1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1997
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from _____ to _____
Commission file number 1-12434
M/I SCHOTTENSTEIN HOMES, INC.
-----------------------------
(Exact name of registrant as specified in its charter)
Ohio 31-1210837
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(State of incorporation) (I.R.S. Employer Identification No.)
3 Easton Oval, Suite 500, Columbus, Ohio 43219
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(Address of principal executive offices) (Zip Code)
(614) 418-8000
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(Telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common stock, par value $.01 per share: 7,597,561 shares
outstanding as of August 12, 1997
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M/I SCHOTTENSTEIN HOMES, INC.
FORM 10-Q
INDEX
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PAGE
PART I. FINANCIAL INFORMATION NUMBER
Item 1. Financial Statements
Consolidated Balance Sheets
June 30, 1997 and
December 31, 1996 3
Consolidated Statements of Income
for the Three Months and Six Months Ended
June 30, 1997 and 1996 4
Consolidated Statements of Cash Flows
for the Six Months Ended
June 30, 1997 and 1996 5
Notes to Interim Unaudited Consolidated Financial
Statements 6
Item 2. Management's Discussion and Analysis
of Results of Operations and
Financial Condition 8
PART II. Other Information
Item 1. Legal Proceedings 20
Item 2. Changes in Securities 20
Item 3. Defaults upon Senior Securities 20
Item 4. Submission of Matters to a Vote of Security
Holders 20
Item 5. Other Information 20
Item 6. Exhibits and Reports on Form 8-K 20
Signatures 21
Exhibit Index 22
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CONSOLIDATED BALANCE SHEETS
M/I SCHOTTENSTEIN HOMES, INC. AND SUBSIDIARIES
- -----------------------------------------------------------------------------------------------------------------
JUNE 30, December 31,
(Dollars in thousands) 1997 1996
- -----------------------------------------------------------------------------------------------------------------
(UNAUDITED)
ASSETS
Cash, including cash in escrow $ 11,124 $ 6,761
Receivables 25,697 34,447
Inventories:
Single-family lots, land and land development costs 139,697 129,025
Houses under construction 119,430 89,696
Model homes and furnishings - at cost (less accumulated depreciation:
June 30, 1997 - $61;
December 31, 1996 - $56) 21,909 19,482
Land purchase deposits 600 716
Office furnishings, transportation and construction equipment - at cost (less
accumulated depreciation:
June 30, 1997 - $3,693;
December 31, 1996 - $6,668) 8,185 1,635
Investment in unconsolidated joint ventures and limited partnerships 12,828 12,998
Other assets 9,758 10,599
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TOTAL $ 349,228 $ 305,359
==============================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable banks - home-building operations $129,000 $77,000
Note payable bank - financial operations 9,580 23,300
Subordinated notes 25,000 25,000
Accounts payable 42,137 32,016
Accrued compensation 5,941 11,802
Income taxes payable 1,162 1,502
Accrued interest, warranty and other 12,555 15,349
Customer deposits 9,097 7,071
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TOTAL LIABILITIES 234,472 193,040
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Commitments and Contingencies
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Stockholders' equity:
Preferred stock - $.01 par value;
authorized 2,000,000 shares;
none outstanding - -
Common stock - $.01 par value;
authorized 38,000,000 shares;
issued 8,800,000 shares, of which 500,000 shares are held in Treasury 88 88
Additional paid-in capital 50,573 50,573
Retained earnings 69,345 61,658
Treasury stock - at cost (5,250) -
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TOTAL STOCKHOLDERS' EQUITY 114,756 112,319
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TOTAL $ 349,228 $ 305,359
==============================================================================================================
See Notes to Interim Unaudited Consolidated Financial Statements.
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CONSOLIDATED STATEMENTS OF INCOME
M/I SCHOTTENSTEIN HOMES, INC. AND SUBSIDIARIES
(Unaudited)
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THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
(Dollars in thousands, except per share information) 1997 1996 1997 1996
- -------------------------------------------------------------------------------------------------------------
Revenue $146,014 $137,357 $251,843 $233,215
- ---------------------------------------------------------------------------------------------------------------
Costs and expenses:
Land and housing 117,459 110,975 201,532 187,930
General and administrative 8,388 7,559 14,798 13,518
Selling 9,620 8,948 17,537 16,743
Interest 2,699 3,097 5,061 6,028
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Total costs and expenses 138,166 130,579 238,928 224,219
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Income before income taxes 7,848 6,778 12,915 8,996
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Income taxes:
Current 3,213 3,817 4,364 4,125
Deferred - (975) 864 (388)
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Total income taxes 3,213 2,842 5,228 3,737
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Net income $ 4,635 $ 3,936 $ 7,687 $ 5,259
===============================================================================================================
Net income per common share $ 0.56 $ 0.45 $ 0.90 $ 0.60
===============================================================================================================
Weighted average common shares
outstanding 8,300,000 8,800,000 8,507,182 8,800,000
===============================================================================================================
See Notes to Interim Unaudited Consolidated Financial Statements.
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CONSOLIDATED STATEMENTS OF CASH FLOWS
M/I SCHOTTENSTEIN HOMES, INC. AND SUBSIDIARIES
(Unaudited)
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SIX MONTHS ENDED JUNE 30,
(Dollars in thousands) 1997 1996
- ---------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 7,687 $ 5,259
Adjustments to reconcile net income to net cash
used by operating activities:
Loss from property disposals 121 40
Depreciation and amortization 774 771
Decrease (increase) deferred income taxes 864 (975)
Decrease in receivables 8,750 1,109
Increase in inventories (38,242) (24,253)
Increase in other assets (132) (573)
Increase in accounts payable 10,121 14,321
Decrease in income taxes payable (340) (1,274)
Decrease in accrued liabilities (8,655) (2,057)
Equity in undistributed income of
unconsolidated joint ventures and limited partnerships (151) (84)
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Net cash used in operating activities (19,203) (7,716)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to model and office furnishings,
transportation and construction equipment (7,329) (301)
Investment in unconsolidated joint ventures (4,680) (5,003)
Distributions from unconsolidated joint ventures
and limited partnerships 519 358
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Net cash used in investing activities (11,490) (4,946)
- -------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Notes payable banks:
Cash proceeds from borrowings 131,490 132,096
Principal repayments (93,210) (119,016)
Principal repayments of mortgage notes payable - (404)
Net increase in customer deposits 2,026 3,773
Payments to acquire treasury stock (5,250) -
- ------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 35,056 16,449
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Net increase in cash 4,363 3,787
Cash balance at beginning of period 6,761 8,136
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Cash balance at end of period $ 11,124 $ 11,923
==================================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized) $ 4,555 $ 5,229
Income taxes $ 4,810 $ 5,415
NON-CASH TRANSACTIONS DURING THE YEAR:
Single-family lots distributed from unconsolidated joint ventures $ 4,482 $ 2,224
==================================================================================================================
See Notes to Interim Unaudited Consolidated Financial Statements.
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M/I SCHOTTENSTEIN HOMES, INC. AND SUBSIDIARIES
NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The accompanying consolidated financial statements and notes thereto have
been prepared in accordance with the rules and regulations of the Securities
and Exchange Commission for interim financial information. The results of
operations for the six months ended June 30, 1997 and 1996 are not
necessarily indicative of the results for the full year.
It is suggested that these financial statements be read in conjunction with
the financial statements, accounting policies and financial notes thereto
included in the Company's Annual Report to Shareholders for the year ended
December 31, 1996.
In the opinion of management, the accompanying unaudited financial statements
reflect all adjustments (consisting only of normal recurring accruals) which
are necessary for a fair presentation of financial results for the interim
periods presented.
NOTE 2. AMENDED LOAN AGREEMENTS
On May 7, 1997, the Company amended its bank loan agreement. Limits on
certain restrictive covenants were increased under the amended agreement. The
amount available and other terms of the agreement remain substantially the
same as those in the agreement that it amends.
On July 18, 1997, the Company and M/I Financial entered into a new $30
million bank loan agreement with the existing lender, pursuant to which the
Company and M/I Financial have the ability to borrow at (a) the prime rate
less 0.25%, or (b) LIBOR plus 1.75% or (c) a combination of (a) and (b). The
agreement was previously amended on June 20, 1997 extending the maturity date
until July 20, 1997 through a short-term note. The new agreement terminates
on June 25, 1998, at which time the unpaid balance is due.
NOTE 3. SUBORDINATED DEBT
The Company signed a letter of intent with BankBoston, N.A. to issue $50
million of Senior Subordinated Notes. The proceeds will be used to repay
outstanding amounts under the bank credit facility and the existing $25
million Subordinated Note. The notes will bear interest at a fixed rate of
9.51% and will mature in August of 2004. The Company expects to complete the
Subordinated Debt Agreement in late August of 1997.
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NOTE 4. INTEREST
The Company capitalizes interest during development and construction.
Capitalized interest is charged to interest expense as the related inventory
is delivered. The summary of total interest for the three and six months
ended June 30, 1997 and 1996 is as follows:
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
(Dollars in thousands) 1997 1996 1997 1996
- -------------------------------------------------------------------------------------------------------------
Interest capitalized, beginning of period $ 7,125 $ 7,648 $ 6,862 $ 7,560
Interest incurred 3,172 3,183 5,797 6,202
Interest expensed (2,699) (3,097) (5,061) (6,028)
- --------------------------------------------------------------------------------------------------------------
Interest capitalized, end of period $ 7,598 $ 7,734 $ 7,598 $ 7,734
==============================================================================================================
NOTE 5. CONTINGENCIES
At June 30, 1997, the Company had options and contingent purchase contracts
to acquire land and developed lots with an aggregate purchase price of
approximately $154.9 million.
NOTE 6. PER SHARE DATA
Per share data for the three and six months ended June 30, 1997 was computed
using the weighted average number of common shares outstanding during the
period of 8,300,000 and 8,507,182, respectively. The Company has no common
stock equivalents other than outstanding options, which have no significant
effect on the calculation.
NOTE 7. ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 128 (SFAS 128), "Earnings per
Share." SFAS 128 replaces the presentation of primary EPS with a presentation
of basic EPS. This statement is effective for financial statements for both
interim and annual periods ending after December 15, 1997. The Company has
determined that the new standard will have no material impact on its EPS
calculation.
In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 131 (SFAS 131), "Disclosure
about Segments of an Enterprise and Related Information". SFAS 131 is
required to be adopted for the Company's 1998 annual financial statements.
The Company has not yet determined what, if any, impact the adoption of this
standard will have on its financial statements.
NOTE 8. TREASURY STOCK
On August 1, 1997, the Company repurchased 702,439 shares of the Company's
common stock at $12.8125 per share, which represents the closing price of the
Company's common stock on July 30, 1997, from the Melvin L. Schottenstein
family interests. These shares are held as treasury shares by the Company.
The total purchase price was $9,000,000 and was paid from the Company's bank
credit facility.
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M/I SCHOTTENSTEIN HOMES, INC. AND SUBSIDIARIES
FORM 10-Q - PART I
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
CONSOLIDATED
Total Revenue. Total revenue for the three months ended June 30, 1997
increased $8.7 million and for the six months ended June 30, 1997 increased
$18.6 million from the comparable periods of 1996. Increases for the three-month
period in housing revenue of $8.8 million and other revenue of $0.5 million were
partially offset by a $0.6 million decrease in land revenue. For the six-month
period, housing revenue, other revenue and land revenue increased $14.6 million,
$1.1 million and $2.9 million, respectively. The increase in housing revenue for
both the three and six-month periods was attributable to an increase in the
average sales price of Homes Delivered of 9.3% and 7.2%, respectively. For both
periods, the increase in other revenue is primarily attributable to financial
services where the gains recognized from the sale of loans increased in the
current year. The decrease in land revenue for the three months ended June 30,
1997 was primarily due to a decrease in the number of lots sold to third parties
in the Maryland division from the comparable period of 1996. The increase in
land revenue for the six months ended June 30, 1997 was primarily due to an
increase in the number of lots sold to third parties in the Maryland division
over the comparable period of 1996.
Income Before Income Taxes. Income before income taxes for the three
months ended June 30, 1997 increased 15.8% and for the six months ended June 30,
1997 increased 43.6% from the comparable periods of 1996. The increase for the
three months ended June 30, 1997 related primarily to housing, where income
before income taxes increased from $5.7 million to $6.4 million. The increase
for the six months ended June 30, 1997 related primarily to housing and land,
where income before income taxes increased from $6.9 million to $9.8 million and
financial services, where income before income taxes increased from $2.1 million
to $3.1 million. The increase in housing for both the three- and six-month
periods was primarily due to the increase in the average sales price of Homes
Delivered. The increase in land for the six month period was primarily due to a
significant increase in the number of lots sold to third parties at relatively
high margins in the Maryland division during the first half of 1997 in
comparison to the first half of 1996. The increase in financial services was
primarily due to the significant increase in income from the sale of servicing
and marketing gains due to increased loan volume and the favorable interest rate
environment during the last half of 1996 and the first half of 1997. Income
before income taxes also increased due to a decrease in interest expense from
$3.1 and $6.0 million in the three and six months ended June 30, 1996,
respectively, to $2.7 and $5.1 million in the comparable periods of 1997. These
decreases were primarily attributable to a decrease in the weighted average
interest rate and an increase in the net amount of interest capitalized. The
weighted average interest rate decreased due to more favorable terms on the
Company's line of credit facilities and retirement of the 14% Subordinated Notes
and issuance of a new Subordinated Note in December 1996 at a significantly
lower rate. Capitalized interest increased due to a significant increase in the
Company's land development activities and land holdings in the first half of
1997.
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HOME-BUILDING SEGMENT
The following table sets forth certain information related to the Company's
home-building segment:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
(Dollars in thousands) 1997 1996 1997 1996
- --------------------------------------------------------------------------------------------------------------------------------
Revenue:
Housing sales $140,908 $132,100 $239,588 $224,993
Land and lot sales 2,793 3,370 7,395 4,475
Other income 408 225 704 428
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Total Revenue $144,109 $135,695 $247,687 $229,896
================================================================================================================================
Revenue:
Housing sales 97.8 % 97.3 % 96.7 % 97.9 %
Land and lot sales 1.9 2.5 3.0 1.9
Other income 0.3 0.2 0.3 0.2
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Total Revenue 100.0 100.0 100.0 100.0
Land and housing costs 81.9 82.2 81.8 82.2
- --------------------------------------------------------------------------------------------------------------------------------
Gross Margin 18.1 17.8 18.2 17.8
General and administrative expenses 2.9 2.3 3.1 2.7
Selling expenses 6.7 6.6 7.1 7.3
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Operating Income 8.5 8.9 8.0 7.8
================================================================================================================================
MIDWEST REGION
Unit Data:
New contracts, net 442 444 1,029 1,046
Homes delivered 464 479 806 798
Backlog at end of period 1,131 1,185 1,131 1,185
Average sales price of homes in backlog $177 $168 $177 $168
Aggregate sales value of homes in backlog $200,000 $198,000 $200,000 $198,000
Number of active subdivisions 75 85 75 85
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FLORIDA REGION
Unit Data:
New contracts, net 193 160 365 341
Homes delivered 165 167 277 280
Backlog at end of period 309 286 309 286
Average sales price of homes in backlog $181 $171 $181 $171
Aggregate sales value of homes in backlog $56,000 $49,000 $56,000 $49,000
Number of active subdivisions 35 40 35 40
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NORTH CAROLINA, VIRGINIA AND MARYLAND REGION
Unit Data:
New contracts, net 133 156 281 329
Homes delivered 147 149 250 264
Backlog at end of period 239 324 239 324
Average sales price of homes in backlog $263 $230 $263 $230
Aggregate sales value of homes in backlog $63,000 $75,000 $63,000 $75,000
Number of active subdivisions 35 35 35 35
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TOTAL
Unit Data:
New contracts, net 768 760 1,675 1,716
Homes delivered 776 795 1,333 1,342
Backlog at end of period 1,679 1,795 1,679 1,795
Average sales price of homes in backlog $190 $179 $190 $179
Aggregate sales value of homes in backlog $319,000 $322,000 $319,000 $322,000
Number of active subdivisions 145 160 145 160
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The Phoenix division, which began operations late in 1996, had no unit activity
for the three and six months ended June 30, 1997.
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A home is included in "New Contracts" when the Company's standard sales
contract, which requires a deposit and generally has no contingencies other than
for buyer financing, is executed. In the Midwest Region, contracts are sometimes
accepted contingent upon the sale of an existing home. "Homes Delivered"
represents units for which the closing of the sale has occurred and title has
transferred to the buyer. Revenue and cost of revenue for a home sale are
recognized at the time of such closing.
"Backlog" represents homes for which the Company's standard sales
contract has been executed, but which are not included in Homes Delivered
because closings for the sale of such homes have not yet occurred as of the end
of the periods specified. Most cancellations of contracts for homes in Backlog
occur because customers cannot qualify for financing. These cancellations
usually occur prior to the start of construction. Since the Company arranges
financing with guaranteed rates for many of its customers, the incidence of
cancellations after the start of construction is low. In the first six months of
1997, the Company delivered 1,333 homes, most of which were homes under contract
in Backlog at December 31, 1996. Of the 1,337 contracts in Backlog at December
31, 1996, 12.3% have been canceled as of June 30, 1997. For homes in Backlog at
December 31, 1995, 13.1% had been canceled as of June 30, 1996. For the homes in
Backlog at December 31, 1995, the final cancellation percentage was 14.4%.
Unsold speculative homes, which are in various stages of construction, totaled
131 and 145 at June 30, 1997 and 1996, respectively.
THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THREE MONTHS ENDED JUNE 30, 1996
Total Revenue. Total revenue for the three months ended June 30, 1997
increased 6.2% over the three months ended June 30, 1996. A 6.7% increase in
housing revenue was partially offset by a 17.1% decrease in land revenue. The
increase in housing revenue was due to a 9.3% increase in the average sales
price of Homes Delivered. The average sales price of Homes Delivered increased
in all of the Company's markets with the exception of Raleigh and Palm Beach
County; however, the increase was primarily due to increases in the Columbus and
Cincinnati markets where the Company is building in more upscale and certain
niche subdivisions. The decrease in land revenue from $3.4 million to $2.8
million was primarily attributable to the Maryland division. The Maryland
division had significant lot sales to outside home-builders from its Willows
land development project in the three months ended June 30, 1996 which did not
occur in the current year. The Company is developing additional sections of this
project and has entered into contracts to sell a portion of the lots developed
to certain outside home-builders.
Home Sales and Backlog. The Company recorded a 1.1% increase in the
number of New Contracts in the three months ended June 30, 1997 as compared to
the same period of 1996. New Contracts recorded in the second quarter of 1996
were higher in all of the Company's markets except Indianapolis, Raleigh and
Washington D.C. The Company believes the increase is partially attributable to
the more favorable interest rate environment in the second quarter of 1997 as
compared to the same period of 1996. The number of New Contracts recorded in
future periods will be dependent on numerous factors, including future economic
conditions, timing of land development, consumer confidence and interest rates
available to potential home buyers.
At June 30, 1997, the aggregate sales value of the Company's Backlog of
1,679 homes was approximately $319.0 million, representing a 0.9% decrease in
sales value and a 6.5% decrease in units from the levels reported at June 30,
1996. The decrease in units at June 30, 1997 is a result of near record
deliveries in the first half of 1997 and a decrease in New Contracts recorded in
the first half of 1997. The average sales price of homes in Backlog increased
6.1% from June 30, 1996 to June 30, 1997. This increase was primarily due to
increases in the Columbus, Cincinnati, Orlando and Maryland markets
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where the Company is building in more upscale and certain niche subdivisions.
The Chevy Chase subdivision in Maryland, where the Company started selling in
May of 1997, has an average selling price of over $700,000.
Gross Margin. The overall gross margin for the home-building segment
was 18.1% for the three month period ended June 30, 1997 compared to 17.8% for
the three month period ended June 30, 1996. While the gross margin from housing
sales remained close to record levels for the Company, the increase in overall
gross margin was mainly due to lot and land sales. The gross margin from housing
sales was 18.1% in the second quarter of 1997 as compared to 18.2% in the second
quarter of 1996. The overall increase in gross margin was mainly due to lot and
land sales, where margins increased from 14.4% to 27.4%. The Virginia division
had a significant increase in the number of lots sold to outside home-builders
from its Wallney Road development project. The division sold 8 lots in Wallney
Road in the second quarter of 1997, while there were no lots sold from this
project in the second quarter of 1996. Management continues to focus on
maintaining accurate, up-to-date costing information so that sales prices can be
set to achieve the desired margins. The Company has also focused on acquiring or
developing lots in premier locations so that it can obtain higher margins. The
Company's ability to maintain these levels of margins is dependent on a number
of factors, some of which are beyond the Company's control. Due to the strong
level of sales during the last quarter of 1996 and the first half of 1997, some
of the Company's divisions are beginning to experience shortages of qualified
subcontractors in certain construction trades. This could negatively impact
gross margins by requiring the Company to pay premiums to expedite construction
work or by delaying construction, thus delaying revenue recognition and
increasing carrying costs. In addition, due to the competitive sales
environment, the Company is offering promotions in selected cities which could
adversely impact gross margins in 1997.
General and Administrative Expenses. General and administrative
expenses as a percentage of total revenue increased from 2.3% for the three
months ended June 30, 1996 to 2.9% for the three months ended June 30, 1997.
This increase was primarily attributable to the increase in bonuses recorded in
the second quarter of 1997 as compared to the second quarter of 1996 due to the
significant increase in net income. Additionally, the Company incurred general
and administrative expenses of approximately $510,000 in their newest market,
Phoenix, Arizona.
Selling Expenses. Selling expenses as a percentage of total revenue
increased slightly from 6.6% for the three months ended June 30, 1996 to 6.7%
for the three months ended June 30, 1997. This increase was primarily due to
increases in sales commissions paid to internal salespeople as a result of the
increase in sales volume.
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996
Total Revenue. Total revenue for the six months ended June 30, 1997
increased 7.7% from the comparable period of 1996. The increase resulted from
significant increases in both housing revenue and lot and land sales. The
increase in housing revenue was attributable to a 7.2% increase in the average
sales price of Homes Delivered. The average sales price of Homes Delivered
increased in all of the Company's markets with the exception of Raleigh, Orlando
and Palm Beach County; however, the increase was primarily due to increases in
the Columbus, Cincinnati and Charlotte markets where the Company is building in
more upscale and certain niche subdivisions. The increase in land revenue from
$4.5 million to $7.4 million was primarily attributable to the Maryland
division. The Maryland division had significant lot sales to outside
home-builders from its Willows land development project in the six months ended
June 30, 1997 which did not occur in the prior year. The Company is developing
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additional sections of this project and has entered into contracts to sell a
portion of the lots developed to certain outside home-builders.
Home Sales and Backlog. The number of New Contracts recorded during the
first six months of 1997 was 2.4% lower than the number recorded for the
comparable period in the prior year. New Contracts recorded in the first six
months of 1997 were lower in all of the Company's regions, except the Florida
region. The decrease in the number of New Contracts recorded is primarily
attributable to a record number of New Contracts recorded in the first six
months of 1996. The number of New Contracts recorded in future periods will be
dependent on future economic conditions, timing of land development, consumer
confidence and interest rates available to potential home buyers.
Gross Margin. The overall gross margin for the home-building segment
was 18.2% for the six months ended June 30, 1997 as compared to 17.8% for the
comparable period of 1996. The gross margin from housing sales was 18.1% in the
first half of 1997 as compared to 18.2% in the first half of 1996. The overall
increase in gross margin was mainly due to lot and land sales, where margins
increased from 11.4% to 27.7%. The Maryland division had a significant increase
in the number of lots sold to outside home-builders from its Willows land
development project. The division sold thirty lots in the Willows in the six
months ended June 30, 1997 as compared to fourteen lots in the six months ended
June 30, 1996. Management continues to focus on maintaining accurate, up-to-date
costing information so that sales prices can be set to achieve the desired
margins. The Company has also focused on acquiring or developing lots in premier
locations so that it can obtain higher margins. The Company's ability to
maintain these levels of margins is dependent on a number of factors, some of
which are beyond the Company's control. Due to the strong level of sales during
the last quarter of 1996 and the first six months of 1997, some of the Company's
divisions are beginning to experience shortages of qualified subcontractors in
certain construction trades. This could negatively impact gross margins by
requiring the Company to pay premiums to expedite construction work or by
delaying construction, thus delaying revenue recognition and increasing carrying
costs. In addition, due to the competitive sales environment, the Company is
offering promotions in selected cities which could adversely impact gross
margins in 1997.
General and Administrative Expenses. General and administrative
expenses as a percentage of total revenue increased from 2.7% for the six months
ended June 30, 1996 to 3.1% for the comparable period in the current year. This
increase was primarily attributable to the increase in real estate tax expense
and bonuses. Real estate taxes increased in the current year as the Company's
investment in developed lots and raw land awaiting development increased over
prior year balances. More bonuses were recorded in the first six months of 1997
as compared to the first six months of 1996 due to the significant increase in
net income.
Selling Expenses. Selling expenses as a percentage of total revenue
decreased to 7.1% for the six months ended June 30, 1997 from 7.3% for the
comparable period of 1996. The decrease in the six month period was primarily
due to decreases in sales commissions paid to outside Realtors.
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FINANCIAL SERVICES SEGMENT - M/I FINANCIAL
The following table sets forth certain information related to the Company's
financial services segment:
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
(Dollars in thousands) 1997 1996 1997 1996
- ----------------------------------------------------------------------------------------------------------
Number of loans originated 567 599 990 1,007
Revenue:
Loan origination fees $ 750 $ 737 $1,312 $ 1,223
Sale of servicing and marketing gains 1,176 962 2,721 2,042
Other 630 547 1,258 1,052
- ----------------------------------------------------------------------------------------------------------
Total Revenue 2,556 2,246 5,291 4,317
- ----------------------------------------------------------------------------------------------------------
General and administrative expenses 1,123 1,175 2,159 2,226
- ----------------------------------------------------------------------------------------------------------
Operating Income $1,433 $ 1,071 $3,132 $ 2,091
==========================================================================================================
THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THREE MONTHS ENDED JUNE 30, 1996
Total Revenue. Total revenue for the three months ended June 30, 1997
was $2.6 million, a 13.8% increase over the $2.2 million recorded for the
comparable period of 1996. Loan origination fees increased 1.9% in the three
months ended June 30, 1997 from the comparable period of 1996, even though the
number of loans originated decreased 32 units from the comparable period of
1996. This was primarily due to M/I Financial capturing a higher percentage of
the Company's higher end product line and larger loan amounts.
Revenue from the sale of servicing and marketing gains increased $0.2
million to $1.2 million in the three months ended June 30, 1997 from the
comparable period of 1996. The increase in marketing gains was primarily due to
favorable market conditions during the last part of 1996 and early part of 1997
which increased marketing gains on loans that closed during the second quarter
of 1997. M/I Financial used hedging methods whereby it has the option, but is
not required, to complete the hedging transaction. This allowed the Company to
record significant servicing and marketing gains during the period of falling
interest rates while limiting its risk of loss from a rising interest rate
market.
Revenue from other sources increased from $0.5 million to $0.6 million
in the three months ended June 30, 1997 from the comparable period of 1996. The
increase was primarily due to a 49.9% interest in a title agency that started
operations during the first half of 1997.
General and Administrative Expenses. General and administrative
expenses for the three months ended June 30, 1997 were $1.1 million, a 4.4%
decrease from the comparable period of 1996. This decrease was primarily
attributable to lower interest expenses and tighter cost controls over variable
expenses. There were also no new branches opened during 1997.
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996
Total Revenue. Total revenue for the six months ended June 30, 1997 was
$5.3 million, a 22.6% increase over the $4.3 million recorded for the comparable
period of 1996. Loan origination fees increased 7.3% in the six months ended
June 30, 1997 from the comparable period of 1996, even though the number of
loans originated decreased 17 units from the comparable period of 1996. This was
primarily due to a higher capture rate of the Company's higher end product line
and higher loan amounts.
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14
Revenue from the sale of servicing and marketing gains increased $0.7
million to $2.7 million in the six months ended June 30, 1997 from the
comparable period of 1996. The increase in marketing gains was primarily due to
favorable market conditions during the last part of 1996 and early part of 1997
which increased marketing gains on loans that closed during the second half of
1997. M/I Financial used hedging methods whereby it has the option, but is not
required, to complete the hedging transaction. This allowed the Company to
record significant servicing and marketing gains during the period of falling
interest rates while limiting its risk of loss from a rising interest rate
market.
Revenue from other sources increased from $1.1 million to $1.3 million
in the six months ended June 30, 1997 from the comparable period of 1996. The
increase was primarily due to income received from a 49.9% interest in a title
agency that started operations during the first half of 1997.
General and Administrative Expenses. General and administrative expenses
for the six months ended June 30, 1997 were $2.2 million, a 3.0% decrease from
the comparable period of 1996. This decrease was primarily attributable to lower
interest expenses and tighter cost controls over variable expenses. There were
also no new branches opened during 1997. In addition, there were 65 fewer
applications taken in the six months ended June 30, 1997 as compared to the six
months ended June 30, 1996.
OTHER OPERATING RESULTS
Corporate General and Administrative Expenses. Corporate general and
administrative expenses increased slightly to $3.1 million for the three months
ended June 30, 1997 from $3.0 million for the same period of 1996 and remained
constant at $4.9 million for the six months ended June 30, 1997 and 1996. As a
percentage of total revenue, general and administrative expenses for the three
and six months ended June 30, 1997 decreased to 2.1% and 1.9%, respectively,
from 2.2% and 2.1% for the comparable periods in the prior year. These decreases
resulted from increases in total revenue.
Interest Expense. Corporate and home-building interest expense for the
three and six months ended June 30, 1997 decreased to $2.7 and $5.0 million,
respectively, from $3.0 and $5.9 million recorded for the comparable periods of
the prior year. Interest expense was lower in the current year due a decrease in
the weighted average interest rate and an increase in the net amount of interest
capitalized during the first half of 1997 as compared to the first half of 1996.
This was partially offset by an increase in the average borrowings outstanding.
The weighted average interest rate decreased due to the Company replacing its
14% Subordinated Notes with a new Subordinated Note at a significantly lower
rate in December of 1996. In May of 1996, the Company switched its bank
borrowings from prime to LIBOR plus a margin which also reduced the interest
rate. Capitalized interest increased due to a significant increase in the
Company's land development activities and land holdings in the first half of
1997.
LIQUIDITY AND CAPITAL RESOURCES
Notes Payable Banks. The Company's financing needs depend upon its
sales volume, asset turnover, land acquisition and inventory balances. The
Company has incurred substantial indebtedness, and may incur substantial
indebtedness in the future, to fund the growth of its home-building activities.
Historically, the Company's principal source of funds for construction and
development activities has been from internally generated cash and from bank
borrowings, which are primarily unsecured.
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15
At June 30, 1997, the Company had bank borrowings outstanding of $129.0
million under its loan agreement relating to its home-building operations, which
permits aggregate borrowings, other than for the issuance of letters of credit,
not to exceed the lesser of: (i) $186.0 million and (ii) the Company's borrowing
base, which is calculated based on specified percentages of certain types of
assets held by the Company as of each month end, less the sum of (A) outstanding
letters of credit issued for purposes other than to satisfy bonding requirements
and (B) the aggregate amount of outstanding letters of credit, other than
letters of credit issued for the purpose of satisfying bonding requirements, for
joint ventures in which the Company is a partner and which are guaranteed by the
Company. The loan agreement matures September 30, 2001, at which time the unpaid
balance of the revolving credit loans outstanding will be due and payable. Under
the terms of the loan agreement, the banks will determine annually whether or
not to extend the maturity date of the commitments by one year. At June 30,
1997, borrowings under the loan agreement were at the prime rate or, at the
Company's option, at LIBOR plus a margin of between 1.75% and 2.50% based on the
Company's ratio of Earnings Before Interest, Taxes, Depreciation and
Amortization ("Bank EBITDA") to consolidated interest incurred and were
primarily unsecured. The loan agreement contains restrictive covenants which
require the Company, among other things, to maintain minimum net worth and
working capital amounts, to maintain a minimum ratio of Bank EBITDA to
consolidated interest incurred and to maintain certain other financial ratios.
The loan agreement also places limitations on the amount of additional
indebtedness that may be incurred by the Company, the acquisition of undeveloped
land, on dividends that may be paid and on the aggregate cost of certain types
of inventory the Company can hold at any one time.
On May 7, 1997, the Company amended its bank loan agreement. Limits on
certain restrictive covenants were increased under the amended agreement. The
amount available and other terms of the agreement remain substantially the same
as those in the agreement that it amends.
An additional $9.6 million was outstanding as of June 30, 1997 under
the M/I Financial loan agreement, which permits borrowings of $25.0 million to
finance mortgage loans initially funded by M/I Financial for customers of the
Company and a limited amount for loans to others. The Company and M/I Financial
are co-borrowers under the M/I Financial loan agreement. This agreement limits
the borrowings to 95% of the aggregate face amount of certain qualified
mortgages and contains restrictive covenants requiring M/I Financial to maintain
minimum net worth and certain minimum financial ratios. At June 30, 1997,
borrowings under this agreement accrued interest at a rate slightly less than
the lenders' prime rate and were unsecured. The agreement matured on June 20,
1997, but the maturity was extended until July 20, 1997 through a short-term
note. On July 18, 1997, the Company and M/I Financial entered into a new
short-term $30.0 million replacement credit facility with the existing lender,
pursuant to which the Company and M/I Financial have the ability to borrow at
(a) the prime rate less 0.25%, or (b) LIBOR plus 1.75% or (c) a combination of
(a) and (b). The new agreement terminates on June 25, 1998, at which time the
unpaid balance is due.
At June 30, 1997, the Company had the right to borrow up to $209.9
million under its credit facilities, including $23.9 million under the M/I
Financial loan agreement (95% of the aggregate face amount of eligible mortgage
loans). At June 30, 1997, the Company had $71.3 million of unused borrowing
availability under its loan agreements. The Company also had approximately $27.0
million of completion bonds and letters of credit outstanding at June 30, 1997.
Subordinated Note. In addition, the Company had outstanding a
Subordinated Note in the amount of $25.0 million at June 30, 1997, which is held
by First National Bank of Boston. The maturity date is December 15, 2001 and can
be extended two additional years at the Company's option. The Subordinated Note
is redeemable, in whole or in part, after December 15, 1997, and in certain
circumstances prior to such
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16
time, without penalty or premium. Interest on the Subordinated Note accrues at
LIBOR plus 3.50% and adjusts quarterly.
In compliance with the terms of the Subordinated Note, the Company
purchased two three-year 9% interest rate cap agreements, each effective
December 2, 1996 through December 2, 1999. The agreements provide that if the
interest rate of the Subordinated Note in effect for each three month period is
greater than the cap rate, the respective counterparty will pay to the Company
the excess interest computed.
The Company signed a letter of intent with BankBoston, N.A. to issue
$50 million of Senior Subordinated Notes. The proceeds will be used to repay
outstanding amounts under the bank credit facility and the existing $25 million
Subordinated Note. The notes will bear interest at a fixed rate of 9.51% and
will mature in August of 2004. The Company expects to complete the Subordinated
Debt Agreement in late August of 1997.
Cash. Net income from housing and lot and land sales is the Company's
primary source of net cash provided by operating activities. Net cash used by
operating activities in the six months ended June 30, 1997 was $19.2 million
compared to $7.7 million for the prior year period. The increase in net cash
used by operating activities was primarily due to a large increase in
inventories and a decrease in accrued liabilities. This was partially offset by
a decrease in accounts receivable.
Land and Land Development. Over the past several years, the Company's
land development activities and land holdings have increased significantly, and
the Company expects this trend will continue in the foreseeable future.
Single-family lots, land and land development costs increased 8.3% from December
31, 1996 to June 30, 1997. The Company anticipates that its land holdings in the
Columbus market will increase 50% in 1997. These increases are primarily due to
the shortage of qualified land developers in certain of the Company's markets as
well as the competitive advantages that can be achieved by developing land
internally rather than purchasing lots from developers or other competing
home-builders. This is particularly true for the Company's Horizon product line
where, due to the price points the Company targets, lots are generally not
available from third party developers at economically feasible prices. The
Company continues to purchase lots from outside developers under option
contracts, when possible, to limit its risk; however, the Company will continue
to evaluate all of its alternatives to satisfy the Company's demand for lots in
the most cost effective manner.
The $38.3 million increase in notes payable to banks from December 31,
1996 to June 30, 1997 reflects increased borrowings primarily attributable to
the seasonal increase in houses under construction, along with an increase in
single-family lots, land and land development costs. Houses under construction
increased $29.7 million from December 31, 1996 to June 30, 1997 while
single-family lots, land and land development costs increased $10.7 million. It
is expected that borrowing needs will increase as the Company continues to
increase its investment in land under development and developed lots and as its
investment in houses under construction increases.
As of June 30, 1997, the Company has closed on the first four phases of
a six-phase land purchase contract in the Maryland division. This contract was
entered into in 1994 and required a greater investment than the Company normally
commits. The Company sold a portion of the developed lots from the first and
second phases to outside home-builders and is currently selling a portion of the
lots in the third and fourth phases to outside home-builders. The Company has an
option to purchase each of the remaining two phases. If the Company purchases
all six phases, the total purchase price will be approximately $39.8 million and
the land will be developed into approximately 710 lots.
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17
As its capital requirements increase, the Company may increase its
borrowings under its bank line of credit. In addition, the Company continually
explores and evaluates alternative sources from which to obtain additional
capital.
Treasury Stock. On August 1, 1997, the Company repurchased 702,439
shares of the Company's common stock at $12.8125 per share, which represents the
closing price of the Company's common stock on July 30, 1997, from the Melvin L.
Schottenstein family interests. There shares are held as treasury shares by the
Company. The total purchase price was $9,000,000 and was paid from the Company's
bank credit facility. In conjunction with this stock repurchase, Eric J.
Schottenstein, Holly S. Kastan and Amy D. Schottenstein have resigned from the
Board of Directors.
INTEREST RATES AND INFLATION
The Company's business is significantly affected by general economic
conditions of the United States and, particularly, by the impact of interest
rates. Higher interest rates may decrease the potential market by making it more
difficult for home buyers to qualify for mortgages or to obtain mortgages at
interest rates acceptable to them. Increases in interest rates also would
increase the Company's interest expense as the rate on the revolving loans is
based upon floating rates of interest. The weighted average interest rates on
the Company's outstanding debt for the six months ended June 30, 1997 was 8.4%
as compared to 9.8% for the six months ended June 30, 1996.
In conjunction with its mortgage banking operations, the Company uses
hedging methods to reduce its exposure to interest rate fluctuations between the
commitment date of the loan and the time the loan closes.
In recent years, the Company generally has been able to raise prices by
amounts at least equal to its cost increases and, accordingly, has not
experienced any detrimental effect from inflation. Where the Company develops
lots for its own use, inflation may increase the Company's profits because land
costs are fixed in advance of sales efforts. The Company is generally able to
maintain costs with subcontractors from the date a home sales contract is
accepted; however, in certain situations unanticipated costs may occur between
the time a sales contract is executed and the time a home is constructed, which
results in lower gross profit margins.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The Company wishes to take advantage of the safe harbor provisions
included in the Private Securities Litigation Reform Act of 1995. Accordingly,
in addition to historical information, this Management's Discussion and Analysis
of Results of Operations and Financial Condition contains certain
forward-looking statements, including, but not limited to, statements regarding
the Company's future financial performance and financial condition. These
statements involve a number of risks and uncertainties. Any forward-looking
statements made by the Company 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, but not limited to, those referred to below.
General Real Estate, Economic, Interest Rates and Other Conditions. The
home-building industry is significantly affected by changes in national and
local economic and other conditions, including employment levels, changing
demographic considerations, availability of financing, interest rates, consumer
confidence and housing demand. In addition, home-builders are subject to various
risks, many of them
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18
outside the control of the home-builder, including competitive overbuilding,
availability and cost of building lots, availability of materials and labor,
adverse weather conditions which can cause delays in construction schedules,
cost overruns, changes in government regulations, and increases in real estate
taxes and other local government fees. The Company cannot predict whether
interest rates will be at levels attractive to prospective homebuyers. If
interest rates increase, and in particular mortgage interest rates, the
Company's business could be adversely affected.
Land Development Activities. The Company develops the lots for a
majority of its subdivisions. Therefore, the medium- and long-term financial
success of the Company will be dependent on the Company's ability to develop its
subdivisions successfully. Acquiring land and committing the financial
managerial resources to develop a subdivision involves significant risks. Before
a subdivision generates any revenue, material expenditures are required for
items such as acquiring land and constructing subdivision infrastructure (such
as roads and utilities). It generally takes more than one year for subdivisions
which are internally developed to achieve cumulative positive cash flow.
The Company's Markets. The Company's operations are situated in the
Columbus and Cincinnati, Ohio; Indianapolis, Indiana; Tampa, Orlando and Palm
Beach County, Florida; Charlotte and Raleigh, North Carolina; and Virginia and
Maryland metropolitan areas. Adverse general economic conditions in these
markets could have a material adverse impact on the operations of the Company.
For the year ended December 31, 1996, approximately 38% of the Company's housing
revenue and a significant portion of the Company's operating income was derived
from operations in its Columbus, Ohio market. The Company's performance could be
significantly affected by changes in this market. The Company expanded into a
new geographic market, Phoenix, Arizona, in late 1996. A new market may prove to
be less stable and may involve delays, problems and expenses not typically found
by the Company in the existing markets with which it is familiar.
Competition. The home-building industry is highly competitive. The
Company competes in each of its local market areas with numerous national,
regional and local home-builders, some of which have greater financial,
marketing, land acquisition, and sales resources than the Company. Builders of
new homes compete not only for homebuyers, but also for desirable properties,
financing, raw materials and skilled subcontractors. The Company also competes
with the resale market for existing homes which provides certain attraction for
homebuyers over building a new home.
Governmental Regulation and Environmental Considerations. The
home-building industry is subject to increasing local, state and Federal
statutes, ordinances, rules and regulations concerning zoning, resource
protection (preservation of woodlands and hillside areas), building design, and
construction and similar matters, including local regulations which impose
restrictive zoning and density requirements in order to limit the number of
homes that can eventually be built within the boundaries of a particular
location. Such regulation affects construction activities, including
construction materials which must be used in certain aspects of building design,
as well as sales activities and other dealings with homebuyers. The Company must
also obtain licenses, permits and approvals from various governmental agencies
for its development activities, the granting of which are beyond the Company's
control. Furthermore, increasingly stringent requirements may be imposed on
home-builders and developers in the future. Although the Company cannot predict
the impact on the Company of compliance with any such requirements, such
requirements could result in time consuming and expensive compliance programs.
The Company is also subject to a variety of local, state and Federal
statutes, ordinances, rules and regulations concerning the protection of health
and the environment. The particular environmental laws which apply to any given
project vary greatly according to the project site and the present and former
uses
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19
of the property. These environmental laws may result in delays, cause the
Company to incur substantial compliance costs (including substantial
expenditures for pollution and water quality control) and prohibit or severely
restrict development in certain environmentally sensitive regions. Although
there can be no assurance that it will be successful in all cases, the Company
has a general practice of requiring an environmental audit and resolution of
environmental issues prior to purchasing land in an effort to avoid major
environmental issues in the Company's developments.
In addition, the Company has been, and in the future may be, subject to
periodic delays or may be precluded from developing certain projects due to
building moratoriums. These moratoriums generally relate to insufficient water
supplies, sewage facilities, delays in utility hook-ups, or inadequate road
capacity within the specific market area or subdivision. These moratoriums can
occur prior to, or subsequent to, commencement of operations by the Company
without notice to, or recourse by, the Company.
Risk of Material and Labor Shortages. The Company is presently not
experiencing any serious material or labor shortages. However, the residential
construction industry in the past has, from time to time, experienced shortages
in insulation, drywall, certain carpentry and framing work and cement, as well
as fluctuating lumber prices and supplies. Delays in construction of homes due
to these shortages could adversely affect the Company's business.
Significant Voting Control by Principal Shareholders. As of August 1,
1997, members of the Melvin L. Schottenstein and Irving E. Schottenstein
families owned approximately 53% of the outstanding Common Shares. In
particular, Irving E. Schottenstein, in his own name and as trustee of trusts
for his children, had the right to vote 2,761,800 Common Shares, or 36.4% of the
outstanding Common Shares, and Melvin L. Schottenstein's children had the right
to vote in the aggregate 1,243,000 Common Shares, or 16.4% of the outstanding
Common Shares. Therefore, members of the Irving E. Schottenstein and Melvin L.
Schottenstein families have significant voting power with respect to the
election of the Board of Directors of the Company and, in general, the
determination of the outcome of the various matters submitted to the
shareholders of the Company for approval.
Dependence on Key Executives. The Company is managed by a relatively
small number of executive officers. The loss of the services of one or more of
these executive officers could have an adverse effect on the Company's business
and operations.
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PART II - OTHER INFORMATION
- ---------------------------
Item 1. Legal Proceedings - none.
- --------------------------
Item 2. Changes in Securities - none.
- ------------------------------
Item 3. Defaults upon Senior Securities - none.
- ---------------------------------------
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
On May 7, 1997, the Company held its 1997 annual meeting of
shareholders. The shareholders voted on the election of three directors to
three-year terms. The results of the voting for the directors are as follows:
1. Election of Directors
---------------------
For Withheld
--- --------
Steven Schottenstein 7,578,859 6,140
Lewis R. Smoot, Sr. 7,578,834 6,165
Holly S. Kastan 7,577,833 7,166
Item 5. Other Information - none.
- --------------------------
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
The exhibits required to be filed herewith are set forth below. No
reports were filed on Form 8-K for the quarter for which this report is filed.
Exhibit
Number Description
- ------ -----------
10.1 Revolving Credit Agreement by and among the Company; M/I Financial
Corp. and Bank One, Columbus, N.A. dated July 18, 1997.
10.2 Company's 1997 President and Senior Executive Vice President Bonus
Program.
10.3 Company's 1997 Senior Vice President and Chief Financial Officer
Bonus Program.
10.4 Company's Director Deferred Compensation Plan.
10.5 Termination Agreement dated July 31, 1997 between the Company and
parties to the Melvin and Irving Schottenstein Family Agreement.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
M/I Schottenstein Homes, Inc.
-----------------------------
(Registrant)
Date: August 12, 1997 by: /s/ Robert H. Schottenstein
---------------------------
Robert H. Schottenstein
President
Date: August 12, 1997 by: /s/ Kerrii B. Anderson
----------------------
Kerrii B. Anderson
Senior Vice President,
Chief Financial Officer
(Principal Financial and
Accounting Officer)
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