M/I Homes Inc. (MHO)
Q4 2012 Earnings Call
January 31, 2013 04:00 pm ET
Phillip G. Creek – Executive Vice President and Chief Financial Officer
Paul Rosen – President, Mortgage Company
Robert H. Schottenstein – Chairman, President and Chief Executive Officer
Ann Marie Hunker – Vice President Corporate Controller
Kevin C. Hake – Senior Vice President, Treasurer
Alan Ratner – Zelman & Associates
Alex Barron – Housing Research Center
Previous Statements by MHO
» M/I Homes Inc. Q1 2010 Earnings Call Transcript
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Thank you. I would now like to turn the conference over to Phil Creek. Please go ahead sir.
Phillip G. Creek
Thank you very much. Joining me on the call today is Bob Schottenstein, our CEO and President; Tom Mason, our Executive Vice President; Paul Rosen, President of our Mortgage Company; Ann Marie Hunker, our VP Corporate Controller; and Kevin Hake, Senior VP.
First to address regulation per disclosure, we encourage you to ask any questions regarding issues that you consider material during this call because we are prohibited from discussing significant non-public items with you directly. And as to forward-looking statements, I want to remind everyone that the cautionary language about forward-looking statements contained in today’s press release also applies to any comments made during this call. Also be advised that the company undertakes no obligation to update any forward-looking statements made during this call.
With that, I will now turn the call over to Bob.
Robert H. Schottenstein
Thanks, Phil. Good afternoon everyone. Thank you for joining our call to review our fourth quarter and full year results.
We are very pleased with our fourth quarter and full year results highlighted by $47 million bottom-line improvement over last year and a return to full year profitability. In achieving these results, we made significant progress on a number of fronts. Pre-tax income from operations for the fourth quarter was $7 million compared with $1.4 million on last year’s fourth quarter. In addition, it’s worth noting that we made $18 million from operations during the first nine months, or during the last rather nine months of 2012.
Our fourth quarter new contracts increased 33%, with about 9% increase in community count. And we ended the year with 965 homes in backlog and only 300 units more than a year ago. Value of our backlog is up 56% representing our highest year end backlog, both in units and dollar value since 2006. The year-over-year improvement in our profitability result from a 21% increase in closings, a 9% increase in our average selling price and a 200 basis point increase in adjusted gross margins with 2012 margins reaching 19.5%.
We delivered 887 homes in the fourth quarter, 33% more than a year ago and 2,765 homes for the full year, resulting in $762 million of total revenue for the year, which is an increase in revenue of 35% over 2011. The material improvement in our gross margins was the result of the continued solid performance of our new communities, along with the strategic shift and our geographic footprint which resulted in more closings in our better performing markets.
Additionally, our mortgage and title operations also contributed significantly to our profitability in 2012 and Paul Rosen will speak more about that in a few minutes. With macro housing conditions continuing to show noticeable signs of improvement, we are very excited about the future. We have a solid position in each of our markets and we expect to continue to expand our community count and grow our aggregate market share in our existing markets, all the while remaining focused on continued improvement and profitability.
More specifically, we estimate that in 2013, our company wide community count will increase by 25%. We have materially strengthened our land position, particularly in Raleigh, Charlotte, Tampa, and Orlando and expect strong results in these markets in 2013 and beyond. We will also continue the successful expansion of our footprint in Texas.
As many of you will recall, we first opened in Houston, Texas two and a half years ago. We first opened in San Antonio, Texas approximately one and a half years ago. And we announced our entry into the Austin markets during the third quarter of 2012 expecting to open our first communities in Austin later this year.
Whenever you open in a new division, your investment levels typically precede sometimes by a significant amount your revenues. And then the years that [liable] for us, we expect meaningful growth in Texas that will further strengthen our operating leverage and improve our profitability. Let me just say a few more words about our specific regions, before I turn this call back over to Phil.
First, the Midwest region, we delivered 318 homes in the Midwest during the fourth quarter 1,113 homes for the year, which represents 40% of our business. It’s important to note, that the ratio of closings in the Midwest has declined from 53% of total deliveries in 2009 to now 40%. This is all pursuant to an intentional strategic shift in our geographic footprint.
Our deliveries in the Midwest for the fourth quarter increased 27%, compared with last year. New contracts in the Midwest for the quarter were up 18%. Sales backlog was up 13% in the Midwest from the start of the year in dollar value, and we increased our controlled lot position in the Midwest by more than 300 lots we’re about 7% from a year ago. We ended the quarter with 61 of our active communities in the Midwest, which is a slight increase 3% to be exact from the end of last year.