M/I Homes, Inc. (NYSE:MHO), Columbus, on Wednesday reported net income of $29.3 million, or $1.01 per diluted share, for the third quarter ended September 30, 2018, up from $22.3 million, or $0.64 per diluted share, for the third quarter of 2017. The results beat analyst estimates of a gain of $0.99 per share.
The third quarter of 2018 included a $0.7 million pre-tax purchase accounting charge ($0.02 per diluted share) related to the acquisition of Pinnacle Homes in Detroit, Michigan in the first quarter of 2018. The third quarter of 2017 included a $2.3 million after-tax equity adjustment ($0.07 per diluted share) related to the redemption of preferred shares in that period.
Year-to-date in 2018, the company incurred $6.2 million of pre-tax acquisition-related charges ($0.16 per diluted share) and, in the same nine-month period in 2017, incurred $8.5 million ($0.18 per diluted share) for pre-tax stucco- related repair costs in certain of our Florida communities. Exclusive of these charges in both periods and the equity adjustment charge in 2017, year-to-date adjusted net income to common shareholders was $79.9 million in 2018 compared to $58.0 million in 2017’s same period, a 38% increase.
Homes delivered in 2018's third quarter reached a third quarter record of 1,422, increasing 13% from the 1,256 deliveries in 2017’s third quarter. New contracts for 2018's third quarter were 1,302, an increase of 6% over 2017's third quarter. Homes in backlog increased 20% at September 30, 2018 to 2,846 units, with a sales value record of $1.1 billion (a 25% increase over last year’s third quarter), and an average sale price of $401,000. At September 30, 2017, the sales value of homes in backlog was $912 million, with an average sale price of $383,000 and backlog units of 2,378. M/I Homes had 212 active communities at September 30, 2018 compared to 179 at September 30, 2017. The company's cancellation rate was 16% in the third quarter of 2018 and 15% in 2017.
Robert H. Schottenstein, CEO and president, commented, “We reported another strong quarter highlighted by all-time third quarter records for new contracts, homes delivered, revenue, and net income. Our backlog sales value reached $1.1 billion - a record for our third quarter and a 25% increase over 2017’s third quarter. We delivered 1,422 homes in the third quarter, a 13% increase over last year, and our pre-tax income improved by 14% reaching a third quarter record of $39.5 million. We are particularly pleased that our adjusted gross margin improved 50 basis points from the second quarter, to 20.5%, and our overhead expense ratio improved 40 basis points from last year’s third quarter to 12.7%. Our growth in pre-tax income, combined with a lower tax rate, resulted in a 31% increase in net income from $22.3 million in last year’s third quarter to a third quarter record of $29.3 million in 2018.”
