Exhibit 99.1
M/I Homes Reports
Third Quarter Results
Columbus, Ohio (October 25, 2010) - M/I Homes, Inc. (NYSE:MHO) announced results for the third quarter and nine months ended September 30, 2010.
2010 Third Quarter Highlights:
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| • | Operating gross margins of 18.1% |
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| • | Pre-tax loss from operations of $2.2 million; net loss of $2.1 million |
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| • | EBITDA of $7.3 million - fifth consecutive quarter of positive EBITDA |
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| • | Net debt to net capital ratio of 30% |
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| • | Backlog average sales price of $261,000 |
For the third quarter of 2010, the Company reported a net loss of $2.1 million, or $0.11 per share, compared to a net loss of $21.1 million, or $1.14 per share during the third quarter of 2009. The current quarter loss includes $1.9 million of asset impairments, offset by a $2.4 million recovery related to imported drywall. The Company reported a net loss of $15.2 million for the first nine months of 2010, or $0.82 per share, compared to a net loss of $69.1 million, or $4.29 per share, for the same period a year ago.
Homes delivered in the third quarter of 2010 decreased 23% to 515 from 665 in the same period of 2009. For the nine months ended September 30, 2010, homes delivered increased 15% to 1,784 from 1,551 in the same period of 2009. New contracts for 2010's third quarter were 489, down 21% from 2009's third quarter of 619. For the first nine months of 2010, new contracts were 1,856 compared to 2,045 in the first nine months of 2009 . The Company had 108 active communities at September 30, 2010 compared to 105 at September 30, 2009 and 109 at June 30, 2010. The backlog of homes at September 30, 2010 had a sales value of $188 million, consisting of 722 units with an average sales price of $261,000. The backlog of homes at September 30, 2009 had a sales value of $263 million comprised of 1,060 units with an average sales price of $248,000.
Robert H. Schottenstein, Chief Executive Officer and President, commented, “Housing conditions continued to be challenging during our third quarter. We experienced sluggish demand for new homes linked to high unemployment rates and low levels of consumer confidence across our markets. From a macro standpoint, demand for new homes has been adversely affected by weak and uncertain general economic conditions along with the expiration of the federal homebuyer tax credit. Despite these conditions and our decline in volume, we were pleased that our third quarter operating gross margin of 18.1% reached its highest level in three years, and improved by m ore than 200 basis points from the second quarter's 16.0 %. Our selling, general and administrative expenses declined compared to the prior year quarter and our net loss improved to $2 million from a loss of $21 million a year ago. We also achieved our fifth consecutive quarter of positive EBITDA.”
Mr. Schottenstein continued, “Housing and general economic conditions are likely to remain uncertain and choppy in the near term. Because of this, we will continue to manage cautiously. We ended the quarter with $92 million of cash, no outstanding borrowings under our $140 million homebuilding credit facility, and a 30% net debt to net capital ratio. Looking ahead, we will continue focusing on our core business strategies while maintaining tight controls on ou r expenses.”
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 2011.
M/I Homes, Inc. is one of the nation's leading builders of single-family homes, having delivered over 77,500 homes. The Company's homes ar e 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 and Orlando, Florida; Charlotte and Raleigh, North Carolina; the Virginia and Maryland suburbs of Washington, D.C.; and Houston, Texas.
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, 2009, 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 increa se 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.
We have used non-GAAP financial measures in this press release, including adjusted operating gross margin, adjusted gross margin percentage, adjusted pre-tax loss from operations, adjusted EBITDA and adjusted cash flow provided by (used in) operating activities. For these measures we have provided reconciliations to the most comparable GAAP measures along with an explanation of the usefulness of the non-GAAP measure. Please see the “Non-GAAP Financial Resu lts / Reconciliations” table.
Contact M/I Homes, Inc.
Phillip G. Creek, Executive Vice President, Chief Financial Officer, (614) 418-8011
Ann Marie W. Hunker, Vice President, Corporate Controller, (614) 418-8225
Kevin C. Hake, Vice President, Treasurer (614) 418-8224
M/I Homes, Inc. and Subsidiaries
Summary Operating Results (Unaudited)
(Dollars in thousands, except per share amounts)
| | | | | | | | | | | | | | | | |
| | | Three Months Ended | | Nine Months Ended |
| | | September 30, | | September 30, |
| | | 2010 | | 2009 | | 2010 | | 2009 |
| New contracts | | 489 | | | 619 | | | 1,856 | | | 2,045 | |
| Average community count | | 109 | | | 106 | | | 107 | | | 113 | |
| Cancellation rate | | 22 | % | | 20 | % | | 18 | % | | 18 | % |
| Backlog units | | | | | | 722 | | | 1,060 | |
| Backlog value | | | | | | $ | 188,000 | | | $ | 263,000 | |
| | | | | | | | | |
| Homes delivered | | 515 | | | 665 | | | 1,784 | | | 1,551 | |
| Average home closing price | | $ | 257 | | | $ | 224 | | | $ | 247 | | | $ | 228 | |
| | | | | | | | | |
| Total revenue | | $ | 135,609 | | | $ | 152,738 | | | $ | 451,402 | | | $ | 365,033 | |
| Cost of sales | | 110,455 | | | 146,378 | | | 384,236 | | | 353,413 | |
| Gross margin | | 25,154 | | | 6,360 | | | 67,166 | | | 11,620 | |
| General and administrative expense | | 13,148 | | | 14,414 | | | 39,601 | | | 42,831 | |
| Selling expense | | 11,735 | | | 11,601 | | | 36,482 | | | 30,339 | |
| Operating loss | | 271 | | | (19,655 | ) | | (8,917 | ) | | (61,550 | ) |
| Other loss | | — | | | — | | | — | | | 941 | |
| Interest expense | | 1,952 | | | 1,298 | | | 6,172 | | | 6,305 | |
| Loss before income taxes | | (1,681 | ) | | (20,953 | ) | | (15,089 | ) | | (68,796 | ) |
| Provision for income taxes | | 389 | | | 121 | | | 123 | | &n bsp; | 309 | |
| Net loss | | (2,070 | ) | | (21,074 | ) | | (15,212 | ) | | (69,105 | ) |
| Net loss per share | | $ | (0.11 | ) | | $ | (1.14 | ) | | $ | (0.82 | ) | | $ | (4.29 | ) |
| | | | | | | | | |
| Weighted average shares outstanding: | | | | | | | | |
| Basic | | 18,523 | | | 18,514 | | | 18,523 | | | 16,127 | |
| Diluted | | 18,523 | | | 18,514 | | | 18,523 | | | 16,127 | |
M/I Homes, Inc. and Subsidiaries
Summary Balance Sheet and Other Information (unaudited)
(Dollars in thousands, except per share and unit amounts)
| | | | | | | | |
| | | As of |
| | | September 30, |
| | | 2010 | | 2009 |
| Assets: | | | | |
Total cash and cash equivalents(1) | | $ | 92,002 | | | $ | 102,794 | |
| Mortgage loans held for sale | | 32,446 | | | 37,087 | |
| Inventory: | | | | |
| Lots, land and land development | | 258,657 | | | 259,651 | |
| Land held for sale | | — | | | 2,804 | |
| Homes under construction | | 199,129 | | | 206,361 | |
| Other inventory | | 30,200 | | | 25,454 | |
| Total inventory | | $ | 487,986 | | | $ | 494,270 | |
| | | | | |
| Property and equipment - net | | 17,453 | | | 19,701 | |
| Investments in unconsolidated joint ventures | | 11,102 | | | 7,656 | |
| Income tax receivable | | 4,298 | | | — | |
Other assets(2) | | 11,937 | | | 16,424 | |
| Total Assets | | $ | 657,224 | | | $ | 677,932 | |
| | | | | |
| Liabilities: | | | | |
| Debt - Homebuilding Operations: | | | | |
| Senior notes | | $ | 199,616 | | | 199,360 | |
| Notes payable - other | | 5,932 | | | 6,232 | |
| Total Debt - Homebuilding Operations | | $ | 205,548 | | | $ | 205,592 | &nb sp; |
| | | | | |
| Note payable bank - financial services operations | | 23,773 | | | 26,622 | |
| Total Debt | | $ | 229,321 | | | $ | 232,214 | |
| | | | | |
| Accounts payable | | 53,863 | | | 50,464 | |
| Obligations for inventory not owned | | 7,406 | | | 9,754 | |
| Other liabilities | | 52,751 | | | 66,543 | |
| Total Liabilities | | $ | 343,341 | | | $ | 358,975 | |
| | | | | |
| Shareholders' Equity | | 313,883 | | | 318,957 | |
| Total Liabilities and Shareholders' Equity | | $ | 657,224 | | | $ | 677,932 | |
| | | | | |
| Book value per common share | | $ | 11.55 | | | $ | 11.82 | |
Net debt/net capital ratio(3) | | 30 | % | | 29 | % |
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| (1) | 2010 and 2009 amounts include $48.1 million and $77.8 million of restricted cash and cash held in escrow, respectively. |
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| (2) | 2010 and 2009 amounts include gross deferred tax assets of $122.8 million and $128.2 million, respectively, net of valuation allowances of $122.8 million and $128.2 million, respectively. |
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| (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 | | Nine Months Ended |
| | | September 30, | | September 30, |
| | | 2010 | | 2009 | | 2010 | | 2009 |
| Homebuilding revenue: | | | | | | | | |
| Housing revenue | | $ | 132,003 | | | $ | 148,587 | | | $ | 440,516 | | | $ | 354,042 | |
| Land revenue | | — | | | 92 | | | 86 | | | 749 | |
| Total homebuilding revenue | | $ | 132,003 | | | $ | 148,679 | | | $ | 440,602 | | | $ | 354,791 | |
| | | | | | | | | |
| Financial services revenue | | 3,606 | | | 4,059 | | | 10,800 | | | 10,242 | |
| Total revenue | | $ | 135,609 | | | $ | 152,738 | | | $ | 451,402 | | | $ | 365,033 | |
| | | | | | | | | |
| Gross margin | | $ | 25,154 | | | $ | 6,360 | | | $ | 67,166 | | | $ | 11,620 | |
Adjusted operating gross margin(1) | | $ | 24,540 | | | $ | 25,722 | | | $ | 76,562 | | | $ | 53,754 | |
Adjusted operating gross margin %(1) | | 18.1 | % | | 16.8 | % | | 17.0 | % | | 14.7 | % |
| | | | | | | | | |
Adjusted pre-tax loss from operations(1) | | $ | (2,155 | ) | | $ | (1,224 | ) | | $ | (5,296 | ) | | $ | (22,123 | ) |
| | | | | | | | | |
Adjusted EBITDA(1) | | $ | 7,189 | | | $ | 1,212 | | | $ | 19,963 | | | $ | (11,514 | ) |
| &nb sp; | | | | | | | | |
| Cash flow (used in) provided by operating activities | | $ | (24,949 | ) | | $ | (15,834 | ) | | $ | (42,987 | ) | | $ | 25,017 | |
Adjusted cash flow provided by (used in) operating activities(1) | | $ | 25,935 | | | $ | (2,782 | ) | | $ | 80,593 | | | $ | 59,853 | |
| Cash (used in) provided by investing activities | | $ | (2,543 | ) | | $ | 8,674 | | | $ | (18,551 | ) | | $ | (63,682 | ) |
| Cash (used in) provided by financing activities | | $ | (10,216 | ) | | $ | 7,160 | | | $ | (4,498 | ) | | $ | 31,147 | |
| | | | | | | | | |
| Financial services pre-tax income | | $ | 1,519 | | | $ | 2,007 | | | $ | 4,500 | | | $ | 4,737 | |
| | | | | | | | | |
| Deferred tax asset valuation allowance - net | | $ | 763 | | | $ | 8,204 | | | $ | 5,684 | | | $ | 27,532 | |
Land, Lot and Investment in Unconsolidated Subsidiaries
Impairment by Region
(Dollars in thousands)
| | | | | | | | | | | | | | | | |
| | | Three Months Ended | | Nine Months Ended |
| | | September 30, | | September 30, |
| | | 2010 | | 2009 | | 2010 | | 2009 |
| Midwest | | $ | 141 | | | $ | 8,557 | | | $ | 3,113 | | | $ | 11,492 | |
| Florida | | 1,545 | | | 6,383 | | | 3,717 | | | 16,991 | |
| Mid-Atlantic | | 110 | | | 22 | | | 4,376 | | | 4,001 | |
| Total | | $ | 1,796 | | | $ | 14, 962 | | | $ | 11,206 | | | $ | 32,484 | |
| | | | | | | | | |
| Abandonments by Region: | | | | | | | | |
| Midwest | | $ | 5 | | | $ | 24 | | | $ | 94 | | | $ | 547 | |
| Florida | | 94 | | | 6 | | | 95 | | | 20 | |
| Mid-Atlantic | | 41 | | | 42 | | | 208 | | | 921 | |
| Total | | $ | 140 | | | $ | 72 | | | $ | 397 | | | $ | 1,488 | |
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| (1) | See “Non-GAAP Financial Results / Reconciliations” table below. |
M/I Homes, Inc. and Subsidiaries
Non-GAAP Financial Results / Reconciliations
(Dollars in thousands)
| | | | | | | | | | | | | | | | |
| | | Three Months Ended | | Nine Months Ended |
| | | September 30, | | September 30, |
| | | 2010 | | 2009 | | 2010 | | 2009 |
| Gross margin | | $ | 25,154 | | | $ | 6,360 | | | $ | 67,166 | | | $ | 11,620 | |
| Add: Impairments | | 1,796 | | | 14,962 | | | 11,206 | | | 32,484 | |
| Imported drywall charges | | (2,410 | ) | | 4,400 | | | (1,810 | ) | | 9,650 | |
| Adjusted operating gross margin | | $ | 24,540 | | | $ | 25,722 | | | $ | 76,562 | | | $ | 53,754 | |
| | | | | | | | | |
| Loss before income taxes | | $ | (1,681 | ) | | $ | (20,953 | ) | | $ | (15,089 | ) | | $ | (68,796 | ) |
| Add: Impairments and abandonments | | 1,936 | | | 15,034 | | | 11,603 | | | 33,972 | |
| Imported drywall charges | | (2,410 | ) | | 4,400 | | | (1,810 | ) | | 9,650 | |
| Other loss/expense | | — | | | — | | | — | | | 941 | |
| Restructuring/bad debt expense | | — | | | 295 | | | — | | | 2,110 | |
| Adjusted pre-tax loss from operations | | $ | (2,155 | ) | | $ | (1,224 | ) | | $ | (5,296 | ) | | $ | (22,123 | ) |
| | | | | | | | | |
| Net loss | | $ | (2,070 | ) | | $ | (21,074 | ) | | $ | (15,212 | ) | | $ | (69,105 | ) |
| Add (subtract): | | | | | | | | |
| Income taxes | | 389 | | | 121 | | | 123 | | | 309 | |
| Interest expense net of interest income | | 1,631 | | | 1,007 | | | 5,261 | | | 5,538 | |
| Interest amortized to cost of sales | | 2,719 | | | 3,363 | | | 9,904 | | | 8,093 | |
| Depreciation and amortization | | 1,889 | | | 1,930 | | | 6,105 | | | 6,342 | |
| Non-cash charges | | 2,631 | | | 15,865 | | | 13,782 | | | 37,309 | |
| Adjusted EBITDA | | $ | 7,189 | | | $ | 1,212 | | | $ | 19,963 | | | $ | (11,514 | ) |
| | | | | | | | | |
| Cash flow (used in) provided by operating activities | | $ | (24,949 | ) | | $ | (15,834 | ) | | $ | (42,987 | ) | | $ | 25,017 | |
| Add: Land/lot purchases | | 35,873 | | | 7,821 | | | 94,017 | | | 22,157 | |
| Land development spending | | 15,011 | | | 5,323 | | | 29,649 | | | 13,428 | |
| Less: Land/lot sale proceeds | | — | | | (92 | ) | | (86 | ) | | (749 | ) |
| Adjusted cash flows provided by (used in) operating activities | | $ | 25,935 | | | $ | (2,782 | ) | | $ | 80,593 | | | $ | 59,853 | |
Adjusted operating gross margin, adjusted operating gross margins %, adjusted pre-tax loss from operations, adjusted EBITDA and adjusted cash flows provided by (used in) operating activities are non-GAAP financial measures. Management finds these measures to be useful in evaluating the Company's performance because they disclose the financial results generated from homes the Company actually delivered during the period, as the asset impairments and certain other write-offs relate, in part, to inventory that was not delivered during the period. They also assist the Company's management in making strategic decisions regarding the Company's future operations. The Company believes investors will also find these measures to be important and useful because they disclose profitability measures that can be compared to a prior period without regard to the variability of asset impairments and certain other write-offs. In addition, to the extent that the Company's competitors provide similar information, disclosure of these measures helps readers of the Company's financial statements compare the Company's profits to the profits of its competitors with regard to the homes they deliver in the same period. Because these measures are not calculated in accordance with GAAP, they may not be completely comparable to similarly titled measures of the Company's competitors due to potential differences in methods of calculation and charges being excluded. Due to the significance of the GAAP components excluded, such measures should not be considered in isolation or as an alternative to operating performance measures prescribed by GAAP.
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 | 2010 | | 2009 | | Change | | 2010 | | 2009 | | Change |
| | | | | | | | | | | | |
| Midwest | 248 | | | 322 | | | (23 | ) | | 994 | | | 1,076 | | | (8 | ) |
| | | | | | | | | | | | |
| Florida | 93 | | | 124 | | | (25 | ) | | 365 | | | 348 | | | 5 | |
| | | | | | | | | | | | |
| Mid-Atlantic | 148 | | | 173 | | | (14 | ) | | 497 | | | 621 | | | (20 | ) |
| | | | ; | | | | | | | | |
| Total | 489 | | | 619 | | | (21 | ) | | 1,856 | | | 2,045 | | | (9 | ) |
| | | | | | | | | | | | | | | | |
| | HOMES DELIVERED |
| | Three Months Ended | | Nine Months Ended |
| | September 30, | | September 30, |
| | | | | | % | | | | | | % |
| Region | 2010 | | 2009 | | Change | | 2010 | | 2009 | | Change |
| | | | | | | | | | | | |
| Midwest | 272 | | | 367 | | | (26 | ) | | 967 | | | 783 | | | 23 |
| | | | | | | | | | | | |
| Florida | 79 | | | 107 | | | (26 | ) | | 323 | | | 302 | | | 7 |
| | | | | | | | | | | | |
| Mid-Atlantic | 164 | | | 191 | | | (14 | ) | | 494 | | | 466 | | | 6 |
| | | | | | | | | | | | |
| Total | 515 | | | 665 | | | (23 | ) | | 1,784 | | | 1,551 | | | 15 |
| | | | | | | | | | | | | | | | | | | | | |
| | BA CKLOG |
| | September 30, 2010 | | September 30, 2009 |
| | | | Dollars | | Average | | | | Dollars | | Average |
| Region | Units | | (millions) | | Sales Price | | Units | | (millions) | | Sales Price |
| | | | | | | | | | | | |
| Midwest | 444 | | | $ | 110 | | | $ | 248,000 | | | 658 | | | $ | 144 | | | $ | 218,000 | |
| | | | | | | | | | | | |
| Florida | 97 | | | $ | 21 | | | $ | 221,000 | | | 123 | | | $ | 27 | | | $ | 224,000 | |
| | | | | | | | | | | | |
| Mid-Atlantic | 181 | | | $ | 57 | | | $ | 315,000 | | | 279 | | | $ | 92 | | | $ | 330,000 | |
| | | | | | | | | | | | |
| Total | 722 | | | $ | 188 | | | $ | 261,000 | | | 1,060 | | | $ | 263 | | | $ | 248,000 | |
| | | | | | | | | | | | | | |
| | LAND POSITION SUMMARY |
| | September 30, 2010 | | | September 30, 2009 |
| | Lots | Lots Under | | | | Lots | Lots Under | |
| Region | Owned | Contract | Total | | | Owned | Contract | Total |
| | | | | | | | | |
| Midwest | 4,189 | | 1,137 | | 5,326 | | | | 4,442 | | 1,111 | | 5,553 | |
| | | | | | | | | |
| Florida | 1,539 | | 223 | | 1,762 | | | | 1,591 | | 36 | | 1,627 | |
| | | | | | | | | |
| Mid-Atlantic | 2,080 | | 489 | | 2,569 | | | | 1,267 | | 803 | | 2,070 | |
| | | | | | | | | |
| Total | 7,808 | | 1,849 | | 9,657 | | | | 7,300 | | 1,950 | | 9,250 | |
