2 unchanged sentences
M/I Homes, Inc.
−Removed: and subsidiaries (the “Company” or “we”) is one of the nation’s leading builders of single-family homes, having sold over 127,650 homes since commencing homebuilding activities in 1976.
+Added: and subsidiaries is one of the nation’s leading builders of single-family homes, having sold over 136,700 homes since commencing homebuilding activities in 1976.
The Company’s homes are marketed and sold primarily under the M/I Homes brand.
7 unchanged sentences
Austin, Dallas/Fort Worth, Houston and San Antonio, Texas;
−Removed: and Charlotte and Raleigh, North Carolina.
+Added: Charlotte and Raleigh, North Carolina;
+Added: and Nashville, Tennessee.
Included in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are the following topics relevant to the Company’s performance and financial condition:
2 unchanged sentences
• Discussion of Our Liquidity and Capital Resources;
−Removed: • Summary of Our Contractual Obligations;
−Removed: • Discussion of Our Utilization of Off-Balance Sheet Arrangements;
• Impact of Interest Rates and Inflation.
18 unchanged sentences
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer.
−Removed: A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied.
+Added: A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance
+Added: obligation is satisfied.
All of our home purchase contracts have a single performance obligation as the promise to transfer the home is not separately identifiable from other promises in the contract and, therefore, not distinct.
−Removed: Our performance obligation, to deliver the agreed-upon home, is generally satisfied in less than one year from the original contract date.
−Removed: Deferred revenue resulting from uncompleted performance obligations existing at the time we deliver new homes to our homebuyers is not material.
+Added: Our primary performance obligation, to deliver the agreed-upon home, is generally satisfied in less than one year from the original contract date.
+Added: Deferred revenue resulting from any other uncompleted performance obligations existing at the time we deliver new homes to our homebuyers is not material.
Although our third party land sale contracts may include multiple performance obligations, the revenue we expect to recognize in any future year related to remaining performance obligations, excluding revenue pertaining to contracts that have an original expected duration of one year or less, is not material.
32 unchanged sentences
Due to the inherent uncertainties in management’s estimates and uncertainties related to our operations and our industry as a whole as further discussed in “Item 1A.
−Removed: Risk Factors” in Part I of this Annual Report on Form 10-K, we are unable to determine at this time if and to what extent continuing future impairments will occur.
+Added: Risk Factors” in Part I of this Annual Report on Form 10-K, we are unable to determine at this time if and to what extent future impairments will occur.
Additionally, due to the volume of possible outcomes that can be generated from changes in the various model inputs for each community, we do not believe it is possible to create a sensitivity analysis that can provide meaningful information for the users of our financial statements.
12 unchanged sentences
Actual future warranty costs could differ from our current estimated amount.
−Removed: Our warranty reserves for our 30-year (offered on all homes sold after April 25, 1998 and on or before December 1, 2015 in all of our markets except our Texas markets), 15-year (offered on all homes sold after December 1, 2015 in all of our markets except our Texas markets) and 10-year (offered on all homes sold in our Texas markets) transferable structural warranty programs are established on a per-unit basis.
+Added: Our warranty reserves for our 30-year (offered on all homes sold after April 25, 1998 and on or before December 1, 2015 in all of our markets except our Texas markets), 15-year (offered on all homes sold after December 1, 2015 and on or before December 31, 2021 in all of our markets except our Texas markets) and 10-year (offered on all homes sold in our Texas markets and in all of our markets beginning January 1, 2022) transferable structural warranty programs are established on a per-unit basis.
While the structural warranty reserve is recorded as each house is delivered, the sufficiency of the structural warranty per unit charge and total reserve is reevaluated on an annual basis, with the assistance of an actuary, using our own historical data and trends, industry-wide historical data and trends, and other project specific factors.
5 unchanged sentences
RESULTS OF OPERATIONS
−Removed: For the year ended December 31, 2020, we achieved record levels of new contracts, homes delivered, revenue and income before income taxes.
−Removed: We also achieved record levels of backlog sales value at December 31, 2020.
+Added: In 2021, housing market conditions were positive, with healthy demand, a limited supply of new and resale inventory and relatively low interest rates driving record bottom line results for our business.
+Added: Strong demand for our homes enabled us to increase selling prices in many of our communities in concert with rising labor and building material costs.
+Added: This, in combination with our focus on balancing sales pace, price and construction starts at many of our communities, helped us to achieve record homes delivered, revenue, income before income taxes and net income and the second highest level of new contracts in our history, despite the supply chain challenges and disruptions that we experienced throughout 2021.
+Added: Our backlog sales value and number of homes in backlog at December 31, 2021 were also year-end records.
Our improved profitability is attributable primarily to the increase in homes delivered, improved margins and overhead leverage.
−Removed: Additionally, our complementary financial services business also achieved record revenue and income before income taxes, and originated a record number of loans in 2020, while benefiting from a higher margin per loan throughout the year.
−Removed: Following a substantial decline in new contracts in the latter half of March and April as a result of the COVID-19 pandemic, we experienced a sharp recovery and an increase in sales activity commencing in May as pandemic-related restrictions began to ease.
−Removed: This trend of increasing sales volume continued through our third and fourth quarters, resulting in the Company achieving a record for new contracts in 2020, along with records in a number of other operating and financial metrics described below.
−Removed: We believe that the homebuilding industry benefited from record-low interest rates, a continued undersupply of available homes and a desire of many consumers to move from rental apartments and densely populated areas to single family homes in suburban locations.
−Removed: We believe these factors will continue to support demand into 2021, subject to the economic uncertainties caused by the continuing COVID-19 pandemic as well as higher unemployment levels.
+Added: Additionally, our complementary financial services business also achieved record revenue and income before income taxes, and originated a record number of loans in 2021.
+Added: We believe that the homebuilding industry conditions that we experienced in 2021 will continue to support demand into 2022, subject to the economic uncertainties caused by rising interest rates, higher inflation, labor and supply shortages, and increased cost pressures described further below in our Outlook Section.
During the year ended December 31, 2021, we achieved the following record results in comparison to the year ended December 31, 2020:
−Removed: • New contracts increased 39% to 9,427 contracts - a record high for our Company
• Homes delivered increased 12% to 8,638 homes - a record high for our Company
• Total sales value in backlog increased 29% to $2.4 billion - a year-end record for our Company
+Added: • Number of homes in backlog increased 10% - a year-end record for our Company
• Revenue increased 23% to $3.7 billion - a record high for our Company
• Income before income taxes increased 64% to $509.1 million - a record high for our Company
−Removed: In addition to the record results described above, our number of homes in backlog increased 64%, and we achieved net income of $239.9 million in 2020, an 88% increase from the prior year.
−Removed: Our financial services operations also achieved record income before income taxes in 2020, benefiting from an increase in homes closed, the number of mortgages originated and higher margins, as well as technology enabled efficiencies.
+Added: • Net income increased 65% to $396.9 million - a record high for our Company
+Added: In addition to the record results described above, our financial services operations also achieved record income before income taxes in 2021, benefiting from an increase in homes closed, the number of mortgages originated and higher margins, as well as technology enabled efficiencies.
Our company-wide absorption pace of sales per community in 2021 improved to 4.1 per month compared to 3.7 per month in 2020.
2 unchanged sentences
Our ability to timely replace existing communities could further impact our number of active communities.
−Removed: We continue to work to open new communities, and we are also actively managing sales pace, in part by selectively increasing prices, to better match our availability of lots and production schedule.
+Added: We continue to work to open new communities, and we are also actively managing sales at a community level, while selectively increasing prices, to better match our availability of lots and production schedule.
Summary of Company Financial Results in 2021
1 unchanged sentence
Income before income taxes for the twelve months ended December 31, 2021 increased 64% from $310.0 million for the year ended December 31, 2020 to $509.1 million for the year ended December 31, 2021.
−Removed: Income before income taxes for 2020 was unfavorably impacted by asset impairment charges of $8.4 million and $0.9 million of stucco-related repair costs (as more fully discussed below and in N ote 8 to our Consolidated Financial Statements).
−Removed: Income before income taxes for 2019 was unfavorably impacted by asset impairment charges of $5.0 million and $0.6 million of acquisition-related charges as a result of our acquisition of Pinnacle Homes in March 2018.
+Added: Income before income taxes for 2021 was unfavorably impacted by $9.1 million of loss on early extinguishment of debt (as more fully discussed below and in Note 8 to our Consolidated Financial Statements).
+Added: Income before income taxes for 2020 was unfavorably impacted by asset impairment charges of $8.4 million and $0.9 million of stucco-related repair costs.
Excluding these charges in both 2021 and 2020, adjusted income before income taxes increased 62% from $319.3 million in 2020 to $518.2 million in 2021.
−Removed: In 2020, we achieved net income of $239.9 million, or $8.23 per diluted share, which includes the after-tax impact of both the asset impairment charges and stucco-related charges noted above ($0.22 and $0.02 per diluted share, respectively), compared to net income of $127.6 million, or $4.48 per diluted share in 2019, which includes the after-tax impact of both the asset impairment charges and the acquisition-related charges noted above ($0.13 and $0.02 per diluted share, respectively).
+Added: In 2021, we achieved net income of $396.9 million, or $13.28 per diluted share, which includes the after-tax impact of the loss on early extinguishment of debt noted above ($0.23 per diluted share), compared to net income of $239.9 million, or $8.23 per diluted share in 2020, which includes the after-tax impact of both the asset impairment charges and stucco-related charges noted above ($0.22 and $0.02 per diluted share, respectively).
Excluding these charges in both periods, adjusted net income increased 64% from $246.9 million ($8.47 per diluted share) in 2020 to $403.9 million ($13.51 per diluted share) in 2021.
1 unchanged sentence
In 2021, we recorded record total revenue of $3.75 billion, of which $3.63 billion was from homes delivered, $13.4 million was from land sales, and $102.0 million was from our financial services operations.
−Removed: Revenue from homes delivered increased 21% from 2019 driven primarily by the 1,413 additional homes delivered in 2020 (a 22% increase), offset, in part, by a 1% decrease in the average sales price of homes delivered ($3,000 per home delivered), which was primarily the result of the mix of homes delivered.
+Added: Revenue from homes delivered increased 23% from 2020 driven primarily by the 929 additional homes delivered in 2021 (a 12% increase) and a 10% increase in the average sales price of homes delivered ($39,000 per home delivered), which was primarily the result of the mix of homes delivered and higher demand.
Revenue from land sales decreased $5.8 million from 2020 due primarily to fewer land sales in the current year compared to the prior year.
−Removed: Revenue from our financial services segment increased 57% to $87.0 million in 2020 as a result of an increase in loans closed and sold during the year, in addition to higher margins on loans sold during the period compared to the prior year.
+Added: Revenue from our financial services segment increased 17% to $102.0 million in 2021 as a result of an increase in loans closed and sold during the year
Total gross margin (total revenue less total land and housing costs) increased $232.6 million in 2021 compared to 2020 as a result of a $217.6 million improvement in the gross margin of our homebuilding operations (the sum of housing gross margin and land gross margin) and a $15.0 million improvement in the gross margin of our financial services operations.
−Removed: With respect to our homebuilding gross margin, our gross margin on homes delivered (housing gross margin) improved $154.7 million, due to the 22% increase in the number of homes delivered, offset partially by an increase of $3.4 million in asset impairment charges.
−Removed: Our housing gross margin percentage improved 210 basis points from 17.9% in the prior year to 20.0% in 2020.
−Removed: Exclusive of the asset impairment charges and stucco-related repair charges in 2020, and the asset impairment charges and acquisition-related charges in 2019, our adjusted housing gross margin percentage improved from 18.1% in 2019 to 20.3% in 2020 as a result of the mix of homes delivered during the period.
+Added: With respect to our homebuilding gross margin, our gross margin on homes delivered (housing gross margin) improved $215.3 million, due to the 12% increase in the number of homes delivered and the 10% increase in the average sales price of homes delivered ($39,000 per home delivered) compared to prior year.
+Added: Our housing gross margin percentage improved 210 basis points from
+Added: 20.0% in the prior year to 22.1% in 2021.
+Added: Exclusive of the asset impairment charges and stucco-related repair charges in 2020, our adjusted housing gross margin percentage improved 180 basis points.
Our gross margin on land sales (land gross margin) improved $2.3 million in 2021 compared to 2020 as a result of the mix of lots sold in the current year compared to the prior year.
−Removed: The gross margin of our financial services operations increased $31.7 million in 2020 compared to 2019 as a result of increases in the number of loan originations, in addition to higher margins on loans sold during the period, mainly due to a favorable pricing environment.
+Added: The gross margin of our financial services operations increased $15.0 million in 2021 compared to 2020 as a result of increases in the number of loan originations.
We opened 72 new communities during 2021.
3 unchanged sentences
Due to the increase in demand that we have experienced since May 2020, we are selling through communities faster;
−Removed: therefore, our ability to replace existing communities timely could impact our ability to meet current demand and negatively impact recent growth trends in our number of active communities.
−Removed: For 2020, selling, general and administrative expense increased $54.7 million, which partially offset the increase in our gross margin discussed above, but declined as a percentage of revenue to 11.7% in 2020 from 12.1% in 2019.
+Added: therefore, our ability to replace existing communities timely could impact our ability to meet current demand.
+Added: For 2021, selling, general and administrative expense increased $33.5 million, which partially offset the increase in our gross margin discussed above, but improved as a percentage of revenue to 10.4% in 2021 from 11.7% in 2020.
Selling expense increased $19.0 million from 2020 and improved as a percentage of revenue to 5.3% in 2021 from 5.9% in 2020.
−Removed: Variable selling expense for sales commissions contributed $24.5 million to the increase due to the higher number of homes delivered during the period, and the remainder was attributable to an increase in non-variable selling expense.
−Removed: General and administrative expense increased $29.6 million compared to 2019 but declined as a percentage of revenue from 5.9% in 2019 to 5.8% in 2020.
−Removed: The dollar increase in general and administrative expense was primarily due to a $15.2 million increase in compensation-related expenses due to our increased headcount and strong financial performance which led to higher incentive-based compensation, a $2.6 million increase in land-related expenses, a $2.4 million increase in costs associated with new information systems, a $1.4 million increase in corporate home office rent-related expenses, a $1.4 million increase in professional fees, a $1.2 million increase in COVID-19-related cleaning expenses, a $1.0 million increase in rent related to our division offices, a $0.8 million increase in advertising expenses, and a $3.6 million increase in miscellaneous expenses.
−Removed: We believe that new home sales will continue to benefit from record-low interest rates, a continued undersupply of available homes and consumer demographics, including a growing number of homebuyers moving from rental apartments and more densely populated areas to single family homes in suburban locations.
−Removed: However, we also expect that overall economic conditions in the United States will continue to be negatively impacted by the COVID-19 pandemic.
−Removed: The extent to which these matters will impact the U.S.
−Removed: economy and level of employment, capital markets, secondary mortgage markets, consumer confidence and availability of mortgage loans to homebuyers, and therefore our operational and financial performance, is highly uncertain and cannot be predicted.
−Removed: In addition, in the latter part of 2020, we experienced cost increases in certain construction materials, particularly lumber, and are actively managing and monitoring those costs.
+Added: Variable selling expense for sales commissions contributed $19.5 million to the increase due to the higher number of homes delivered during the period, offset partially by a $0.5 million decrease in non-variable selling expense.
+Added: General and administrative expense increased $14.5 million compared to 2020 but improved as a percentage of revenue from 5.8% in 2020 to 5.1% in 2021.
+Added: The dollar increase in general and administrative expense was primarily due to a $14.2 million increase in compensation-related expenses due to our increased headcount and strong financial performance which led to higher incentive-based compensation, and a $0.3 million increase in miscellaneous expenses.
+Added: We believe that new home sales will continue to benefit from a continued undersupply of available homes, mortgage rates that remain historically low, improving employment levels and positive consumer demographics, which are leading to a growing number of younger homebuyers moving to single family homes in suburban locations.
+Added: However, we also expect that overall economic and homebuilding industry conditions in the United States in 2022 will continue to be negatively impacted by labor and supply shortages, inflation, and increasing costs of materials and labor.
We have been able to raise home prices in many of our communities to offset these cost increases and preserve or increase our margins.
−Removed: During the second half of 2020, our ability to raise prices, together with cost management, enabled us to achieve a total gross margin percentage of 22.2% for 2020, an improvement of 260 basis points compared to 2019.
−Removed: We may experience future shortages in materials and labor as well as price increases for materials and labor and may not be able to maintain our current level of direct construction costs as a percentage of average sales price.
+Added: During 2021, our ability to raise prices, together with cost management, enabled us to achieve a total gross margin percentage of 24.3%, an improvement of 210 basis points compared to 2020.
+Added: We expect to experience shortages in materials and labor as well as price increases for materials and labor in 2022 and may not be able to maintain our current level of direct construction costs as a percentage of average sales price.
We remain sensitive to changes in market conditions, and continue to focus on controlling overhead leverage and carefully managing our investment in land and land development spending.
−Removed: Also due to strong overall housing demand, we have experienced periodic disruptions in our supply chain, including the availability of skilled labor and the timely availability of certain finishing products such as cabinets and appliances which have lengthened the production cycles in certain markets.
−Removed: In 2020, we were able to manage through these disruptions but we cannot predict whether any widespread supply chain disruptions will occur in 2021 or the extent to which any such disruptions will affect our business in 2021.
We are also closely monitoring mortgage availability and lending standards.
−Removed: Interest rates remain low, and the decline in mortgage availability and tightening of underwriting standards that we experienced in March 2020 have eased.
−Removed: This tightening did not significantly impact our business during 2020, but it did require us to adjust our deliveries of lower credit quality loans.
−Removed: We adjusted our pre-closing documentation timeframes based on Fannie Mae, Freddie Mac and government agency recommendations.
+Added: While interest rates remain low by historical standards, mortgage rates are generally expected to increase during 2022 which could negatively impact affordability and mortgage availability.
We expect to continue to emphasize the following strategic business objectives in 2022:
• managing our land spend and inventory levels;
−Removed: • accelerating the opening of new communities wherever possible;
+Added: • opening new communities on schedule wherever possible;
• maintaining a strong balance sheet and liquidity levels;
2 unchanged sentences
During 2021, we invested $630.1 million in land acquisitions and $421.8 million in land development.
−Removed: We continue to closely review all of our land acquisition and land development spending and monitor our ongoing pace of home sales and deliveries, including any potential effects as a result of the COVID-19 pandemic, and we will adjust our land and inventory home investment spend accordingly.
−Removed: As a result of the uncertainty of the magnitude and duration of the COVID-19 pandemic, we are not providing land spending estimates for 2021 at this time.
−Removed: Due to the uncertainty of the current environment, and the unknown effects on the specific timing of opening and closing out communities, we are not providing estimated community count information for 2021 at this time.
−Removed: However, as a result of our accelerated pace of home sales, we are selling through communities at a faster pace, which will make it challenging to increase our number of active communities in 2021.
+Added: We continue to closely review all of our land acquisition and land development spending and monitor our ongoing pace of home sales and deliveries, and we will adjust our land and inventory home investment spend accordingly.
+Added: As a result of the unprecedented current market conditions, we are not providing land spending estimates for 2022 at this time.
+Added: As a result of our accelerated pace of home sales, we sold through communities at a faster pace than anticipated in 2021.
We ended 2021 with approximately 44,000 lots under control, which represents a 5.1 year supply of lots based on 2021 homes delivered, including certain lots that we anticipate selling to third parties.
−Removed: This represents a 19% increase from our approximately 33,300 lots under control at the end of 2019.
+Added: This represents an 11% increase from our approximately 39,500 lots under control at the end of 2020.
We opened 72 communities and closed 99 communities in 2021, ending the year with a total of 175 communities, compared to 202 at the end of 2020.
Of our total communities at the end of 2021, 72 offered our more affordable Smart Series designs, which are primarily designed for first-time homebuyers.
+Added: Although the timing of opening new communities and closing out existing communities is subject to substantial variation, we expect to open a record number of new communities in 2022, growing our community count by approximately 15% by the end of 2022 to more than 200 communities.
We believe our ability to design and develop attractive homes in desirable locations at an affordable cost, and to grow our business while also leveraging our fixed costs, has enabled us to maintain and improve our strong financial results.
We further believe that we are well positioned with a strong balance sheet to manage through the current economic environment.
−Removed: See “Item 1A.
−Removed: Risk Factors” for further information regarding the potential impacts of the COVID-19 pandemic on our business, results of operations, financial condition and cash flows.
+Added: Housing market demand has remained strong over the past year and continues as we enter fiscal 2022.
+Added: However, future economic and homebuilding industry conditions and the demand for homes are subject to continued uncertainty due to many factors, including the impacts of inflation, materials and labor cost increases, supply chain disruptions and labor shortages, the ongoing impact of the pandemic and government directives, actions and economic relief efforts related thereto, and the further impact of these actions on the economy, mortgage rates and markets, employment levels, consumer confidence, and financial markets, among other things.
+Added: These factors are highly uncertain and outside our control.
+Added: As a result, our past performance may not be indicative of future results.
Segment Reporting
15 unchanged sentences
Raleigh, North Carolina
+Added: Nashville, Tennessee
The following table shows, by segment:
36 unchanged sentences
$ 518,296 $ 319,261 $ 187,089
−Removed: Interest expense:
+Added: Interest expense (income):
Northern homebuilding $ 76 $ 2,465 $ 7,474
2 unchanged sentences
3,912 2,927 3,651
+Added: Corporate (1,368) — —
Total interest expense $ 2,156 $ 9,684 $ 21,375
−Removed: Equity in income from joint venture arrangements $ (466) $ (311) $ (312)
−Removed: Acquisition and integration costs (e)
+Added: Other income (e)
+Added: $ (2,046) $ (466) $ (311)
+Added: Loss on early extinguishment of debt (f)
Income before income taxes $ 509,114 $ 310,043 $ 166,025
6 unchanged sentences
(a) Our financial services operational results should be viewed in connection with our homebuilding business as its operations originate loans and provide title services primarily for our homebuyers, with the exception of a small amount of mortgage refinancing.
−Removed: (b) Includes $0.6 million and $5.1 million of acquisition-related charges taken during 2019 and 2018, respectively, as a result of our acquisition of Pinnacle Homes in Detroit, Michigan on March 1, 2018.
+Added: (b) Includes $0.6 million of acquisition-related charges taken during 2019 as a result of our acquisition of Pinnacle Homes in Detroit, Michigan on March 1, 2018.
(c) The year ended December 31, 2020 includes a $0.9 million net charge for stucco-related repair costs in certain of our Florida communities (as more fully discussed below and in Note 8 to our Consolidated Financial Statements).
−Removed: (d) For the years ended December 31, 2020, 2019 and 2018, total gross margin and total operating income were reduced by $8.4 million, $5.0 million and $5.8 million, respectively, related to asset impairment charges taken during the period.
−Removed: (e) Represents costs which include, but are not limited to, legal fees and expenses, travel and communication expenses, cost of appraisals, accounting fees and expenses, and miscellaneous expenses related to our acquisition of Pinnacle Homes.
−Removed: As these costs are not eligible for capitalization as initial direct costs, such amounts are expensed as incurred.
+Added: (d) For the years ended December 31, 2020 and 2019, total gross margin and total operating income were reduced by $8.4 million and $5.0 million, respectively, related to asset impairment charges taken during the period.
+Added: (e) Other income is comprised of the gain on the sale of a non-operating asset during the fourth quarter of 2021 as well as equity in (income) loss from joint venture arrangements.
+Added: (f) Loss on early extinguishment of debt relates to the early redemption of our 5.625% senior notes due 2025 (the “2025 Senior Notes”) during the third quarter of 2021, consisting of a $7.1 million prepayment premium due to early redemption and $2.0 million for the write-off of unamortized debt issuance costs.
The following tables show total assets by segment at December 31, 2021, 2020 and 2019:
80 unchanged sentences
(a) Includes the effect of total homebuilding selling, general and administrative expense for the region as disclosed in the first table set forth in this “Outlook” section.
−Removed: (b) Includes $0.6 million and $5.1 million of acquisition-related charges taken during 2019 and 2018, respectively, as a result of our acquisition of Pinnacle Homes in Detroit, Michigan on March 1, 2018.
+Added: (b) Includes $0.6 million of acquisition-related charges taken during 2019 as a result of our acquisition of Pinnacle Homes in Detroit, Michigan on March 1, 2018.
(c) Includes a $0.9 million net charge for stucco-related repair costs in certain of our Florida communities (as more fully discussed below and in Note 8 to our Consolidated Financial Statements) taken during 2020.
−Removed: (d) Includes $8.4 million, $5.0 million and $5.8 million of asset impairment charges taken during the years ended December 31, 2020, 2019 and 2018, respectively.
+Added: (d) Includes $8.4 million and $5.0 million of asset impairment charges taken during the years ended December 31, 2020 and 2019, respectively.
Year Ended December 31,
43 unchanged sentences
Acquisition-related charges (c)
−Removed: Acquisition and integration costs (d)
+Added: Loss on early extinguishment of debt (d)
Adjusted income before income taxes $ 518,186 $ 319,338 $ 171,666
4 unchanged sentences
Acquisition-related charges - net of tax (c)
−Removed: Acquisition and integration costs - net of tax (d)
+Added: Loss on early extinguishment of debt - net of tax (d)
Adjusted net income $ 403,853 $ 246,939 $ 131,875
2 unchanged sentences
(c) Represents acquisition-related charges related to our acquisition of Pinnacle Homes in Detroit, Michigan on March 1, 2018 (as more fully discussed in Note 12 to our Consolidated Financial Statements).
−Removed: (d) Represents costs which include, but are not limited to, legal fees and expenses, travel and communication expenses, cost of appraisals, accounting fees and expenses, and miscellaneous expenses related to our acquisition of Pinnacle Homes.
−Removed: As these costs are not eligible for capitalization as initial direct costs, such amounts are expensed as incurred.
+Added: (d) Loss on early extinguishment of debt relates to the early redemption of our 2025 Senior Notes during the third quarter of 2021, consisting of a $7.1 million prepayment premium due to early redemption and $2.0 million for the write-off of unamortized debt issuance costs.
We believe adjusted housing gross margin, adjusted income before income taxes, and adjusted net income are each relevant and useful financial measures to investors in evaluating our operating performance as they measure the gross profit, income before income taxes, and net income we generated specifically on our operations during a given period.
These non-GAAP financial measures isolate the impact that the acquisition-related charges, stucco-related charges and impairment charges have on housing gross margins;
−Removed: the impact that the acquisition-related charges, acquisition and integration costs, stucco-related charges and impairment charges have on income before income taxes;
−Removed: and that the acquisition-related charges, acquisition and integration costs, stucco-related charges and impairment charges have on net income, and allow investors to make comparisons with our competitors that adjust housing gross margins, income before income taxes, and net income in a similar manner.
+Added: the impact that the other income, loss on early debt extinguishment, acquisition-related charges, stucco-related charges and impairment charges have on income before income taxes;
+Added: and that the other income, loss on early debt extinguishment, acquisition-related charges, stucco-related charges and impairment charges have on net income, and allow investors to make comparisons with our competitors that adjust housing gross margins, income before income taxes, and net income in a similar manner.
We also believe investors will find these adjusted financial measures relevant and useful because they represent a profitability measure that may be compared to a prior period without regard to variability of the charges noted above.
5 unchanged sentences
During the twelve months ended December 31, 2021, homebuilding revenue in our Northern region increased $339.3 million, from $1.3 billion in 2020 to $1.6 billion in 2021.
−Removed: This 22% increase in homebuilding revenue was the result of a 24% increase in the number of homes delivered (589 units), offset, in part, by a 1% decrease in the average sales price of homes delivered ($3,000 per home delivered) and a $3.1 million decrease in land sale revenue.
+Added: This 27% increase in homebuilding revenue was the result of a 17% increase in the number of homes delivered (521 units), a 9% increase in the average sales price of homes delivered ($35,000 per home delivered) and a $0.8 million increase in land sale revenue.
Operating income in our Northern region increased $86.4 million, from $125.6 million in 2020 to $212.0 million in 2021.
The increase in operating income was primarily the result of a $98.6 million increase in our gross margin, offset, in part, by a $12.2 million increase in selling, general, and administrative expense.
−Removed: With respect to our homebuilding gross margin, our housing gross margin improved $50.0 million, due to the 24% increase in the number of homes delivered noted above.
−Removed: Our housing gross margin percentage improved 70 basis points from 17.9% in 2019 to 18.6% in 2020.
−Removed: Our housing gross margin was unfavorably impacted in 2020 by $8.4 million of asset impairment charges, and in 2019 by $3.4 million of asset impairment charges and $0.6 million of acquisition-related charges as a result of our acquisition of Pinnacle Homes in March 2018.
−Removed: Exclusive of these charges in both years, our adjusted housing gross margin percentage in 2020 improved from 18.3% in 2019 to 19.3% in 2020 largely due to a change in product type and market mix of homes delivered compared to prior year and improved demand, offset, in part, by increased lot costs.
−Removed: Our land sale gross margin remained flat in the twelve months ended December 31, 2020 compared to the same period in 2019.
−Removed: Selling, general and administrative expense increased $20.7 million, from $86.6 million in 2019 to $107.3 million in 2020, and increased as a percentage of revenue to 8.5% in 2020 from 8.4% in 2019.
+Added: With respect to our homebuilding gross margin, our housing gross margin improved $97.7 million, due to the increases noted above.
+Added: Our housing gross margin percentage improved 220 basis points from 18.6% in 2020 to 20.8% in 2021 largely due to improved demand, offset, in part, by increased construction and lot costs.
+Added: Our housing gross margin was unfavorably impacted in 2020 by $8.4 million of asset impairment charges.
+Added: Exclusive of these charges, our adjusted housing gross margin percentage improved 150 basis points.
+Added: Our land sale gross margin improved $0.9 million as a result of the mix of lots sold in the current year compared to the prior year.
+Added: Selling, general and administrative expense increased from $107.3 million in 2020 to $119.6 million in 2021, but improved as a percentage of revenue to 7.5% in 2021 from 8.5% in 2020.
The increase in selling, general and administrative expense was attributable, in part, to a $10.5 million increase in selling expense, due to (1) a $9.6 million increase in variable selling expenses resulting from increases in sales commissions produced by the higher number of homes delivered and (2) a $0.9 million increase in non-variable selling expenses primarily related to increased headcount and other costs associated with our sales offices and models.
−Removed: The increase in selling, general and administrative expense was also attributable to a $7.6 million increase in general and administrative expense, which was primarily related to a $3.1 million increase in compensation related expenses, a $2.1 million increase in land-related expenses, a $1.1 million increase in professional fees, and a $1.3 million increase in miscellaneous other expenses.
−Removed: During 2020, we experienced a 39% increase in new contracts in our Northern region, from 2,695 in 2019 to 3,743 in 2020, and a 59% increase in backlog from 1,143 homes at December 31, 2019 to 1,815 homes at December 31, 2020.
−Removed: The increases in new contracts and backlog were attributable to (1) improved demand in our Smart Series communities compared to the prior year and (2) an increase in our average number of communities during the period.
+Added: The increase in selling, general and administrative expense was also attributable to a $1.7 million increase in general and administrative expense, which was primarily related to a $3.5 million increase in compensation related expenses as a result of increased employee headcount and an increase in incentive compensation due to improved results, partially offset by a $1.8 million decrease in professional fees.
+Added: During 2021, we experienced a 2% decrease in new contracts in our Northern region, from 3,743 in 2020 to 3,667 in 2021 as a result of a decrease in our average number of communities and limiting sales in certain communities during the period.
+Added: Backlog increased 4% from 1,815 homes at December 31, 2020 to 1,890 homes at December 31, 2021 which was attributable to improved demand in our Smart Series communities compared to the prior year.
Average sales price in backlog increased to $484,000 at December 31, 2021 compared to $436,000 at December 31, 2020 which was primarily due to improved demand in our Northern Region in 2021 compared to prior year.
3 unchanged sentences
For the twelve months ended December 31, 2021, homebuilding revenue in our Southern region increased $345.4 million, from $1.7 billion in 2020 to $2.0 billion in 2021.
−Removed: This 20% increase in homebuilding revenue was primarily the result of a 22% increase in the number of homes delivered (824 units), partially offset by a $2.3 million decrease in land sale revenue and a 1% decrease in the average sales price of homes delivered ($3,000 per home delivered).
+Added: This 20% increase in homebuilding revenue was primarily the result of a 9% increase in the number of homes delivered (408 units) and an 11% increase in the average sales price of homes delivered ($40,000 per home delivered), partially offset by a $6.6 million decrease in land sale revenue.
Operating income in our Southern region increased $110.1 million from $202.6 million in 2020 to $312.7 million in 2021.
−Removed: This increase in operating income was the result of a $105.2 million improvement in our gross margin, offset, in part, by a $17.7 million increase in selling, general, and administrative expense.
−Removed: With respect to our homebuilding gross margin, our housing gross margin improved $104.8 million, due primarily to the 22% increase in the number of homes delivered noted above and the $1.6 million decline in pre-tax impairment charges compared to prior year, partially offset by $0.9 million of stucco-related repair costs in certain of our Florida communities recorded in 2020 (as more fully described in Note 8).
−Removed: Our housing gross margin percentage improved 320 basis points from 17.9% in 2019 to 21.1% in 2020.
−Removed: Exclusive of the stucco-related repair charges in 2020 and the impairment charges in 2019, our adjusted housing gross margin percentage improved 310 basis points from 18.0% in 2019 to 21.1% in 2020 largely due to a change in product type and mix of homes delivered compared to prior year and improved demand in our Southern Region.
+Added: This increase in operating income was the result of a $119.0 million improvement in our gross margin, offset, in part, by an $8.9 million increase in selling, general, and administrative expense.
+Added: With respect to our homebuilding gross margin, our housing gross margin improved $117.7 million, due primarily to the increases in the number and average sales price of homes delivered noted above.
+Added: Our housing gross margin percentage improved 210 basis points from 21.1% in 2020 to 23.2% in 2021 largely due to improved demand, offset, in part, by increased construction and lot costs.
+Added: Exclusive of the stucco-related repair charges in 2020, our adjusted housing gross margin percentage remained 21.1%.
Our land sale gross margin improved $1.3 million as a result of the mix of lots sold in the current year compared to the prior year.
−Removed: Selling, general and administrative expense increased $17.8 million from $136.1 million in 2019 to $153.9 million in 2020 but declined as a percentage of revenue to 9.0% in 2020 from 9.6% in 2019.
+Added: Selling, general and administrative expense increased from $153.9 million in 2020 to $162.7 million in 2021 but declined as a percentage of revenue to 7.9% in 2021 from 9.0% in 2020.
The increase in selling, general and administrative expense was attributable, in part, to a $7.7 million increase in selling expense due to a $10.0 million increase in variable selling expenses resulting from increases in sales commissions produced by the higher number of homes delivered, offset, in part, by a $2.3 million decrease in non-variable selling expenses primarily related to the timing of sales office and model openings and a reduction in marketing costs.
−Removed: The increase in selling, general and administrative expense was also attributable to a $5.8 million increase in general and administrative expense, which was primarily related to a $3.7 million increase in incentive compensation due to our improved performance, and a $2.1 million increase in land-related expenses.
−Removed: During 2020, we experienced a 39% increase in new contracts in our Southern region, from 4,078 in 2019 to 5,684 in 2020, and a 68% increase in backlog from 1,528 homes at December 31, 2019 to 2,574 homes at December 31, 2020.
−Removed: The increases in new contracts and backlog were primarily due to changes in product type and market mix, along with improvement in demand across our Southern markets compared to prior year.
+Added: The increase in selling, general and administrative expense was also attributable to a $1.2 million increase in general and administrative expense, which was primarily related to a $2.5 million increase in compensation related
+Added: expenses as a result of increased employee headcount and an increase in incentive compensation due to improved results, offset partially by a $1.3 million decrease in land-related expenses.
+Added: During 2021, we experienced a 5% decrease in new contracts in our Southern region, from 5,684 in 2020 to 5,417 in 2021 as a result of a decrease in our average number of communities and limiting sales in certain communities during the period.
+Added: Backlog increased 14% from 2,574 homes at December 31, 2020 to 2,945 homes at December 31, 2021 primarily due to changes in product type and market mix, along with improvement in demand across our Southern markets compared to prior year.
Average sales price in backlog increased to $493,000 at December 31, 2021 from $406,000 at December 31, 2020 primarily due to a change in product type and market mix and improved demand in our Southern Region.
2 unchanged sentences
Financial Services.
−Removed: Revenue from our mortgage and title operations increased $31.7 million, or 57%, from $55.3 million for the twelve months ended December 31, 2019 to a record $87.0 million for the twelve months ended December 31, 2020 as a result of a 32% increase in the number of loan originations, from 4,476 in 2019 to 5,888 in 2020, and an increase in the average loan amount from $309,000 in 2019 to $313,000 in 2020.
−Removed: We also experienced higher margins on loans sold during the period compared to 2019.
−Removed: Revenue was reduced by a $0.2 million impairment charge on our mortgage servicing rights caused by the disruption in the mortgage industry as a result of the COVID-19 pandemic.
−Removed: See Note 3 to our financial statements for further information.
−Removed: Our financial service operations ended 2020 with a $26.0 million increase in operating income compared to 2019, which was primarily due to the increase in our revenue discussed above partially offset by a $5.6 million increase in selling, general and administrative expense compared to 2019.
+Added: Revenue from our mortgage and title operations increased $15.0 million, or 17%, from $87.0 million for the twelve months ended December 31, 2020 to a record $102.0 million for the twelve months ended December 31, 2021 as a result of an 11% increase in the number of loan originations, from 5,888 in 2020 to 6,525 in 2021, and an increase in the average loan amount from $313,000 in 2020 to $343,000 in 2021.
+Added: Our financial service operations ended 2021 with an $8.9 million increase in operating income compared to 2020, which was primarily due to the increase in our revenue discussed above partially offset by a $6.1 million increase in selling, general and administrative expense compared to 2020.
The increase in selling, general and administrative expense was attributable to an increase in compensation expense related to our increase in employee headcount and an increase in incentive compensation due to improved results.
4 unchanged sentences
Corporate selling, general and administrative expense increased $6.3 million, from $62.3 million in 2020 to $68.6 million in 2021.
−Removed: The increase was primarily due to a $4.7 million increase in compensation expense due to improved results during the period, a $1.4 million increase in corporate home office rent-related expense, a $1.3 million increase related to costs associated with new information systems, a $0.9 million increase in charitable contributions, and a $2.4 million increase in other miscellaneous expenses.
−Removed: Equity in income from joint venture arrangements.
+Added: The increase was primarily due to a $4.3 million increase in compensation expense due to increased headcount during the period, a $1.2 million increase related to costs associated with new information systems and a $0.8 million increase in advertising expenses.
+Added: Other income.
+Added: Other income includes a $1.9 million gain on the sale of a non-operating asset that occurred during the fourth quarter of 2021 (see Note 1 to our Consolidated Financial Statements for more information) and equity in income from joint venture arrangements.
Equity in income from joint venture arrangements represents our portion of pre-tax earnings from our joint venture arrangements where a special purpose entity is established (“LLCs”) with the other partners.
2 unchanged sentences
Interest expense for the Company decreased $7.5 million from $9.7 million in the twelve months ended December 31, 2020 to $2.2 million in the twelve months ended December 31, 2021.
−Removed: This decrease was primarily the result of a decrease in average borrowings under our Credit Facility during 2020 compared to prior year, the redemption of our 6.75% Senior Notes due 2021 (the “2021 Senior Notes”) at the beginning of the first quarter of 2020, and the issuance of our 2028 Senior Notes, which were not outstanding during 2019 and have a lower interest rate than the 2021 Senior Notes.
−Removed: Our weighted average borrowings decreased from $842.4 million in 2019 to $767.5 million in 2020, and our weighted average borrowing interest rate declined from 6.17% in 2019 to 5.53% in the 2020.
+Added: This decrease was primarily the result of a decrease in average borrowings during 2021 compared to prior year, the redemption of our 2025 Senior Notes during the third quarter of 2021, the issuance of our 2030 Senior Notes, which were not outstanding during 2020 and have a lower interest rate than the 2025 Senior Notes and higher interest capitalization due to the high level of inventory we have under development compared to the prior year.
+Added: Our weighted average borrowings decreased from $767.5 million in 2020 to $716.7 million in 2021.
+Added: Our weighted average borrowing interest rate increased slightly from 5.53% in 2020 to 5.55% in the 2021 as a result of a change in the mix of borrowings in the current year compared to prior year.
Income Taxes.
13 unchanged sentences
Impairment (a)
−Removed: 8,435 3,395 273
−Removed: Acquisition-related charges (b)
Adjusted housing gross margin $ 330,404 $ 241,172
5 unchanged sentences
Housing gross margin 473,255 355,604
−Removed: Impairment (a)
−Removed: — 1,607 5,536
−Removed: Stucco-related charges (c)
+Added: Stucco-related charges (b)
Adjusted housing gross margin $ 473,255 $ 356,464
2 unchanged sentences
(a) Represents asset impairment charges taken during the respective periods.
−Removed: (b) Represents acquisition-related charges from our acquisition of Pinnacle Homes in Detroit, Michigan on March 1, 2018.
−Removed: (c) Represents warranty charges, net of recoveries, for stucco-related repair costs in certain of our Florida communities taken during 2020.
−Removed: With respect to this matter, during 2020, we identified 156 additional homes in need of repair and completed repairs on 176 homes, and at December 31, 2020, we have 116 homes in various stages of repair.
+Added: (b) Represents warranty charges, net of recoveries, for stucco-related repair costs in certain of our Florida communities taken during 2020.
See Note 8 to our Consolidated Financial Statements for further information.
4 unchanged sentences
Overview of Capital Resources and Liquidity
−Removed: At December 31, 2020, we had $260.8 million of cash, cash equivalents and restricted cash, with $260.7 million of this amount comprised of unrestricted cash and cash equivalents, which represents a $254.8 million increase in unrestricted cash and cash equivalents from December 31, 2019.
−Removed: Our principal uses of cash during 2020 were investment in land and land development, construction of homes, mortgage loan originations, investment in joint ventures, operating expenses, short-term working capital, debt service requirements, including the redemption of our 2021 Senior Notes and the repayment of amounts outstanding under our credit facilities, and the repurchase of $1.9 million of our outstanding common shares under our 2018 Share Repurchase Program (as defined below) during the first quarter of 2020.
+Added: At December 31, 2021, we had $236.4 million of cash, cash equivalents and restricted cash, with $236.0 million of this amount comprised of unrestricted cash and cash equivalents, which represents a $24.6 million decrease in unrestricted cash and cash equivalents from December 31, 2020.
+Added: Our principal uses of cash during 2021 were investment in land and land development, construction of homes, mortgage loan originations, investment in joint ventures, operating expenses, short-term working capital, debt service requirements, including the redemption of our 2025 Senior Notes, and the repurchase of $51.5 million of our outstanding common shares under our 2021 Share Repurchase Program during the third and fourth quarters of 2021.
In order to fund these uses of cash, we used proceeds from home deliveries, the sale of mortgage loans and the sale of mortgage servicing rights, as well as excess cash balances, proceeds from the issuance of our 2030 Senior Notes (as described below), borrowings under our credit facilities, and other sources of liquidity.
2 unchanged sentences
as borrower and guaranteed by the Company’s wholly-owned homebuilding subsidiaries;
−Removed: (2) the MIF Mortgage Warehousing Agreement, our $125 million secured mortgage warehousing agreement (which increased to $160 million from September 25, 2020 to October 15, 2020 and to $185 million from November 15, 2020 to February 4, 2021), with M/I Financial as borrower;
+Added: (2) the MIF Mortgage Warehousing Agreement, our $175 million secured mortgage warehousing agreement (which increased to $210 million from September 25, 2021 to October 15, 2021 and to $235 million from November 15, 2021 to February 4, 2022),
+Added: with M/I Financial as borrower;
and (3) the MIF Mortgage Repurchase Facility, our $90 million mortgage repurchase agreement, with M/I Financial as borrower.
−Removed: In January 2020, we issued $400 million aggregate principal amount of our 2028 Senior Notes at par, for net proceeds of approximately $393.9 million.
−Removed: We used $300.4 million of the net proceeds to redeem all $300.0 million aggregate principal amount of our 2021 Senior Notes, at par, and we used the remaining net proceeds to repay a portion of our outstanding borrowings under the Credit Facility.
+Added: In August 2021, we issued $300.0 million aggregate principal amount of our 2030 Senior Notes at par, for net proceeds of approximately $296.0 million.
+Added: We used $257.9 million of the net proceeds to redeem all $250.0 million aggregate principal amount of our outstanding 2025 Senior Notes at a redemption price of 102.813% of the principal amount, plus accrued and unpaid interest thereon.
As of December 31, 2021, there were no borrowings outstanding and $85.0 million of letters of credit outstanding under the Credit Facility, leaving $465.0 million in available borrowings.
−Removed: We expect to continue managing our balance sheet and liquidity carefully in 2021 by managing our spending on land acquisition and development and construction of inventory homes, as well as overhead expenditures, relative to our ongoing volume of home deliveries, and we expect to meet our current and anticipated capital requirements in 2021 from cash receipts and availability under our Credit Facility, as well as excess cash balances.
+Added: As of December 31, 2021, we had outstanding notes payable (consisting primarily of notes payable for our financial services operations, the 2030 Senior Notes and the 2028 Senior Notes) with varying maturities totaling an aggregate principal amount of $966.2 million, with $266.2 million payable within 12 months.
+Added: Future interest payments associated with these notes payable totaled $229.3 million as of December 31, 2021, with $31.6 million payable within 12 months.
+Added: We expect to continue managing our balance sheet and liquidity carefully in 2022 by managing our spending on land acquisition and development and construction of inventory homes, as well as overhead expenditures, relative to our ongoing volume of home deliveries, and we expect to meet our current and anticipated cash requirements in 2022 from cash receipts and availability under our credit facilities, as well as excess cash balances.
During the year ended December 31, 2021, we delivered 8,638 homes, started 9,506 homes, and spent $630.1 million on land purchases and $421.8 million on land development.
We are selectively acquiring and developing lots in our markets to replenish and increase our lot supply and will continue to monitor market conditions and our pace of home sales and deliveries and adjust our land spending accordingly.
−Removed: Pursuant to such land option agreements, as of December 31, 2020, we had a total of 22,710 lots under contract, with an aggregate purchase price of approximately $799.7 million, to be acquired during the period from 2021 through 2029.
+Added: Pursuant to our land option agreements, as of December 31, 2021, we had a total of 19,364 lots under contract, with an aggregate purchase price of approximately $816.1 million, to be acquired during the period from 2022 through 2029.
+Added: Our off-balance sheet arrangements relating to our homebuilding operations include joint venture arrangements, land option agreements, guarantees and indemnifications associated with acquiring and developing land, and the issuance of letters of credit and completion bonds.
+Added: Our use of these arrangements is for the purpose of securing the most desirable lots on which to build homes for our homebuyers in a manner that we believe reduces the overall risk to the Company.
+Added: See Note 6 to our Consolidated Financial Statements for more information regarding these arrangements.
Operating Cash Flow Activities .
−Removed: During 2020, we generated $168.3 million of cash from operating activities, compared to generating $65.6 million of cash in operating activities in 2019.
−Removed: The cash generated from operating activities in 2020 was primarily a result of net income of $239.9 million and a $128.7 million increase in accounts payable, customer deposits and other liabilities, offset partially by payments for mortgage loan originations which exceeded the proceeds from the sale of mortgage loans by $78.7 million and a $134.9 million increase in inventory.
−Removed: The cash provided by operating activities in 2019 was primarily a result of net income of $127.6 million and $12.1 million of proceeds from the sale of mortgage loans net of mortgage loan originations, offset partially by an $88.4 million increase in inventory and a $17.5 million decrease in accounts payable and other liabilities.
+Added: During 2021, we used $16.8 million of cash in operating activities, compared to generating $168.3 million of cash from operating activities in 2020.
+Added: The cash used in operating activities in 2021 was primarily a result of a $508.2 million increase in inventory, along with payments for mortgage loan originations which exceeded the proceeds from the sale of mortgage loans by $43.9 million, offset by net income of $396.9 million and a $121.7 million increase in accounts payable, customer deposits and other liabilities.
+Added: The cash provided by operating activities in 2020 was primarily a result of net income of $239.9 million and a $128.7 million increase in accounts payable, customer deposits and other liabilities, offset partially by payments for mortgage loan originations which exceeded the proceeds from the sale of mortgage loans by $78.7 million and a $134.9 million increase in inventory.
Investing Cash Flow Activities.
During 2021, we used $51.7 million of cash in investing activities, compared to using $33.9 million of cash in investing activities during 2020.
−Removed: This $6.3 million increase in cash usage was primarily due to a $7.2 million increase in purchases of property and equipment during the period compared to prior year, offset partially by $3.9 million in proceeds from the sale of a portion of our mortgage servicing rights during the fourth quarter of 2020.
+Added: This $17.8 million increase in cash usage was primarily due to an increase in our investments in joint venture arrangements.
Financing Cash Flow Activities.
−Removed: During 2020, we generated $120.3 million of cash from our financing activities, compared to using $53.5 million of cash during 2019.
−Removed: The cash generated from financing activities in 2020 was primarily due to the issuance of our 2028 Senior Notes, net of debt issuance costs, for $391.5 million and increased borrowings under our two M/I Financial credit facilities of $88.7 million, offset partially by the redemption of all $300.0 million aggregate principal amount of our 2021 Senior Notes, and repayments of $66.0 million (net of proceeds from borrowings) under our Credit Facility during 2020.
−Removed: On August 14, 2018, the Company announced that its Board of Directors authorized a share repurchase program (the “2018 Share Repurchase Program”) pursuant to which the Company may purchase up to $50 million of its outstanding common shares (see Note 1 6 to our Consolidated Financial Statements).
−Removed: During 2020, the Company repurchased 0.1 million common shares with an aggregate purchase price of $1.9 million which was funded with cash on hand and borrowings under our Credit Facility.
−Removed: As of December 31, 2020, the Company is authorized to repurchase an additional $17.2 million of outstanding common shares under the 2018 Share Repurchase Program.
−Removed: At December 31, 2020 and December 31, 2019, our ratio of homebuilding debt to capital was 34% and 38%, respectively, calculated as the carrying value of our outstanding homebuilding debt (which consists of borrowings under our Credit Facility, our 2028 Senior Notes, our 2025 Senior Notes, and Notes Payable-Other) divided by the sum of the carrying value of our outstanding homebuilding debt plus shareholders' equity.
+Added: During 2021, we generated $44.1 million of cash from our financing activities, compared to generating $120.3 million of cash during 2020.
+Added: The cash generated from financing activities in 2021 was primarily due to the issuance of $300.0 million of our 2030 Senior Notes, net of debt issuance costs, for $296.0 million, and net borrowings under our two M/I Financial credit facilities of $40.5 million, offset partially by the redemption of all $250.0 million of our then outstanding 2025 Senior Notes, and the repurchase of $51.5 million of our outstanding common shares during 2021 .
+Added: On July 28, 2021, the Company announced that its Board of Directors authorized the 2021 Share Repurchase Program pursuant to which the Company may purchase up to $100 million of its outstanding common shares (see Note 16 to our Consolidated Financial Statements).
+Added: During 2021, the Company repurchased 0.8 million common shares with an aggregate purchase price of $51.5 million which was funded with cash on hand.
+Added: As of December 31, 2021, the Company was authorized to repurchase an additional $48.5 million of outstanding common shares under the 2021 Share Repurchase Program.
+Added: On February 17, 2022, the Company announced that its Board of Directors approved an increase to its 2021 Share Repurchase Program by an additional
+Added: $100 million, leaving up to $148.5 million available for repurchase.
+Added: See Note 17 to our Consolidated financial Statements and “Item 9B.
+Added: Other Information”, for more information regarding the increase in the 2021 Share Repurchase Program.
+Added: Based on current market conditions, expected capital needs and availability, and the current market price of the Company’s common shares, we expect to continue repurchasing shares during the first quarter of 2022.
+Added: The timing and amount of any purchases under the 2021 Share Repurchase Program will be determined by the Company’s management at its discretion based on a variety of factors, including the market price of the Company’s common shares, business considerations, general market and economic conditions and legal requirements.
+Added: The 2021 Share Repurchase Program replaced and superseded the share repurchase program authorized by the Board of Directors in 2018 which authorized the repurchase of $50 million of the Company’s common shares (the “2018 Share Repurchase Program”).
+Added: At December 31, 2021 and December 31, 2020, our ratio of homebuilding debt to capital was 30% and 34%, respectively, calculated as the carrying value of our outstanding homebuilding debt (which consists of borrowings under our Credit Facility, our 2030 Senior Notes, our 2028 Senior Notes, our 2025 Senior Notes, and Notes Payable-Other) divided by the sum of the carrying value of our outstanding homebuilding debt plus shareholders’ equity.
We believe that this ratio provides useful information for understanding our financial position and the leverage employed in our operations, and for comparing us with other homebuilders.
12 unchanged sentences
(b) $ 266,160 $ 2,043
−Removed: (a) The available amount under the Credit Facility is computed in accordance with the borrowing base calculation under the Credit Facility, which applies various advance rates for different categories of inventory and totaled $926.9 million of availability for additional senior debt at December 31, 2020.
+Added: (a) The available amount under the Credit Facility is computed in accordance with the borrowing base calculation under the Credit Facility, which applies various advance rates for different categories of inventory and totaled $1.3 billion of availability for additional senior debt at December 31, 2021.
As a result, the full $550 million commitment amount of the facility was available, less any borrowings and letters of credit outstanding.
There were no borrowings outstanding and $85.0 million of letters of credit outstanding at December 31, 2021, leaving $465.0 million available.
−Removed: The Credit Facility has an expiration date of July 18, 2023 for $475.0 million of commitments and July 18, 2021 for $25.0 million of commitments.
+Added: The Credit Facility has an expiration date of July 18, 2025.
(b) The available amount is computed in accordance with the borrowing base calculations under the MIF Mortgage Warehousing Agreement and the MIF Mortgage Repurchase Facility, each of which may be increased by pledging additional mortgage collateral.
4 unchanged sentences
The Credit Facility provides for an aggregate commitment amount of $550 million, and also includes an accordion feature pursuant to which the maximum borrowing availability may be increased to an aggregate of $700 million, subject to obtaining additional commitments from lenders.
−Removed: The Credit Facility matures on July 18, 2023 for $475.0 million of commitments and July 18, 2021 for $25.0 million of commitments.
+Added: The Credit Facility matures on July 18, 2025.
Interest on amounts borrowed under the Credit Facility is payable at a rate which is adjusted daily and is equal to the sum of one-month LIBOR (subject to a floor of 0.25%) plus a margin of 175 basis points (subject to adjustment in subsequent quarterly periods based on the Company’s leverage ratio).
+Added: The Credit Facility includes a provision for the replacement of LIBOR under certain circumstances where one-month LIBOR is no longer available.
Borrowings under the Credit Facility constitute senior, unsecured indebtedness and availability is subject to, among other things, a borrowing base calculated using various advance rates for different categories of inventory.
The Credit Facility also provides for a $150 million sub-facility for letters of credit.
−Removed: The Credit Facility contains various representations, warranties and covenants which require, among other things, that the Company maintain (1) a minimum level of Consolidated Tangible Net Worth of $813.4 million at December 31, 2020 (subject to increase over time based on earnings and proceeds from equity offerings), (2) a leverage ratio not in excess of 60%, and (3) either a minimum Interest Coverage Ratio of 1.5 to 1.0 or a minimum amount of available liquidity.
+Added: The Credit Facility contains various representations, warranties and covenants which require, among other things, that the Company maintain (1) a minimum level of Consolidated Tangible Net Worth of $1.1 billion at December 31, 2021 (subject to increase over time based on earnings and proceeds from equity offerings), (2) a leverage ratio not in excess of 60%, and (3) either a minimum Interest Coverage Ratio of 1.5 to 1.0 or a minimum amount of available liquidity.
In addition, the Credit Facility contains covenants that limit the Company’s number of unsold housing units and model homes, as well as the amount of Investments in Unrestricted Subsidiaries and Joint Ventures (each as defined in the Credit Facility).
+Added: On February 16, 2022, the Company amended its Credit Facility to eliminate specified limits on the Company to make investments in its subordinated debt and capital stock.
+Added: Such investments are subject to the Company’s compliance with the other covenants and provisions in the Credit Facility.
The Company’s obligations under the Credit Facility are guaranteed by all of the Company’s subsidiaries, with the exception of subsidiaries that are primarily engaged in the business of mortgage financing, title insurance or similar financial businesses relating to the homebuilding and home sales business, certain subsidiaries that are not 100%-owned by the Company or another subsidiary, and other subsidiaries designated by the Company as Unrestricted Subsidiaries, subject to limitations on the aggregate amount invested in such Unrestricted Subsidiaries.
15 unchanged sentences
Interest on amounts borrowed under the MIF Mortgage Warehousing Agreement is payable at a per annum rate equal to the one-month LIBOR rate (subject to a floor of 0.5%) plus a spread of 190 basis points.
+Added: The MIF Mortgage Warehousing Agreement includes a provision for the replacement of LIBOR under certain circumstances where one-month LIBOR is no longer available.
As is typical for similar credit facilities in the mortgage origination industry, at closing, the expiration of the MIF Mortgage Warehousing Agreement was set at approximately one year and is under consideration for extension annually by the participating lenders.
1 unchanged sentence
The MIF Mortgage Warehousing Agreement is secured by certain mortgage loans originated by M/I Financial that are being “warehoused” prior to their sale to investors.
−Removed: The MIF Mortgage Warehousing Agreement provides for limits with respect to certain loan types that can secure outstanding borrowings.
+Added: The MIF Mortgage Warehousing Agreement provides for limits with respect to
+Added: certain loan types that can secure outstanding borrowings.
There are currently no guarantors of the MIF Mortgage Warehousing Agreement.
12 unchanged sentences
As is typical for similar credit facilities in the mortgage origination industry, at closing, the expiration of the MIF Mortgage Repurchase Facility was set at approximately one year, and is under consideration for extension annually by the participating lender.
−Removed: M/I Financial pays interest on each advance under the MIF Mortgage Repurchase Facility at a per annum rate equal to the one-month LIBOR rate (subject to a floor of 1.0%) plus 175 or 200 basis points depending on the loan type.
+Added: M/I Financial pays interest on each advance under the MIF Mortgage Repurchase Facility at a per annum rate equal to the one-month LIBOR rate (subject to a floor of 0.75% or 0.625% based on the type of loan ) plus 175 or 200 basis points depending on the loan type.
+Added: The MIF Mortgage Repurchase Facility includes a provision for the replacement of LIBOR under certain circumstances where one-month LIBOR is no longer available.
The covenants in the MIF Mortgage Repurchase Facility are substantially similar to the covenants in the MIF Mortgage Warehousing Agreement.
5 unchanged sentences
3.95% Senior Notes.
−Removed: On January 22, 2020, the Company issued $400.0 million aggregate principal amount of 2028 Senior Notes.
−Removed: The 2028 Senior Notes bear interest at a rate of 4.95% per year, payable semiannually in arrears on February 1 and August 1 of each year, and mature on February 1, 2028.
−Removed: The 2028 Senior Notes contain covenants substantially similar to the covenants described below for the 2025 Senior Notes, and as more fully described and defined in the indenture governing the 2028 Senior Notes.
−Removed: The Company used a portion of the net proceeds from the issuance of the 2028 Senior Notes to redeem all of its outstanding 2021 Senior Notes at 100.000% of the principal amount outstanding on January 22, 2020.
+Added: On August 23, 2021, the Company issued $300.0 million aggregate principal amount of 3.95% Senior Notes due 2030.
+Added: The 2030 Senior Notes contain certain covenants, as more fully described and defined in the indenture governing the 2030 Senior Notes, which limit the ability of the Company and the restricted subsidiaries to, among other things:
+Added: incur certain liens securing indebtedness without equally and ratably securing the 2030 Senior Notes and the guarantees thereof;
+Added: enter into certain sale and leaseback transactions;
+Added: and consolidate or merge with or into other companies, liquidate or sell or otherwise dispose of all or substantially all of the Company’s assets.
+Added: These covenants are subject to a number of exceptions and qualifications as described in the indenture governing the 2030 Senior Notes.
As of December 31, 2021, the Company was in compliance with all terms, conditions, and covenants under the indenture.
−Removed: See Note 11 to our Consolidated Financial Statements for more information regarding the 2028 Senior Notes.
+Added: We used a portion of the net proceeds from the issuance of the 2030 Senior Notes to redeem all of our outstanding 2025 Senior Notes at a redemption price of 102.813% of the principal amount, plus accrued and unpaid interest thereon, on August 24, 2021.
+Added: In connection with the early redemption of our 2025 Senior Notes, we incurred a $9.1 million loss on early extinguishment of debt, consisting of a prepayment premium of $7.1 million and the write-off of unamortized debt issuance costs of $2.0 million.
4.95% Senior Notes.
−Removed: In August 2017, the Company issued $250.0 million aggregate principal amount of 2025 Senior Notes.
+Added: On January 22, 2020, the Company issued $400.0 million aggregate principal amount of 4.95% Senior Notes due 2028.
The 2028 Senior Notes contain certain covenants, as more fully described and defined in the indenture governing the 2028 Senior Notes, which limit the ability of the Company and the restricted subsidiaries to, among other things:
5 unchanged sentences
As of December 31, 2021, the Company was in compliance with all terms, conditions, and covenants under the indenture.
−Removed: See Note 11 to our Consolidated Financial Statements for more information regarding the 2025 Senior Notes.
+Added: See Note 11 to our Consolidated Financial Statements for more information regarding the 2030 Senior Notes and the 2028 Senior Notes.
Supplemental Financial Information.
12 unchanged sentences
or a Restricted Subsidiary in a transaction in compliance with the terms of the applicable indenture;
−Removed: (3) the Subsidiary Guarantor is designated an Unrestricted Subsidiary (or otherwise ceases to be a Restricted Subsidiary (including by way of liquidation or merger)) in compliance with the terms of the
−Removed: applicable indenture;
+Added: (3) the Subsidiary Guarantor is designated an Unrestricted Subsidiary (or otherwise ceases to be a Restricted Subsidiary (including by way of liquidation or merger)) in compliance with the terms of the applicable indenture;
(4) M/I Homes, Inc.
−Removed: exercises its legal defeasance option or covenant defeasance option under the applicable indenture;
+Added: exercises its legal defeasance option or covenant defeasance option under the
+Added: applicable indenture;
or (5) all obligations under the applicable indenture are discharged in accordance with the terms of the applicable indenture.
23 unchanged sentences
In 2021 and 2020, our weighted average borrowings outstanding were $716.7 million and $767.5 million, respectively, with a weighted average interest rate of 5.55% and 5.53%, respectively.
−Removed: The decrease in our weighted average borrowings and our weighted average interest rate related to decreased borrowings under our Credit Facility in 2020 compared to 2019, as well as the issuance of our 2028 Senior Notes on January 22, 2020, which have a lower interest rate than our 2021 Senior Notes which were redeemed on January 22, 2020.
−Removed: At December 31, 2020, we had no borrowings outstanding under the Credit Facility, a decrease from $66.0 million of outstanding borrowings at December 31, 2019.
−Removed: During the twelve months ended December 31, 2020, the company used the Credit Facility for investment in land and land development, construction of homes, operating expenses, working capital requirements and share repurchases under our 2018 Share Repurchase Program.
−Removed: During the twelve months ended December 31, 2020, the average daily amount outstanding under the Credit Facility was $17.3 million and the maximum amount outstanding under the Credit Facility was $111.3 million.
−Removed: Based on our currently anticipated spending on home construction, overhead expenses, and land acquisition and development in 2021, offset by expected cash receipts from home deliveries and other sources, we may borrow under the Credit Facility during 2021, but do not expect the peak amount outstanding to exceed $100 million.
+Added: The decrease in our weighted average borrowings related to a decrease in borrowings under our two MIF credit facilities during 2021 compared to 2020.
+Added: At both December 31, 2021 and December 31, 2020, we had no borrowings outstanding under the Credit Facility.
+Added: During the twelve months ended December 31, 2021, the average daily amount outstanding and the maximum amount outstanding under the Credit Facility were both zero, and during the twelve months ended December 31, 2020, the average daily amount outstanding under the Credit Facility was $17.3 million and the maximum amount outstanding under the Credit Facility was $111.3 million.
+Added: Based on our currently anticipated spending on home construction, overhead expenses, share repurchases and land acquisition and development in 2022, offset by expected cash receipts from home deliveries and other sources, we may borrow under the Credit Facility during 2022, but do not expect the peak amount outstanding to exceed $150 million.
The actual amount borrowed in 2022 (and the estimated peak amount outstanding) and the related timing will be subject to numerous factors, which are subject to significant variation as a result of the timing and amount of land and house construction expenditures, payroll and other general and administrative expenses, and cash receipts from home deliveries.
−Removed: The amount borrowed will also be impacted by other cash receipts and payments, any capital markets transactions or other additional financings by the Company, any repayments or redemptions of outstanding debt, any additional share repurchases under the 2018 Share Repurchase Program and any other extraordinary events or transactions, including the uncertain effects of the COVID-19 pandemic.
+Added: The amount borrowed will also be impacted by other cash receipts and payments, any capital markets transactions or other additional financings by the Company, any repayments or redemptions of outstanding debt, any additional share repurchases under the 2021 Share Repurchase Program and any other extraordinary events or transactions.
The Company may also experience significant variation in cash and Credit Facility balances from week to week due to the timing of such receipts and payments.
4 unchanged sentences
At December 31, 2021, M/I Financial had $69.4 million outstanding under the MIF Mortgage Repurchase Facility.
−Removed: During 2020, the average daily amount outstanding under the MIF Mortgage Repurchase Facility was $39.2 million and the maximum amount outstanding was $69.8 million, which occurred during December.
+Added: During 2021, the average daily amount outstanding under the MIF Mortgage Repurchase Facility was $43.2 million and the maximum amount outstanding was $78.6 million, which occurred during April.
Universal Shelf Registration.
2 unchanged sentences
The timing and amount of offerings, if any, will depend on market and general business conditions.
−Removed: CONTRACTUAL OBLIGATIONS
−Removed: Included in the table below is a summary, as of December 31, 2020, of future cash requirements under the Company’s contractual obligations:
−Removed: Payments due by period
−Removed: Less Than 1 - 3 3 - 5 More than
−Removed: (In thousands) Total 1 year Years Years 5 years
−Removed: Notes payable bank – homebuilding operations (a)
−Removed: $ — $ — $ — $ — $ —
−Removed: Notes payable bank – financial services (b)
−Removed: 225,789 225,789 — — —
−Removed: Notes payable – other (including interest) 4,279 2,847 1,353 79 —
−Removed: Senior notes (including interest) 868,318 33,863 67,725 317,725 449,005
−Removed: Obligation for consolidated inventory not owned (c)
−Removed: 9,914 9,914 — — —
−Removed: Operating leases 40,245 8,629 13,797 7,933 9,886
−Removed: Total $ 1,148,545 $ 281,042 $ 82,875 $ 325,737 $ 458,891
−Removed: (a) At December 31, 2020, there were no borrowings outstanding under the Credit Facility.
−Removed: Interest on amounts borrowed under the Credit Facility is payable at a rate which is adjusted daily and is equal to the sum of the one month LIBOR rate (subject to a floor of 0.75%) plus a margin of 250 basis points.
−Removed: The margin is subject to adjustment in subsequent quarterly periods based on the Company’s leverage ratio.
−Removed: Interest payments by period will be based upon the outstanding borrowings and the applicable interest rate(s) in effect.
−Removed: See Note 11 to our Consolidated Financial Statements for additional information.
−Removed: (b) Borrowings under the MIF Mortgage Warehousing Agreement are at the one-month LIBOR rate (subject to a floor of 1.0%) plus a spread of 200 basis points.
−Removed: Borrowings under the MIF Mortgage Repurchase Facility are at the one-month LIBOR rate (subject to a floor of 1.0%) plus 175 or 200 basis points, depending on the loan type.
−Removed: Total borrowings outstanding under both agreements at December 31, 2020 had a weighted average interest rate of 3.0%.
−Removed: Interest payments by period will be based upon the outstanding borrowings and the applicable interest rate(s) in effect.
−Removed: (c) The Company is party to certain land purchase agreements in which the Company has specific performance requirements.
−Removed: The future amounts payable related to these land purchase agreements is the number of lots the Company is obligated to purchase at the lot price set forth in the agreement.
−Removed: In addition, the amount of deposits and prepaid acquisition and development costs on certain land purchase agreements have exceeded thresholds relative to the remaining purchase price of the lots for those agreements, such that the remaining purchase price of the lots is recorded as an Obligation for consolidated inventory not owned on our Consolidated Balance Sheets.
−Removed: In each case, the time period in which these payments will be made is the Company’s best estimate of when these lots will be purchased.
−Removed: OFF-BALANCE SHEET ARRANGEMENTS
−Removed: Reference is made to Notes 6 , 7 , and 8 in the accompanying Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K.
−Removed: These Notes discuss our off-balance sheet arrangements with respect to land acquisition contracts and option agreements, and land development joint ventures, including the nature and amounts of financial obligations relating to these items.
−Removed: In addition, these Notes discuss the nature and amounts of certain types of commitments that arise in the ordinary course of our land development and homebuilding operations, including commitments of land development joint ventures for which we might be obligated.
−Removed: Our off-balance sheet arrangements relating to our homebuilding operations include joint venture arrangements, land option agreements, guarantees and indemnifications associated with acquiring and developing land, and the issuance of letters of credit
−Removed: and completion bonds.
−Removed: Our use of these arrangements is for the purpose of securing the most desirable lots on which to build homes for our homebuyers in a manner that we believe reduces the overall risk to the Company.
−Removed: Additionally, in the ordinary course of its business, M/I Financial issues guarantees and indemnities relating to the sale of loans to third parties.
INTEREST RATES AND INFLATION
10 unchanged sentences
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.