<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2000
--------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from _____ to _____
Commission file number 1-12434
M/I SCHOTTENSTEIN HOMES, INC.
-----------------------------
(Exact name of registrant as specified in its charter)
Ohio 31-1210837
---- ----------
(State of incorporation) (I.R.S. Employer Identification No.)
3 Easton Oval, Suite 500, Columbus, Ohio 43219
- ---------------------------------------- -----
(Address of principal executive offices) (Zip Code)
(614) 418-8000
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(Telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common stock, par value $.01 per share: 7,977,790 shares
outstanding as of May 12, 2000
<PAGE> 2
M/I SCHOTTENSTEIN HOMES, INC.
FORM 10-Q
INDEX
PAGE
PART I. FINANCIAL INFORMATION NUMBER
Item 1. Financial Statements
Consolidated Balance Sheets March 31, 2000
(Unaudited) and December 31, 1999 3
Unaudited Consolidated Statements of Income
for the Three Months Ended March 31, 2000 and 1999 4
Unaudited Consolidated Statement of Stockholders'
Equity for the Three Months Ended March 31, 2000 5
Unaduited Consolidated Statements of Cash Flows
for the Three Months Ended March 31, 2000 and 1999 6
Notes to Interim Unaudited Consolidated
Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 2. Changes in Securities 17
Item 3. Defaults Upon Senior Securities 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 17
Signatures 18
Exhibit Index 19
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<PAGE> 3
CONSOLIDATED BALANCE SHEETS
M/I SCHOTTENSTEIN HOMES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
==============================================================================================================
MARCH 31, December 31,
(Dollars in thousands, except par values) 2000 1999
- --------------------------------------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash $ 7,673 $ 5,665
Cash held in escrow 752 828
Receivables 28,608 39,988
Inventories:
Single-family lots, land and land development costs 267,888 254,385
Houses under construction 187,593 163,266
Model homes and furnishings - at cost (less accumulated depreciation:
March 31, 2000 - $42;
December 31, 1999 - $41) 14,472 12,349
Land purchase deposits 2,049 2,702
Building, office furnishings, transportation and construction equipment -
at cost (less accumulated depreciation:
March 31, 2000 - $6,204;
December 31, 1999 - $5,733) 18,982 19,368
Investment in unconsolidated joint ventures and limited liability companies 25,603 20,238
Other assets 11,496 12,773
- --------------------------------------------------------------------------------------------------------------
TOTAL $565,116 $531,562
==============================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Notes payable banks - homebuilding operations $178,000 $132,000
Note payable bank - financial services operations 6,070 15,400
Mortgage notes payable 14,903 14,675
Senior subordinated notes 50,000 50,000
Accounts payable 68,085 63,198
Accrued compensation 3,845 18,244
Accrued interest, warranty and other 22,487 23,827
Customer deposits 16,470 13,706
- --------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 359,860 331,050
- --------------------------------------------------------------------------------------------------------------
Commitments and Contingencies
- --------------------------------------------------------------------------------------------------------------
Stockholders' equity:
Preferred stock - $.01 par value;
authorized 2,000,000 shares;
none outstanding -- --
Common stock - $.01 par value;
authorized 38,000,000 shares;
issued 8,813,061 shares 88 88
Additional paid-in capital 62,957 62,282
Retained earnings 153,200 145,337
Treasury stock - at cost - 766,921 and 496,221 shares, respectively,
held in treasury at March 31, 2000 and December 31, 1999 (10,989) (7,195)
- ---------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 205,256 200,512
- --------------------------------------------------------------------------------------------------------------
TOTAL $565,116 $531,562
==============================================================================================================
</TABLE>
See Notes to Interim Unaudited Consolidated Financial Statements.
-3-
<PAGE> 4
CONSOLIDATED STATEMENTS OF INCOME
M/I SCHOTTENSTEIN HOMES, INC. AND SUBSIDIARIES
(UNAUDITED)
<TABLE>
<CAPTION>
==============================================================================================================
THREE MONTHS ENDED MARCH 31,
(Dollars in thousands, except per share amounts) 2000 1999
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Revenue $173,856 $148,824
- --------------------------------------------------------------------------------------------------------------
Costs and expenses:
Land and housing 135,835 114,589
General and administrative 8,929 8,100
Selling 11,392 10,323
Interest 4,184 3,136
- --------------------------------------------------------------------------------------------------------------
Total costs and expenses 160,340 136,148
- --------------------------------------------------------------------------------------------------------------
Income before income taxes 13,516 12,676
- --------------------------------------------------------------------------------------------------------------
Income taxes:
Current 4,203 3,782
Deferred 1,034 1,225
- --------------------------------------------------------------------------------------------------------------
Total income taxes 5,237 5,007
- --------------------------------------------------------------------------------------------------------------
Net income $ 8,279 $ 7,669
==============================================================================================================
Net income per common share:
Basic $ 1.01 $ 0.87
Diluted $ 1.00 $ 0.86
==============================================================================================================
Weighted average shares outstanding (in thousands):
Basic 8,176 8,812
Diluted 8,302 8,919
==============================================================================================================
</TABLE>
See Notes to Interim Unaudited Consolidated Financial Statements.
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<PAGE> 5
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
M/I SCHOTTENSTEIN HOMES, INC. AND SUBSIDIARIES
(UNAUDITED)
<TABLE>
<CAPTION>
==============================================================================================================
THREE MONTHS ENDED MARCH 31, 2000
- --------------------------------------------------------------------------------------------------------------
Common Stock
------------ Additional
(Dollars in thousands, except Shares Paid-In Retained Treasury
per share amounts) Outstanding Amount Capital Earnings Stock
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1999 8,316,840 $88 $62,282 $145,337 $(7,195)
Net income -- -- - 8,279 --
Dividends to stockholders,
$0.05 per common share -- -- - (416) --
Purchase of treasury shares (271,200) -- - -- (3,801)
Stock option exercised 500 -- (4) -- 7
Deferred stock awards -- -- 679 -- --
- --------------------------------------------------------------------------------------------------------------
BALANCE AT MARCH 31, 2000 8,046,140 $88 $62,957 $153,200 $(10,989)
==============================================================================================================
</TABLE>
See Notes to Interim Unaudited Consolidated Financial Statements.
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<PAGE> 6
CONSOLIDATED STATEMENTS OF CASH FLOWS
M/I SCHOTTENSTEIN HOMES, INC. AND SUBSIDIARIES
(UNAUDITED)
<TABLE>
<CAPTION>
================================================================================================================
THREE MONTHS ENDED MARCH 31,
(Dollars in thousands) 2000 1999
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 8,279 $ 7,669
Adjustments to reconcile net income to net cash
used in operating activities:
Loss from property disposals 40 --
Depreciation and amortization 535 508
Deferred income taxes 1,034 1,225
Decrease (increase) in cash held in escrow 76 (751)
Decrease in receivables 11,380 15,670
Increase in inventories (32,283) (40,049)
Decrease (increase) in other assets 1,236 (684)
Increase in accounts payable 4,887 1,205
Decrease in accrued liabilities (16,094) (12,141)
Equity in undistributed income of unconsolidated joint
ventures and limited liability companies (189) (140)
- ----------------------------------------------------------------------------------------------------------------
Net cash used in operating activities (21,099) (27,488)
- ----------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (148) (306)
Investment in unconsolidated joint ventures and
limited liability companies (11,666) (4,386)
Distributions from unconsolidated joint ventures and
limited liability companies 211 175
- ---------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (11,603) (4,517)
- ----------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from bank borrowings - net of repayments 36,670 23,995
Principal repayments of mortgage notes payable (510) (31)
Net increase in customer deposits 2,764 2,755
Dividends paid (416) (440)
Proceeds from exercise of stock options 3 --
Payments to acquire treasury shares (3,801) (140)
- ----------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 34,710 26,139
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash 2,008 (5,866)
Cash balance at beginning of year 5,665 10,068
- ---------------------------------------------------------------------------------------------------------------
Cash balance at end of period $ 7,673 $ 4,202
===============================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized $ 3,829 $ 2,887
Income taxes $ 2,681 $ 5,121
NON-CASH TRANSACTIONS DURING THE PERIOD:
Land acquired with mortgage notes payable - net $ 738 $ --
Single-family lots distributed from unconsolidated joint ventures and
limited liability companies $ 6,279 $ 6,080
Deferred stock awards $ 679 $ 1,245
===============================================================================================================
</TABLE>
See Notes to Interim Unaudited Consolidated Financial Statements.
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<PAGE> 7
M/I SCHOTTENSTEIN HOMES, INC. AND SUBSIDIARIES
NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The accompanying consolidated financial statements and notes thereto have
been prepared in accordance with the rules and regulations of the Securities
and Exchange Commission for interim financial information. The results of
operations for the three months ended March 31, 2000 and 1999 are not
necessarily indicative of the results for the full year.
It is suggested that these consolidated financial statements be read in
conjunction with the financial statements, accounting policies and financial
notes thereto included in the Company's Annual Report to Shareholders for the
year ended December 31, 1999.
In the opinion of management, the accompanying consolidated financial
statements reflect all adjustments (consisting only of normal recurring
accruals) which are necessary for a fair presentation of financial results
for the interim periods presented.
NOTE 2. INTEREST
The Company capitalizes interest during development and construction.
Capitalized interest is charged to interest expense as the related inventory
is delivered. The summary of total interest for the three months ended March
31, 2000 and 1999 is as follows:
Three Months Ended March 31,
(Dollars in thousands) 2000 1999
- -------------------------------------------------------------------------------
Interest capitalized, beginning of period $ 8,886 $ 7,957
Interest incurred 4,612 3,236
Interest expensed (4,184) (3,136)
- --------------------------------------------------------------------------------
Interest capitalized, end of period $ 9,314 $ 8,057
================================================================================
NOTE 3. CONTINGENCIES
At March 31, 2000, the Company had options and contingent purchase contracts
to acquire land and developed lots with an aggregate purchase price of
approximately $164.8 million.
NOTE 4. PER SHARE DATA
Per share data is calculated based on the weighted average number of common
shares outstanding during each period. The difference between basic and
diluted shares outstanding is due to the effect of dilutive stock options and
deferred stock. There are no adjustments to net income necessary in the
calculation of basic and diluted earnings per share.
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<PAGE> 8
NOTE 5. DIVIDENDS
On April 21, 2000, the Company paid to the stockholders of record on April 3,
2000 a cash dividend of $0.05 per share. On April 19, 2000, the Board of
Directors approved a $0.05 per share cash dividend payable to stockholders of
record of its common stock on July 3, 2000, payable on July 21, 2000.
-8-
<PAGE> 9
M/I SCHOTTENSTEIN HOMES, INC. AND SUBSIDIARIES
FORM 10-Q PART I
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
CONSOLIDATED
Total Revenue. Total revenue for the three months ended March 31, 2000
was $173.9 million, a 16.8% increase over the $148.8 million recorded for the
comparable period of 1999. Homebuilding revenue increased by $25.4 million and
financial services revenue decreased by $0.3 million. The increase in
homebuilding revenue was the result of increases in housing and land revenues of
$23.8 million and $1.6 million, respectively. The increase in housing revenue
for the first quarter of 2000 in comparison with the prior year was attributable
to 54 additional Homes Delivered and an 8.4% increase in the average sales price
of Homes Delivered. The increase in land revenue was primarily the result of
lots sold to third parties in the Washington, D.C. market. While fewer lots were
sold in comparison to the comparable period of 1999, sales prices were
significantly higher. Financial services revenue decreased due to a decrease in
the revenue earned from the sale of loans.
Income Before Income Taxes. Income before income taxes for the first
quarter of 2000 was a record $13.5 million, a $0.8 million increase over the
comparable period of 1999. The increase was primarily the result of an increase
in homebuilding revenue partially offset by a decrease in income before income
taxes for the financial services segment. Homebuilding revenue increased 17.6%
over 1999, however, homebuilding income before income taxes increased only 2.2%.
This was due to a decrease in gross margin from 19.8% to 19.2%. Unallocated
amounts include interest from other segments along with salaries and other
administrative expenses which are not identifiable with a specific segment.
The information below is presented in conformity with SFAS 131
"Disclosure about Segments of an Enterprise and Related Information" for all
periods presented.
THREE MONTHS ENDED MARCH 31,
(Dollars in thousands) 2000 1999
- --------------------------------------------------------------------------------
Revenue:
Homebuilding $169,509 $144,152
Financial services 5,180 5,499
Intersegment (833) (827)
- --------------------------------------------------------------------------------
TOTAL REVENUE $173,856 $148,824
- --------------------------------------------------------------------------------
Income Before Income Taxes:
Homebuilding $ 5,441 $ 5,325
Financial services 3,733 4,048
Unallocated amounts 4,342 3,303
- -------------------------------------------------------------------------------
TOTAL INCOME BEFORE INCOME TAXES $ 13,516 $ 12,676
- --------------------------------------------------------------------------------
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<PAGE> 10
HOMEBUILDING SEGMENT
The following table sets forth certain information related to our homebuilding
segment:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
(Dollars in thousands) 2000 1999
===============================================================================================================
<S> <C> <C>
Revenue:
Housing sales $164,329 $140,576
Land and lot sales 4,759 3,116
Other income 421 460
- ---------------------------------------------------------------------------------------------------------------
Total revenue $169,509 $144,152
===============================================================================================================
Revenue:
Housing sales 96.9% 97.5%
Land and lot sales 2.9 2.2
Other income 0.2 0.3
- ---------------------------------------------------------------------------------------------------------------
Total revenue 100.0 100.0
Land and housing costs 80.8 80.2
- ---------------------------------------------------------------------------------------------------------------
Gross margin 19.2 19.8
General and administrative expenses 3.0 3.5
Selling expenses 6.8 7.2
- ---------------------------------------------------------------------------------------------------------------
Operating income 9.4 9.1
Allocated expenses 6.2 5.4
- ---------------------------------------------------------------------------------------------------------------
Income before income taxes 3.2% 3.7%
===============================================================================================================
MIDWEST REGION
Unit data:
New contracts, net 725 755
Homes delivered 461 429
Backlog at end of period 1,655 1,648
Average sales price of homes in Backlog $ 197 $ 185
Aggregate sales value of homes in Backlog $325,000 $305,000
Number of active subdivisions 80 73
===============================================================================================================
FLORIDA REGION
Unit data:
New contracts, net 182 175
Homes delivered 136 117
Backlog at end of period 413 391
Average sales price of homes in Backlog $ 213 $ 198
Aggregate sales value of homes in Backlog $ 88,000 $ 77,000
Number of active subdivisions 26 25
===============================================================================================================
NORTH CAROLINA, VIRGINIA AND MARYLAND, AND ARIZONA REGION
Unit data:
New contracts, net 199 237
Homes delivered 146 143
Backlog at end of period 449 462
Average sales price of homes in Backlog $ 351 $ 344
Aggregate sales value of homes in Backlog $158,000 $159,000
Number of active subdivisions 36 40
===============================================================================================================
TOTAL
Unit data:
New contracts, net 1,106 1,167
Homes delivered 743 689
Backlog at end of period 2,517 2,501
Average sales price of homes in Backlog $ 227 $ 216
Aggregate sales value of homes in Backlog $571,000 $541,000
Number of active subdivisions 142 138
===============================================================================================================
</TABLE>
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<PAGE> 11
A home is included in "New Contracts" when our standard sales contract
is executed. "Homes Delivered" represents homes for which the closing of the
sale has occurred and title has transferred to the buyer.
"Backlog" represents homes for which the standard sales contract has
been executed, but which are not included in Homes Delivered because closings
for these homes have not yet occurred as of the end of the period specified.
Most cancellations of contracts for homes in Backlog occur because customers
cannot qualify for financing and usually occur prior to the start of
construction. Because we arrange financing with guaranteed rates for many of our
customers, the incidence of cancellations after the start of construction is
low. In the first three months of 2000, the Company delivered 743 homes, most of
which were homes under contract in Backlog at December 31, 1999. The
cancellation rate of homes in Backlog at December 31, 1999 and 1998 was 8.4% and
10.5% as of March 31, 2000 and 1999, respectively. For homes in Backlog at
December 31, 1998, the final cancellation percentage was 11.1%. Unsold
speculative homes, which are in various stages of construction, totaled 129 and
130 at March 31, 2000 and 1999, respectively.
Total Revenue. Total revenue for the homebuilding segment for the
quarter ended March 31, 2000 was $169.5 million, a 17.6% increase over 1999's
first quarter. The increase consisted of an increase in housing revenue of 16.9%
and an increase in land revenue of 52.7%. Housing revenue increased as a result
of a 7.8% increase in Homes Delivered. Homes Delivered were higher in all of the
Company's markets with the exception of West Palm Beach, Raleigh and Washington,
D.C. The increase in housing revenue was also due to an 8.4% increase in the
average sales price of Homes Delivered. The average sales price of Homes
Delivered increased in all regions due to product mix and higher land and
regulatory costs which were passed on to the home buyer. The Phoenix market had
the most significant impact on the increase due to an increase in the number of
Homes Delivered and a substantially higher average sales price. The increase in
land revenue from $3.1 million to $4.8 million was primarily attributable to
higher sales prices for lot sales in the Washington, D.C. market in comparison
to the first quarter of 1999. There were 13 fewer lots sold at an average sales
price which was significantly higher than last year's first quarter.
Home Sales and Backlog. New Contracts in the first quarter of 2000
decreased slightly from 1999's first quarter. An increase in New Contracts for
the Florida region was offset by decreases for our other regions. New Contracts
recorded in April 2000 were 6.7% lower than New Contracts recorded in April
1999; however, it was the second best April in our history. We believe the
decrease was primarily attributable to increases in sales prices to cover
increased material and labor costs, and three increases in the prime lending
rate during the third and fourth quarters of 1999. The number of New Contracts
recorded in future periods will be dependent on numerous factors, including
future economic conditions, timing of land development, consumer confidence,
number of subdivisions and interest rates available to potential home buyers.
At March 31, 2000, our Backlog consisted of 2,517 homes with an
approximate sales value of $571.0 million. This represents a 0.6% increase in
units and a 5.5% increase in sales value in comparison to the first quarter of
1999. The average sales price of homes in backlog increased by 5.1% with
increases occurring in virtually all of our markets. Sales price increases are
the result of building in more upscale and niche subdivisions as well as
increases to cover increased material and labor costs.
Gross Margin. The overall gross margin for the homebuilding segment was
19.2% for the three month period ended March 31, 2000 compared to 19.8% for the
three month period ended March 31, 1999. Housing gross margin decreased from
20.5% to 19.9% and the land gross margin remained fairly consistent at 11.3%
compared to 11.4% for 1999's first quarter. The decrease in housing gross margin
was the result of increases in lumber costs and higher closing costs due to fees
paid to extend loans beyond their original term caused by a delay in the
delivery of homes.
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<PAGE> 12
General and Administrative Expenses. General and administrative
expenses increased to $5.1 million, or 3.0% of revenue, for the first three
months of 2000 compared to $5.0 million, or 3.5% of revenue, for the first three
months of 1999. The increase in dollars was primarily attributable to increases
in payroll and related costs that were required to support the growth in revenue
and operations. Real estate taxes also increased as a result of an increase in
our investment in land development activities.
Selling Expenses. Selling expenses increased 11.2%, from $10.3 million,
or 7.2% of revenue, for the first quarter of 1999 to $11.5 million, or 6.8% of
revenue, for the first quarter of 2000. The increase primarily related to
additional sales commissions paid to outside Realtors and internal salespeople
resulting from the increase in Homes Delivered. Model expenses also increased
slightly.
FINANCIAL SERVICES SEGMENT - M/I FINANCIAL
The following table sets forth certain information related to the Company's
financial services segment:
Three Months Ended March 31,
(Dollars in thousands) 2000 1999
================================================================================
Number of loans originated 587 568
Revenue:
Loan origination fees $ 907 $ 797
Sale of loans 3,079 3,602
Other 1,194 1,100
- --------------------------------------------------------------------------------
Total Revenue 5,180 5,499
- --------------------------------------------------------------------------------
General and administrative expenses 1,447 1,451
- --------------------------------------------------------------------------------
Operating Income $3,733 $4,048
================================================================================
Total Revenue. Total revenue for the three months ended March 31, 2000
was $5.2 million, a 5.8% decrease from the $5.5 million recorded for the
comparable period of the prior year. Loan origination fees increased 13.8% from
the first quarter of 1999 compared to the first quarter of 2000. This increase
was due to a 3.3% increase in loans originated along with an increase the in
average loan amount. Special financing programs and competitive market
conditions also reduced loan origination fees in the first quarter of 1999.
Revenue from the sale of loans decreased 14.5% from $3.6 million for
the three months ended March 31, 1999 to $3.1 million for the three months ended
March 31, 2000. The decrease was primarily due to a shift from fixed rate to
adjustable rate mortgages as a result of increasing interest rates, causing
lower servicing release premiums from investors.
Revenue from other sources increased 8.5% from $1.1 million for the
three months ended March 31, 1999 to $1.2 million for the three months ended
March 31, 2000. This was primarily due to increased earnings from title services
as a result of the increase in Homes Delivered.
General and Administrative Expenses. General and administrative
expenses for the three months ended March 31, 2000 and 1999 were $1.4 million.
There was no significant change in expenses from the comparable period of the
prior year.
-12-
<PAGE> 13
OTHER OPERATING RESULTS
Corporate General and Administrative Expenses. Corporate general and
administrative expenses increased from $1.7 million for the three months ended
March 31, 1999 to $2.3 million for the three months ended March 31, 2000. As a
percentage of total revenue, general and administrative expenses increased to
1.3% for the three months ended March 31, 2000 from 1.2% for the comparable
period in the prior year. The increase in dollars was a result of various
general and administrative expenses increasing as a result of an increase in
profitability.
Interest Expense. Corporate and homebuilding interest expense for the
first quarter of 2000 totaled $4.2 million, a 33.4% increase from the $3.1
million recorded for the comparable period of the prior year. Interest expense
was higher due to an increase in the average borrowings outstanding which
increased due to a significant increase in our backlog and land inventories.
This was partially offset by an increase in capitalized interest which increased
due to a significant increase in land under development.
Income Taxes. The effective tax rate for the three months ended March
31, 2000 decreased to 38.8% from 39.5% for the comparable period of 1999. The
decrease is primarily attributable to lower state taxes.
LIQUIDITY AND CAPITAL RESOURCES
Our financing needs depend on sales volume, asset turnover, land
acquisition and inventory balances. We have incurred substantial indebtedness,
and may incur substantial indebtedness in the future, to fund the growth of our
homebuilding activities. Our principal source of funds for construction and
development activities has been from internally generated cash and from bank
borrowings, which are primarily unsecured.
Notes Payable Banks. At March 31, 2000, we had bank borrowings
outstanding of $178.0 million under our Bank Credit Facility. The Bank Credit
Facility permits aggregate borrowings, other than for the issuance of letters of
credit, not to exceed the lesser of: (i) $250.0 million and (ii) our borrowing
base. Under the terms of the Bank Credit Facility, the banks will determine
annually whether or not to extend the maturity date of the commitments by one
year. The Bank Credit Facility matures September 30, 2003, at which time the
unpaid balance of the revolving credit loans outstanding will be due and
payable.
We have reached an agreement in principal with our lenders to enter
into a new bank loan agreement. The new agreement will increase the amount of
credit, extend the term of the loan and make immaterial modifications to the
covenants. We expect to finalize the new agreement by July 30, 2000. In
addition, we continually explore and evaluate alternative sources from which to
obtain additional capital.
An additional $6.1 million was outstanding as of March 31, 2000 under
the M/I Financial loan agreement, which permits borrowings of $30.0 million to
finance mortgage loans initially funded by M/I Financial for our customers and a
limited amount for loans to others. The Company and M/I Financial are
co-borrowers under the M/I Financial loan agreement. This agreement limits the
borrowings to 95% of the aggregate face amount of certain qualified mortgages.
The agreement terminates on June 22, 2001, at which time the unpaid balance is
due.
At March 31, 2000, we had the right to borrow up to $274.9 million
under our credit facilities, including $24.9 million under the M/I Financial
loan agreements (95% of the aggregate face amount of certain qualified
mortgages). At March 31, 2000, we had $90.8 million of unused borrowing
availability under our loan agreements. We also had approximately $47.3 million
of completion bonds and letters of credit outstanding at March 31, 2000.
-13-
<PAGE> 14
Subordinated Notes. At March 31, 2000, there was $50.0 million of
Senior Subordinated Notes outstanding. The notes bear interest at a fixed rate
of 9.51% and mature August 29, 2004.
Land and Land Development. Over the past several years, our land
development activities and land holdings have increased significantly.
Single-family lots, land and land development costs increased 5.3% from December
31, 1999 to March 31, 2000. This increase was primarily due to the shortage of
qualified land developers in certain markets. Additionally, we developed more
land due to the competitive advantages that can be achieved by developing land
internally rather than purchasing lots from developers or competing
homebuilders. We continue to purchase some lots from outside developers under
option contracts, when possible; however, we will continue to evaluate all of
our alternatives to satisfy our increasing demand for lots in the most cost
effective manner.
The $46.0 million increase in notes payable banks - homebuilding
operations from December 31, 1999 to March 31, 2000 reflects increased
borrowings primarily attributable to increases in houses under construction and
single-family lots, land and land development costs. Houses under construction
increased $24.3 million from December 31, 1999 to March 31, 2000, and
single-family lots, land and land development costs increased $13.5 million.
Borrowing needs may continue to increase as we invest in land under development
and developed lots, depending upon the market and competition.
At March 31, 2000, mortgage notes payable outstanding were $14.9
million, secured by an office building, lots and land with a recorded book value
of $19.3 million.
Purchase of Treasury Shares. On February 15, 2000, our Board of
Directors authorized the repurchase of up to 2,000,000 shares of outstanding
common stock. The purchases may occur in the open market and/or in privately
negotiated transactions as market conditions warrant. As of March 31, 2000 we
had purchased 780,200 shares at an average price of $14.40.
INTEREST RATES AND INFLATION
Our business is significantly affected by general economic conditions
of the United States and, particularly, by the impact of interest rates. Higher
interest rates may decrease the potential market by making it more difficult for
home buyers to qualify for mortgages or to obtain mortgages at interest rates
that are acceptable to them. Increases in interest rates would also increase our
interest expense because the rate on the revolving loans is based upon floating
rates of interest. The weighted average interest rate for our outstanding debt
for the three months ended March 31, 2000 was 8.2% compared to 8.3% for the
three months ended March 31, 1999.
In conjunction with our mortgage banking operations, hedging methods
are used to reduce our exposure to interest rate fluctuations between the
commitment date of the loan and the time the loan closes.
In recent years, we have generally been able to raise prices by amounts
at least equal to our cost increases and, accordingly, have not experienced any
detrimental effect from inflation. When we develop lots for our own use,
inflation may increase our profits because land costs are fixed well in advance
of sales efforts. We are generally able to maintain costs with subcontractors
from the date a home is started through the date of close. However, in certain
situations, unanticipated costs may occur between the time of start and the time
a home is constructed, resulting in lower gross profit margins.
-14-
<PAGE> 15
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
We wish to take advantage of the safe harbor provisions included in the
Private Securities Litigation Reform Act of 1995. Accordingly, in addition to
historical information, this Management's Discussion & Analysis of Financial
Condition and Results of Operations contains certain forward-looking statements,
including, but not limited to, statements regarding our future financial
performance and financial condition. These statements involve a number of risks
and uncertainties. Any forward-looking statements that we make herein and in
future reports and statements are not guarantees of future performance, and
actual results may differ materially from those in such forward-looking
statements as a result of various factors including, but not limited to, those
referred to below.
General Real Estate, Economic and Other Conditions. The homebuilding
industry is significantly affected by changes in national and local economic and
other conditions. Many of these conditions are beyond our control. These
conditions include employment levels, changing demographics, availability of
financing, consumer confidence and housing demand. In addition, homebuilders are
subject to risks related to competitive overbuilding, availability and cost of
building lots, availability of materials and labor, adverse weather conditions
which can cause delays in construction schedules, cost overruns, changes in
government regulations and increases in real estate taxes and other local
government fees. Interest rate increases also adversely affect the industry as
it is impossible to predict whether rates will be at levels that are attractive
to prospective home buyers. The prime lending rate increased three times in the
third and fourth quarters of 1999. This caused mortgage interest rates to
increase, and we believe as a result, sales have decreased. If mortgage interest
rates continue to increase, our business could be adversely affected.
Land Development Activities. We develop the lots for a majority of our
subdivisions. Therefore, our short- and long-term financial success will be
dependent upon our ability to develop these subdivisions successfully. Acquiring
land and committing the financial and managerial resources to develop a
subdivision involves significant risks. Before a subdivision generates any
revenue, we must make material expenditures for items such as acquiring land and
constructing subdivision infrastructure (such as roads and utilities).
The Company's Markets. We have operations in Columbus and Cincinnati,
Ohio; Indianapolis, Indiana; Tampa, Orlando and Palm Beach County, Florida;
Charlotte and Raleigh, North Carolina; the Virginia and Maryland suburbs of
Washington, D.C.; and Phoenix, Arizona. Adverse general economic conditions in
these markets could have a material adverse impact on our operations. For the
three months ended March 31, 2000 approximately 40% of our housing revenue and a
significant portion of our operating income were derived from operations in the
Columbus market.
Competition. The homebuilding industry is highly competitive. We
compete in each of our local market areas with numerous national, regional and
local homebuilders, some of which have greater financial, marketing, land
acquisition, and sales resources than we do. Builders of new homes compete not
only for home buyers, but also for desirable properties, financing, raw
materials and skilled subcontractors. We also compete with the resale market for
existing homes which provides certain attractions for home buyers over the new
home market.
Governmental Regulation and Environmental Considerations. The
homebuilding industry is subject to increasing local, state and Federal
statutes, ordinances, rules and regulations concerning zoning, resource
protection (preservation of woodlands and hillside areas), building design, and
construction and similar matters. This includes local regulations which impose
restrictive zoning and density requirements in order to limit the number of
homes that can eventually be built within the boundaries of a particular
location. Such regulation affects construction activities, including
construction materials which must be used in certain aspects of building design,
as well as sales activities and other dealings with home buyers.
-15-
<PAGE> 16
We must also obtain licenses, permits and approvals from various governmental
agencies for our development activities, the granting of which are beyond our
control. Furthermore, increasingly stringent requirements may be imposed on
homebuilders and developers in the future. Although we cannot predict the impact
on us to comply with any such requirements, such requirements could result in
time consuming and expensive compliance programs.
We are also subject to a variety of local, state and Federal statutes,
ordinances, rules and regulations concerning the protection of health and the
environment. The particular environmental laws, which apply to any given
project, vary greatly according to the project site and the present and former
uses of the property. These environmental laws may result in delays, cause us to
incur substantial compliance costs (including substantial expenditures for
pollution and water quality control) and prohibit or severely restrict
development in certain environmentally sensitive regions. Although there can be
no assurance that we will be successful in all cases, we have a general practice
of requiring an environmental audit and resolution of environmental issues prior
to purchasing land in an effort to avoid major environmental issues in our
developments.
In addition, we have been, and in the future may be, subject to
periodic delays or may be precluded from developing certain projects due to
building moratoriums. These moratoriums generally relate to insufficient water
supplies or sewage facilities, delays in utility hook-ups or inadequate road
capacity within the specific market area or subdivision. These moratoriums can
occur prior to, or subsequent to, commencement of our operations without notice
or recourse.
Risk of Material and Labor Shortages. The residential construction
industry has, from time to time, experienced significant material and labor
shortages in insulation, drywall, brick, cement and certain areas of carpentry
and framing, as well as fluctuations in lumber prices and supplies. Recently, we
experienced shortages in certain areas such as brick material and framing labor.
Continued shortages in these areas could delay construction of homes which could
adversely affect our business; however, at this time, we do not anticipate a
material effect for fiscal year 2000.
Significant Voting Control by Principal Shareholders. As of March 31,
2000, members of the Irving E. Schottenstein family owned approximately 35% of
our outstanding common shares. Therefore, members of the Irving E. Schottenstein
family have significant voting power.
Quantitative and Qualitative Disclosures about Market Risk. Our primary
market risk results from fluctuations in interest rates. We are exposed to
interest rate risk through the borrowings under our unsecured revolving credit
facilities which permit borrowings up to $280.0 million. To minimize the effect
of the interest rate fluctuation, we have three interest rate swap arrangements
with certain banks for a total notional amount of $75.0 million. Under these
agreements we pay a fixed rate of 5.10% on $25.0 million and 6.25% on $50.0
million.
Assuming a hypothetical 10% change in short-term interest rates,
interest expense would not change significantly, as the interest rate swap
agreements would partially offset the impact.
Additionally, M/I Financial offers fixed and adjustable rate mortgage
loans to buyers of our homes. The loans are granted at current market interest
rates which are guaranteed from the loan lock date through the transfer of the
title of the home to the buyer. M/I Financial hedges its interest rate risk
using optional and mandatory forward sales to hedge risk from the loan lock date
generally to the date a loan is closed. At March 31, 2000, the notional
principal amount under these forward sales agreements was approximately $150.0
million and the related fair value of these agreements was approximately $0.8
million. The hedging agreements outstanding at March 31, 2000 mature within
90-120 days. Gains or losses on these agreements are recognized at the time the
loan is sold.
-16-
<PAGE> 17
PART II - OTHER INFORMATION
Item 1. Legal Proceedings - none.
Item 2. Changes in Securities - none.
Item 3. Defaults Upon Senior Securities - none.
Item 4. Submission of Matters to a Vote of Security Holders - none.
Item 5. Other Information - none.
Item 6. Exhibits and Reports on Form 8-K
The exhibits required to be filed herewith are set forth below. No
reports were filed on Form 8-K for the quarter for which this report is filed.
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
10.1 Amended and Restated M/I Schottenstein Homes, Inc. Executives' Deferred
Compensation Plan, dated April 19, 2000.
10.2 Company's 2000 Chief Executive Officer Bonus Program.
10.3 Company's 2000 President Bonus Program.
10.4 Company's 2000 Chief Operating Officer Bonus Program.
10.5 Company's 2000 Chief Financial Officer Bonus Program.
27 Financial Data Schedule.
-17-
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
M/I Schottenstein Homes, Inc.
-----------------------------
(Registrant)
Date: May 12, 2000 by: /s/ Robert H. Schottenstein
---------------------------
Robert H. Schottenstein
President and Director
Date: May 12, 2000 by: /s/ Kerrii B. Anderson
----------------------
Kerrii B. Anderson
Senior Vice President,
Chief Financial Officer, Assistant
Secretary and Director
(Principal Financial and Accounting
Officer)
-18-
<PAGE> 19
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION PAGE #
- -------------- ----------- ------
10.1 Amended and Restated M/I Schottenstein Homes, Inc.
Executives' Deferred Compensation Plan, dated
April 19, 2000.
10.2 Company's 2000 Chief Executive Officer Bonus Program.
10.3 Company's 2000 President Bonus Program.
10.4 Company's 2000 Chief Operating Officer Bonus Program.
10.5 Company's 2000 Chief Financial Officer Bonus Program.
27 Financial Data Schedule.
-19-
<PAGE> 1
EXHIBIT 10.1
M/I SCHOTTENSTEIN HOMES, INC.
EXECUTIVES' DEFERRED COMPENSATION PLAN
--------------------------------------
Section 1. PURPOSE
- --------- -------
The Company desires and intends to recognize the value to the Company and its
Affiliates of the past and present services of its Executives, to encourage
their continued service to the Company and its Affiliates and to be able to
attract and retain Executives by adopting and implementing this Plan to provide
such Executives an opportunity to defer compensation otherwise payable to them
from the Company and/or Affiliate. In addition, the Company desires to allow
such Executives an opportunity to invest in the Common Shares of the Company by
providing that amounts deferred under this Plan will be distributed in Common
Shares.
This Plan was initially adopted effective November 1, 1998 and is amended and
restated in its entirety as provided in this document effective on January 1,
2000.
Section 2. CERTAIN DEFINITIONS
- --------- -------------------
The following terms will have the meanings provided below.
"Additions" means the credits applied to Deferred Compensation Accounts
as provided in Section 4 hereof.
"Adjustment Date" means the last business day of each quarter of each
Plan Year during which the Plan is in effect. However, solely for purposes of
crediting dividends, this term means the last business day of the calendar month
during which the dividend is paid.
"Affiliate" means any organization or entity which, together with the
Company, is a member of a controlled group of corporations or of a commonly
controlled group of trades or businesses [as defined in Sections 414(b) and (c)
of the Code], or of an affiliated service group [as defined in Code Section
414(m)] or other organization described in Code Section 414(o).
"Annual Cash Bonus" means, with respect to any calendar year or other
period, the bonus which, absent its deferral hereunder, would be payable to a
Participant for services rendered as an Executive. However, the term will not
include any bonus or special distribution made in connection with any other
employer provided benefit or fringe benefit program,
"Beneficiary" means the person or persons designated in writing as such
and filed with the Plan Administrator at any time by a Participant. Any such
designation may be withdrawn or changed in writing (without the consent of the
Beneficiary), but only the last designation on file with the Plan Administrator
shall be effective.
<PAGE> 2
"Board" means the Board of Directors of the Company.
"Change of Control" means (i) the acquisition by any person or group of
persons (within the meaning of Section 13 or 14 of the Securities Exchange Act
of 1934, as amended (the "Exchange Act")), other than Irving E. Schottenstein or
any of his immediate family members or lineal descendants, any heir of the
foregoing, any trust for the benefit of any of the foregoing, any private
charitable foundation or any partnership, limited liability company or
corporation owned or controlled by some or all of the foregoing, of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 25 percent or more of the outstanding voting capital stock of the Company or
(ii) the failure of the directors of the Company on the date hereof (the
"Current Board"), or such directors who are elected or recommended or endorsed
for election to the board of directors of the Company by a majority of the
Current Board or their successors so elected, recommended or endorsed to
constitute a majority of the board of directors of the Company.
"Code" means the Internal Revenue Code of 1986, as may be amended from
time to time.
"Common Shares" means the common shares of the Company, par value $.01.
"Company" means M/I Schottenstein Homes, Inc., an Ohio corporation, its
subsidiaries, and any successor entity.
"Deferred Compensation Account" means the separate Deferred
Compensation Account established for each Participant pursuant to Section 4 of
the Plan.
"Disability" shall mean any condition which renders the Participant
unable to continue employment with the Company as determined by the Plan
Administrator, in the Plan Administrator's sole and absolute discretion.
"Discretionary Deferral" means the amount each Participant has elected
to be credited to such Participant's Deferred Compensation Account with respect
to any Plan Year pursuant to the terms of Section 4(B) of the Plan.
"Effective Date" means January 1, 2000.
"Executive" means those select management or highly compensated
employees whom the Board designates as eligible to participate in this Plan. As
of the Effective Date, these include those persons who are employed as the
Company's Chief Executive Officer; President; Chief Operating Officer; Senior
Vice President, Chief Financial Officer; Senior Vice President, Treasurer;
President Land Operations, General Counsel; Region Presidents, President,
Columbus Land; Vice President, Research and Design; Vice President, Research and
Design, Florida; Vice President, Marketing; Division Presidents; and the
President of M/I Financial.
2
<PAGE> 3
"Executive Stock Bonus Plan" means the separate incentive compensation
program extended by the Company to select members of its management from time to
time.
"Fair Market Value" of the Common Shares means the most recent closing
price of the Common Shares on any national securities exchange on which the
Common Shares are then listed.
"Mandatory Deferral" means the mandatory amount credited to each
Participant's Deferred Compensation Account with respect to any Plan Year,
pursuant to the terms of Section 4(B) of the Plan.
"Participant" has the meaning specified in Section 3 of the Plan.
"Plan" means the M/I Schottenstein Homes, Inc. Executives' Deferred
Compensation Plan, as reflected in this document, as the same may be amended
from time to time after the Effective Date.
"Plan Administrator" means the Company or the person or committee to
whom the Company has delegated all of its powers and duties to administer the
Plan.
"Plan Year" means the fiscal year of the Company.
"Retirement" means the Participant's voluntary termination of
employment with the Company after completing not less than ten years of
employment. Whether an Executive's termination was voluntary shall be as
determined by the Plan Administrator, in the Plan Administrator's sole and
absolute discretion.
"Termination Date" means the date of a Participant's termination of
employment with the Company for any reason other than Retirement or Disability.
"Trust" means the trust fund that, in the discretion of the Company,
may be established for purposes of segregating certain assets of the Company for
payment of benefits hereunder as the same may be amended from time to time. Such
Trust may be irrevocable, but the assets thereof shall, at all times, remain the
property of the Company subject to the claims of the Company's creditors.
Section 3. PARTICIPANTS
- --------- ------------
Each person who is an Executive on the Effective Date shall be designated by the
Plan Administrator as eligible for participation in the Plan on the Effective
Date. Each individual who becomes an Executive after the Effective Date will be
eligible to participate in the Plan as of the date on which he becomes an
Executive or the date specified by the Plan Administrator, whichever is latest.
An Executive so designated shall immediately become a "Participant" in the Plan.
A Participant shall continue to participate in the Plan until his status as a
Participant is
3
<PAGE> 4
terminated by a complete distribution of his Deferred Compensation Account
pursuant to the terms of the Plan, by written directive of the Plan
Administrator or if he or she is no longer an Executive.
Section 4. DEFERRED COMPENSATION ACCOUNTS
- --------- ------------------------------
A. Establishment of Deferred Compensation Accounts. The Plan
Administrator will establish a Deferred Compensation Account for each
Participant. The Plan Administrator will establish a subaccount for each
participant for each Plan Year.
B. Participant Deferrals. With respect to each Plan Year and subject to
the requirements and limits described in Section 4.H below, (i) five percent of
each Participant's Annual Cash Bonus will be credited to his or her Deferred
Compensation Account as a Mandatory Deferral and (ii) a Participant may elect to
have an additional portion of his or her Annual Cash Bonus credited to this
account as a Discretionary Deferral. Before June 30 of each Plan Year, each
Participant must advise the Plan Administrator in writing, on a form prescribed
by the Plan Administrator (each, a "Deferral Notice"), of the following: (a) the
number of Common Shares owned by such Participant (determined in accordance with
Section 4(H) below), (b) the amount of any Discretionary Deferral, and (c) the
date the Participant elects to receive distribution of the Mandatory Deferral
and the Discretionary Deferral for that Plan Year; provided, however, subject to
Section 5(D) of the Plan, the earliest date the Participant may elect to receive
distribution of the Mandatory Deferral and the Discretionary Deferral for any
Plan Year shall be the date which is three years after the end of that Plan
Year. Notwithstanding the preceding sentence, for Plan Year 1998, a Participant
may complete a Deferral Notice at any time prior to December 1, 1998. In the
event a Participant fails to deliver a Deferral Notice, (1) the Mandatory
Deferral shall be made (unless not required under the limits described in
Section 4(H) below), (2) no Discretionary Deferral shall be made, (3) the
Participant shall be deemed to have elected to receive distribution of the
Mandatory Deferral for that Plan Year on the date which is three years after the
end of that Plan Year, and (4) the Participant shall be deemed to have elected
to receive distribution upon a change in control under the terms of Section 5(D)
of the Plan. Each Deferral Notice shall apply only to Annual Cash Bonuses
payable to, or earned by, the Participant for that Plan Year. A Deferral Notice
relating to a particular Plan Year shall remain in effect for that Plan Year
unless and until changed by the Participant. A Participant may from time to
time, extend the date specified by the Participant for distribution of his or
her Mandatory Deferral and Discretionary Deferral for any Plan Year by
delivering an Amendment to Deferral Notice on a form prescribed by the Plan
Administrator (each, an "Amendment to Deferral Notice"), but only if the
Amendment to Deferral Notice is received by the Plan Administrator no later than
six months before the distribution date designated in the Deferral Notice or
Amendment to Deferral Notice then in effect.
C. Executive Stock Bonus Plan Awards. Amounts awarded under the
Executive Stock Bonus Plan during any Plan Year also will be credited to the
recipient's Deferred Compensation Account and distributed as if it were a
Mandatory Deferral for that Plan Year.
4
<PAGE> 5
D. Company Contributions. After the end of each Plan Year, the Company
will allocate to the Participant's Deferred Compensation Account for that Plan
Year, the percentage of the Annual Cash Bonus equal to the aggregate of (i) the
amount required as a Mandatory Deferral, and (ii) the amount specified as the
Discretionary Deferral in the Deferral Notice. Any amounts so allocated by the
Company are called "Company Contributions."
E. Adjustment of Account Balances. The amount credited to the annual
Deferred Compensation Account of each Participant for each Plan Year shall be
divided by the average Fair Market Value of the Common Shares determined as of
the last four Adjustment Dates. Upon completion of this calculation, each
Deferred Compensation Account shall be credited with the resulting number of
whole Common Shares and any remaining amounts shall continue to be credited to
the Deferred Compensation Account until converted to whole Common Shares based
on their Fair Market Value as of the most recent Adjustment Date. The Deferred
Compensation Account of each Participant shall be credited with cash dividends
on Common Share at the times and equal in amount to the cash dividends actually
paid with respect to Common Shares on and after the date credited to the
Deferred Compensation Account. The amount of cash dividends credited to each
Deferred Compensation Account (and any other amounts then credited to such
account) shall be divided by the then Fair Market Value of the Common Shares
determined as of the most recent Adjustment Date; and the Deferred Compensation
Account of each Participant shall be credited with the resulting number of whole
Common Shares and any remaining amounts shall continue to be credited to the
Deferred Compensation Account until it may be converted to whole Common Shares
based on their Fair Market Value as of the most recent Adjustment Date. The Plan
Administrator may prescribe any reasonable method or procedure for the
accounting of for these adjustments.
F. Stock Adjustments. The number of Common Shares in the Deferred
Compensation Account of each Participant and the minimum and maximum share
limits described in Section 4.H shall be adjusted from time to time to reflect
stock splits, stock dividends or other changes in the Common Shares resulting
from a change in the Company's capital structure.
G. Participant's Rights in Accounts. A Participant's only right with
respect to his Deferred Compensation Account (and amounts allocated thereto)
will be to receive distributions in accordance with the provisions of Section 5
of the Plan.
H. Limits on Deferrals. The mandatory deferral described in Section 4.B
will not be applied in any year for which a Participant's Annual Cash Bonus
(before application of the Participant's Deferral Notice) is less than $50,000.
If the Annual Cash Bonus for any year is $50,000 or larger, the Mandatory
Deferral will be applied to the entire amount of the bonus, not just the portion
that exceeds $50,000. The Mandatory Deferral will not be required with respect
to any Plan Year, if contemporaneously with such Participant's delivery of the
Deferral Notice for that Plan Year, the Participant provides evidence acceptable
to the Plan Administrator establishing that the Participant "owns" a number of
Common Shares greater than or equal to the minimum number of Common Shares
required of such Participant as set forth in the following table. For purposes
of the immediately preceding sentence, the number of Common Shares
5
<PAGE> 6
"owned" by a Participant shall be the aggregate of (i) the number of Common
Shares then credited to the Participant's Deferred Compensation Account, plus
(ii) the number of Common Shares the Participant owns individually (i.e. without
regard to this Plan), plus (iii) the number of Common Shares the Participant
owns indirectly by application of Section 318 of the Code. If the completion of
the Mandatory Deferral for a Participant (i.e. the credit of 5% of the
Participant's Annual Cash Bonus) for any Plan Year would result in the
Participant "owning" (as determined in accordance with the immediately preceding
sentence) more than the minimum number of Common Shares required of such
Participant as set forth in the following table, the amount of the Mandatory
Deferral for that Plan Year shall be automatically reduced to the extent
necessary so that the amount owned by the Participant is equal to the minimum
number of Common Shares required of such Participant as set forth in the
following table. A Discretionary Deferral will not be permitted with respect to
any Plan Year, if at the end of that Plan Year, the number of Common Shares then
credited to the Participant's Deferred Compensation Account is greater than or
equal to, the maximum number of Common Shares permitted to be credited to such
Participant's Deferred Compensation Account as set forth in the following table.
If the completion of a Discretionary Deferral for any Plan Year would result in
the number of Common Shares credited to the Participant's Deferred Compensation
Account to be greater than the maximum number of Common Shares permitted to be
credited to such Participant's Deferred Compensation Account as set forth in the
following table, the amount of the Discretionary Deferral for that Plan Year
shall be automatically reduced to the extent necessary so that the number of
Common Shares credited to such Participant's Deferred Compensation Account is
equal to the maximum number of Common Shares permitted to be credited to such
Participant's Deferred Compensation Account as set forth in the following table.
<TABLE>
<CAPTION>
- ---------------------------------------- -------------------------------------- --------------------------------------
(b) (c)
TITLE MINIMUM NUMBER OF COMMON SHARES MAXIMUM NUMBER OF COMMON SHARES
- ---------------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
Chief Executive Officer None None
- ---------------------------------------- -------------------------------------- --------------------------------------
President None None
- ---------------------------------------- -------------------------------------- --------------------------------------
Chief Operating Officer None None
- ---------------------------------------- -------------------------------------- --------------------------------------
Senior Vice President, Chief Financial
Officer 10,000 None
- ---------------------------------------- -------------------------------------- --------------------------------------
Senior Vice President, Treasurer 10,000 None
- ---------------------------------------- -------------------------------------- --------------------------------------
President Land Operations, General
Counsel 10,000 None
- ---------------------------------------- -------------------------------------- --------------------------------------
Region Presidents 10,000 15,000
- ---------------------------------------- -------------------------------------- --------------------------------------
</TABLE>
6
<PAGE> 7
<TABLE>
<S> <C> <C>
- ---------------------------------------- -------------------------------------- --------------------------------------
President, M/I Financial 10,000 15,000
- ---------------------------------------- -------------------------------------- --------------------------------------
Vice President, Research and
Development 5,000 15,000
- ---------------------------------------- -------------------------------------- --------------------------------------
Vice President, Marketing 5,000 15,000
- ---------------------------------------- -------------------------------------- --------------------------------------
Division Presidents 5,000 15,000
- ---------------------------------------- -------------------------------------- --------------------------------------
Other Executives To be established To be established
- ---------------------------------------- -------------------------------------- --------------------------------------
</TABLE>
Section 5. PAYMENT OF DEFERRED BENEFITS
- --------- ----------------------------
A. Time of Payment. Distribution of a Participant's Deferred
Compensation Account for a specific Plan Year shall be made within sixty (60)
days of the earlier of (i) the date specified by the Participant in the Deferral
Notice delivered to the Plan Administrator or in any properly delivered
Amendment to Deferral Notice; (ii) the Participant's Termination Date.
B. Method of Distribution. The Common Shares credited to a
Participant's Deferred Compensation Account (as adjusted in accordance with the
terms of Sections 4(E) and 4(F)) with respect to each Plan Year, shall be
distributed to the Participant in a single bulk distribution of such Common
Shares in accordance with the Participant's Deferral Notice or Amendment to
Deferral Notice then in effect for that Plan Year or, if no Deferral Notice has
been given, then in accordance with the terms of this Agreement.
C. Hardship Distributions. Prior to the time all or any portion of a
Participant's Deferred Compensation Account becomes payable with respect to any
Plan Year, the Plan Administrator, in its sole discretion, may elect to
distribute all or a portion of such account in the event such Participant
requests a distribution due to severe financial hardship. For purposes of this
Plan, severe financial hardship shall be deemed to exist in the event the Plan
Administrator determines that a Participant needs a distribution to meet
immediate and heavy financial needs resulting from a sudden or unexpected
illness or accident of the Participant or a member of the Participant's family,
loss of the Participant's property due to casualty or other similar
extraordinary and unforeseeable circumstances arising as a result of events
beyond the control of the Participant. A distribution based on financial
hardship shall not exceed the amount required to meet the immediate financial
need created by the hardship and shall be made by distributing the smaller of
(i) the number of Common Shares credited to his or her Deferred Compensation
Account or (ii) the number of Common Shares with a Fair Market Value equal to
the amount needed to meet the financial hardship, reduced by the maximum amount
that the Participant could borrow or withdraw from any other deferred
compensation program in which he or she participates, including a plan described
in Section 401(a) of the Code.
7
<PAGE> 8
D. Change of Control. Regardless of any other Plan provision to the
contrary, the portion of a Participant's Deferred Compensation Account
applicable to any Plan Year will be distributed as soon as administratively
practical (but no later than 60 days) after a Change of Control but only if the
Participant elected this distribution event in his or her Deferral Notice or
Amendment to Deferral Notice then in effect for that Plan Year. Any election a
Participant makes in his or her Deferral Notice with respect to a distribution
after a Change of Control may be changed by delivering an Amendment to Deferral
Notice to the Plan Administrator before the Change of Control occurs. Any
modification made after that date will not be implemented.
E. Designation of Beneficiary. Upon the death of a Participant prior to
the distribution of his Deferred Compensation Account, such Deferred
Compensation Account shall be paid to the Beneficiary designated by the
Participant. If there is no designated Beneficiary or no designated Beneficiary
surviving at a Participant's death, payment of the Participant's Deferred
Compensation Account shall be made to the Participant's estate.
F. Taxes. In the event any taxes are required by law to be withheld or
paid from any payments made pursuant to the Plan, the Plan Administrator shall
pay these taxes from the proceeds of a personal check which the Participant
shall give the Plan Administrator to pay these taxes. The Plan Administrator
will pay these amounts to the appropriate taxing authority.
Section 6. ASSIGNMENT OR ALIENATION
- --------- ------------------------
The right of a Participant, Beneficiary or any other person to the payment of a
benefit under this Plan may not be assigned, transferred, pledged or encumbered
except by will or by the laws of descent and distribution.
Section 7. PLAN ADMINISTRATION
- --------- -------------------
The Plan Administrator will have the right to interpret and construe the Plan
and to determine all questions of eligibility and of status, rights and benefits
of Participants and all other persons claiming benefits under the Plan. In all
such interpretations and constructions, the Plan Administrator's determination
will be based upon uniform rules and practices applied in a nondiscriminatory
manner and will be binding upon all persons affected thereby. Subject to the
provisions of Section 8 below, any decision by the Plan Administrator with
respect to any such matters will be final and binding on all parties. The Plan
Administrator will have absolute discretion in carrying out its responsibilities
under this Section 7.
8
<PAGE> 9
Section 8. CLAIMS PROCEDURE
- --------- ----------------
A. Filing Claims. Any Participant or Beneficiary entitled to benefits
under the Plan will file a claim request with the Plan Administrator.
B. Notification to Claimant. If a claim is wholly or partially denied,
the Plan Administrator will furnish to the claimant a notice of the decision
within ninety (90) days in writing and in a manner calculated to be understood
by the claimant, which notice will contain the following information:
(i) the specific reason or reasons for the denial;
(ii) specific reference to pertinent Plan provisions upon
which the denial is based;
(iii) a description of any additional material or
information necessary for the claimant to perfect the
claim and an explanation of why such material or
information is necessary; and
(iv) an explanation of the Plan's claims review procedure
describing the steps to be taken by a claimant who
wishes to submit his claims for review.
C. Review Procedure. A claimant or his authorized representative may,
with respect to any denied claim:
(i) request a review upon a written application filed
within sixty (60) days after receipt by the claimant
of written notice of the denial of his claim;
(ii) review pertinent documents; and
(iii) submit issues and comments in writing.
Any request or submission will be in writing and will be directed to the Plan
Administrator (or its designee). The Plan Administrator (or its designee) will
have the sole responsibility for the review of any denied claim and will take
all steps appropriate in the light of its findings.
D. Decision on Review. The Plan Administrator (or its designee) will
render a decision upon review. If special circumstances (such as the need to
hold a hearing on any matter pertaining to the denied claim) warrant additional
time, the decision will be rendered as soon as possible, but not later than one
hundred twenty (120) days after receipt of the request for review. Written
notice of any such extension will be furnished to the claimant prior to the
commencement of the extension. The decision on review will be in writing and
will include specific reasons for the decision, written in a manner calculated
to be understood by the claimant, as well as specific references to the
pertinent provisions of the Plan on which the decision is
9
<PAGE> 10
based. If the decision on review is not furnished to the claimant within the
time limits prescribed above, the claim will be deemed denied on review.
Section 9. UNSECURED AND UNFUNDED OBLIGATION
- --------- ---------------------------------
Notwithstanding any provision herein to the contrary, the benefits offered under
the Plan shall constitute an unfunded, unsecured promise by the Company to pay
benefits determined hereunder which are accrued by Participants while such
Participants are Executives. No provision shall at any time be made with respect
to segregating any assets of the Company for payment of any benefits hereunder,
except to the extent that the Company, in its discretion, establishes a Trust
for such purpose. To the extent any benefits provided under the Plan are
actually paid from a Trust, neither the Company nor any Affiliate shall have any
further obligation therefor, but to the extent not so paid, such benefits shall
remain the obligations of, and shall be paid by, the Company. No Participant,
Beneficiary or any other person shall have any interest in any particular assets
of the Company or any Affiliate by reason of the right to receive a benefit
under the Plan and any such Participant, Beneficiary or other person shall have
only the rights of a general unsecured creditor of the Company with respect to
any rights under the Plan. Nothing contained in the Plan shall constitute a
guaranty by the Company, any Affiliate or any other entity or person that the
assets of the Company will be sufficient to pay any benefit hereunder. All
expenses and fees incurred in the administration of the Plan and of any Trust
shall be paid by the Company, provided that, in the event that a Trust is
established, at the direction of the Company, such expenses and fees shall be
paid from the Trust, provided that such amounts are not paid by the Company or
an Affiliate.
Section 10. AMENDMENT AND TERMINATION OF THE PLAN
- ---------- -------------------------------------
The Company reserves the right, by a resolution of the Board, to amend the Plan
at any time, and from time to time, in any manner which it deems desirable,
provided that no amendment will adversely affect the accrued benefits of any
Participant under the Plan. The Company also reserves the right, by a resolution
of the Board, to terminate this Plan at any time without providing any advance
notice to any Participant; and in the event of any Plan termination, the Company
reserves the right to then distribute all amounts allocated to Participants'
Deferred Compensation Accounts.
Section 11. BINDING UPON SUCCESSORS
- ---------- -----------------------
The Plan shall be binding upon and inure to the benefit of the Company, its
successors and assigns and the Participants and their heirs, executors,
administrators and legal representatives. In the event of the merger or
consolidation of the Company with or into any other corporation, or in the event
substantially all of the assets of the Company shall be transferred to another
corporation, the successor corporation resulting from the merger or
consolidation, or the transferee of such assets, as the case may be, shall, as a
condition to the consummation of the
10
<PAGE> 11
merger, consolidation or transfer, assume the obligations of the Company
hereunder and shall be substituted for the Company hereunder.
Section 12. NO GUARANTEE OF PLAN PERMANENCY
- ---------- -------------------------------
This Plan does not contain any guarantee of provisions for continued service on
the Board to any Executive or Participant nor is it guaranteed by the Company to
be a permanent plan.
Section 13. GENDER
- ---------- ------
Any reference in the Plan made in the masculine pronoun shall apply to both men
and women.
Section 14. INCAPACITY OF RECIPIENT
- ---------- -----------------------
In the event that a Participant or Beneficiary is declared incompetent and a
guardian, conservator or other person legally charged with the care of his
person or of his estate is appointed, any benefits under the Plan to which such
Participant or Beneficiary is entitled shall be paid to such guardian,
conservator or other person legally charged with the care of his person or his
estate. Except as provided hereinabove, when the Plan Administrator, in its sole
discretion, determines that a Participant or Beneficiary is unable to manage his
financial affairs, the Plan Administrator may, but shall not be required to,
direct distribution(s) to any one or more of the spouse, lineal ascendants or
descendants or other closest living relatives of such Participant or Beneficiary
who demonstrates to the satisfaction of the Plan Administrator the propriety of
making such distribution(s). Any payment made under this Section 14 shall be in
complete discharge of any liability under the Plan for such payment. The Plan
Administrator shall not be required to see to the application of any such
distribution made to any person.
Section 15. GOVERNING LAW
- ---------- -------------
This Plan shall be construed in accordance with and governed by the laws of the
State of Ohio.
Section 16. INABILITY TO LOCATE PARTICIPANT OR BENEFICIARY
- ---------- ----------------------------------------------
Each Participant is obliged to keep the Plan Administrator apprised of his or
her current mailing address and that of his or her Beneficiary. The Plan
Administrator's obligation to search for any Participant or Beneficiary is
limited to sending a registered or certified letter to the Participant's or
Beneficiary's last known address. Any amounts credited to the Deferred
Compensation Account of any Participant or Beneficiary that does not present
himself or herself to the Plan Administrator will be forfeited no later than 12
months after that benefit otherwise would have been payable. However, this
forfeited benefit will be restored and paid if the Plan Administrator
11
<PAGE> 12
subsequently receives a claim for benefits which is approved under the
procedures described in Section 8.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed by
a duly authorized officer as of the 19th day of April, 2000.
M/I SCHOTTENSTEIN HOMES, INC.
By: /s/ Robert H. Schottenstein
-----------------------------------
Its: President
-----------------------------------
12
<PAGE> 13
M/I SCHOTTENSTEIN HOMES, INC.
EXECUTIVES' DEFERRED COMPENSATION PLAN
DEFERRAL NOTICE
---------------
Name:
------------------------------------------------------------------
Soc. Sec. No.:
---------------------------------------------------------
Plan Year to Which Deferral Relates:
-----------------------------------
Minimum Number of Common Shares Required:
------------------------------
1. MANDATORY DEFERRAL.
I acknowledge that as described in Section 4(A) of the Plan (and
----- subject to the limits described in Section 4(H) of the Plan), up to 5%
of my Annual Cash Bonus (as described in the Plan) for this Plan Year
will automatically be deferred to the Plan (the "Mandatory Deferral")
until such time as I "own" the mandatory minimum number of Common
Shares as set forth above.
I represent and warrant that on the date hereof, I "own" ______ Common
----- Shares. For purposes of this representation and warranty, the shares I
"own" includes (i) shares credited to my Deferred Compensation Account,
(ii) shares I own individually outside of the Plan, and (iii) common
shares I own indirectly by application of Section 318 of the Code. I
will supply proof of the Common Shares I "own" upon the request of the
Plan Administrator.
2. DISCRETIONARY DEFERRAL.
----------------------
----- In accordance with the provisions of Section 4(A) of the Plan (and
subject to the limits described in Section 4(H) of the Plan), I hereby
elect to defer an additional ______ percent (____%) of my Annual Cash
Bonus payable to me for services as an Executive of M/I Schottenstein
Homes, Inc. or any of its affiliates with respect to this Plan Year
(the "Discretionary Deferral").
3. DISTRIBUTION DATE.
-----------------
----- I hereby elect to receive distribution of the Common Shares credited to
my Deferred Compensation Account in respect of my Mandatory Deferral
and my Discretionary Deferral for this Plan Year within 60 days of
______________. I acknowledge that, notwithstanding the foregoing
election, distribution of the Common Shares credited to my Deferred
Compensation account in respect of my Mandatory Deferral and my
Discretionary Deferral for this Plan Year will be made within 60 days
of my Termination Date.
13
<PAGE> 14
4. CHANGE IN CONTROL DISTRIBUTION
------------------------------
Subject to Section 4(D) of the Plan, I elect:
To receive,
-----
Not to receive,
-----
a distribution of the Common Shares credited to my Deferred
Compensation Account with respect to the Plan Year set forth above, as
soon as administratively possible after a Change of Control occurs.
5. METHOD OF PAYMENT.
------------------
I hereby acknowledge that I will receive the distribution of all of the
----- Common Shares credited to my Deferred Compensation Account in the Plan
with respect to the Plan Year set forth above in a single distribution.
6. DESIGNATION OF BENEFICIARY.
---------------------------
I hereby designate _____________________ as my primary Beneficiary and
______________________ as my contingent Beneficiary(ies) to receive any
amounts payable under the Plan for the Plan Year set forth above in the
event of my death.
7. ACKNOWLEDGMENT.
---------------
I hereby acknowledge that (i) the deferral portions of my Annual Cash
Bonus for the Plan Year set forth above under the Plan is irrevocable,
subject to the terms of the Plan with respect to amounts which are
deferred under the Plan for the Plan Year set forth above and shall
remain in effect until terminated or modified, (ii) the Plan is
unfunded and is maintained primarily for the purpose of providing
deferred compensation to a select group of management or highly
compensated employees (as defined in the Employee Retirement Income
Security Act of 1974, as amended) and that I have no rights or claims
to receive amounts or Common Shares credited to my Deferred
Compensation Account other than those specifically granted by the terms
of the Plan, and (iii) I am solely responsible for ensuring that the
Plan Administrator's files contain my current mailing address and that
of my Beneficiary.
- ------------------ ------------------------------------------
Date Signature
------------------------------------------
Name (please print)
14
<PAGE> 15
M/I SCHOTTENSTEIN HOMES, INC.
EXECUTIVES' DEFERRED COMPENSATION PLAN
CONSENT TO AMENDMENT
--------------------
Name:
------------------------------------------------------------------
Soc. Sec. No.:
---------------------------------------------------------
I understand that the M/I Schottenstein Homes, Inc. Executives' Deferred
Compensation Plan has been amended and that amendment may affect the date that
my benefits are distributable. By signing below, I consent to that change and
agree that payment of my benefits will be governed solely by the terms of the
amended Plan.
- ------------------ ------------------------------------------
Date Signature
------------------------------------------
Name (please print)
15
<PAGE> 16
AMENDMENT TO
DEFERRAL NOTICE
Name:
------------------------------------------------------------------
Soc. Sec. No.:
---------------------------------------------------------
Plan Year to Which Deferral Relates:
-----------------------------------
1. EXTENSION OF DEFERRAL PERIOD. In accordance with the provisions of the
M/I Schottenstein Homes, Inc. Executives' Deferred Compensation Plan
(the "Plan"), I hereby elect to extend the deferral I made with respect
to the Mandatory Deferral and the Discretionary Deferral for the Plan
Year set forth above to within 60 days of the earlier of (i) my
Termination Date (as defined in the Plan), or (ii) _____________.
2. CHANGE IN CONTROL DISTRIBUTION
Subject to Section 4(D) of the Plan, I elect:
To receive,
-----
Not to receive,
-----
a distribution of the amount credited to my Deferred Compensation
Account with respect to the Plan Year set forth above, as soon as
administratively possible after a Change of Control occurs.
3. REDESIGNATION OF BENEFICIARY.. I hereby designate _____________________
as my primary Beneficiary and ______________________ as my contingent
Beneficiary(ies) to receive any amounts payable under the Plan for the
Plan Year set forth above in the event of my death.
4. ACKNOWLEDGMENT. I hereby acknowledge that (i) the deferral of portions
of my Annual Cash Bonus for the Plan Year Set forth above under the
Plan is irrevocable, subject to the terms of the Plan with respect to
amounts which are deferred under the Plan for the Plan Year set forth
above and shall remain in effect until terminated or modified, (ii) the
Plan is unfunded and is maintained primarily for the purpose of
providing deferred compensation to a select group of management or
highly compensated employees (as defined in the Employee Retirement
Income Security Act of 1974, as amended) and that I have no rights or
claims to receive amounts or Common Shares credited to my Deferred
Compensation Account other than those specifically granted by the terms
of the Plan, (iii) I am solely responsible for ensuring that the Plan
Administrator's files contain my current mailing address and that of my
Beneficiary, and (iv) this Amendment to Deferral Notice supersedes all
prior Deferral Notices and Amendment to Deferral Notices in respect of
the Plan Year to which this Amendment to Deferral Notice relates.
- ------------------ ------------------------------------------
Date Signature
------------------------------------------
Name (please print)
16
<PAGE> 1
EXHIBIT 10.2
M/I SCHOTTENSTEIN HOMES, INC.
AWARD FORMULAS AND PERFORMANCE GOALS
CHIEF EXECUTIVE OFFICER
EFFECTIVE JANUARY 1, 2000
---------------
In accordance with the terms of the M/I Schottenstein Homes Executive Officer
Compensation Plan (the "Plan"), the Executive Officer Compensation Committee
(the "Committee") shall, for each Participant, establish the award formulas and
performance goals (as those terms are defined in the Plan) to be measured to
determine the amount of bonus awards for each Plan Year. The following are the
performance goals and award formulas for the 2000 plan year for the Chief
Executive Officer. Subject to the maximum limit set forth in Section 7.4 of the
Plan, the maximum award the Chief Executive Officer is eligible to receive for
the 2000 Plan Year shall be an amount equal to 500% of his 1999 base salary.
NOTE: IN THE FOLLOWING CRITERIA, INCREMENTS BETWEEN LEVELS ARE PRORATED.
- ------------------------------------------------------------------------
I. ACTUAL NET INCOME: In the event the actual net income of the Company is
at least 50% of budgeted net income, the Chief Executive Officer will a
given percentage of December 31 base salary as per the following
schedule:
<TABLE>
<CAPTION>
Net Income as a Percentage of Budget: Percentage of December 31 Base Salary
------------------------------------- Awarded:
--------
<S> <C>
50.00% - 54.99% 100.00%
55.00% - 59.99% 110.00%
60.00% - 64.99% 120.00%
65.00% - 69.99% 130.00%
70.00% - 74.99% 140.00%
75.00% - 79.99% 160.00%
80.00% - 84.99% 180.00%
85.00% - 89.99% 200.00%
90.00% - 94.99% 210.00%
95.00% - 99.99% 220.00%
100.00% - 104.99% 240.00%
105.00% - 109.99% 275.00%
110.00% + 300.00%
</TABLE>
II. If the Company achieves at least a 92% affirmative response to Question
Number 14 on the Homeowner Questionnaire, the Chief Executive Officer
will receive a given portion of his December 31 base salary as follows:
<TABLE>
<CAPTION>
Customer Response Achieved: Percent of December 31 Salary:
--------------------------- ------------------------------
<S> <C>
92.00% - 92.99% 50.00%
93.00% - 93.99% 60.00%
94.00% - 94.99% 75.00%
95.00% - 95.99% 85.00%
96.00% - 96.99% 90.00%
97.00% - 97.99% 95.00%
98.00% - 98.99% 100.00%
99.00% - 99.99% 110.00%
100% 120.00%
</TABLE>
1
<PAGE> 2
M/I SCHOTTENSTEIN HOMES, INC.
AWARD FORMULAS AND PERFORMANCE GOALS
CHIEF EXECUTIVE OFFICER
EFFECTIVE JANUARY 1, 2000
---------------
III. If the Return on Equity (defined as net income for the 2000 year
divided by equity at the beginning of the calendar year) of the
Corporation is at least 10%, the Chief Executive Officer will receive a
given portion of his December 31 base salary as follows:
<TABLE>
<CAPTION>
Return on Equity Results: Percentage of December 31 Salary:
------------------------- ---------------------------------
<S> <C>
10.00% 50.00%
11.00% 60.00%
12.00% 65.00%
13.00% 70.00%
14.00% 75.00%
15.00% 80.00%
16.00% 85.00%
17.00% 90.00%
18.00% 95.00%
19.00% 100.00%
20.00% 105.00%
</TABLE>
PAYMENT
- -------
In accordance with the terms of the Plan, the Committee will determine the
amount of the award earned by the Chief Executive Officer after the end of the
2000 Plan Year. Of this amount, not less than 5% will be paid in Company Stock
under the 1998 Executive Deferred Compensation Plan.
ACKNOWLEDGED:
- ------------------------------------------ -------------
Name Date
2
<PAGE> 1
EXHIBIT 10.3
M/I SCHOTTENSTEIN HOMES, INC.
AWARD FORMULAS AND PERFORMANCE GOALS
PRESIDENT
EFFECTIVE JANUARY 1, 2000
---------------
In accordance with the terms of the M/I Schottenstein Homes Executive Officer
Compensation Plan (the "Plan"), the Executive Officer Compensation Committee
(the "Committee") shall, for each Participant, establish the award formulas and
performance goals (as those terms are defined in the plan) to be measured to
determine the amount of bonus awards for each plan year. The following are the
performance goals and award formulas for the 2000 plan year for the President.
Subject to the maximum limit set forth in Section 7.4 of the Plan, the maximum
amount the President is eligible to receive for the 2000 plan year shall be an
amount equal to 350% of his 2000 base salary.
NOTE: IN THE FOLLOWING CRITERIA, INCREMENTS BETWEEN LEVELS ARE PRORATED.
- ------------------------------------------------------------------------
I. ACTUAL NET INCOME: In the event the actual net income of the Company is
at least 50% of budgeted net income, the above individual will receive
a given percentage of December 31 base salary as per the following
schedule:
<TABLE>
<CAPTION>
Net Income as a Percentage of Budget: Percentage of December 31 Base Salary
------------------------------------- Awarded:
--------
<S> <C>
50.00% - 54.99% 25.00%
55.00% - 59.99% 30.00%
60.00% - 64.99% 35.00%
65.00% - 69.99% 45.00%
70.00% - 74.99% 55.00%
75.00% - 79.99% 65.00%
80.00% - 84.99% 75.00%
85.00% - 89.99% 90.00%
90.00% - 94.99% 100.00%
95.00% - 99.99% 105.00%
100.00% - 104.99% 110.00%
105.00% - 109.99% 125.00%
110.00% + 150.00%
</TABLE>
II. If the Company achieves at least a 92% affirmative response to Question
Number 14 on the Homeowner Questionnaire, the above individual will
receive a given portion of his December 31 base salary as follows:
<TABLE>
<CAPTION>
Customer Response Achieved: Percent of December 31 Salary:
--------------------------- ------------------------------
<S> <C>
92.00% - 92.99% 50.00%
93.00% - 93.99% 60.00%
94.00% - 94.99% 75.00%
95.00% - 95.99% 85.00%
96.00% - 96.99% 90.00%
97.00% - 97.99% 95.00%
98.00% - 98.99% 100.00%
99.00% - 99.99% 102.50%
100.00% + 110.00%
</TABLE>
1
<PAGE> 2
M/I SCHOTTENSTEIN HOMES, INC.
AWARD FORMULAS AND PERFORMANCE GOALS
PRESIDENT
EFFECTIVE JANUARY 1, 2000
---------------
III. If the Return on Equity (defined as net income for 2000, divided by
equity at the beginning of the calendar year) of the Corporation is at
least 10%, the above individual will receive a given portion of his
December 31 base salary as follows:
<TABLE>
<CAPTION>
Return on Equity Results: Percentage of December 31 Salary:
------------------------- ---------------------------------
<S> <C>
10.00% 50.00%
11.00% 60.00%
12.00% 65.00%
13.00% 70.00%
14.00% 75.00%
15.00% 80.00%
16.00% 85.00%
17.00% 90.00%
18.00% 95.00%
19.00% 100.00%
20.00% 105.00%
</TABLE>
PAYMENT
- -------
In accordance with the terms of the Plan, the Committee will determine the
amount of the award earned by the President after the end of the 2000 Plan Year.
Of this amount, not less than 5% will be paid in Company stock under the 1998
Executive Deferred Compensation Plan.
ACKNOWLEDGED:
- ------------------------------------------ -------------
Name Date
2
<PAGE> 1
EXHIBIT 10.4
M/I SCHOTTENSTEIN HOMES, INC.
AWARD FORMULAS AND PERFORMANCE GOALS
CHIEF OPERATING OFFICER
EFFECTIVE JANUARY 1, 2000
---------------
In accordance with the terms of the M/I Schottenstein Homes Executive Officer
Compensation Plan (the "Plan"), the Executive Officer Compensation Committee
(the "Committee") shall, for each Participant, establish the award formulas and
performance goals (as those terms are defined in the plan) to be measured to
determine the amount of bonus awards for each plan year. The following are the
performance goals and award formulas for the 2000 plan year for the Chief
Operating Officer. Subject to the maximum limit set forth in Section 7.4 of the
Plan, the maximum amount the Chief Operating Officer is eligible to receive for
the 2000 plan year shall be an amount equal to 350% of his 2000 base salary.
NOTE: IN THE FOLLOWING CRITERIA, INCREMENTS BETWEEN LEVELS ARE PRORATED.
- ------------------------------------------------------------------------
I. ACTUAL NET INCOME: In the event the actual net income of the Company is
at least 50% of budgeted net income, the above individual will receive
a given percentage of December 31 base salary as per the following
schedule:
<TABLE>
<CAPTION>
Net Income as a Percentage of Budget: Percentage of December 31 Base Salary
------------------------------------- Awarded:
--------
<S> <C>
50.00% - 54.99% 25.00%
55.00% - 59.99% 30.00%
60.00% - 64.99% 35.00%
65.00% - 69.99% 45.00%
70.00% - 74.99% 55.00%
75.00% - 79.99% 65.00%
80.00% - 84.99% 75.00%
85.00% - 89.99% 90.00%
90.00% - 94.99% 100.00%
95.00% - 99.99% 105.00%
100.00% - 104.99% 110.00%
105.00% - 109.99% 125.00%
110.00% + 150.00%
</TABLE>
II. If the Company achieves at least a 92% affirmative response to Question
Number 14 on the Homeowner Questionnaire, the above individual will
receive a given portion of his December 31 base salary as follows:
<TABLE>
<CAPTION>
Customer Response Achieved: Percent of December 31 Salary:
--------------------------- ------------------------------
<S> <C>
92.00% - 92.99% 50.00%
93.00% - 93.99% 60.00%
94.00% - 94.99% 75.00%
95.00% - 95.99% 85.00%
96.00% - 96.99% 90.00%
97.00% - 97.99% 95.00%
98.00% - 98.99% 100.00%
99.00% - 99.99% 102.50%
100% 110.00%
</TABLE>
1
<PAGE> 2
M/I SCHOTTENSTEIN HOMES, INC.
AWARD FORMULAS AND PERFORMANCE GOALS
CHIEF OPERATING OFFICER
EFFECTIVE JANUARY 1, 2000
---------------
III. If the Return on Equity (defined as net income for 2000, divided by
equity at the beginning of the calendar year) of the Corporation is at
least 10%, the above individual will receive a given portion of his
December 31 base salary as follows:
<TABLE>
<CAPTION>
Return on Equity Results: Percentage of December 31 Salary:
------------------------- ---------------------------------
<S> <C>
10.00% 50.00%
11.00% 60.00%
12.00% 65.00%
13.00% 70.00%
14.00% 75.00%
15.00% 80.00%
16.00% 85.00%
17.00% 90.00%
18.00% 95.00%
19.00% 100.00%
20.00% 105.00%
</TABLE>
PAYMENT
- -------
In accordance with the terms of the Plan, the Committee will determine the
amount of the award earned by the Chief Operating Officer after the end of the
2000 Plan Year. Of this amount, not less than 5% will be paid in Company stock
under the 1998 Executive Deferred Compensation Plan.
ACKNOWLEDGED:
- ------------------------------------------ -------------
Name Date
2
<PAGE> 1
EXHIBIT 10.5
M/I SCHOTTENSTEIN HOMES, INC.
AWARD FORMULAS AND PERFORMANCE GOALS
CHIEF FINANCIAL OFFICER
EFFECTIVE JANUARY 1, 2000
---------------
In accordance with the terms of the M/I Schottenstein Homes Executive Officer
Compensation Plan (the "Plan"), the Executive Officer Compensation Committee
(the "Committee") shall, for each Participant, establish the award formulas and
performance goals (as those terms are defined in the plan) to be measured to
determine the amount of bonus awards for each plan year. The following are the
performance goals and award formulas for the 2000 plan year for the Chief
Financial Officer. Subject to the maximum limit set forth in Section 7.4 of the
Plan, the Chief Financial Officer is eligible to receive for the 2000 plan year
shall be an amount equal to 175% of her 2000 base salary.
NOTE: IN THE FOLLOWING CRITERIA, INCREMENTS BETWEEN LEVELS ARE PRORATED.
- ------------------------------------------------------------------------
I. ACTUAL NET INCOME: In the event the actual net income of the Company is
at least 50% of budgeted net income, the above individual will receive
a given percentage of December 31 base salary as per the following
schedule:
<TABLE>
<CAPTION>
Net Income as a Percentage of Budget: Percentage of December 31 Base Salary
------------------------------------- Awarded:
--------
<S> <C>
50.00% - 54.99% 15.00%
55.00% - 59.99% 17.50%
60.00% - 64.99% 20.00%
65.00% - 69.99% 25.00%
70.00% - 74.99% 30.00%
75.00% - 79.99% 32.50%
80.00% - 84.99% 35.00%
85.00% - 89.99% 37.50%
90.00% - 94.99% 40.00%
95.00% - 99.99% 42.50%
100.00% - 104.99% 45.00%
105.00% - 109.99% 55.00%
110.00% + 65.00%
</TABLE>
II. If the Company achieves at least a 92% affirmative response to Question
Number 14 on the Homeowner Questionnaire, the above individual will
receive a given portion of her December 31 base salary as follows:
<TABLE>
<CAPTION>
Customer Response Achieved: Percent of December 31 Salary:
--------------------------- ------------------------------
<S> <C>
92.00% - 92.99% 20.00%
93.00% - 93.99% 25.00%
94.00% - 94.99% 30.00%
95.00% - 95.99% 35.00%
96.00% - 96.99% 40.00%
97.00% - 97.99% 45.00%
98.00% - 98.99% 50.00%
99.00% - 99.99% 55.00%
100% 60.00%
</TABLE>
1
<PAGE> 2
M/I SCHOTTENSTEIN HOMES, INC.
AWARD FORMULAS AND PERFORMANCE GOALS
CHIEF FINANCIAL OFFICER
EFFECTIVE JANUARY 1, 2000
---------------
III. If the Return on Equity (defined as net income for 2000, divided by
equity at the beginning of the calendar year) of the Corporation is at
least 10% , the above individual will receive a given portion of her
December 31 base salary as follows:
<TABLE>
<CAPTION>
Return on Equity Results: Percentage of December 31 Salary:
------------------------- ---------------------------------
<S> <C>
10.00% 10.00%
11.00% 15.00%
12.00% 20.00%
13.00% 25.00%
14.00% 30.00%
15.00% 35.00%
16.00% 40.00%
17.00% 45.00%
18.00% 50.00%
19.00% 55.00%
20.00% 60.00%
</TABLE>
PAYMENT
- -------
In accordance with the terms of the Plan, the Committee will determine the
amount of the award earned by the Chief Financial Officer after the end of the
2000 Plan Year. Of this amount, not less than 5% will be paid in Company stock
under the 1998 Executive Deferred Compensation Plan.
ACKNOWLEDGED:
- ------------------------------------------ -------------
Name Date
2
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 2000 AND THE CONSOLIDATED STATEMENT
OF INCOME FOR THE THREE MONTHS THEN ENDED OF M/I SCHOTTENSTEIN HOMES, INC.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 8,425
<SECURITIES> 0
<RECEIVABLES> 28,608
<ALLOWANCES> 0
<INVENTORY> 472,002
<CURRENT-ASSETS> 509,035
<PP&E> 25,186
<DEPRECIATION> 6,204
<TOTAL-ASSETS> 565,116
<CURRENT-LIABILITIES> 110,887
<BONDS> 14,903
0
0
<COMMON> 88
<OTHER-SE> 205,168
<TOTAL-LIABILITY-AND-EQUITY> 565,116
<SALES> 169,088
<TOTAL-REVENUES> 173,856
<CGS> 135,835
<TOTAL-COSTS> 135,835
<OTHER-EXPENSES> 20,321
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,184
<INCOME-PRETAX> 13,516
<INCOME-TAX> 5,237
<INCOME-CONTINUING> 8,279
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,279
<EPS-BASIC> 1.01
<EPS-DILUTED> 1.00
</TABLE>
