M/I Homes Reports
Second Quarter Results
Columbus, Ohio (July 28, 2011) - M/I Homes, Inc. (NYSE:MHO) announced results for the second quarter and six months ended June 30, 2011.
2011 Second Quarter Results:
| • | Adjusted pre-tax loss from operations of $3.5 million |
| • | Net loss of $9.1 million |
| • | Adjusted EBITDA of $4.9 million |
| • | New contracts increased 5% |
| • | Homes delivered down 25% |
| • | Backlog units and value up 11% and 7% |
| • | Total cash balance of $113.8 million, including $45 million of unrestricted cash |
| • | Net debt to net capital ratio of 37% |
| • | Closed acquisition of TriStone Homes in San Antonio, Texas |
For the second quarter of 2011, the Company reported a net loss of $9.1 million, or $0.49 per share, compared to a net loss of $4.8 million, or $0.26 per share during the second quarter of 2010. The current quarter loss consists primarily of a $3.5 million adjusted pre-tax loss from operations and $5.5 million of asset impairments. The prior year second quarter loss consisted of $1.7 million adjusted pre-tax income from operations and $6.5 million of asset impairments. The Company reported a net loss of $26.2 million for the first half of 2011, or $1.40 per share, compared to a net loss of $13.1 million, or $0.71 per share, for the same period a year ago.
New contracts for 2011's second quarter were 635, up 5% from 2010's second quarter of 602. For the first six months of 2011, new contracts declined 6% from 1,367 in 2010 to 1,289 in 2011. M/I Homes had 115 active communities at June 30, 2011 compared to 109 at June 30, 2010 and 111 at March 31, 2011. The Company's cancellation rate was 20% in the second quarter of 2011 compared to 16% in 2010's second quarter. Homes delivered in 2011's second quarter were 590 compared to 790 in 2010's second quarter. Homes delivered for the six months ended June 30, 2011 were 1,029 compared to 2010's deliveries of 1,269. Backlog of homes at June 30, 2011 had a sales value of $214 million, with an average sales price of $257,000 and backlog units of 833. At June 30, 2010 backlog sales value was $200 million, with an average sales price of $267,000 and backlog units of 748.
Robert H. Schottenstein, Chief Executive Officer and President, commented, “Housing conditions continued to be challenging during the second quarter. While our new contracts improved over last year's second quarter, the spring selling season was not nearly as robust as many had expected. General economic uncertainty and caution by consumers, as well as tougher lending standards, are keeping many would-be homebuyers on the sidelines. Despite this year's challenging market conditions, we are encouraged by a number of performance metrics for the quarter, including a sequential improvement of 70 basis points in our adjusted operating gross margin from 2011's first quarter, a reduction in our selling, general and administrative expenses in the quarter compared to 2010's second quarter, and our eighth consecutive quarter of positive adjusted EBITDA. We also continue to be pleased with the performance of our new communities."
Mr. Schottenstein continued, “Because economic conditions remain uncertain, we will continue to manage cautiously while taking advantage of opportunities, like our recent San Antonio acquisition, that we believe will improve our business. We ended the quarter with $114 million of cash, no outstanding borrowings under our $140 million homebuilding credit facility, and a 37% net debt to net capital ratio. Looking ahead, we will continue focusing on our core business strategies while maintaining tight controls on our expenses. We are confident that our strategy and market position should allow us to continue making progress as we strive to return to profitability."
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 July 2012.
M/I Homes, Inc. is one of the nation's leading builders of single-family homes, having delivered over 79,000 homes. The Company's homes are marketed and sold under the trade names M/I Homes, Showcase Homes and TriStone Homes. The Company has homebuilding operations in Columbus and Cincinnati, Ohio; Chicago, Illinois; Indianapolis, Indiana; Tampa and Orlando, Florida; 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, 2010, 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 the following non-GAAP financial measures: adjusted operating gross margin, adjusted operating gross margin percentage, adjusted pre-tax loss from operations, and adjusted EBITDA. For these measures, we have provided reconciliations to the most comparable GAAP measures along with an explanation of the usefulness of the non-GAAP measures. Please see the “Non-GAAP Financial Results / Reconciliations” table below.
Contact M/I Homes, Inc.
Phillip G. Creek, Executive Vice President, Chief Financial Officer, (614) 418-8011
Ann Marie W. Hunker, Vice President, Controller, (614) 418-8225
Kevin C. Hake, Senior Vice President, Treasurer (614) 418-8227
M/I Homes, Inc. and Subsidiaries
Summary Operating Results (Unaudited)
(Dollars in thousands, except per share amounts)
| Three Months Ended | Six Months Ended | ||||||||||||||
| June 30, | June 30, | ||||||||||||||
| 2011 | 2010 | 2011 | 2010 | ||||||||||||
| New contracts | 635 | 602 | 1,289 | 1,367 | |||||||||||
| Average community count | 113 | 109 | 112 | 107 | |||||||||||
| Cancellation rate | 20 | % | 16 | % | 18 | % | 17 | % | |||||||
| Backlog units | 833 | 748 | |||||||||||||
| Backlog value | $ | 214,019 | $ | 199,986 | |||||||||||
| Homes delivered | 590 | 790 | 1,029 | 1,269 | |||||||||||
| Average home closing price | $ | 227 | 245 | $ | 234 | $ | 243 | ||||||||
| Homebuilding revenue: | |||||||||||||||
| Housing revenue | $ | 134,044 | $ | 192,917 | $ | 240,564 | $ | 308,513 | |||||||
| Land revenue | 105 | — | 955 | 86 | |||||||||||
| Total homebuilding revenue | $ | 134,149 | $ | 192,917 | $ | 241,519 | $ | 308,599 | |||||||
| Financial services revenue | 3,295 | 3,487 | 6,495 | 7,194 | |||||||||||
| Total revenue | $ | 137,444 | $ | 196,404 | $ | 248,014 | $ | 315,793 | |||||||
| Cost of sales - operations | 114,043 | 165,063 | 206,617 | 263,771 | |||||||||||
| Cost of sales - impairment / other | 5,445 | 6,294 | 16,316 | 10,010 | |||||||||||
| Gross margin | 17,956 | 25,047 | 25,081 | 42,012 | |||||||||||
| General and administrative expense | 12,766 | 13,561 | 24,168 | 26,453 | |||||||||||
| Selling expense | 10,754 | 14,153 | 19,408 | 24,747 | |||||||||||
| Operating loss | (5,564 | ) | (2,667 | ) | (18,495 | ) | (9,188 | ) | |||||||
| Interest expense | 3,465 | 2,079 | 7,500 | 4,220 | |||||||||||
| Loss before income taxes | (9,029 | ) | (4,746 | ) | (25,995 | ) | (13,408 | ) | |||||||
| Expense (benefit) for income taxes | 115 | 61 | 188 | (266 | ) | ||||||||||
| Net loss | (9,144 | ) | (4,807 | ) | (26,183 | ) | (13,142 | ) | |||||||
| Net loss per share | $ | (0.49 | ) | $ | (0.26 | ) | $ | (1.40 | ) | $ | (0.71 | ) | |||
| Weighted average shares outstanding: | |||||||||||||||
| Basic | 18,711 | 18,523 | 18,663 | 18,522 | |||||||||||
| Diluted | 18,711 | 18,523 | 18,663 | 18,522 | |||||||||||
M/I Homes, Inc. and Subsidiaries
Summary Balance Sheet and Other Information (unaudited)
(Dollars in thousands, except per share amounts)
| As of | |||||||
| June 30, | |||||||
| 2011 | 2010 | ||||||
| Assets: | |||||||
Total cash and cash equivalents(1) | $ | 113,802 | $ | 128,673 | |||
| Mortgage loans held for sale | 35,725 | 51,944 | |||||
| Inventory: | |||||||
| Lots, land and land development | 250,497 | 232,171 | |||||
| Land held for sale | — | 3,047 | |||||
| Homes under construction | 174,314 | 171,113 | |||||
| Other inventory | 37,985 | 26,917 | |||||
| Total inventory | $ | 462,796 | $ | 433,248 | |||
| Property and equipment - net | 15,461 | 17,778 | |||||
| Investments in unconsolidated joint ventures | 10,026 | 10,569 | |||||
| Income tax receivable | 1,163 | 4,450 | |||||
Other assets(2) | 14,310 | 18,494 | |||||
| Total Assets | $ | 653,283 | $ | 665,156 | |||
| Liabilities: | |||||||
| Debt - Homebuilding Operations: | |||||||
| Senior notes | $ | 238,813 | $ | 199,552 | |||
| Notes payable - other | 5,801 | 6,010 | |||||
| Total Debt - Homebuilding Operations | $ | 244,614 | $ | 205,562 | |||
| Note payable bank - financial services operations | 32,133 | 33,911 | |||||
| Total Debt | $ | 276,747 | $ | 239,473 | |||
| Accounts payable | 43,191 | 48,376 | |||||
| Other liabilities | 53,317 | 62,074 | |||||
| Total Liabilities | $ | 373,255 | $ | 349,923 | |||
| Shareholders' Equity | 280,028 | 315,233 | |||||
| Total Liabilities and Shareholders' Equity | $ | 653,283 | $ | 665,156 | |||
| Book value per common share | $ | 9.62 | $ | 11.62 | |||
Net debt/net capital ratio(3) | 37 | % | 26 | % | |||
| (1) | 2011 and 2010 amounts include $68.9 million and $47.1 million of restricted cash and cash held in escrow, respectively. |
| (2) | 2011 and 2010 amounts include gross deferred tax assets of $138.2 million and $122.0 million, respectively, net of valuation allowances of $138.2 million and $122.0 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 | Six Months Ended | ||||||||||||||
| June 30, | June 30, | ||||||||||||||
| 2011 | 2010 | 2011 | 2010 | ||||||||||||
Adjusted operating gross margin(1) | $ | 23,401 | $ | 31,341 | $ | 41,397 | $ | 52,022 | |||||||
Adjusted operating gross margin %(1) | 17.0 | % | 16.0 | % | 16.7 | % | 16.5 | % | |||||||
Adjusted pre-tax (loss) income from operations(1) | $ | (3,542 | ) | $ | 1,730 | $ | (9,379 | ) | $ | (3,141 | ) | ||||
Adjusted EBITDA(1) | $ | 4,929 | $ | 11,429 | $ | 7,621 | $ | 12,774 | |||||||
| Cash flow used in operating activities | $ | (11,146 | ) | $ | (13,403 | ) | $ | (8,519 | ) | $ | (18,038 | ) | |||
| Cash used in investing activities | $ | (30,038 | ) | $ | (13,251 | ) | $ | (29,044 | ) | $ | (16,008 | ) | |||
| Cash provided by financing activities | $ | 5,723 | $ | 5,670 | $ | 1,255 | $ | 5,718 | |||||||
| Land/lot purchases | $ | 17,179 | $ | 32,861 | $ | 36,456 | $ | 58,143 | |||||||
| Land development spending | $ | 12,649 | $ | 9,029 | $ | 20,214 | $ | 14,638 | |||||||
| Land/lot sale proceeds | $ | 105 | $ | — | $ | 955 | $ | 86 | |||||||
| Financial services pre-tax income | $ | 1,441 | $ | 1,248 | $ | 2,793 | $ | 2,981 | |||||||
| Deferred tax asset valuation allowance | $ | 3,754 | $ | 1,887 | $ | 10,312 | $ | 4,921 | |||||||
Impairment and Abandonments by Region
(Dollars in thousands)
| Three Months Ended | Six Months Ended | ||||||||||||||
| June 30, | June 30, | ||||||||||||||
| Impairment by Region: | 2011 | 2010 | 2011 | 2010 | |||||||||||
| Midwest | $ | 5,327 | $ | 2,971 | $ | 10,339 | $ | 2,972 | |||||||
| Southern | 101 | 437 | 5,960 | 2,172 | |||||||||||
| Mid-Atlantic | 17 | 2,886 | 17 | 4,266 | |||||||||||
| Total | $ | 5,445 | $ | 6,294 | $ | 16,316 | $ | 9,410 | |||||||
| Abandonments by Region: | |||||||||||||||
| Midwest | $ | 1 | $ | 79 | $ | 22 | $ | 89 | |||||||
| Southern | 29 | — | 37 | 1 | |||||||||||
| Mid-Atlantic | 12 | 103 | 241 | 167 | |||||||||||
| Total | $ | 42 | $ | 182 | $ | 300 | $ | 257 | |||||||
| (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 | Six Months Ended | ||||||||||||||
| June 30, | June 30, | ||||||||||||||
| 2011 | 2010 | 2011 | 2010 | ||||||||||||
| Gross margin | $ | 17,956 | $ | 25,047 | $ | 25,081 | $ | 42,012 | |||||||
| Add: Impairments | 5,445 | 6,294 | 16,316 | 9,410 | |||||||||||
| Imported drywall charges | — | — | — | 600 | |||||||||||
| Adjusted operating gross margin | $ | 23,401 | $ | 31,341 | $ | 41,397 | $ | 52,022 | |||||||
| Loss before income taxes | $ | (9,029 | ) | $ | (4,746 | ) | $ | (25,995 | ) | $ | (13,408 | ) | |||
| Add: Impairments and abandonments | 5,487 | 6,476 | 16,616 | 9,667 | |||||||||||
| Imported drywall charges | — | — | — | 600 | |||||||||||
| Adjusted pre-tax (loss) income from operations | $ | (3,542 | ) | $ | 1,730 | $ | (9,379 | ) | $ | (3,141 | ) | ||||
| Net loss | $ | (9,144 | ) | $ | (4,807 | ) | $ | (26,183 | ) | $ | (13,142 | ) | |||
| Add (subtract): | |||||||||||||||
| Income taxes | 115 | 61 | 188 | (266 | ) | ||||||||||
| Interest expense net of interest income | 3,206 | 1,702 | 7,013 | 3,630 | |||||||||||
| Interest amortized to cost of sales | 2,819 | 4,954 | 5,157 | 7,185 | |||||||||||
| Depreciation and amortization | 1,888 | 2,254 | 3,789 | 4,216 | |||||||||||
| Non-cash charges | 6,045 | 7,265 | 17,657 | 11,151 | |||||||||||
| Adjusted EBITDA | $ | 4,929 | $ | 11,429 | $ | 7,621 | $ | 12,774 | |||||||
Adjusted operating gross margin, adjusted operating gross margin percentage, adjusted pre-tax (loss) income from operations and adjusted EBITDA 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 financial measures that can be compared to a prior period without regard to the variability of asset impairments and certain other write-offs and unusual charges. 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 financial results to the results 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. Adjusted EBITDA is also presented in accordance with the terms of our revolving credit facility.
M/I Homes, Inc. and Subsidiaries
Selected Supplemental Financial and Operating Data
| NEW CONTRACTS | |||||||||||||||||
| Three Months Ended | Six Months Ended | ||||||||||||||||
| June 30, | June 30, | ||||||||||||||||
| % | % | ||||||||||||||||
| Region | 2011 | 2010 | Change | 2011 | 2010 | Change | |||||||||||
| Midwest | 308 | 310 | (1 | )% | 595 | 746 | (20 | )% | |||||||||
| Southern | 143 | 133 | 8 | % | 302 | 272 | 11 | % | |||||||||
| Mid-Atlantic | 184 | 159 | 16 | % | 392 | 349 | 12 | % | |||||||||
| Total | 635 | 602 | 5 | % | 1,289 | 1,367 | (6 | )% | |||||||||
| HOMES DELIVERED | |||||||||||||||||
| Three Months Ended | Six Months Ended | ||||||||||||||||
| June 30, | June 30, | ||||||||||||||||
| % | % | ||||||||||||||||
| Region | 2011 | 2010 | Change | 2011 | 2010 | Change | |||||||||||
| Midwest | 273 | 430 | (37 | )% | 487 | 695 | (30 | )% | |||||||||
| Southern | 154 | 151 | 2 | % | 233 | 244 | (5 | )% | |||||||||
| Mid-Atlantic | 163 | 209 | (22 | )% | 309 | 330 | (6 | )% | |||||||||
| Total | 590 | 790 | (25 | )% | 1,029 | 1,269 | (19 | )% | |||||||||
| BACKLOG | |||||||||||||||||||||
| June 30, 2011 | June 30, 2010 | ||||||||||||||||||||
| Dollars | Average | Dollars | Average | ||||||||||||||||||
| Region | Units | (millions) | Sales Price | Units | (millions) | Sales Price | |||||||||||||||
| Midwest | 444 | $ | 110 | $ | 248,000 | 468 | $ | 115 | $ | 246,000 | |||||||||||
| Southern | 197 | $ | 44 | $ | 225,000 | 83 | $ | 18 | $ | 212,000 | |||||||||||
| Mid-Atlantic | 192 | $ | 60 | $ | 310,000 | 197 | $ | 67 | $ | 341,000 | |||||||||||
| Total | 833 | $ | 214 | $ | 257,000 | 748 | $ | 200 | $ | 267,000 | |||||||||||
| LAND POSITION SUMMARY | ||||||||||||||
| June 30, 2011 | June 30, 2010 | |||||||||||||
| Lots | Lots Under | Lots | Lots Under | |||||||||||
| Region | Owned | Contract | Total | Owned | Contract | Total | ||||||||
| Midwest | 3,990 | 1,052 | 5,042 | 4,027 | 1,286 | 5,313 | ||||||||
| Southern | 1,390 | 796 | 2,186 | 1,576 | 184 | 1,760 | ||||||||
| Mid-Atlantic | 1,907 | 1,152 | 3,059 | 2,069 | 419 | 2,488 | ||||||||
| Total | 7,287 | 3,000 | 10,287 | 7,672 | 1,889 | 9,561 | ||||||||