EX-99.1 2 exhbit991earningspressrele.htm EXHIBIT 99.1 EARNINGS PRESS RELEASE 10-24-18 Exhibit


Exhibit 99.1


mihomeslogowoutwelcometobett.jpg

M/I Homes Reports
2018 Third Quarter Results


Columbus, Ohio (October 24, 2018) - M/I Homes, Inc. (NYSE:MHO) announced results for the three and nine months ended September 30, 2018.

2018 Third Quarter Highlights:
•
New contracts increased 6% to a third quarter record 1,302 contracts
•
Backlog sales value increased 25% to a third quarter record of $1.1 billion, and backlog units
increased 20% to 2,846
•
Revenue increased 19% to a third quarter record of $568 million
•
Homes delivered increased 13% to a third quarter record 1,422 homes
•
Net income increased by 31% to a third quarter record of $29.3 million from
$22.3 million in 2017
•
Diluted earnings per share increased 58% to $1.01 from $0.64 in 2017, which included a $2.3 million equity adjustment due to the redemption of preferred shares
•
Shareholders’ equity reached an all-time record of $835 million, a 16% increase from a year ago,
with book value per share of $29.69

For the third quarter of 2018, the Company reported net income of $29.3 million, or $1.01 per diluted share. This compares to net income of $22.3 million, or $0.64 per diluted share, for the third quarter of 2017. The third quarter of 2018 included a $0.7 million pre-tax purchase accounting charge ($0.02 per diluted share) related to our acquisition of Pinnacle Homes in Detroit, Michigan in the first quarter of 2018. The third quarter of 2017 included a $2.3 million after-tax equity adjustment ($0.07 per diluted share) related to the redemption of preferred shares in that period. For the nine months ended September 30, 2018, the Company reported net income to common shareholders of $75.3 million, or $2.56 per diluted share, compared to $50.3 million, or $1.73 per diluted share, for the same period of 2017. Year-to-date in 2018, the Company incurred $6.2 million of pre-tax acquisition-related charges ($0.16 per diluted share) and, in the same nine-month period in 2017, incurred $8.5 million ($0.18 per diluted share) for pre-tax stucco-related repair costs in certain of our Florida communities. Exclusive of these charges in both periods and the equity adjustment charge in 2017, year-to-date adjusted net income to common shareholders was $79.9 million in 2018 compared to $58.0 million in 2017’s same period, a 38% increase.

Homes delivered in 2018's third quarter reached a third quarter record of 1,422, increasing 13% from the 1,256 deliveries in 2017’s third quarter. Homes delivered for the nine months ended September 30, 2018 increased 13% to 3,953 from 2017's deliveries of 3,505. New contracts for 2018's third quarter were 1,302, an increase of 6% over 2017's third quarter. For the first nine months of 2018, new contracts increased 15% to a record 4,672 from 4,079 in 2017. Homes in backlog increased 20% at September 30, 2018 to 2,846 units, with a sales value record of $1.1 billion (a 25% increase over last year’s third quarter), and an average sale price of $401,000. At September 30, 2017, the sales value of homes in backlog was $912 million, with an average sale price of $383,000 and backlog units of 2,378. M/I Homes had 212




active communities at September 30, 2018 compared to 179 at September 30, 2017. The Company's cancellation rate was 16% in the third quarter of 2018 and 15% in 2017.

Robert H. Schottenstein, Chief Executive Officer and President, commented, “We reported another strong quarter highlighted by all-time third quarter records for new contracts, homes delivered, revenue, and net income. Our backlog sales value reached $1.1 billion - a record for our third quarter and a 25% increase over 2017’s third quarter. We delivered 1,422 homes in the third quarter, a 13% increase over last year, and our pre-tax income improved by 14% reaching a third quarter record of $39.5 million. We are particularly pleased that our adjusted gross margin improved 50 basis points from the second quarter, to 20.5%, and our overhead expense ratio improved 40 basis points from last year’s third quarter to 12.7%. Our growth in pre-tax income, combined with a lower tax rate, resulted in a 31% increase in net income from $22.3 million in last year’s third quarter to a third quarter record of $29.3 million in 2018.”

Mr. Schottenstein continued, “Our financial condition remains strong. We ended the third quarter with record-high shareholders’ equity of $835 million, an increase of 16% from 2017’s third quarter, book value per share of $29.69, and a homebuilding debt to capital ratio of 48%. During the quarter, we also repurchased 437,490 of our common shares. As we begin the final quarter of 2018, we remain well positioned to have another solid year of steady growth and improved financial performance.”

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 October 2019.

M/I Homes, Inc. is one of the nation’s leading builders of single-family homes, having sold over 110,000 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. 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, 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.


Contact M/I Homes, Inc.
Kevin C. Hake, Senior Vice President, Treasurer, (614) 418-8227
Ann Marie W. Hunker, Vice President, Controller, (614) 418-8225





M/I Homes, Inc. and Subsidiaries
Summary Statement of Income (Unaudited)
(Dollars and shares in thousands, except per share amounts)

 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2018
 
2017
 
2018
 
2017
New contracts
1,302

 
1,225

 
4,672

 
4,079

Average community count
211

 
183

 
204

 
182

Cancellation rate
16
%
 
15
%
 
14
%
 
14
%
Backlog units
 
 
 
 
2,846

 
2,378

Backlog sales value
 
 
 
 
$
1,140,037

 
$
911,657

Homes delivered
1,422

 
1,256

 
3,953

 
3,505

Average home closing price
$
390

 
$
366

 
$
384

 
$
368

 
 
 
 
 
 
 
 
Homebuilding revenue:
 
 
 
 
 
 
 
   Housing revenue
$
554,820

 
$
459,342

 
$
1,518,278

 
$
1,289,893

   Land revenue
829

 
5,318

 
6,424

 
12,438

Total homebuilding revenue
$
555,649

 
$
464,660

 
$
1,524,702

 
$
1,302,331

 
 
 
 
 
 
 
 
Financial services revenue
12,193

 
11,763

 
39,095

 
37,938

Total revenue
$
567,842

 
$
476,423

 
$
1,563,797

 
$
1,340,269

 
 
 
 
 
 
 
 
Cost of sales - operations
451,337

 
374,673

 
1,245,518

 
1,054,052

Cost of sales - purchase accounting adjustments
692

 
—

 
4,549

 
—

Cost of sales - stucco-related charges
—

 
—

 
—

 
8,500

Gross margin
$
115,813

 
$
101,750

 
$
313,730

 
$
277,717

General and administrative expense
36,897

 
31,337

 
99,514

 
89,209

Selling expense
35,054

 
31,136

 
100,708

 
88,666

Operating income
$
43,862

 
$
39,277

 
$
113,508

 
$
99,842

Acquisition and integration costs
—

 
—

 
1,700

 
—

Equity in income from joint venture arrangements
(44
)
 
(71
)
 
(268
)
 
(198
)
Interest expense
4,426

 
4,675

 
15,192

 
13,847

Income before income taxes
$
39,480

 
$
34,673

 
$
96,884

 
$
86,193

Provision for income taxes
10,198

 
12,346

 
21,628

 
29,994

Net income
$
29,282

 
$
22,327

 
$
75,256

 
$
56,199

Excess of fair value over book value of preferred shares subject to redemption
—

 
2,257

 
—

 
2,257

Preferred dividends
—

 
1,218

 
—

 
3,656

Net income to common shareholders
$
29,282

 
$
18,852

 
$
75,256

 
$
50,286

 
 
 
 
 
 
 
 
Earnings per share:
 
 
 
 
 
 
 
Basic
$
1.03

 
$
0.74

 
$
2.65

 
$
2.00

Diluted
$
1.01

 
$
0.64

 
$
2.56

 
$
1.73

 
 
 
 
 
 
 
 
Weighted average shares outstanding:
 
 
 
 
 
 
 
Basic
28,469

 
25,581

 
28,389

 
25,106

Diluted
28,906

 
30,675

 
29,511

 
30,539





M/I Homes, Inc. and Subsidiaries
Summary Balance Sheet and Other Information (unaudited)
(Dollars in thousands, except per share amounts)

 
As of
 
September 30,
 
2018
 
2017
Assets:
 
 
 
Total cash, cash equivalents and restricted cash(1)
$
36,360

 
$
103,636

Mortgage loans held for sale
115,189

 
91,987

Inventory:
 
 
 
Lots, land and land development
754,322

 
663,170

Land held for sale
14,312

 
12,330

Homes under construction
831,129

 
645,816

Other inventory
151,762

 
134,493

Total Inventory
$
1,751,525

 
$
1,455,809

 
 
 
 
Property and equipment - net
28,691

 
25,320

Investments in joint venture arrangements
24,568

 
22,981

Goodwill
16,400

 
—

Deferred income tax asset
16,925

 
29,569

Other assets
68,677

 
55,393

Total Assets
$
2,058,335

 
$
1,784,695

 
 
 
 
Liabilities:
 
 
 
Debt - Homebuilding Operations:
 
 
 
Senior notes due 2021 - net
$
297,608

 
$
296,505

Senior notes due 2025 - net
246,441

 
245,958

 Convertible senior subordinated notes due 2018 - net
—

 
85,955

 Notes payable - homebuilding
222,700

 
—

 Notes payable - other
8,838

 
4,057

Total Debt - Homebuilding Operations
$
775,587

 
$
632,475

 
 
 
 
Preferred shares subject to redemption
—

 
50,420

Notes payable bank - financial services operations
104,026

 
91,275

Total Debt
$
879,613

 
$
774,170

 
 
 
 
Accounts payable
148,421

 
120,598

Other liabilities
195,097

 
166,954

Total Liabilities
$
1,223,131

 
$
1,061,722

 
 
 
 
Shareholders’ Equity
835,204

 
722,973

Total Liabilities and Shareholders’ Equity
$
2,058,335

 
$
1,784,695

 
 
 
 
Book value per common share
$
29.69

 
$
26.27

Homebuilding debt / capital ratio(2)
48
%
 
47
%
(1)
Includes $0.9 million and $0.7 million of restricted cash and cash held in escrow for the quarters ended September 30, 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 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
 
Nine Months Ended
 
September 30,
 
September 30,
 
2018
 
2017
 
2018
 
2017
Cash used in operating activities
$
(54,194
)
 
$
(26,705
)
 
$
(73,895
)
 
$
(66,025
)
Cash used in investing activities
$
(17,417
)
 
$
(6,022
)
 
$
(121,526
)
 
$
(5,065
)
Cash provided by financing activities
$
40,154

 
$
106,423

 
$
80,078

 
$
140,285

 
 
 
 
 
 
 
 
Land/lot purchases
$
81,222

 
$
65,511

 
$
256,498

 
$
250,141

Land development spending
$
63,680

 
$
53,755

 
$
152,256

 
$
137,019

Land sale revenue
$
829

 
$
5,318

 
$
6,424

 
$
12,438

Land sale gross profit
$
66

 
$
365

 
$
552

 
$
883

 
 
 
 
 
 
 
 
Financial services pre-tax income
$
4,846

 
$
5,231

 
$
18,860

 
$
19,988




M/I Homes, Inc. and Subsidiaries
Non-GAAP Financial Results (1) 
(Dollars in thousands)
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2018
 
2017
 
2018
 
2017
Net income
$
29,282

 
$
22,327

 
$
75,256

 
$
56,199

Add:
 
 
 
 
 
 
 
Provision for income taxes
10,198

 
12,346

 
21,628

 
29,994

Interest expense net of interest income
3,516

 
4,003

 
12,765

 
11,719

Interest amortized to cost of sales
6,278

 
4,988

 
17,345

 
13,597

Depreciation and amortization
3,650

 
3,633

 
10,754

 
10,499

Non-cash charges
1,041

 
1,468

 
3,771

 
4,034

Adjusted EBITDA
$
53,965

 
$
48,765

 
$
141,519

 
$
126,042








M/I Homes, Inc. and Subsidiaries
Non-GAAP Reconciliation (1) 
(Dollars and shares in thousands, except per share amounts)
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2018
 
2017
 
2018
 
2017
Income before income taxes
$
39,480

 
$
34,673

 
$
96,884

 
$
86,193

Add: Purchase accounting adjustments
692

 
—

 
4,549

 
—

Add: Acquisition and integration costs
—

 
—

 
1,700

 
—

Add: Stucco-related charges
—

 
—

 
—

 
8,500

Adjusted income before income taxes
$
40,172

 
$
34,673

 
$
103,133

 
$
94,693

 
 
 
 
 
 
 
 
Net income to common shareholders
$
29,282

 
$
18,852

 
$
75,256

 
$
50,286

Add: Purchase accounting adjustments - net of tax
512

 
—

 
3,366

 
—

Add: Acquisition and integrations costs - net of tax
—

 
—

 
1,258

 
—

Add: Excess of fair value over book value of preferred shares subject to redemption
—

 
2,257

 
—

 
2,257

Add: Stucco-related charges - net of tax
—

 
—

 
—

 
5,440

Adjusted net income to common shareholders
$
29,794

 
$
21,109

 
$
79,880

 
$
57,983

 
 
 
 
 
 
 
 
Purchase accounting adjustments - net of tax
$
512

 
$
—

 
$
3,366

 
$
—

Divided by: Diluted weighted average shares outstanding
28,906

 
30,675

 
29,511

 
30,539

Diluted earnings per share related to purchase accounting adjustments
$
0.02

 
$
—

 
$
0.12

 
$
—

 
 
 
 
 
 
 
 
Acquisition and integration costs - net of tax
$
—

 
$
—

 
$
1,258

 
$
—

Divided by: Diluted weighted average shares outstanding
28,906

 
30,675

 
29,511

 
30,539

Diluted earnings per share related to acquisition and integration costs
$
—

 
$
—

 
$
0.04

 
$
—

 
 
 
 
 
 
 
 
Stucco-related charges - net of tax
$
—

 
$
—

 
$
—

 
$
5,440

Divided by: Diluted weighted average shares outstanding
28,906

 
30,675

 
29,511

 
30,539

Diluted earnings per share related to stucco-related charges
$
—

 
$
—

 
$
—

 
$
0.18

 
 
 
 
 
 
 
 
Excess of fair value over book value of preferred shares subject to redemption
$
—

 
$
2,257

 
$
—

 
$
2,257

Divided by: Diluted weighted average shares outstanding
28,906

 
30,675

 
29,511

 
30,539

Diluted earnings per share related to preferred dividends
$
—

 
$
0.07

 
$
—

 
$
0.07

 
 
 
 
 
 
 
 
Add: Diluted earnings per share
1.01

 
0.64

 
2.56

 
1.73

Adjusted diluted earnings per share
$
1.03

 
$
0.71

 
$
2.72

 
$
1.98

(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.





M/I Homes, Inc. and Subsidiaries
Selected Supplemental Financial and Operating Data

NEW CONTRACTS
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
 
 
 
 
%
 
 
 
 
 
%
Region
2018
 
2017
 
Change
 
2018
 
2017
 
Change
Midwest
537

 
458

 
17
 %
 
1,891

 
1,545

 
22
 %
Southern
597

 
583

 
2
 %
 
2,147

 
1,798

 
19
 %
Mid-Atlantic
168

 
184

 
(9
)%
 
634

 
736

 
(14
)%
Total
1,302

 
1,225

 
6
 %
 
4,672

 
4,079

 
15
 %


HOMES DELIVERED
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
 
 
 
 
%
 
 
 
 
 
%
Region
2018
 
2017
 
Change
 
2018
 
2017
 
Change
Midwest
583

 
461

 
26
 %
 
1,548

 
1,277

 
21
 %
Southern
612

 
520

 
18
 %
 
1,819

 
1,459

 
25
 %
Mid-Atlantic
227

 
275

 
(17
)%
 
586

 
769

 
(24
)%
Total
1,422

 
1,256

 
13
 %
 
3,953

 
3,505

 
13
 %


BACKLOG
 
September 30, 2018
 
September 30, 2017
 
 
 
Dollars
 
Average
 
 
 
Dollars
 
Average
Region
Units
 
(millions)
 
Sales Price
 
Units
 
(millions)
 
Sales Price
Midwest
1,284

 
$
549

 
$
427,000

 
1,025

 
$
416

 
$
406,000

Southern
1,236

 
$
454

 
$
367,000

 
1,013

 
$
360

 
$
355,000

Mid-Atlantic
326

 
$
137

 
$
421,000

 
340

 
$
136

 
$
399,000

Total
2,846

 
$
1,140

 
$
401,000

 
2,378

 
$
912

 
$
383,000



LAND POSITION SUMMARY
 
September 30, 2018
 
 
September 30, 2017
 
Lots
Lots Under
 
 
 
Lots
Lots Under
 
Region
Owned
Contract
Total
 
 
Owned
Contract
Total
Midwest
5,561

6,921

12,482

 
 
4,622

4,947

9,569

Southern
6,288

6,023

12,311

 
 
5,081

7,688

12,769

Mid-Atlantic
1,931

2,881

4,812

 
 
1,746

2,779

4,525

Total
13,780

15,825

29,605

 
 
11,449

15,414

26,863