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M/I Homes Inc. Reports Operating Results (10-K)

March 01, 2011 | About:
Sheldon Shi

10qk

18 followers
M/I Homes Inc. (MHO) filed Annual Report for the period ended 2010-12-31.

M/i Homes Inc. has a market cap of $247.3 million; its shares were traded at around $13.35 with and P/S ratio of 0.4. Hedge Fund Gurus that owns MHO: Jim Simons of Renaissance Technologies LLC. Mutual Fund and Other Gurus that owns MHO: Donald Smith of Donald Smith & Co..

Highlight of Business Operations:

Our homebuilding operations comprise the most substantial portion of our business, representing 98% of consolidated revenue during 2010 and 2009. We design, market, construct and sell single-family homes, attached townhomes, and condominiums to first-time, move-up, empty-nester and luxury buyers, with a particular focus on first-time and value-focused buyers. Our homes are offered primarily in development communities and mixed- use communities. We use the term “home” to refer to a single-family residence, whether it is a single-family home or other type of residential property, and we use the term “community” to refer to a single development in which homes are constructed as part of an integrated plan. We are currently offering homes for sale in 110 communities within 10 markets located in 9 states. We offer a variety of homestyles at base prices ranging from approximately $85,000 to $1,300,000, with an average sales price in 2010, including options, of $247,000. Offering homes at a variety of price points allows us to attract a wide range of buyers. We believe that we distinguish ourselves from competitors by offering homes in select areas with a high level of design and construction quality within a given price range, and by providing customers with the confidence they can only get from superior customer service. In addition to home sales, our homebuilding operations occasionally generate revenue from the sale of land and lots.

In 2010, we generated total revenues of $616.4 million and a net loss of $26.3 million, compared to total revenues of $570.0 million and a net loss of $62.1 million in 2009. At December 31, 2010, we had 532 homes in backlog with a sales value of $135.2 million compared to 650 homes in backlog with a sales value of $176.7 million at December 31, 2009. Our financial results for 2010 and 2009 reflect challenging operating conditions that have persisted in the homebuilding industry to varying degrees since a general housing market downturn began in mid-2006, as well as strategic actions taken by us since the downturn began in an effort to align our operations with these changing market conditions and maintain a strong financial position.

On a regional basis, we offer homes ranging in base sales price from approximately $85,000 to $1,300,000, and ranging in square footage from approximately 1,200 to 4,200 square feet. In addition to single-family detached homes, we also offer attached townhomes in most of our markets as well as condominiums in our Columbus, Orlando, and Washington, D.C. markets. By offering a wide range of homes, we are able to attract first-time, move-up, empty-nester and luxury homebuyers. Our recently introduced eco series line, discussed below, was designed to appeal to first-time homebuyers because of the emphasis such homebuyers place on affordability and energy cost savings and conservation. It is our goal to sell more than one home to our buyers, and we have frequently been successful in this pursuit.

as well as the changing market requirements. We spent $2.4 million, $1.8 million and $1.7 million in the years ended December 31, 2010, 2009 and 2008, respectively, for research and development of our homes. Across all of our divisions, we currently offer approximately 400 different floor plans designed to reflect current lifestyles and design trends. In 2009, we unveiled our “eco series,” a line of value-oriented homes designed for attractive pricing and to offer greater plan flexibility to our buyers. The “eco series” product line has been value-engineered to reduce production costs and construction cycle times, while adhering to our quality standards and using materials and construction techniques that reflect our commitment to more environmentally conscious homebuilding methods. Value-engineering encompasses measures such as simplifying the location and installation of internal plumbing and electrical systems, using engineered flooring systems, roof trusses and other building components, and generally employing construction techniques that minimize costs and maximize efficiencies. It also includes working continuously with our trade partners and materials suppliers to reduce direct construction costs and construction cycle times. All of these actions have allowed us to achieve faster returns and higher gross margins from our inventory compared to our previous product designs, which has supported cash flow generation and progress toward our profitability goal. We have introduced the eco series throughout the Midwest region and North Carolina and have developed a unique eco series line specifically for our Florida Divisions.

During the development of lots, we are required by some municipalities and other governmental authorities to provide completion bonds or letters of credit for sewer, streets and other improvements. At December 31, 2010, $18.2 million of completion bonds and $30.7 million of letters of credit were outstanding for these purposes. The development agreements under which we are required to provide completion bonds or letters of credit are generally not subject to a required completion date and only require that the improvements are in place in phases as homes are built and sold. In locations where development has progressed, the amount of development work remaining to be completed is typically less than the remaining amount of bonds or letters of credit due to timing delays in obtaining release of the bonds or letters of credit.

At December 31, 2010, we had purchase agreements to acquire1,929 developed lots and raw land to be developed into approximately 630 lots for a total of 2,559 lots, with an aggregate current purchase price of approximately $113.2 million. Purchase of these properties is generally contingent upon satisfaction of certain requirements by us and the sellers, such as zoning approval and availability of building permits. Our purchase contracts do not generally contain specific performance obligations, and therefore, we believe that our maximum exposure as of December 31, 2010 related to these agreements is equal to the amount of our outstanding deposits, which totaled $3.6 million, including prepaid acquisition costs of $0.7 million and letters of credit of $1.2 million. Further details relating to our land option agreements are included in Note 14 to our Consolidated Financial Statements.

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