M/I Homes
Annual Report 2002

Plain-text annual report

2002 Highlights (cid:127) Seventh consecutive record year (cid:127) Over $1 Billion in revenues for the first time in history (cid:127) Record income, year-end backlog, gross margins and operating margins (cid:127) Twelfth consecutive year with homeowner approval rating of 95% or greater Indianapolis, Indiana Cincinnati, Ohio Columbus, Ohio Revenue (in thousands) Net Income (in thousands) Shareholders’ Equity (in thousands) Charlotte, North Carolina Northern Virginia & Suburban Maryland $1,100,000 1,000,000 900,000 800,000 700,000 $70,000 60,000 50,000 40,000 30,000 20,000 $350,000 300,000 250,000 200,000 150,000 Orlando, Florida 1998 1999 2000 2001 2002 1998 1999 2000 2001 2002 1998 1999 2000 2001 2002 Tampa, Florida West Palm Beach, Florida Raleigh, North Carolina M/I Schottenstein Homes Profile Founded in 1976, M/I Schottenstein Homes is one of superior customer service, innovative design, the nation’s leading builders of single-family homes. quality construction and premier locations. Since its inception, the Company has sold more M/I Schottenstein Homes serves a broad segment than 53,000 homes under the M/I and Showcase of the market including first-time, move-up, luxury Homes tradenames. During the past 27 years, M/I and empty-nester buyers. Listed on the New York Schottenstein Homes has established an exemplary Stock Exchange, the Company’s stock is traded reputation based on a strong commitment to under the ticker symbol MHO. Income Statement Data Year Ended December 31, (dollars in thousands, except per share amounts) Revenue Gross Margin Operating Income Income Before Income Taxes Net Income Net Income Per Share (Diluted) Unit Data Year Ended December 31, (dollars in thousands) New Contracts Homes Delivered Backlog 2002 2001 2000 1999 1998 $1,033,025 $976,766 $935,039 $852,445 $739,613 249,273 123,010 109,200 66,612 221,554 101,210 85,042 55,282 198,972 184,570 151,114 90,918 72,564 44,444 83,180 68,780 41,611 59,681 46,553 27,651 $4.30 $3.56 $2.76 $2.34 $1.63 2002 4,130 4,140 2,321 2001 4,447 4,227 2,331 2000 4,027 4,070 2,111 1999 4,072 3,941 2,154 1998 4,108 3,629 2,023 Backlog Sales Value $567,000 $559,000 $492,000 $490,000 $439,000 Backlog Average Sales Price $244 $240 $233 $228 $217 Balance Sheet Data At December 31, (dollars in thousands, except per share amounts) Homebuilding Inventory $451,217 $479,236 $449,434 $432,702 $323,500 2002 2001 2000 1999 1998 Total Assets Homebuilding Debt Shareholders’ Equity Shareholders’ Equity Per Share 578,458 62,658 339,729 612,110 164,227 279,891 567,642 182,519 228,889 531,562 196,675 200,512 427,147 131,793 166,640 $22.97 $18.74 $15.28 $12.06 $9.46 3 To Our Shareholders And Friends 2002 was another great year for M/I Homes. were pleased to announce a two-for-one Providing homes in desirable locations has delivering homes of the highest quality, and been, and will always be, a crucial factor in our maintaining our focus on increasing success and a continuing area of focus. We profitability and shareholder value. Our long standing commitment to superior stock split in June. For the year, our stock price have consistently stated that we are in the service, quality construction and integrity increased 12% – following a 106% increase in have culminated in our seventh 2001 and a 55% increase in 2000. Our stock consecutive record year. We achieved outperformed both the S&P 500 and the S&P record results in many areas including Homebuilding Index in 2002. revenue, income and backlog. Net income for 2002 reached $66.6 million, performance, we know that our record- an all-time record for our Company and a setting results would not have been possible 21% increase over the previous record set in without the exceptional customer service 2001. Revenue exceeded $1 billion for the demonstrated by all of our employees and As pleased as we are with our financial subdivision business and we believe our current We thank our shareholders for their support subdivisions are the best M/I has ever offered. in helping us build a successful company with an exciting future. We thank our Given the strength of our markets, our strong homebuyers for placing their trust in us to year-end backlog and land position, and provide them with quality homes. And we the quality and dedication of our thank the dedicated employees and management and employees, we eagerly associates of M/I Schottenstein Homes look forward to 2003 and the years that whose exceptional efforts and devotion to follow. As we begin a new year of our customers have allowed us to become homebuilding excellence, we are well one of the nation’s leading homebuilders. first time in our history. Our year-end associates. As with any business, the future positioned as an industry leader to continue backlog consisted of 2,321 homes with a profitability of our Company is largely record value of $567 million and a record influenced by the success we have in average sales price of $244,000. achieving high levels of customer satisfaction. Perhaps the greatest vote of confidence we Our focus on margins and profitability has can receive is for M/I homeowners to long been one of our core strengths. This recommend us to other potential buyers. In was clearly evident in our 2002 results as gross 2002, 99% of our homebuyers stated that they margins for the year exceeded 24% and would recommend M/I Homes to others. This operating margins equaled 11.9% – both represents our twelfth consecutive year with Company records. These strong margins a homeowner approval rating of at least once again place M/I Homes at or near the 95%. We believe this standard is unmatched top of our industry. in our industry. The overall financial condition of our We consider our operating markets to be Company has never been stronger, with 2002’s among the premier housing markets in the return on equity reaching 24% and year-end United States and continue to be very pleased shareholders’ equity reaching $340 million. Our with their results. We are committed to growth, record equity is even more impressive and while most of our divisions had very strong considering that during the past several years, years in 2002, we believe our Columbus, we have invested $40 million in our stock Indianapolis, Tampa, Orlando and Charlotte repurchase program. In a year dominated by divisions offer the best future growth falling stock prices in the general market, we opportunities for M/I Homes. providing superior customer service, February 17, 2003 Robert H. Schottenstein President Irving E. Schottenstein Chairman and Chief Executive Officer Steven Schottenstein Chief Operating Officer 4 5 A Place To Grow. A homeowner approval rating of at least 95% for the past twelve years. As always, homebuyers want a home where they That’s why we’ve become one of the nation’s can watch their families grow. They want largest homebuilders. Meeting the changing communities where people know their neighbors demands of today’s homebuyers is one of the and where kids can play in nearby parks and primary reasons M/I Homes has earned a open green spaces. At M/I Homes, these ideas minimum homeowner approval rating of 95% are integrated into the communities and home for the past twelve years. During 2002, our designs we offer. homeowner approval rating was 99% – a We’re designing many of our neighborhoods unmatched in our industry. standard of excellence we believe is around certain eras and influences. Our home designs are also more flexible than ever, allowing families to build a home that changes with their lifestyle and needs. 7 A Place To Call Home. We focus on the customer’s point of view plans. More and more, we’re designing our when researching the best locations for our communities around parks, open green communities. Is it convenient? Is it in a good spaces and gazebos. We’re also school district? Is it a desirable area? We incorporating tree-lined streets, decorative know we will deliver a quality community in a streetlights, sidewalks, walking paths, desirable location when we can answer yes preserves, lakes and other features to further to these questions. complement the neighborhood. Our goal with every community is to create a “Themed” communities are among our most carefully planned, aesthetically pleasing successful. From Mediterranean-inspired neighborhood. We are intensely involved in communities in Florida to Georgian-style all phases of land planning and communities in Ohio and Washington, D.C., development, which enables us to influence our diverse line of products fulfills a variety of the look and feel of the community. individual tastes. Trends such as increased outdoor living and neighborhood gatherings Today, elements of the past are captured in have inspired large front porches, recessed many of our communities through our garages and common green spaces in attention to detail and innovative land many of our neotraditional neighborhoods. 9 12 Our diverse line of products allows for individual tastes Late in 2002, we opened a new community along with experienced management and in northeast Columbus called Upper Albany. marketing knowledge, gives us an advantage A traditional Neighborhood Development, in controlling premier locations. Upper Albany features three distinct newly designed series of homes. The community is Keeping up with current trends enables us to designed to promote neighbor interaction maintain our competitive edge. We and the aesthetics of the streetscape – continually research new housing products, large front porches, garages accessed by building techniques and consumer rear carriageways, parks and open green preferences to increase profitability and spaces. In the first three months, over 60 maximize customer satisfaction. And by homes were sold. partnering with governmental agencies, we are able to offer down payment assistance We remain conservative in our land acquisition and work equity programs to reduce down policies and only purchase land that is zoned payment requirements and allow and serviceable by utilities. We seek to control homebuyers to participate in the construction a three- to five-year supply of land. Our of their new home. expertise in acquiring and developing land, 12 A builder who gives me Confidence. Our Exclusive Confidence Builder Program The Confidence Builder Program is designed Also, we provide our customers with a to give M/I’s homebuyers assurance during Guaranteed Completion Date; we know this the building process. At various stages, we is one of the most important factors to employ a series of checks and balances to buyers when building a new home. And, as ensure the overall quality of the home and various building steps are completed and give peace of mind to our homebuyers. inspected, the Personal Construction Supervisor signs a Quality Control Card, It begins with a Pre-Construction which is posted in the home, assuring it Conference, where detailed house plans meets M/I’s quality standards. are reviewed and the construction schedule is discussed. During this Conference, a hard The Confidence Builder Program also hat is given to each M/I homebuyer. This is includes the convenience of a Design an invitation to visit the home during the Center in our Columbus, Indianapolis, construction process to view M/I’s quality Tampa and Cincinnati markets as well as construction first-hand. our newest Design Center in Orlando, 15 opening in 2003. These Design Centers allow Our commitment to our homebuyers homebuyers to view and select interior and doesn’t stop at the completion of the exterior options with assistance from a construction process. We offer professional design consultant. comprehensive homeowner service after closing. We believe this contributes greatly After construction is complete, buyers to our superior homeowner approval rating. attend a Pre-Settlement Conference, which includes a walk-through of their new home. Through M/I Financial Corp., our mortgage- We guarantee the completion of any banking subsidiary, we offer a wide range of outstanding items before our buyers move competitive conventional and government into their home. mortgages at fixed and adjustable rates. We offer a competitive wide range of mortgages Title services are also provided to meet our customers’ needs. Our buyers enjoy the convenience of building, financing and closing entirely through M/I. 17 A Builder I Trust. Our homebuyers want exceptional locations, community amenities, innovative home designs, outstanding craftsmanship and superior levels of support and service. But, perhaps most importantly, today’s buyer wants a builder they can trust. While competitors offer similar home styles and neighboring locations, the similarities stop there. We differentiate ourselves in many ways – especially through our dedication to quality and commitment to homeowner satisfaction. Our solid reputation continues to be built one home at a time. Our experienced leadership team anticipates and prepares for change. A and customer satisfaction is a steadfast corporate team of seasoned professionals principle that makes M/I Homes one of the supports each operating division in the areas nation’s most respected and profitable of land development, research and design, homebuilders. finance, marketing, legal, information systems, human resources and accounting. We will continue to focus on premier We work diligently in all areas to contribute to locations and innovative home designs future growth. as we look to the future. As always, we will continue to give superior customer service. The effectiveness of these business concepts And our strong, forward-thinking leadership is reflected in our performance. Growth in will focus on increasing profitability and revenue and income has been dramatic shareholder value. 19 

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