 1,525 $ 496 $ 326,000 1,385 $ 401 $ 290,000 LAND POSITION SUMMARY March 31, 2014 March 31, 2013 Lots Lots Under Lots Lots Under Region Owned Contract Total Owned Contract Total Midwest 3,532 2,609 6,141 3,078 2,989 6,067 Southern 4,823 4,306 9,129 2,693 3,800 6,493 Mid-Atlantic 2,287 3,408 5,695 1,685 2,124 3,809 Total 10,642 10,323 20,965 7,456 8,913 16,369
2014 First Quarter Highlights:
For the first quarter, the Company reported net income of $12.6 million, or $0.41 per diluted share. Excluding the reversal of $5.3 million of our state deferred tax asset valuation allowance, the Company's net income totaled $7.3 million or $0.23 per diluted share. This compares to $4.6 million, or $0.11 per share during the first quarter of 2013.
Homes delivered in the first quarter were 737, an increase of 18% from the 627 reported for the same period of 2013. New contracts for the first quarter were 982, a 6% decrease from the 1,047 recorded in 2013's first quarter. The backlog of homes at March 31, 2014 had a total sales value of $496 million, a 24% increase over a year-ago, with backlog units of 1,525 and an average sales price of $326,000. At March 31, 2013 backlog sales value was $401 million, with backlog units of 1,385 and an average sales price of $290,000. M/I Homes had 158 active communities at March 31, 2014 compared to 135 at March 31, 2013 and 157 at December 31, 2013. The Company's cancellation rate was 16% in the first quarter of 2014 compared to 15% in 2013's first quarter.
Robert H. Schottenstein, Chief Executive Officer and President, commented, "We had a very solid first quarter highlighted by an 18% increase in homes delivered, 23% growth in revenue, 156% improvement in pre-tax income and our gross margin improving to 21.7%, a 180 basis point increase over the fourth quarter of 2013. At the same time, our results were a bit mixed, with new contracts declining by 6%, in part due to unusually harsh winter weather conditions, but also due to a softer than expected start to the spring selling season."
Mr. Schottenstein continued, "Our financial condition is strong, with cash of $101 million at the end of the quarter, shareholders' equity of $507 million, net debt to net capital at 39%, and no outstanding borrowings under our $200 million credit facility. Looking ahead, with the strength of our backlog and planned new community openings, we are poised to have a very solid 2014. We remain focused on increasing our profitability, continuing to grow 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 2015.
M/I Homes, Inc. is one of the nation's leading builders of single-family homes, having delivered over 87,400 homes. The Company's homes are marketed and sold under the trade names M/I Homes, Showcase Collection (exclusively by M/I), and Triumph Homes. The Company has homebuilding operations in Columbus and Cincinnati, Ohio; Chicago, Illinois; Indianapolis, Indiana; Tampa and Orlando, Florida; Austin, Dallas/Ft 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," "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 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 and various governmental rules and regulations, as more fully discussed in the Risk Factors section in the Company's Annual Report on Form 10-K for the year ended December 31, 2013, 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 in this press release will increase with the passage of time. The Company undertakes 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.
In this press release, we use adjusted EBITDA, a non-GAAP financial measure. Please see the "Non-GAAP Financial Results / Reconciliation" table below.
SOURCE M/I Homes, Inc.
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