M/I Homes Reports
Second Quarter Results
Columbus, Ohio (July 31, 2007) - M/I Homes, Inc. (NYSE:MHO) announced results for the second quarter and six months ended June 30, 2007.
The Company reported a net loss of $42.6 million and a loss per common share of $3.05 in 2007’s second quarter, compared to net income of $18.3 million and diluted earnings per share of $1.29 in last year’s second quarter. Included in the Company’s 2007 second quarter loss are pre-tax charges totaling $72.1 million as follows: (i) land-related impairment and abandonment charges of $64.2 million; (ii) joint venture investment write-offs of $2.7 million; and (iii) $5.2 million for the write-off of acquisition intangibles. Exclusive of the $3.20 per share impact of these charges, the Company would have earned $0.15 per common share in the quarter. The Company reported a net loss of $40.4 million for the first half of 2007, or $2.89 per common share, compared to net income of $34.7 million, or diluted earnings per share of $2.43 in the same period a year ago.
The Company delivered 755 homes in the second quarter compared to 987 in same period of 2006, down 24%. Homes delivered for the six-months ended June 30, 2007 decreased 20% to 1,459 from 1,819 in 2006. New contracts for 2007’s second quarter were 688, down 10% from 2006’s second quarter of 764. For the first six-months, 2007’s new contracts declined 14% to 1,630 from 1,901 in 2006. The Company had 161 active communities at June 30, 2007 compared to 165 at June 30, 2006. The sales value of backlog of homes at June 30, 2007 was $554 million with backlog units of 1,694 and an average sales price of $327,000. The backlog of homes at June 30, 2006 had a sales value of $1.025 billion with backlog units of 2,889 and an average sales price of $355,000.
Robert H. Schottenstein, Chief Executive Officer and President, commented, “As I mentioned earlier this month in our units release, we continue to face challenging conditions in most of our markets. Increasing inventory of new and existing homes, credit tightening and weakening consumer sentiment have led to further price competition and margin compression. Notwithstanding these conditions, our business, excluding impairments and write-offs, produced gross margins of 22% and net income of approximately $7 million in the first half of 2007. We also reduced our owned lot count from 2006’s year-end by 9%. We continue to employ a predominantly defensive operating strategy to manage through this downturn.”
The Company will broadcast live its earnings conference call today at 4:00 p.m. EDT. To hear the call, 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.” The call, along with any applicable reconciliation of non-GAAP financial measures, will continue to be available on our website through July 31, 2008.
M/I Homes, Inc. is one of the nation’s leading builders of single-family homes, having delivered nearly 70,000 homes. The Company’s homes are marketed and sold under the trade names M/I Homes and Showcase Homes. The Company has homebuilding operations in Columbus and Cincinnati, Ohio; Chicago, Illinois; Indianapolis, Indiana; Tampa, Orlando and West Palm Beach, Florida; Charlotte and Raleigh, North Carolina; Delaware; 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 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, 2006. 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.
Contact M/I Homes, Inc.
Phillip G. Creek, Senior Vice President and Chief Financial Officer, (614) 418-8011
Ann Marie W. Hunker, Vice President and Corporate Controller, (614) 418-8225
investorrelations@mihomes.com
M/I Homes, Inc. and Subsidiaries
Consolidated Statements of Income
(In thousands, except per share amounts)
| | Three Months Ended | Six Months Ended |
| | June 30, | June 30, |
| | | | | |
| | 2007 | 2006 | 2007 | 2006 |
| | | | | |
| Revenue | $235,647 | | $311,794 | | $460,106 | | $570,849 |
| | | | | | | | |
| Net (loss) income | $ (40,179 | ) | $ 18,281 | | $ (37,949 | ) | $ 34,659 |
| | | | | | | | |
| Net (loss) income available to | | | | | | | |
| common shareholders | $ (42,617 | ) | $ 18,281 | | $ (40,387 | ) | $ 34,659 |
| | | | | | | | |
| Earnings per share | | | | | | | |
| Basic | $ (3.05 | ) | $ 1.31 | | $ (2.89 | ) | $ 2.47 |
| Diluted | $ (3.05 | ) | $ 1.29 | | $ (2.89 | ) | $ 2.43 |
| | | | | | | | |
| Weighted average shares outstanding | | | | | | | |
| Basic | 13,975 | | 13,973 | | 13,959 | | 14,042 |
| Diluted | 13,975 | | 14,174 | | 13,959 | | 14,247 |
M/I Homes, Inc. and Subsidiaries
Selected Supplemental Financial and Operating Data
(Dollars in thousands, except per share amounts)
| | Three Months Ended | | | Six Months Ended | |
| | June 30, | | | June 30, | |
| | 2007 | | | 2006 | | | 2007 | | | 2006 | |
| | | | | | | | | | | | |
| Revenue | $235,647 | | | $311,794 | | | $460,106 | | | $570,849 | |
| Gross margin | (15,514 | ) | | 85,986 | | | 32,079 | | | 156,675 | |
| General and administrative expense | 27,074 | | | 29,358 | | | 48,838 | | | 49,557 | |
| Selling expense | 19,622 | | | 22,952 | | | 37,601 | | | 43,865 | |
| Operating income | (62,210 | ) | | 33,676 | | | (54,360 | ) | | 63,253 | |
| Interest expense | 3,015 | | | 4,191 | | | 7,266 | | | 7,352 | |
| (Loss) income before income taxes | (65,225 | ) | | 29,485 | | | (61,626 | ) | | 55,901 | |
| Income tax (benefit) provision | (25,046 | ) | | 11,204 | | | (23,677 | ) | | 21,242 | |
| Net (loss) income | (40,179 | ) | | 18,281 | | | (37,949 | ) | | 34,659 | |
| Preferred stock dividend | 2,438 | | | - | | | 2,438 | | | - | |
| Net (loss) income available to | |
| common shareholders | $ (42,617 | ) | | $ 18,281 | | | $ (40,387 | ) | | $ 34,659 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Revenue: | | | | | | | | | | | |
| Housing revenue | $227,161 | | | $301,869 | | | $441,118 | | | $549,859 | |
| Land revenue | 4,703 | | | 2,772 | | | 9,069 | | | 4,422 | |
| Other | (1,012 | ) | | 1,110 | | | (228 | ) | | 4,797 | |
| Total homebuilding revenue | 230,852 | | | 305,751 | | | 449,959 | | | 559,078 | |
| | | | | | | | | | | | |
| Financial services revenue | 4,795 | | | 7,139 | | | 10,147 | | | 14,126 | |
| Eliminations | - | | | (1,096 | ) | | - | | | (2,355 | ) |
| Total revenue | $235,647 | | | $ 311,794 | | | $460,106 | | | $570,849 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Additional Information: | | | | | | | | | | | |
| Average closing price | $ 301 | | | $ 306 | | | $ 303 | | | $ 302 | |
| Housing gross margin percentage | (7.9 | )% | | 25.8 | % | | 5.2 | % | | 25.6 | % |
| Land gross margin percentage | (44.0 | )% | | 35.5 | % | | (12.4 | )% | | 25.7 | % |
| Land gross margin dollars | $ (2,068 | ) | | $ 983 | | | $ (1,126 | ) | | $ 1,136 | |
| | | | | | | | | | | | |
| Financial services pre-tax income | $ 2,188 | | | $ 4,253 | | | $ 4,838 | | | $ 8,320 | |
| | | | | | | | | | | | |
Land, Lot and Investment in | | | | | | | | | | | |
Unconsolidated Subsidiaries | | | | | | | | | | | |
Impairment by Region: | | | | | | | | | | | |
| Midwest | $ 7,129 | | | $ - | | | $ 6,889 | | | $ - | |
| Florida | 32,318 | | | - | | | 32,625 | | | - | |
| Mid-Atlantic | 26,613 | | | - | | | 27,691 | | | - | |
| Total Impairment | $ 66,060 | | | $ - | | | $ 67,205 | | | $ - | |
| | | | | | | | | | | | |
Abandonments by Region: | | | | | | | | | | | |
| Midwest | $ - | | | $ 226 | | | $ 22 | | | $ 246 | |
| Florida | 825 | | | 1,354 | | | 1,828 | | | 1,466 | |
| Mid-Atlantic | 16 | | | 229 | | | 46 | | | 238 | |
| Total Abandonments | $ 841 | | | $ 1,809 | | | $ 1,896 | | | $ 1,950 | |
M/I Homes, Inc. and Subsidiaries
Selected Supplemental Financial and Operating Data
(Dollars in thousands, except per share amounts)
| | Three Months Ended | | Six Months Ended | |
| | June 30, | | June 30, | |
| | 2007 | | 2006 | | 2007 | | 2006 | |
| | | | | | | | | |
| EBITDA (1) | $15,859 | | $ 37,804 | | $ 31,899 | | $ 70,913 | |
| Interest incurred – net of fee | | | | | | | | |
| amortization | $ 8,522 | | $ 11,134 | | $ 18,224 | | $ 20,389 | |
| Interest amortized to cost of sales | $ 3,640 | | $ 1,081 | | $ 7,036 | | $ 1,938 | |
| Depreciation and amortization | $ 1,943 | | $ 1,589 | | $ 3,868 | | $ 3,134 | |
| Non-cash charges | $72,850 | | $ 2,243 | | $ 76,026 | | $ 3,293 | |
| | | | | | | | | |
| Cash provided by (used in) operating | | | | | | | | |
| activities | $ 9,241 | | $(39,875 | ) | $ 62,437 | | $(137,280 | ) |
| Cash used in investing activities | $ (3,969 | ) | $(3,573 | ) | $ (6,203 | ) | $ (11,968 | ) |
| Cash provided by (used in) financing | | | | | | | | |
| activities | $ (7,159 | ) | $33,876 | | $ (65,402 | ) | $ 124,874 | |
| | | | �� | | | | | |
Units: | | | | | | | | |
| New contracts | 688 | | 764 | | 1,630 | | 1,901 | |
| Homes delivered | 755 | | 987 | | 1,459 | | 1,819 | |
| | | | | | | | | |
| (1) Earnings before interest, taxes, depreciation and amortization ("EBITDA") is defined, in accordance with our credit facility, as net income, plus interest expense (including interest amortized to land and housing costs), income taxes, depreciation, amortization and non-cash charges, minus interest income. |
| | June 30, |
| 2007 | | 2006 |
Backlog: | | | |
| Units | 1,694 | | | 2,889 | |
| Aggregate sales value (million) | $ 554,000 | | | $1,025,000 | |
| Average sales price | $ 327 | | | $ 355 | |
| | | | | | |
| | June 30, |
| | 2007 | | 2006 |
Balance Sheet and Operating Data: | | | | | |
| Unrestricted cash/cash held in escrow | $ 16,013 | | | $ 17,554 | |
| | | | | | |
| Homebuilding inventory: | | | | | |
| Lots, land and land development costs | $ 643,016 | | | $ 862,396 | |
| Land held for sale | 55,095 | | | - | |
| Homes under construction | 383,490 | | | 410,544 | |
| Land purchase deposit | 5,139 | | | 10,987 | |
| Other | 41,623 | | | 16,842 | |
| Total homebuilding inventory | $1,128,363 | | | $1,300,769 | |
| | | | | | |
| Total assets | $1,359,523 | | | $1,475,102 | |
| Homebuilding debt | $ 470,610 | | | $ 652,584 | |
| Shareholders’ equity | $ 675,617 | | | $ 610,976 | |
| Total book value per share | $ 48.10 | | | $ 43.98 | |
| Book value per common share | $ 40.98 | | | $ 43.98 | |
| Homebuilding net debt/capital ratio | 40 | % | | 50 | % |
M/I Homes, Inc. and Subsidiaries
Selected Supplemental Financial and Operating Data
| | Land Position Summary |
| | |
| | June 30, 2007 | | June 30, 2006 |
| | | | | | | | |
| | Lots | Lots Under | | | Lots | Lots Under | |
| | Owned | Contract | Total | | Owned | Contract | Total |
| | | | | | | | |
| Midwest Region | 6,820 | 504 | 7,324 | | 8,175 | 3,262 | 11,437 |
| | | | | | | | |
| Florida Region | 8,390 | 351 | 8,741 | | 8,992 | 1,644 | 10,636 |
| | | | | | | | |
| Mid-Atlantic Region | 2,413 | 1,163 | 3,576 | | 3,180 | 1,704 | 4,884 |
| | | | | | | | |
| Total | 17,623 | 2,018 | 19,641 | | 20,347 | 6,610 | 26,957 |
