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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File No. 1-12434
M/I SCHOTTENSTEIN HOMES, INC.
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(Exact name of registrant as specified in its charter)
Ohio 31-1210837
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3 Easton Oval, Suite 500
Columbus, Ohio 43219
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(Address of principal executive offices)(zip code)
Registrant's telephone number, including area code: (614) 418-8000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of Each Exchange on
Title of Each Class Which Registered
---------------------------- ------------------------
Common Stock, par value $.01 New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
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(Title of Class)
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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Act). Yes X No .
--- ---
As of June 28, 2002, the last business day of the registrant's most
recently completed second fiscal quarter, the aggregate market value of voting
common stock held by non-affiliates of the registrant (11,216,596 shares) was
approximately $422,640,000. The number of shares of common stock of M/I
Schottenstein Homes, Inc. outstanding on February 26, 2003 was 14,497,371.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Shareholders for the year ended December 31,
2002 (Part I, II and IV) Portions of the registrant's Definitive Proxy Statement
for the 2003 Annual Meeting of Shareholders filed pursuant to Regulation 14A
(Part III)
PART I
ITEM 1. BUSINESS
COMPANY
M/I Schottenstein Homes, Inc. and subsidiaries ("the Company") is one
of the nation's leading homebuilders. In 2001, the latest year for which
information is available, we were the 18th largest U.S. single-family
homebuilder (based on homes delivered) as ranked by Builder Magazine. The
Company was incorporated, through predecessor entities, in 1973 and commenced
homebuilding activities in 1976. We sell and construct single-family homes to
the first-time, move-up, empty-nester, and luxury buyer under the M/I Homes and
Showcase Homes trade names. In 2002, our average sales price was $238,000.
During the year ended December 31, 2002, we delivered 4,140 homes and had
revenues of $1.0 billion and net income of $66.6 million, the highest in our
history.
Our homes are sold in ten geographic markets including Columbus and
Cincinnati, Ohio; Tampa, Orlando and Palm Beach County, Florida; Charlotte and
Raleigh, North Carolina; Indianapolis, Indiana; and the Virginia and Maryland
suburbs of Washington, D.C. We are the leading homebuilder in the Columbus, Ohio
market, based on revenue, and have been the number one builder of single-family
detached homes in this market for each of the last fourteen years. In addition,
we are currently one of the top ten homebuilders in several of our other markets
and believe we are well positioned to further penetrate these markets. Our
growth strategy primarily targets increasing our market position in the selected
markets in which we currently operate. With respect to geographical
diversification, we have expanded into new markets by opening new divisions
rather than through acquisitions.
We believe that we distinguish ourselves from competitors by offering
homes in select areas with a high level of design and construction quality
within a given price range, and by providing superior customer service. Offering
homes at a variety of price points allows us to attract a wide range of buyers,
including many existing M/I homeowners. We support our homebuilding operations
by providing mortgage financing services through M/I Financial and title-related
services through affiliated entities.
Our financial reporting segments consist of homebuilding and financial
services. Our homebuilding operations comprise the most substantial part of our
business, with more than 98% of consolidated revenues in fiscal 2000, 2001 and
2002. The homebuilding operations segment generates the majority of its revenues
from the sale of completed homes with a lesser amount from the sale of land and
lots. The financial services segment generates its revenues from originating and
selling mortgages and collecting fees for title insurance and closing services.
Financial information, including revenue, pre-tax income and identifiable assets
for each of our reporting segments is included in the consolidated financial
statements.
Our business strategy emphasizes the following key objectives:
Focus on profitability. We focus on improving profitability while
maintaining the high quality of our homes and customer service. We focus on
gross margins by stressing the features, benefits, quality and design of our
homes during the sale process and by minimizing speculative building. We also
value-engineer our homes by working with our subcontractors and suppliers to
provide attractive features while minimizing raw material and construction
costs.
Superior locations. Our success is largely dependent on the quality of
our subdivision locations; therefore, we focus on locating and controlling land
in the most desirable areas of our markets. We are conservative in our land
acquisition policy by limiting acquisitions to land that is already zoned and
serviceable by utilities. We seek to control a three- to four-year supply of
land. We believe our expertise in developing land gives us a competitive
advantage in controlling attractive locations at competitive costs, and, as a
result, we have developed 72% of our communities as of December 31, 2002. At
December 31, 2002, we owned 8,593 lots and controlled an additional 9,171 lots
pursuant to contracts.
Maintain or increase market position in select markets. As the leading
builder of single-family, detached homes in the Columbus market, we seek to
maintain our leading position by continuing to provide high-quality homes and
superior customer service. We also believe there are significant opportunities
to profitably expand in certain of our existing markets, namely Columbus,
Indianapolis, Tampa, Orlando and Charlotte. While our primary growth strategy
will focus on increasing our market position in these five markets, we may, on
an opportunistic basis, explore expansion into new markets through organic
growth or acquisition.
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Provide superior customer service. Our overriding philosophy is to
provide superior customer service to our homeowners. We involve the homeowner in
virtually every phase of the building process from sale through construction,
financing and closing, and service after delivery. Our selling process focuses
on the homes' features, benefits, quality and design as opposed to merely price
and square footage. In certain markets, we utilize design centers to allow
buyers to visualize options and get assistance with choices. This enhances the
selling process and increases the sale of optional features that typically carry
higher margins. As a result, based on the responses to our customer
questionnaire, for the twelfth year in a row, more than 95% of our customers
would recommend us to a potential buyer.
Offer product breadth and innovative design. We devote significant
resources to the research and design of our homes to better meet the needs of
our customers. We offer a number of distinct product lines and more than 400
different floor plans and elevations. In addition to providing customers with a
wide variety of choices, we believe we offer a high level of design and
construction quality within each of our price ranges.
Maintain decentralized operations with experienced management. Each of
our markets has unique characteristics and, therefore, is managed locally by
dedicated, on-site personnel. Our managers possess intimate knowledge of their
particular market and are encouraged to be entrepreneurial to best meet the
needs of that market. Our incentive compensation structure supports our overall
Company goals by rewarding each manager based on financial performance, income
growth and customer satisfaction.
SALES AND MARKETING
We market and sell our homes exclusively under the M/I Homes trade name
in all markets except Columbus where a limited number of our homes are also
marketed under the Showcase Homes trade name. Company-employed sales personnel
conduct home sales from on-site sales offices within our furnished model homes.
Each sales consultant is trained and prepared to fully explain the features and
benefits of our homes, to determine which home best suits each customer's needs,
to explain the construction process and to assist the customer in choosing the
best financing. Significant attention is given to the ongoing training of all
sales personnel to assure the highest level of professionalism and product
knowledge. We currently employ 160 sales consultants and operate approximately
180 model homes.
We advertise using newspapers, magazines, direct mail, billboards,
radio and television. The particular marketing mediums used differ from division
to division based upon marketing demographics and other competitive factors. We
have also significantly increased advertising on the worldwide web through
expansion of our website at www.mihomes.com and through homebuilder.com. In
addition, we encourage independent broker participation and, from time to time,
utilize various promotions and sales incentives to attract interest from these
brokers. Our commitment to quality design and construction along with our
reputation for superior customer service has resulted in a strong referral base
and numerous repeat buyers.
One way that we enhance the selling process is by operating design
centers in the Cincinnati, Columbus, Tampa and Indianapolis markets. We will
also be opening a design center in our Orlando market in 2003 and we are
considering opening additional design centers in certain other markets. These
design centers are staffed with interior design specialists who assist customers
in selecting interior and exterior colors, standard options and upgrades. In our
other markets, this selection process is handled directly by our sales
consultants. We also add to the selling process by offering financing to our
customers through our wholly owned subsidiary, M/I Financial, which has branches
in all of our markets except Virginia and Maryland. M/I Financial originates
loans for purchasers of our homes. The loans are then sold, along with the
servicing rights, to outside mortgage lenders. Title-related services are
provided to purchasers of our homes in the majority of our markets through
affiliated entities.
We generally do not commence construction of a home until we obtain a
sales contract and preliminary oral advice from the customer's lender that
financing should be approved. However, in certain markets, contracts may be
accepted contingent upon the sale of an existing home and construction may be
authorized through a certain stage prior to satisfaction of that contingency. In
addition, a limited, strictly-controlled number of speculative, or "spec", homes
(i.e., homes started in the absence of an executed contract) may be built to
facilitate delivery of homes on an immediate-need basis and to provide
presentation of new products. Spec homes are released for start only after
approval is given by the respective region president and corporate management.
3
Our inspection and warranty programs further enhance our sales and
marketing efforts. Immediately prior to closing and again three months after a
home is delivered, we inspect each home with the customer. We may also provide a
1-year drywall inspection. We offer a 2-year limited warranty on materials and
workmanship and a 30-year limited warranty against major structural defects. To
increase the value of these warranties, both are transferable in the event of
the sale of the home. We also pass along to our customers all warranties
provided by the manufacturers or suppliers of components installed in each home.
Our warranty expense was approximately 1.0% of total costs and expenses for each
of the years ended December 31, 2002, 2001 and 2000.
DESIGN AND CONSTRUCTION
We devote significant resources to the research, design and development
of our homes in order to fulfill the needs of homebuyers in all of our markets.
Experienced and qualified in-house professionals use modern computer-aided
technology to design virtually all of our floor plans and elevations. We offer
more than 400 different floor plans and elevations that are tailored to meet the
requirements of each of our markets.
The construction of each home is supervised by a construction
supervisor who reports to a production manager, both of whom are employees of
M/I Homes. Customers are introduced to their construction supervisor prior to
commencement of home construction at a pre-construction "buyer/builder
conference." The purpose of this conference is to review the home plans and all
relevant construction details with the customer and to explain the construction
process and schedule. Every customer is given a hard hat at the conference as an
open invitation to visit the site of his or her home at any time during the
course of construction. We want customers to be involved in order to understand
the construction of their home and see the quality being built into their home.
All of this is part of our exclusive "confidence builder program" which,
consistent with our business philosophy, is designed to "put the customer first"
and enhance the total homebuying experience.
Homes generally are constructed according to standardized designs and
meet applicable Federal Housing Authority ("FHA") and Veterans Administration
("VA") requirements. To allow maximum design flexibility, we limit the use of
pre-assembled building components. The efficiency of the building process is
enhanced through the use of standardized materials available from a variety of
sources. We utilize independent subcontractors for the installation of site
improvements and the construction of our homes. These subcontractors are
supervised by our on-site construction supervisors. All subcontractor work is
performed pursuant to written agreements. These agreements are generally
short-term, with terms from six to twelve months, and include or specify a fixed
price for labor and materials. The agreements are structured to provide price
protection for a majority of the higher-cost phases of construction for homes in
our Backlog. We seek to build in large volume to reduce the per unit cost of
each home due to advantages achieved by lower unit prices paid to subcontractors
for labor and materials.
4
MARKETS
Our operations are organized into separate homebuilding divisions to
maximize operating efficiencies and use of local management. Our present
divisional operating structure is as follows:
Year
Operations
State Division Commenced
----- -------- ---------
Ohio........................... Columbus - M/I 1976
Columbus - Showcase 1988
Columbus - Horizon 1994
Cincinnati 1988
Indiana........................ Indianapolis 1988
Florida........................ Tampa 1981
Orlando 1984
Palm Beach County 1984
North Carolina................. Charlotte 1985
Raleigh 1986
Washington, D. C. ............. Virginia and Maryland 1991
Columbus is the capital of Ohio, with federal, state and local
governments providing significant and stable employment. Columbus is also the
home of The Ohio State University, one of the largest universities in the world.
Columbus continues to be a stable market with diverse economic and employment
bases and strong permit activity in 2002. Since 1994, we have had three separate
operating divisions in Columbus. We have been the dominant builder in Columbus
for fourteen years, based on revenues, and our market share has exceeded 20%
during each of the last eight years.
Cincinnati is characterized by a stable economic environment and a
diverse employment base. Employers include Proctor & Gamble, Kroger, the
University of Cincinnati and General Electric. In addition, Cincinnati has a
vibrant financial services industry. We continue to expand our Horizon product
line in this market and focus on more affordable communities.
Indianapolis is a growth market noted for its diverse industrial
structure and relatively young population. Significant industries include health
and pharmaceutical, distribution and services. Single-family housing permits
reached nearly 13,500 in 2002.
Tampa's housing market is strong, buoyed by financial and other
back-office operations, tourism and conventions. In-migration remains steady as
a result of on-going business expansions and relocations. Single-family housing
permits reached nearly 17,000 in 2002.
Orlando's economy continues to be stable and offer significant growth
potential. Predominant industries include tourism, high-tech and manufacturing.
Single-family permits reached nearly 17,000 in 2002.
Palm Beach County is one of the more affluent markets in the United
States. Job gains in 2002 were led by the construction, retail, tourism and
service sectors. Housing activity continued to be stable in 2002 with over 8,000
single-family permits.
5
Charlotte is home to firms in the banking industry, as well as a
growing presence of corporate headquarters and high-tech companies. The
demographics continue to support long-term growth with strong in-migration and
an educated workforce. In 2002, construction activity continued to be steady
with over 17,000 single-family permits.
The Raleigh market continues to be strong with state government, the
Research Triangle Park and three major universities contributing to its
significant and stable employment base. Job growth continued in 2002 and
single-family permits exceeded 13,500.
The Washington, D.C. metro economy continues to be favorable with major
contributions from the construction, technology and government sectors. Housing
activity continues to be robust, with over 27,000 single-family permits issued
in 2002. Our operations are located primarily in Fairfax, Prince William and
Loudoun counties in Virginia and Frederick and Montgomery counties in Maryland.
PRODUCT LINES
On a regional basis, we offer homes ranging in base sales price from
approximately $90,000 to $880,000 and ranging in square footage from
approximately 1,100 to 4,200 square feet. There are more than 400 different
floor plans and elevations across all product lines. In addition, we offer a
line of attached townhomes exclusively in the Maryland and Virginia markets that
with approximately 2,000 square feet of living space. By offering a wide range
of homes, we are able to attract first-time, move-up, empty-nester and luxury
homebuyers. It is our goal to sell more than one home to our customers and we
have been very successful in this area.
In each of our home lines, certain options are available to the
purchaser for an additional charge. Major options include fireplaces, additional
bathrooms and higher quality flooring, cabinets and appliances. The options are
typically more numerous and significant on more expensive homes.
LAND DEVELOPMENT ACTIVITIES
Our land development activities and land holdings have increased in the
past few years. We continue to purchase lots from outside developers under
option contracts, when possible, to limit our risk; however, we constantly
evaluate other alternatives to satisfy the need for lots in the most cost
effective manner. We develop ground internally when we can gain a competitive
advantage by doing so or when shortages of qualified land developers make it
impractical to purchase required lots from outside sources. At the present time,
approximately 85% of our lots are internally developed. We seek to limit our
investment in undeveloped land and lots to the amount reasonably expected to be
sold in the next three to four years. Although we purchase land and engage in
land development activities primarily for the purpose of furthering our
homebuilding activities, we have, on a very select basis, developed land with
the intention of selling a portion of the lots to outside homebuilders in
certain markets.
To limit the risk involved in the development of raw land, we acquire
land primarily through the use of contingent purchase contracts. These contracts
require the approval of our land committee and condition our obligation to
purchase land upon approval of zoning, utilities, soil and subsurface
conditions, environmental and wetland conditions, traffic patterns, market
analysis, development costs, title matters and other property-related criteria.
In addition, careful attention is paid to the quality of the public school
system. Only after this thorough evaluation has been completed do we make a
commitment to purchase undeveloped land. To further reduce the risk involved in
acquiring raw land, we generally do not commence engineering or development
until zoning approvals are secured.
From time to time we enter into land joint ventures. At December 31,
2002, we had interests varying from 33% to 50% in each of 25 joint ventures (all
located in Columbus, Ohio) and limited liability companies ("LLCs"). These joint
ventures and LLCs develop raw ground into lots and, typically, we receive our
percentage interest in the form of a distribution of developed lots. These joint
ventures and LLCs are equity financed except where seller financing is available
on attractive terms.
6
During the development of lots, we are required by some municipalities
and other governmental authorities to provide completion bonds or letters of
credit for sewer, streets and other improvements. At December 31, 2002, $34.6
million of completion bonds were outstanding for these purposes, as well as $6.2
million of letters of credit.
AVAILABLE LOTS AND LAND
We seek to balance the economic risk of owning lots and land with the
necessity of having lots available for our homes. At December 31, 2002, we had
3,129 developed lots and 924 lots under development in inventory. We also owned
raw land expected to be developed into approximately 3,229 lots.
In addition, at December 31, 2002, our interest in lots held by joint
ventures and LLCs consisted of 92 lots under development, and raw land zoned for
1,219 lots. It is anticipated that some of the lots owned will be sold to
others.
At December 31, 2002, we had purchase contracts to acquire 2,223
developed lots and land to be developed into approximately 6,948 lots, for a
total of 9,171 lots, with an aggregate current purchase price of approximately
$193 million. Purchase of these properties is contingent upon satisfaction of
certain requirements by us and the sellers, such as zoning approval, completion
of development and availability of building permits.
The following table sets forth our land position in lots (including our
interest in joint ventures and LLCs) at December 31, 2002:
Owned Lots
------------------------------------------------
Under To Be Total Lots under
State Developed Development Developed Owned Contract Total
------------------------------------------------------------------------------------------------------
Ohio and Indiana 2,207 631 3,625 6,463 5,430 11,893
Florida 416 119 510 1,045 2,807 3,852
North Carolina, Virginia,
Maryland and Phoenix 506 266 313 1,085 934 2,019
-----------------------------------------------------------------------------------------------------
Total 3,129 1,016 4,448 8,593 9,171 17,764
=====================================================================================================
FINANCIAL SERVICES
Through our wholly-owned subsidiary, M/I Financial, we offer fixed and
adjustable rate mortgage loans to buyers of our homes. M/I Financial has
branches in all of our housing markets, with the exception of Virginia and
Maryland. Of the 3,898 Homes Delivered in 2002 in the markets in which M/I
Financial operates, M/I Financial provided financing for 3,388 of these homes
representing approximately $632.6 million of mortgage loans originated. M/I
Financial issues commitments to customers and closes both conventional and
government-insured loans in its own name. Loan commitments that relate to the
origination of mortgage loans that will be held for resale are considered
derivative instruments. To minimize the risk of financing activities, M/I
Financial sells the loans it originates to the secondary market which provides
the funding within several days. We retain a small servicing portfolio which is
currently sub-serviced by a financial institution.
M/I Financial hedges its interest rate risk using optional and
mandatory forward sales of mortgage-backed securities whereby we agree to sell
and later repurchase similar but not identical mortgage-backed securities. These
agreements are considered derivative instruments. Generally, the agreements are
fixed-coupon agreements whereby the interest rate and maturity date of both
transactions are approximately the same and are established to correspond with
the closing of the fixed interest rate mortgage loan commitments. The difference
between the two values of the mortgage-backed securities in the agreements at
settlement provide a hedge on the interest rate risk exposure in the mortgage
loan commitments.
7
Additionally, we hedge the interest rate risk relative to unclosed
loans by purchasing commitments from outside investors to acquire the loans at
the interest rate at which the loan will be closed. The cost, if any, of these
purchase commitments is recorded as an asset and is expensed as loans are closed
under the related commitments. Any remaining unused balance is expensed when the
commitment expires or earlier, if we determine that we will be unable to use the
entire commitment prior to its expiration date. At December 31, 2002, we had
approximately $36.6 million of commitments to deliver mortgage loans to outside
investors.
Under SFAS No. 133, derivative instruments designated in a hedge
relationship to mitigate exposure to changes in the fair value of an asset,
liability, or firm commitment attributable to a particular risk, such as
interest rate risk, are considered fair value hedges. The fair values of the
loan commitments and forward sale agreements of mortgage-backed securities are
recorded as derivative assets or derivative liabilities on the Company's balance
sheet and any changes in the value of these derivative instruments are
recognized in current earnings.
To reduce the credit risk associated with accounting losses, which
would be recognized if the counterparties failed to completely perform as
contracted, we limit the entities with which management can enter into a
commitment to the primary dealers in the market. The risk of accounting loss is
the difference between the market rate at the time a counterparty fails and the
rate to which we committed for the mortgage loans and any purchase commitments
recorded with the counterparty.
M/I Financial has been approved by the Department of Housing and Urban
Development and the VA to originate loans insured by the FHA and the VA,
respectively, and has been approved by the Federal Home Loan Mortgage
Corporation ("FHLMC") and by the Federal National Mortgage Association ("FNMA")
as a seller and servicer of mortgages sold to FHLMC and FNMA.
We provide title services to purchasers of our homes through
affiliated entities in the Columbus, Indianapolis, Tampa, Orlando, Cincinnati,
Virginia and Maryland markets.
COMPETITION
The homebuilding industry is highly competitive. In each of our
markets, we compete with numerous national, regional and local homebuilders,
some of which have greater financial, marketing, land acquisition and sales
resources. Builders of new homes compete not only for homebuyers, but also for
desirable properties, financing, raw materials and skilled subcontractors. In
addition, there is competition with the resale market for existing homes.
REGULATION AND ENVIRONMENTAL MATTERS
The homebuilding industry, including M/I Homes, is subject to various
local, state and federal (including FHA and VA) statutes, ordinances, rules and
regulations concerning zoning, building, design, construction, sales and similar
matters. These regulations affect construction activities, including types of
construction materials which may be used, certain aspects of building design,
sales activities and dealings with consumers. We are required to obtain
licenses, permits and approvals from various governmental authorities for
development activities. In many areas, we are subject to local regulations which
impose restrictive zoning and density requirements in order to limit the number
of homes within the boundaries of a particular locality. We strive to reduce the
risks of restrictive zoning and density requirements by using contingent land
purchase contracts which state that land must meet various requirements,
including zoning, prior to our purchase.
Development may be subject to periodic delays or precluded entirely due
to building moratoriums. Generally, these moratoriums relate to insufficient
water or sewage facilities or inadequate road capacity within specific market
areas or subdivisions. The moratoriums we have experienced have not been of long
duration and have not had a material effect on our business.
Each of the states in which we operate has a wide variety of
environmental protection laws. These laws generally regulate developments which
are of substantial size and which are in or near certain specified geographic
areas. Furthermore, these laws impose requirements for development approvals
which are more stringent than those which land developers would have to meet
outside of these geographic areas.
8
Additional requirements may be imposed on homebuilders and developers
in the future which could have a significant impact on us and the industry.
Although we cannot predict the effect, such requirements could result in
time-consuming and expensive compliance programs. In addition, the continued
effectiveness of current licenses, permits or development approvals is dependent
upon many factors, some of which may be beyond our control.
EMPLOYEES
At March 25, 2003, we employed 946 people (including part-time
employees), of which 276 were employed in sales, 422 in construction and 248 in
management, administrative and clerical positions. We consider our employee
relations to be very good. No employees are represented by a collective
bargaining agreement.
ACCESS TO SEC FILINGS THROUGH M/I SCHOTTENSTEIN HOMES, INC. WEBSITE
We maintain a corporate website at www.mihomes.com. We make available
free of charge on or through the website our annual report on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments
to those reports, as soon as reasonably practicable after we electronically file
or furnish such material with or to the Securities and Exchange Commission. The
contents of our website are not part of this report.
ITEM 2. PROPERTIES
We own and operate an approximately 85,000 square foot office building
used for our home office and lease all of our other offices.
Due to the nature of our business, a substantial amount of property is
held as inventory in the ordinary course of business. See "ITEM 1. BUSINESS -
Available Lots and Land."
ITEM 3. LEGAL PROCEEDINGS
We are involved in routine litigation incidental to our business.
Management does not believe that any of this litigation is material to our
consolidated financial statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of 2002, no matters were submitted to a vote
of security holders.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The information required by this item is incorporated herein by
reference from our Annual Report to Shareholders for the year ended December 31,
2002.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item is incorporated herein by
reference from our Annual Report to Shareholders for the year ended December 31,
2002.
9
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by this item is incorporated herein by
reference from our Annual Report to Shareholders for the year ended December 31,
2002.
ITEM 7(A). QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required by this item is incorporated herein by
reference from our Annual Report to Shareholders for the year ended December 31,
2002.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is incorporated herein by
reference from our Annual Report to Shareholders for the year ended December 31,
2002.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes in or disagreements with accountants during
each of the two years ended December 31, 2002 and 2001.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is incorporated herein by
reference to our definitive Proxy Statement relating to the 2003 Annual Meeting
of Shareholders.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated herein by
reference to our definitive Proxy Statement relating to the 2003 Annual Meeting
of Shareholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated herein by
reference to our definitive Proxy Statement relating to the 2003 Annual Meeting
of Shareholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated herein by
reference to our definitive Proxy Statement relating to the 2003 Annual Meeting
of Shareholders.
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ITEM 14. CONTROLS AND PROCEDURES
Within the 90 days prior to the date of this report, we carried out an
evaluation, under the supervision and with the participation of our management,
including our Chief Executive Officer along with our Chief Financial Officer, of
the effectiveness of the design and operation of our disclosure controls and
procedures pursuant to Exchange Act Rule 13a-14. Based upon this evaluation, our
Chief Executive Officer along with our Chief Financial Officer concluded that
our disclosure controls and procedures are effective in timely alerting them to
material information relating to us (including our consolidated subsidiaries)
required to be included in our periodic SEC reports. It should be noted that the
design of any system of controls is based in part upon certain assumptions about
the likelihood of future events, and there can be no assurance that any design
will succeed in achieving its stated goals under all potential future
conditions, regardless of how remote. In addition, a control system, no matter
how well conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are met. Therefore, we do
not expect our disclosure controls to prevent all error and all fraud.
Since the date of our evaluation to the filing date of this Annual
Report on Form 10-K, there have been no significant changes in our internal
controls or in other factors that could significantly affect internal controls,
including any corrective actions with regard to significant deficiencies and
material weaknesses.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements. The following financial statements of
M/I Schottenstein Homes, Inc. and its subsidiaries have been
incorporated herein by reference as set forth in Item 8 of Part II of
this Annual Report on Form 10-K:
Independent Auditors' Report
Consolidated Balance Sheets - December 31, 2002 and 2001
Consolidated Statements of Income - Years Ended December 31, 2002, 2001
and 2000
Consolidated Statements of Shareholders' Equity - Years Ended December
31, 2002, 2001 and 2000
Consolidated Statements of Cash Flows - Years Ended December 31, 2002,
2001 and 2000
Notes to Consolidated Financial Statements
2. Financial Statement Schedules. Page
----
Independent Auditors' Report on Financial Statement Schedules................................... 20
For the Years ended December 31, 2002, 2001 and 2000:
Schedule II - Valuation and Qualifying Accounts ............................................. 21
All other schedules have been omitted because the required information
is included in the consolidated financial statements or notes thereto,
the amounts involved are not significant or the required matter is not
present.
3. Exhibits.
11
The following exhibits required by Item 601 of Regulation S-K are filed
as part of this report. For convenience of reference, the exhibits are
listed according to the numbers appearing in the Exhibit Table to Item 601
of Regulation S-K.
Exhibit Number Description
- -------------- ------------------------------------------------------
3.1 Amended and Restated Articles of Incorporation of the
Company, hereby incorporated by reference to Exhibit
3.1 of the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1993.
3.2 Amended and Restated Regulations of the Company,
hereby incorporated by reference to Exhibit 3.4 of
the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1998.
3.3 Amendment of Article I(f) of the Company's Amended
and Restated Code of Regulations to permit
shareholders to appoint proxies in any manner
permitted by Ohio law, hereby incorporated by
reference to Exhibit 3.1(b) of the Company's
Quarterly Report on Form 10-Q for the quarter ended
June 30, 2001.
4 Specimen of Stock Certificate, hereby incorporated
by reference to Exhibit 4 of the Company's
Registration Statement on Form S-1, Commission File
No. 33-68564.
10.1 The Predecessor's Amended and Restated 401(k) Profit
Sharing Plan, consisting of a savings plan adoption
agreement, savings plan and savings plan trust,
hereby incorporated by reference to Exhibit 10(cc) of
the Predecessor's Annual Report on Form 10-K for the
fiscal year ended December 31, 1991.
10.2 Amendment Number 1 to the M/I Schottenstein Homes,
Inc. 401(k) Profit Sharing Plan for the Economic
Growth and Tax Relief Reconciliation Act of 2001
dated November 12, 2002, hereby incorporated by
reference to Exhibit 10.1 of the Company's Quarterly
Report on Form 10-Q for the quarter ended September
30, 2002.
10.3 Credit Agreement by and among M/I Schottenstein
Homes, Inc., as borrower; Bank One, NA, as agent for
the banks; The Huntington National Bank, as
documentation agent; U.S. Bank, N.A., National City
Bank, AMSouth Bank, and Suntrust Bank, as co-agents;
Bank One NA, The Huntington National Bank, U.S. Bank,
N.A., National City Bank, AMSouth Bank, Suntrust
Bank, Comerica Bank, Fifth Third Bank, Central Ohio,
PNC Bank, National Association, Washington Mutual
Bank, FA, Fleet National Bank and Guaranty Bank, as
banks; and Banc One Capital Markets, Inc., as lead
arranger and sole book runner dated March 6, 2002,
hereby incorporated by reference to Exhibit 10.2 of
the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2001.
10.4 Promissory Note by and among the Company, M/I
Financial Corp. and Bank One, Columbus, N.A., dated
November 5, 1993, hereby incorporated by reference to
Exhibit 19(d) of the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1993.
12
Exhibit Number Description
- -------------- ------------------------------------------------------
10.5 Revolving Credit Agreement by and among M/I
Financial Corp., the Company and Guaranty Bank dated
May 3, 2001, hereby incorporated by reference to
Exhibit 10.1 of the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 2001.
10.6 First Amendment to Revolving Credit Agreement by and
among M/I Financial Corp., the Company and Guaranty
Bank dated May 2, 2002, hereby incorporated by
reference to Exhibit 10.1 of the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31,
2002.
10.7 M/I Schottenstein Homes, Inc. 1993 Stock Incentive
Plan As Amended, dated April 22, 1999, hereby
incorporated by reference to Exhibit 10.4 of the
Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1999.
10.8 First Amendment to M/I Schottenstein Homes, Inc.
1993 Stock Incentive Plan As Amended, dated August
11, 1999, hereby incorporated by reference to Exhibit
10.1 of the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1999.
10.9 Second Amendment to the Company's 1993 Stock
Incentive Plan as Amended dated February 13, 2001,
hereby incorporated by reference to Exhibit 10.2 of
the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 2002.
10.10 Executive Employment Agreement by and between the
Company and Irving E. Schottenstein dated August 9,
1994, hereby incorporated by reference to Exhibit
10(c) of the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1994.
10.11 Amendment to Executive Employment Agreement by and
between the Company and Irving E. Schottenstein dated
November 14, 2001, hereby incorporated by reference
to Exhibit 10.8 of the Company's Annual Report on
Form 10-K for the fiscal year ended December 31,
2001.
10.12 Company's 2001 Chief Executive Officer Bonus Program,
hereby incorporated by reference to Exhibit 10.2 of
the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2001.
10.13 Company's 2001 President Bonus Program, hereby
incorporated by reference to Exhibit 10.3 of the
Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2001.
10.14 Company's 2001 Chief Operating Officer Bonus Program,
hereby incorporated by reference to Exhibit 10.4 of
the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2001.
13
Exhibit Number Description
- -------------- ------------------------------------------------------
10.15 Company's 2001 Chief Financial Officer Bonus Program,
hereby incorporated by reference to Exhibit 10.5 of
the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2001.
10.16 Company's 2002 Chief Executive Officer Bonus Program,
hereby incorporated by reference to Exhibit 10.2 of
the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2002.
10.17 Company's 2002 President Bonus Program, hereby
incorporated by reference to Exhibit 10.3 of the
Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2002.
10.18 Company's 2002 Chief Operating Officer Bonus Program,
hereby incorporated by reference to Exhibit 10.4 of
the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2002.
10.19 Company's 2002 Chief Financial Officer Bonus Program,
hereby incorporated by reference to Exhibit 10.5 of
the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2002.
10.20 Investment Home Compensation Plan dated September 1,
1995, hereby incorporated by reference to Exhibit
10.2 of the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1995.
10.21 Credit Agreement between the Company and BankBoston,
N.A., the other parties which may become lenders and
BankBoston, N.A., as agent, dated August 29, 1997,
hereby incorporated by reference to Exhibit 10.2 of
the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1997.
10.22 First Amendment to Credit Agreement by and among M/I
Schottenstein Homes, Inc., Fleet National Bank
(formerly known as BankBoston, N.A.), Highland Legacy
Limited and Fleet National Bank, as agent, dated
September 15, 2000, hereby incorporated by reference
to Exhibit 10.19 of the Company's Annual Report on
Form 10-K for the fiscal year ended December 31,
2001.
10.23 Second Amendment to Credit Agreement by and among
M/I Schottenstein Homes, Inc., Fleet National Bank
(formerly known as BankBoston, N.A.), Bankers Trust
Company and Fleet National Bank, as agent, dated
March 6, 2002, hereby incorporated by reference to
Exhibit 10.19 of the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 2001.
14
Exhibit Number Description
- -------------- ------------------------------------------------------
10.24 Credit Agreement between M/I Schottenstein Homes,
Inc. and Fleet National Bank, Bankers Trust Company,
and other parties which may become lenders and Fleet
National Bank, as agent and Fleet Securities, Inc.
dated September 28, 2001, hereby incorporated by
reference to Exhibit 10.1 of the Company's Quarterly
Report on Form 10-Q for the quarter ended September
30, 2001.
10.25 Company's Director Deferred Compensation Plan,
hereby incorporated by reference to Exhibit 10.4 of
the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997.
10.26 First Amendment to M/I Schottenstein Homes, Inc.
Director Deferred Compensation Plan, dated February
16, 1999, hereby incorporated by reference to Exhibit
10.2 of the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1999.
10.27 Second Amendment to M/I Schottenstein Homes, Inc.
Director Deferred Compensation Plan, dated July 1,
2001. (Filed herewith).
10.28 Amended and Restated M/I Schottenstein Homes, Inc.
Executives' Deferred Compensation Plan, dated April
18, 2001, hereby incorporated by reference to Exhibit
10.1 of the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 2001.
10.29 First Amendment to M/I Schottenstein Homes, Inc.
Executives' Deferred Compensation Plan, dated July 1,
2001. (Filed herewith).
10.30 Second Amendment to M/I Schottenstein Homes, Inc.
Executives' Deferred Compensation Plan dated June 19,
2002, hereby incorporated by reference to Exhibit
10.2 of the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 2002.
10.31 Collateral Assignment Split-Dollar Agreement by and
among the Company and Robert H. Schottenstein, and
Janice K. Schottenstein, as Trustee of the Robert H.
Schottenstein 1996 Insurance Trust, dated September
24, 1997, hereby incorporated by reference to Exhibit
10.28 of the Company's Annual Report on Form 10-K for
the year ended December 31, 1997.
10.32 Collateral Assignment Split-Dollar Agreement by and
among the Company and Steven Schottenstein, and
Irving E. Schottenstein, as Trustee of the Steven
Schottenstein 1994 Trust, dated September 24, 1997,
hereby incorporated by reference to Exhibit 10.29 of
the Company's Annual Report on Form 10-K for the year
ended December 31, 1997.
10.33 M/I Schottenstein Homes, Inc. Executive Officer
Compensation Plan, hereby incorporated by reference
to the Company's definitive Proxy Statement relating
to the 1999 Annual Meeting of Shareholders.
15
Exhibit Number Description
- -------------- ------------------------------------------------------
11 Earnings Per Share Calculations. (Filed herewith.)
13 Annual Report to Shareholders for the year ended
December 31, 2002. (Filed herewith.)
21 Subsidiaries of Company. (Filed herewith.)
23 Consent of Deloitte & Touche LLP. (Filed herewith.)
24 Powers of Attorney. (Filed herewith.)
99.1 Certification by Irving E. Schottenstein, Chief
Executive Officer, pursuant to 10 U.S.C. Section 1350
as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. A signed original of this
written statement required by Section 906 has been
provided to M/I Schottenstein Homes, Inc. and will be
retained by M/I Schottenstein Homes, Inc. and
furnished to the Securities and Exchange Commission
or its staff upon request.
99.2 Certification by Phillip G. Creek, Chief Financial
Officer, pursuant to 10 U.S.C. Section 1350 as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002. A signed original of this written
statement required by Section 906 has been provided
to M/I Schottenstein Homes, Inc. and will be retained
by M/I Schottenstein Homes, Inc. and furnished to the
Securities and Exchange Commission or its staff upon
request.
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the last quarter of the
period covered by this report.
(c) See Item 15(a)(3).
(d) Financial Statement Schedule - See Item 15(a)(2).
16
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, in Columbus, Ohio on this
31st day of March 2003.
M/I SCHOTTENSTEIN HOMES, INC.
(Registrant)
By: /s/ ROBERT H. SCHOTTENSTEIN
------------------------------
Robert H. Schottenstein
President and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities indicated on this 31st day of March 2003.
NAME AND TITLE NAME AND TITLE
-------------- --------------
IRVING E. SCHOTTENSTEIN* /s/ ROBERT H. SCHOTTENSTEIN
- ----------------------------------------- --------------------------------------------
Irving E. Schottenstein Robert H. Schottenstein
Chairman of the Board and President and Director
Chief Executive Officer
(Principal Executive Officer)
STEVEN SCHOTTENSTEIN* /s/ PHILLIP G. CREEK
- ----------------------------------------- --------------------------------------------
Steven Schottenstein Phillip G. Creek
Chief Operating Officer and Director Senior Vice President, Treasurer,
Chief Financial Officer, Director and
(Principal Financial and Accounting Officer)
FRIEDRICH K.M. BOHM* JEFFREY H. MIRO*
- ----------------------------------------- --------------------------------------------
Friedrich K. M. Bohm Jeffrey H. Miro
Director Director
LEWIS R. SMOOT, SR.* NORMAN L. TRAEGER*
- ----------------------------------------- --------------------------------------------
Lewis R. Smoot, Sr. Norman L. Traeger
Director Director
THOMAS D. IGOE *
- -----------------------------------------
Thomas D. Igoe
Director
* The above-named Directors and Officers of the Registrant execute this report
by Robert H. Schottenstein and Phillip G. Creek, their Attorneys-in-Fact,
pursuant to powers of attorney executed by the above-named Directors and filed
with the Securities and Exchange Commission as Exhibit 24 to the report.
By: /s/ ROBERT H. SCHOTTENSTEIN
-------------------------------------------
Robert H. Schottenstein, Attorney-in-Fact
By: /s/ PHILLIP G. CREEK
-------------------------------------------
Phillip G. Creek, Attorney-in-Fact
17
CERTIFICATIONS
I, Irving E. Schottenstein certify that:
1. I have reviewed this annual report on Form 10-K of M/I Schottenstein
Homes, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weakness in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: March 31, 2003 /s/ Irving E. Schottenstein
--------------------------------------
Irving E. Schottenstein
Chairman and Chief Executive Officer
18
CERTIFICATIONS
I, Phillip G. Creek certify that:
1. I have reviewed this annual report on Form 10-K of M/I Schottenstein
Homes, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weakness in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: March 31, 2003 /s/ Phillip G. Creek
----------------------------------------
Phillip G. Creek
Senior Vice President, Chief Financial
Officer and Treasurer
19
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Directors of
M/I Schottenstein Homes, Inc.
Columbus, Ohio
We have audited the consolidated financial statements of M/I Schottenstein
Homes, Inc. and its subsidiaries as of December 31, 2002 and 2001, and for each
of the three years in the period ended December 31, 2002, and have issued our
report thereon dated February 14, 2003; such consolidated financial statements
and report are included in your 2002 Annual Report to Shareholders and are
incorporated herein by reference. Our audits also included the consolidated
financial statement schedules of M/I Schottenstein Homes, Inc. and its
subsidiaries, listed in Item 15. These consolidated financial statement
schedules are the responsibility of the Company's management. Our responsibility
is to express an opinion based on our audits. In our opinion, such consolidated
financial statement schedules, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly in all
material respects the information set forth therein.
/s/ Deloitte & Touche LLP
- -----------------------------
Deloitte & Touche LLP
Columbus, Ohio
February 14, 2003
20
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Additions
Balance at Charged to Balance at
Beginning Costs and End of
Description of Year Expenses Deductions (1) Year
- ----------- ------- -------- ---------- ----
Valuation allowance deducted from asset account -
single-family lots, land and land development costs:
Year ended
December 31, 2002 $ 9,750,000 $ 2,010,000 $ 2,760,000 $ 9,000,000
=========== =========== =========== ===========
Year ended
December 31, 2001 $ 7,500,000 $ 3,432,000 $ 1,182,000 $ 9,750,000
=========== =========== =========== ===========
Year ended
December 31, 2000 $ 6,967,000 $ 1,322,000 $ 789,000 $ 7,500,000
=========== =========== =========== ===========
(1) Represents write-downs of investment in single-family lots, land and land
development costs.
21
EXHIBIT INDEX
Exhibit Number Description Page No.
- -------------- ---------------------------------------------------------------------- --------------
3.1 Amended and Restated Articles of Incorporation of
the Company, hereby incorporated by reference to
Exhibit 3.1 of the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1993.
3.2 Amended and Restated Regulations of the Company,
hereby incorporated by reference to Exhibit 3.4 of
the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1998.
3.3 Amendment of Article I(f) of the Company's Amended
and Restated Code of Regulations to permit
shareholders to appoint proxies in any manner
permitted by Ohio law, hereby incorporated by
reference to Exhibit 3.1(b) of the Company's
Quarterly Report on Form 10-Q for the quarter ended
June 30, 2001.
4 Specimen of Stock Certificate, hereby incorporated
by reference to Exhibit 4 of the Company's
Registration Statement on Form S-1, Commission File
No. 33-68564.
10.1 The Predecessor's Amended and Restated 401(k) Profit
Sharing Plan, consisting of a savings plan adoption
agreement, savings plan and savings plan trust,
hereby incorporated by reference to Exhibit 10(cc) of
the Predecessor's Annual Report on Form 10-K for the
fiscal year ended December 31, 1991.
10.2 Amendment Number 1 to the M/I Schottenstein Homes,
Inc. 401(k) Profit Sharing Plan for the Economic
Growth and Tax Relief Reconciliation Act of 2001
dated November 12, 2002, hereby incorporated by
reference to Exhibit 10.1 of the Company's Quarterly
Report on Form 10-Q for the quarter ended September
30, 2002.
10.3 Credit Agreement by and among M/I Schottenstein
Homes, Inc., as borrower; Bank One, NA, as agent for
the banks; The Huntington National Bank, as
documentation agent; U.S. Bank, N.A., National City
Bank, AMSouth Bank, and Suntrust Bank, as co-agents;
Bank One NA, The Huntington National Bank, U.S. Bank,
N.A., National City Bank, AMSouth Bank, Suntrust
Bank, Comerica Bank, Fifth Third Bank, Central Ohio,
PNC Bank, National Association, Washington Mutual
Bank, FA, Fleet National Bank and Guaranty Bank, as
banks; and Banc One Capital Markets, Inc., as lead
arranger and sole book runner dated March 6, 2002,
hereby incorporated by reference to Exhibit 10.2 of
the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2001.
22
Exhibit Number Description Page No.
- -------------- ---------------------------------------------------------------------- --------------
10.4 Promissory Note by and among the Company, M/I Financial
Corp. and Bank One, Columbus, N.A., dated November 5,
1993, hereby incorporated by reference to Exhibit
19(d) of the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1993.
10.5 Revolving Credit Agreement by and among M/I Financial
Corp., the Company and Guaranty Bank dated May 3,
2001, hereby incorporated by reference to Exhibit
10.1 of the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 2001.
10.6 First Amendment to Revolving Credit Agreement by and
among M/I Financial Corp., the Company and Guaranty
Bank dated May 2, 2002, hereby incorporated by
reference to Exhibit 10.1 of the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31,
2002.
10.7 M/I Schottenstein Homes, Inc. 1993 Stock Incentive
Plan As Amended, dated April 22, 1999, hereby
incorporated by reference to Exhibit 10.4 of the
Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1999.
10.8 First Amendment to M/I Schottenstein Homes, Inc. 1993
Stock Incentive Plan As Amended, dated August 11,
1999, hereby incorporated by reference to Exhibit
10.1 of the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1999.
10.9 Second Amendment to the Company's 1993 Stock
Incentive Plan as Amended dated February 13, 2001,
hereby incorporated by reference to Exhibit 10.2 of
the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 2002.
10.10 Executive Employment Agreement by and between the
Company and Irving E. Schottenstein dated August 9,
1994, hereby incorporated by reference to Exhibit
10(c) of the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1994.
10.11 Amendment to Executive Employment Agreement by and
between the Company and Irving E. Schottenstein dated
November 14, 2001, hereby incorporated by reference
to Exhibit 10.8 of the Company's Annual Report on
Form 10-K for the fiscal year ended December 31,
2001.
10.12 Company's 2001 Chief Executive Officer Bonus Program,
hereby incorporated by reference to Exhibit 10.2 of
the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2001.
23
Exhibit Number Description Page No.
- -------------- ---------------------------------------------------------------------- --------------
10.13 Company's 2001 President Bonus Program, hereby incorporated by
reference to Exhibit 10.3 of the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31,
2001.
10.14 Company's 2001 Chief Operating Officer Bonus Program,
hereby incorporated by reference to Exhibit 10.4 of
the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2001.
10.15 Company's 2001 Chief Financial Officer Bonus Program,
hereby incorporated by reference to Exhibit 10.5 of
the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2001.
10.16 Company's 2002 Chief Executive Officer Bonus Program,
hereby incorporated by reference to Exhibit 10.2 of
the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2002.
10.17 Company's 2002 President Bonus Program, hereby
incorporated by reference to Exhibit 10.3 of the
Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2002.
10.18 Company's 2002 Chief Operating Officer Bonus Program,
hereby incorporated by reference to Exhibit 10.4 of
the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2002.
10.19 Company's 2002 Chief Financial Officer Bonus Program,
hereby incorporated by reference to Exhibit 10.5 of
the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2002.
10.20 Investment Home Compensation Plan dated September 1,
1995, hereby incorporated by reference to Exhibit
10.2 of the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1995.
10.21 Credit Agreement between the Company and BankBoston,
N.A., the other parties which may become lenders and
BankBoston, N.A., as agent, dated August 29, 1997,
hereby incorporated by reference to Exhibit 10.2 of
the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1997.
24
Exhibit Number Description Page No.
- -------------- ---------------------------------------------------------------------- --------------
10.22 First Amendment to Credit Agreement by and among M/I
Schottenstein Homes, Inc., Fleet National Bank
(formerly known as BankBoston, N.A.), Highland Legacy
Limited and Fleet National Bank, as agent, dated
September 15, 2000, hereby incorporated by reference
to Exhibit 10.19 of the Company's Annual Report on
Form 10-K for the fiscal year ended December 31,
2001.
10.23 Second Amendment to Credit Agreement by and among M/I
Schottenstein Homes, Inc., Fleet National Bank
(formerly known as BankBoston, N.A.), Bankers Trust
Company and Fleet National Bank, as agent, dated
March 6, 2002, hereby incorporated by reference to
Exhibit 10.19 of the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 2001.
10.24 Credit Agreement between M/I Schottenstein Homes,
Inc. and Fleet National Bank, Bankers Trust Company,
and other parties which may become lenders and Fleet
National Bank, as agent and Fleet Securities, Inc.
dated September 28, 2001, hereby incorporated by
reference to Exhibit 10.1 of the Company's Quarterly
Report on Form 10-Q for the quarter ended September
30, 2001.
10.25 Company's Director Deferred Compensation Plan, hereby
incorporated by reference to Exhibit 10.4 of the
Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997.
10.26 First Amendment to M/I Schottenstein Homes, Inc.
Director Deferred Compensation Plan, dated February
16, 1999, hereby incorporated by reference to Exhibit
10.2 of the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1999.
10.27 Second Amendment to M/I Schottenstein Homes, Inc.
Director Deferred Compensation Plan, dated July 1,
2001. (Filed herewith).
10.28 Amended and Restated M/I Schottenstein Homes, Inc.
Executives' Deferred Compensation Plan, dated April
18, 2001, hereby incorporated by reference to Exhibit
10.1 of the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 2001.
10.29 First Amendment to M/I Schottenstein Homes, Inc.
Executives' Deferred Compensation Plan, dated July 1,
2001. (Filed herewith).
10.30 Second Amendment to M/I Schottenstein Homes, Inc.
Executives' Deferred Compensation Plan dated June 19,
2002, hereby incorporated by reference to Exhibit
10.2 of the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 2002.
25
Exhibit Number Description Page No.
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10.31 Collateral Assignment Split-Dollar Agreement by and
among the Company and Robert H. Schottenstein, and
Janice K. Schottenstein, as Trustee of the Robert H.
Schottenstein 1996 Insurance Trust, dated September
24, 1997, hereby incorporated by reference to Exhibit
10.28 of the Company's Annual Report on Form 10-K for
the year ended December 31, 1997.
10.32 Collateral Assignment Split-Dollar Agreement by and among the
Company and Steven Schottenstein, and Irving E.
Schottenstein, as Trustee of the Steven Schottenstein
1994 Trust, dated September 24, 1997, hereby
incorporated by reference to Exhibit 10.29 of the
Company's Annual Report on Form 10-K for the year
ended December 31, 1997.
10.33 M/I Schottenstein Homes, Inc. Executive Officer
Compensation Plan, hereby incorporated by reference
to the Company's definitive Proxy Statement relating
to the 1999 Annual Meeting of Shareholders.
11 Earnings Per Share Calculations. (Filed herewith.)
13 Annual Report to Shareholders for the year ended
December 31, 2002. (Filed herewith.)
21 Subsidiaries of Company. (Filed herewith.)
23 Consent of Deloitte & Touche LLP. (Filed herewith.)
24 Powers of Attorney. (Filed herewith.)
99.1 Certification by Irving E. Schottenstein, Chief
Executive Officer, pursuant to 10 U.S.C. Section 1350
as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. A signed original of this
written statement required by Section 906 has been
provided to M/I Schottenstein Homes, Inc. and will be
retained by M/I Schottenstein Homes, Inc. and
furnished to the Securities and Exchange Commission
or its staff upon request.
26
Exhibit Number Description Page No.
- -------------- ---------------------------------------------------------------------- --------------
99.2 Certification by Phillip G. Creek, Chief Financial
Officer, pursuant to 10 U.S.C. Section 1350 as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002. A signed original of this written
statement required by Section 906 has been provided
to M/I Schottenstein Homes, Inc. and will be retained
by M/I Schottenstein Homes, Inc. and furnished to the
Securities and Exchange Commission or its staff upon
request.
27