Toll Brothers, Inc. (NYSE:TOL) (www.tollbrothers.com), the nation’s
leading builder of luxury homes, today announced results for its
first quarter ended January 31, 2017.
FY 2017 First Quarter Financial Highlights:
- FY 2017’s first quarter net income was $70.4 million and
earnings per share were $0.42 per share diluted, compared to net
income of $73.2 million and $0.40 per share diluted in FY 2016’s
first quarter.
- Pre-tax income was $109.8 million, compared to pre-tax income
of $116.8 million in FY 2016’s first quarter. FY 2017’s first
quarter results included pre-tax inventory write-downs totaling
$4.7 million, compared to $1.3 million in FY 2016’s first
quarter.
- Revenues of $920.7 million and home building deliveries of
1,190 units were approximately flat in dollars and increased 12% in
units, compared to FY 2016’s first-quarter total of $928.6 million
and 1,063 units. The average price of homes delivered
declined to $773,700, due to changes in product mix, compared to
$873,500 in FY 2016’s first quarter.
- Net signed contracts of $1.24 billion and 1,522 units rose 14%
in dollars and 22% in units, compared to FY 2016’s first quarter
totals of $1.09 billion and 1,250 units. The average price of net
signed contracts was $816,700, compared to $869,600 in FY 2016’s
first quarter. The decline in average price was primarily due to:
(1) the Company’s FY 2017 first quarter acquisition of Boise-based
Coleman Homes (“Coleman”), (2) a decline in the number of contracts
signed in the Company’s City Living division compared to one year
ago and (3) an increase in townhome contracts in the North and
Mid-Atlantic regions.
- On a per-community basis, FY 2017’s first-quarter net signed
contracts was 4.73 units per community, compared to first quarter
totals of 4.34 in FY 2016, 4.09 in FY 2015, 3.95 in FY 2014, and
4.34 in FY 2013.
- For the first three weeks of FY 2017’s second quarter,
beginning February 1, 2017, non-binding reservations deposits were
up 16% in units, compared to the same period in FY 2016.
- Backlog of $4.35 billion and 5,145 units rose 19% in dollars
and 21% in units, compared to FY 2016’s first-quarter-end backlog
of $3.66 billion and 4,251 units. The average price of homes in
backlog was $844,500, compared to $861,600 at FY 2016’s
first-quarter end.
- Gross margin, as a percentage of revenues, was 20.4% in FY
2017’s first quarter, compared to 23.3% in FY 2016’s first
quarter. Adjusted Gross Margin, which excludes interest and
inventory write-downs (“Adjusted Gross Margin”), was 23.9%,
compared to 26.9% in FY 2016’s first quarter.
- Other income and Income from unconsolidated entities totaled
$59.1 million, compared to $22.4 million in FY 2016’s first
quarter.
- The Company ended its first quarter with 321 selling
communities, compared to 310 at FYE 2016, and 291 at FY 2016’s
first-quarter end.
- On February 21, 2017, the Company announced that its Board of
Directors approved the initiation of a cash dividend to
shareholders. The first quarterly dividend of $0.08 per
share, equivalent to approximately 1% annualized of the Company’s
current share price, will be paid on April 28, 2017 to shareholders
of record on the close of business on April 14, 2017.
- During the first quarter of FY 2017, the Company repurchased
approximately 557,000 shares of its common stock at an average
price of $27.33, for a total purchase price of $15.2
million.
- The Company is increasing the mid-point of its delivery
guidance for full FY 2017 by 100 units and now expects FY 2017
deliveries of between 6,700 and 7,500 units with an average price
of between $775,000 and $825,000.
- The Company reaffirms its previous guidance for full FY 2017
Adjusted Gross Margin, SG&A as a percentage of revenues, Other
income and Income from unconsolidated entities and effective tax
rate.
- The Company expects FY 2017 second-quarter deliveries of
between 1,350 and 1,650 units with an average price of between
$810,000 and $835,000.
- The Company expects its second-quarter FY 2017 Adjusted Gross
Margin to be between 23.8% and 24.2% of revenues.
- FY 2017 second-quarter SG&A is expected to be approximately
11.4% of second quarter revenues.
- The Company’s second-quarter FY 2017 Other income and Income
from unconsolidated entities is expected to be between $40 million
and $60 million.
- The FY 2017 second quarter effective tax rate is projected to
be approximately 37.5%.
Douglas C. Yearley, Jr., Toll Brothers’ chief
executive officer, stated: “FY 2017’s first-quarter contracts rose
14% in dollars and 22% in units compared to the first quarter of FY
2016. This was our tenth consecutive quarter of year-over-year
growth in contract dollars and units, with double digit increases
in each of the past three quarters. And for the first 3 weeks of FY
2017’s second quarter, non-binding reservation deposits were up 16%
in units, compared to the same period in FY 2016.
“FY 2017 should be another year of substantial
growth. Deliveries are projected to increase from 6,100 in FY 2016
to between 6,700 and 7,500 in FY 2017. We should continue to
post strong gross margins. And Other income and Income from Joint
Ventures (Unconsolidated entities) is projected to increase from
$100 million in FY 2016 to between $160 million and $200 million in
FY 2017. This should produce significantly higher earnings per
share in FY 2017 versus FY 2016 and improve our ROE to 12% of
beginning equity.
“As the only national home building company
focused on the highly fragmented luxury market, we continue to
enjoy strong demand and produce industry-leading contract
growth. Our strategic plan to diversify geographically and by
product type enables us to appeal to a wide demographic interested
in a luxury home. This is helping to drive our results. We
have a nationwide footprint of well-located and beautifully
amenitized communities. Our homes offer great lifestyles, top
school districts, and ease of access to employment and cultural
centers, all for a great value. Our “affordable luxury” product
lines reach a large and growing base of affluent move-up,
empty-nester and millennial buyers. Our strong balance sheet
gives us a financial edge over the small and mid-sized builders who
are our primary competition in the luxury market.
“Our success is also driven by our tremendous
brand. Fortune magazine just named us Most Admired Home Building
Company for the third consecutive year in its 2017 survey of the
World’s Most Admired Companies. This is a tribute to the tremendous
energy and diligence of our associates and their dedication to
providing each and every one of our customers with the quality,
value, and service they expect from the Toll Brothers brand.
“Contracts (in units) were up this quarter in five of our six
regions: California, the West, South, Mid-Atlantic and North. And
despite the interest rate rise at the end of 2016, our results,
encouragingly, showed an acceleration in contracts from November to
December to January this quarter.
“Contracts in our City Living division, which operates primarily
in the urban metro New York City market, were
down year-over-year this quarter, while our quarter-end
backlog was up, our gross margins continue to far exceed Company
averages and we continue to have confidence in the quality of our
locations.
“In conjunction with our geographic and product diversification,
we are also developing a significant portfolio of luxury rental
properties, most of which will be built and owned in joint
ventures. In total, our portfolio includes in excess of
10,000 units built, in construction or planned across the
nation.
“Last night we announced that we will begin paying a quarterly
dividend equal to $.08 per share, or approximately 1% annualized of
our current share price. This dividend is the next step in the
maturation of our company and, along with our stock repurchases,
reflects our commitment to return cash to our shareholders and
improve our return on equity. This dividend should not in any
way restrict our opportunities to invest in future growth, either
through land acquisitions, company acquisitions or other strategic
initiatives. We also believe a dividend at this time and at this
level will broaden our investor base.”
Martin P. Connor, Toll Brothers’ chief financial
officer, stated: “This quarter we exceeded our earnings
expectations as our revenues, gross margin and SG&A, as a
percentage of revenues, all came in better than anticipated. As
expected, the average price point of new contracts declined from
roughly $870,000 to $817,000 due to a shift in mix, including
contracts from our new Boise home builder acquisition, fewer City
Living contracts at our wholly-owned properties, and an increase in
lower-priced townhome contracts in the North and Mid-Atlantic
regions.
“In our Income from unconsolidated entities, we
reported $34.5 million from City Living joint ventures and
benefited from a $6.2 million gain on the partial sale of our
ownership in a Toll Brothers Apartment Living project. This
was the first project in which we round-tripped capital by selling
a portion of our ownership position.
“Subject to our normal caveats regarding
forward-looking statements, we offer the following guidance:
“We generally have not been impacted by significant construction
delays due to labor shortages and thus were able to exceed our
delivery guidance this quarter. Based on this environment and our
strong first-quarter-end $4.35 billion backlog, up year-over-year
by 19% in dollars and 21% in units, we are increasing the mid-point
of our delivery guidance range by 100 units for full FY 2017. We
now project revenues and deliveries to be between $5.2 billion and
$6.2 billion and between 6,700 and 7,500 units.
“For FY 2017’s second quarter, we project
deliveries of between 1,350 and 1,650 units at an average delivered
sales price of between $810,000 and $835,000. Adjusted Gross Margin
is expected to be between 23.8% and 24.2% while SG&A, as a
percentage of revenues, is projected to be about 11.4% of revenues.
Other Income and Income from Unconsolidated Entities is projected
to be between $40 million and $60 million. We project the effective
tax rate for our second quarter to be approximately
37.5%.”
Robert I. Toll, executive chairman, stated: “The housing market
continues on its path of steady growth. Total housing starts
rose in 2016 to approximately 1.2 million units, the highest level
since 2007. However, despite this increase, nationwide
housing starts remain well below historic norms of 1.6 million
annually, even as population has continued to grow over the past
decade. With home price appreciation strengthening personal
balance sheets, the Dow Jones Industrial Average surpassing 20,000
for the first time, and low unemployment, we believe the housing
outlook for 2017 remains favorable.
“The pent-up demand of the past seven years may
be starting to release, bringing more buyers into the market,
especially in the move-up segment, where rising home values are
giving buyers more equity when they sell their homes in order to
move up. The leading edge of the millennial generation has
begun to form families, have children and buy homes. And maturing
baby boomers continue to demonstrate strong demand for our Active
Adult homes. With supplies of new and existing homes still
tight, we believe a rise in demand could push home prices higher.
More buyers would be motivated to get off the fence and into the
market, which could raise prices higher and tighten supply further.
This would especially benefit the luxury sector of the new home
market, where buyers have the incomes and balance sheets to pay
more for the homes of their dreams.”
Toll Brothers’ financial highlights for the FY
2017 first quarter ended January 31, 2017 (unaudited):
- FY 2017’s first-quarter net income of $70.4 million and $0.42
per share diluted, declined 4% and increased 5%, respectively,
compared to FY 2016’s first-quarter net income of $73.2 million, or
$0.40 per share diluted.
- FY 2017’s first-quarter pre-tax income of $109.8 million
decreased 6%, compared to FY 2016 first-quarter pre-tax income of
$116.8 million. FY 2017’s first-quarter results included pre-tax
inventory write-downs totaling $4.7 million ($4.0 million
attributable to operating communities and $0.7 million attributable
to future communities). FY 2016’s first-quarter results
included pre-tax inventory write-downs of $1.3 million ($0.6
million attributable to an operating community and $0.7 million
attributable to future communities).
- FY 2017’s first-quarter total revenues of $920.7 million and
1,190 units were approximately flat in dollars and increased 12% in
units, compared to FY 2016’s first-quarter total revenues of $928.6
million and 1,063 units. The average price of homes delivered
declined to $773,700, due to changes in product mix, compared to
$873,500 in FY 2016’s first quarter.
- The Company’s FY 2017 first-quarter net signed contracts of
$1.24 billion and 1,522 units, increased 14% in dollars and 22% in
units, compared to FY 2016’s first-quarter net signed contracts of
$1.09 billion and 1,250 units. The average price of net
signed contracts was $816,700, compared to $869,600 in FY 2016’s
first quarter. The decline in average price was primarily due to:
(1) the Company’s FY 2017 first quarter acquisition of Boise-based
Coleman Homes, which contributed 60 contracts totaling $20.4
million at an average price of $341,000, (2) a decline in the
number of contracts signed in the Company’s City Living division
compared to one year ago and (3) an increase in townhome contracts
in the North and Mid-Atlantic regions.
- On a per-community basis, FY 2017’s first-quarter net signed
contracts was 4.73 units per community, compared to first-quarter
totals of 4.34 in FY 2016, 4.09 in FY 2015, 3.95 in FY 2014, and
4.34 in FY 2013.
- In FY 2017, first-quarter-end backlog of $4.35 billion and
5,145 units increased 19% in dollars and 21% in units, compared to
FY 2016’s first-quarter-end backlog of $3.66 billion and 4,251
units. The average price of homes in backlog was $844,500,
compared to $861,600 at FY 2016’s first-quarter end.
- On November 4, 2017, the Company acquired substantially all of
the assets and operations of Coleman Homes, a builder in Boise,
Idaho. In the first quarter of FY 2017, Coleman contributed
74 home deliveries totaling $21.9 million of revenues at an average
price of $296,000, and 60 signed contracts totaling $20.4 million
at an average price of $341,000. At FY 2017’s first-quarter end the
Company's backlog included 114 homes totaling $37.3 million at an
average price of $327,000 from Coleman, and its quarter-end
community count included 17 selling communities from Coleman.
- FY 2017’s first-quarter gross margin, as a percentage of
revenues, was 20.4%, compared to 23.3% in FY 2016’s first
quarter. FY 2017’s first-quarter Adjusted Gross Margin was
23.9%, compared to 26.9% in FY 2016’s first quarter.
- Interest included in cost of sales was 3.0% of revenue in FY
2017’s first quarter, compared to 3.4% in FY 2016’s first
quarter.
- SG&A, as a percentage of revenues, was 14.9%, compared to
13.1% in FY 2016’s first quarter.
- Income from operations of $50.6 million represented 5.5% of
revenues in FY 2017’s first quarter, compared to $94.5 million and
10.2% of revenues in FY 2016’s first quarter.
- Other income and Income from unconsolidated entities in FY
2017’s first quarter totaled $59.1 million, compared to $22.4
million in FY 2016’s same quarter.
- FY 2017’s first-quarter cancellation rate (current-quarter
cancellations divided by current-quarter signed contracts) was
5.8%, compared to 7.5%, in FY 2016’s first quarter. As a
percentage of beginning-quarter backlog, FY 2017’s first-quarter
cancellation rate was 2.0%, compared to 2.5% in FY 2016’s first
quarter.
- The Company ended its FY 2017 first quarter with $373.5 million
in cash, compared to $633.7 million in cash at FYE 2016, and $336.2
million in cash at FY 2016’s first-quarter end. At FY 2017’s
first-quarter end, the Company also had $932.6 million available
under its $1.295 billion, 20-bank credit facility, which matures in
May 2021.
- During the first quarter of FY 2017, the Company repurchased
approximately 557,000 shares of its common stock at an average
price of $27.33, for a total purchase price of $15.2 million.
- The Company’s Stockholders’ Equity at FY 2017’s first-quarter
end was $4.32 billion, compared to $4.15 billion at FY 2016’s
first-quarter end.
- The Company ended its FY 2017 first quarter with a
debt-to-capital ratio of 45.7%, compared to 47.2% at FYE 2016 and
44.8% at FY 2016’s first-quarter end. The Company ended FY 2017’s
first quarter with a net debt-to-capital ratio(1) of 42.6%,
compared to 40.9% at FYE 2016, and 41.7% at FY 2016’s first-quarter
end.
- The Company ended FY 2017’s first quarter with approximately
47,800 lots owned and optioned, compared to 48,800 one quarter
earlier, and 43,800 one year earlier. Approximately 33,800 of these
47,800 lots were owned, of which approximately 18,600 lots,
including those in backlog, were substantially improved.
- In the first quarter of FY 2017, the Company purchased 2,235
lots for $211.7 million. This includes approximately 1,350
lots for $85.2 million associated with the acquisition of Coleman
Homes on November 4, 2016.
- The Company ended FY 2017’s first quarter with 321 selling
communities, compared to 310 at FYE 2016 and 291 at FY 2016’s
first-quarter end.
- Based on FY 2017’s first-quarter-end backlog and the pace of
activity at its communities, the Company now estimates it will
deliver between 6,700 and 7,500 homes in FY 2017, compared to
previous guidance of 6,500 and 7,500 units. It now believes
the average delivered price for FY 2017 will be between $775,000
and $825,000 per home. This translates to projected revenues
of between $5.19 billion and $6.19 billion in FY 2017, compared to
$5.17 billion in FY 2016.
- The Company reaffirms its previous guidance for full FY 2017
Adjusted Gross Margin, SG&A as a percentage of revenues, Other
income and Income from unconsolidated entities, and effective tax
rate.
- The Company expects FY 2017 second-quarter deliveries of
between 1,350 and 1,650 units with an average price of between
$810,000 and $835,000.
- The Company expects its second-quarter FY 2017 Adjusted Gross
Margin to be between 23.8% and 24.2% of revenues.
- FY 2017 second-quarter SG&A is expected to be approximately
11.4% of second quarter revenues.
- The Company’s second-quarter FY 2017 Other income and Income
from unconsolidated entities is expected to be between $40 million
and $60 million.
- The FY 2017 second quarter effective tax rate is expected to be
approximately 37.5%.
(1) See “Reconciliation of Non-GAAP Measures” below for more
information on the calculation of the Company’s net debt-to-capital
ratio.
Toll Brothers will be broadcasting live via the
Investor Relations section of its website, www.tollbrothers.com, a
conference call hosted by CEO Douglas C. Yearley, Jr. at 11:00 a.m.
(EST) today, February 22, 2017, to discuss these results and its
outlook for FY 2017. To access the call, enter the Toll Brothers
website, click on the Investor Relations page, and select
"Conference Calls.” Participants are encouraged to log on at least
fifteen minutes prior to the start of the presentation to register
and download any necessary software.
The call can be heard live with an online replay
which will follow. MP3 format replays will be available after the
conference call via the "Conference Calls" section of the Investor
Relations portion of the Toll Brothers website.
Toll Brothers, Inc., A FORTUNE 600 Company, is
the nation's leading builder of luxury homes. The Company began
business in 1967 and became a public company in 1986. Its
common stock is listed on the New York Stock Exchange under the
symbol “TOL.” The Company serves move-up, empty-nester,
active-adult, and second-home buyers and operates in 20 states:
Arizona, California, Colorado, Connecticut, Delaware, Florida,
Idaho, Illinois, Maryland, Massachusetts, Michigan, Minnesota,
Nevada, New Jersey, New York, North Carolina, Pennsylvania, Texas,
Virginia, and Washington, as well as in the District of
Columbia.Toll Brothers builds an array of luxury residential
single-family detached, attached home, master planned resort-style
golf, and urban low-, mid-, and high-rise communities, principally
on land it develops and improves. The Company operates its own
architectural, engineering, mortgage, title, land development and
land sale, golf course development and management, home security,
and landscape subsidiaries. The Company also operates its own
lumber distribution, house component assembly, and manufacturing
operations. Through its Gibraltar Capital and Asset Management
joint venture, the Company provides builders and developers with
land banking and joint venture capital. The Company acquires and
develops commercial and apartment properties through Toll Brothers
Apartment Living, Toll Brothers Campus Living, and the affiliated
Toll Brothers Realty Trust, and develops urban low-, mid-,
and high-rise for-sale condominiums through Toll Brothers City
Living.
In 2017, Toll Brothers was named World’s Most Admired Home
Building Company in Fortune magazine’s survey of the World’s Most
Admired Companies, the third year in a row it has been so honored.
Toll Brothers was named 2014 Builder of the Year by Builder
magazine, and is honored to have been awarded Builder of the Year
in 2012 by Professional Builder magazine, making it the first
two-time recipient. Toll Brothers proudly supports the
communities in which it builds; among other philanthropic pursuits,
the Company sponsors the Toll Brothers Metropolitan Opera
International Radio Network, bringing opera to neighborhoods
throughout the world. For more information, visit
www.tollbrothers.com.
Toll Brothers discloses information about its
business and financial performance and other matters, and provides
links to its securities filings, notices of investor events, and
earnings and other news releases, on the Investor Relations section
of its website (tollbrothers.com/investor-relations).
Forward Looking StatementInformation presented
herein for the first quarter ended January 31, 2017 is subject to
finalization of the Company's regulatory filings, related financial
and accounting reporting procedures and external auditor
procedures.
Certain information included in this release is
forward-looking within the meaning of the Private Securities
Litigation Reform Act of 1995, including, but not limited to,
information related to: anticipated operating results; anticipated
financial performance, resources and condition; selling
communities; home deliveries; average home prices; consumer demand
and confidence; contract pricing; business and investment
opportunities; market and industry trends; and the anticipated
benefits to be realized from the acquisition of Coleman Homes.
Such forward-looking information involves
important risks and uncertainties that could significantly affect
actual results and cause them to differ materially from
expectations expressed herein and in other Company reports, SEC
filings, statements and presentations. These risks and
uncertainties include, among others: local, regional, national and
international economic conditions; fluctuating consumer demand and
confidence; interest and unemployment rates; changes in sales
conditions, including home prices, in the markets where we build
homes; conditions in our newly entered markets and newly acquired
operations; the competitive environment in which we operate; the
availability and cost of land for future growth; conditions that
could result in inventory write-downs or write-downs associated
with investments in unconsolidated entities; the ability to recover
our deferred tax assets; the availability of capital; uncertainties
in the capital and securities markets; liquidity in the credit
markets; changes in tax laws and their interpretation; effects of
governmental legislation and regulation; the outcome of various
legal proceedings; the availability of adequate insurance at
reasonable cost; the impact of construction defect, product
liability and home warranty claims, including the adequacy of
self-insurance accruals, and the applicability and sufficiency of
our insurance coverage; the ability of customers to obtain
financing for the purchase of homes; the ability of home buyers to
sell their existing homes; the ability of the participants in
various joint ventures to honor their commitments; the availability
and cost of labor and building and construction materials; the cost
of raw materials; construction delays; domestic and international
political events; weather conditions; and the anticipated benefits
to be realized from the acquisition of Coleman Homes. For a more
detailed discussion of these factors, see the information under the
captions "Risk Factors" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" in our most
recent annual report on Form 10-K and our subsequent quarterly
reports on Form 10-Q filed with the Securities and Exchange
Commission.
Any or all of the forward-looking statements
included in this release are not guarantees of future performance
and may turn out to be inaccurate. Forward-looking statements
speak only as of the date they are made. The Company
undertakes no obligation to publicly update any forward-looking
statements, whether as a result of new information, future events
or otherwise.
TOLL BROTHERS, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE
SHEETS(Amounts in thousands) |
|
|
January 31, 2017 |
|
October 31, 2016 |
|
(Unaudited) |
|
|
ASSETS |
|
|
|
Cash and cash
equivalents |
$ |
373,469 |
|
|
$ |
633,715 |
|
Restricted cash |
12,445 |
|
|
31,291 |
|
Inventory |
7,539,974 |
|
|
7,353,967 |
|
Property, construction
and office equipment, net |
172,459 |
|
|
169,576 |
|
Receivables, prepaid
expenses and other assets |
512,974 |
|
|
582,758 |
|
Mortgage loans held for
sale |
85,765 |
|
|
248,601 |
|
Customer deposits held
in escrow |
58,012 |
|
|
53,057 |
|
Investments in
unconsolidated entities |
601,696 |
|
|
496,411 |
|
Deferred tax assets,
net of valuation allowances |
160,006 |
|
|
167,413 |
|
|
$ |
9,516,800 |
|
|
$ |
9,736,789 |
|
|
|
|
|
LIABILITIES AND
EQUITY |
|
|
|
Liabilities: |
|
|
|
Loans
payable |
$ |
879,894 |
|
|
$ |
871,079 |
|
Senior
notes |
2,695,524 |
|
|
2,694,372 |
|
Mortgage
company loan facility |
57,040 |
|
|
210,000 |
|
Customer
deposits |
344,150 |
|
|
309,099 |
|
Accounts
payable |
258,694 |
|
|
281,955 |
|
Accrued
expenses |
940,102 |
|
|
1,072,300 |
|
Income
taxes payable |
20,372 |
|
|
62,782 |
|
Total
liabilities |
5,195,776 |
|
|
5,501,587 |
|
|
|
|
|
Equity: |
|
|
|
Stockholders’ Equity |
|
|
|
Common
stock |
1,779 |
|
|
1,779 |
|
Additional paid-in capital |
718,861 |
|
|
728,464 |
|
Retained
earnings |
4,047,713 |
|
|
3,977,297 |
|
Treasury
stock, at cost |
(450,072 |
) |
|
(474,912 |
) |
Accumulated other comprehensive loss |
(3,167 |
) |
|
(3,336 |
) |
Total
stockholders' equity |
4,315,114 |
|
|
4,229,292 |
|
Noncontrolling interest |
5,910 |
|
|
5,910 |
|
Total
equity |
4,321,024 |
|
|
4,235,202 |
|
|
$ |
9,516,800 |
|
|
$ |
9,736,789 |
|
TOLL BROTHERS, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS(Amounts in thousands, except per share
data and percentages)(Unaudited) |
|
|
Three Months Ended January 31, |
|
2017 |
|
2016 |
|
$ |
% |
|
$ |
% |
Revenues |
$ |
920,730 |
|
|
|
$ |
928,566 |
|
|
Cost of revenues |
733,002 |
|
79.6 |
% |
|
712,311 |
|
76.7 |
% |
Gross margin |
187,728 |
|
20.4 |
% |
|
216,255 |
|
23.3 |
% |
|
|
|
|
|
|
Selling, general and
administrative expenses |
137,095 |
|
14.9 |
% |
|
121,796 |
|
13.1 |
% |
Income from
operations |
50,633 |
|
5.5 |
% |
|
94,459 |
|
10.2 |
% |
|
|
|
|
|
|
Other: |
|
|
|
|
|
Income
from unconsolidated entities |
46,445 |
|
|
|
8,638 |
|
|
Other
income - net |
12,703 |
|
|
|
13,720 |
|
|
Income before income
taxes |
109,781 |
|
|
|
116,817 |
|
|
Income tax
provision |
39,365 |
|
|
|
43,637 |
|
|
Net income |
$ |
70,416 |
|
|
|
$ |
73,180 |
|
|
Income per share: |
|
|
|
|
|
Basic |
$ |
0.43 |
|
|
|
$ |
0.42 |
|
|
Diluted |
$ |
0.42 |
|
|
|
$ |
0.40 |
|
|
Weighted-average number
of shares: |
|
|
|
|
|
Basic |
162,588 |
|
|
|
174,205 |
|
|
Diluted |
170,417 |
|
|
|
182,391 |
|
|
|
|
|
|
|
|
Effective tax rate |
35.9 |
% |
|
|
37.4 |
% |
|
TOLL BROTHERS, INC. AND
SUBSIDIARIESSUPPLEMENTAL
DATA(Amounts in
thousands)(unaudited) |
|
|
Three Months Ended January 31, |
|
2017 |
|
2016 |
Impairment charges
recognized: |
|
|
|
Cost of
sales - land owned/controlled for future communities |
$ |
661 |
|
|
$ |
681 |
|
Cost of
sales - operating communities |
4,000 |
|
|
600 |
|
|
$ |
4,661 |
|
|
$ |
1,281 |
|
|
|
|
|
Depreciation and
amortization |
$ |
6,034 |
|
|
$ |
5,727 |
|
Interest incurred |
$ |
41,774 |
|
|
$ |
40,107 |
|
Interest expense: |
|
|
|
Charged
to cost of sales |
$ |
27,928 |
|
|
$ |
32,023 |
|
Charged
to other income - net |
42 |
|
|
275 |
|
|
$ |
27,970 |
|
|
$ |
32,298 |
|
|
|
|
|
Home sites
controlled: |
|
|
|
Owned |
33,775 |
|
|
35,639 |
|
Optioned |
14,005 |
|
|
8,180 |
|
|
47,780 |
|
|
43,819 |
|
Inventory at January 31, 2017 and October 31, 2016
consisted of the following (amounts in thousands):
|
January 31, 2017 |
|
October 31, 2016 |
Land and land
development costs |
$ |
2,343,973 |
|
|
$ |
2,497,603 |
|
Construction in
progress |
4,536,967 |
|
|
4,225,456 |
|
Sample homes |
486,322 |
|
|
460,948 |
|
Land deposits and costs
of future development |
148,083 |
|
|
144,417 |
|
Other |
24,629 |
|
|
25,543 |
|
|
$ |
7,539,974 |
|
|
$ |
7,353,967 |
|
Toll Brothers operates in two segments:
Traditional Home Building and Urban Infill ("City Living").
Within Traditional Home Building, Toll operates in five geographic
segments:
North: |
|
Connecticut, Illinois,
Massachusetts, Michigan, Minnesota, New Jersey and New York |
Mid-Atlantic: |
|
Delaware, Maryland,
Pennsylvania and Virginia |
South: |
|
Florida, North Carolina
and Texas |
West: |
|
Arizona, Colorado,
Idaho, Nevada, and Washington |
California: |
|
California |
|
Three Months Ended January 31, |
|
Units |
|
$ (Millions) |
|
Average Price Per Unit $ |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
HOME BUILDING
REVENUES |
|
|
|
|
|
|
|
|
|
|
|
North |
209 |
|
|
180 |
|
|
$ |
145.6 |
|
|
$ |
120.8 |
|
|
$ |
696,800 |
|
|
$ |
671,200 |
|
Mid-Atlantic |
297 |
|
|
279 |
|
|
184.1 |
|
|
169.8 |
|
|
619,700 |
|
|
608,600 |
|
South |
190 |
|
|
198 |
|
|
142.2 |
|
|
146.8 |
|
|
748,400 |
|
|
741,400 |
|
West |
335 |
|
|
202 |
|
|
211.1 |
|
|
137.3 |
|
|
630,200 |
|
|
679,500 |
|
California |
155 |
|
|
159 |
|
|
219.8 |
|
|
216.9 |
|
|
1,417,900 |
|
|
1,364,200 |
|
Traditional Home Building |
1,186 |
|
|
1,018 |
|
|
902.8 |
|
|
791.6 |
|
|
761,200 |
|
|
777,600 |
|
City Living |
4 |
|
|
45 |
|
|
17.9 |
|
|
137.0 |
|
|
4,484,100 |
|
|
3,044,000 |
|
Total
consolidated |
1,190 |
|
|
1,063 |
|
|
$ |
920.7 |
|
|
$ |
928.6 |
|
|
$ |
773,700 |
|
|
$ |
873,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
CONTRACTS |
|
|
|
|
|
|
|
|
|
|
|
North |
276 |
|
|
244 |
|
|
$ |
171.7 |
|
|
$ |
172.6 |
|
|
$ |
622,300 |
|
|
$ |
707,400 |
|
Mid-Atlantic |
380 |
|
|
300 |
|
|
236.6 |
|
|
187.1 |
|
|
622,600 |
|
|
623,600 |
|
South |
266 |
|
|
210 |
|
|
204.0 |
|
|
166.9 |
|
|
766,800 |
|
|
794,900 |
|
West |
352 |
|
|
281 |
|
|
246.2 |
|
|
200.2 |
|
|
699,400 |
|
|
712,500 |
|
California |
226 |
|
|
162 |
|
|
335.2 |
|
|
253.0 |
|
|
1,483,100 |
|
|
1,561,900 |
|
Traditional Home Building |
1,500 |
|
|
1,197 |
|
|
1,193.7 |
|
|
979.8 |
|
|
795,800 |
|
|
818,600 |
|
City Living |
22 |
|
|
53 |
|
|
49.3 |
|
|
107.2 |
|
|
2,243,100 |
|
|
2,021,500 |
|
Total
consolidated |
1,522 |
|
|
1,250 |
|
|
$ |
1,243.0 |
|
|
$ |
1,087.0 |
|
|
$ |
816,700 |
|
|
$ |
869,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
BACKLOG |
|
|
|
|
|
|
|
|
|
|
|
North |
1,044 |
|
|
954 |
|
|
$ |
718.8 |
|
|
$ |
671.0 |
|
|
$ |
688,600 |
|
|
$ |
703,400 |
|
Mid-Atlantic |
1,069 |
|
|
832 |
|
|
662.5 |
|
|
536.2 |
|
|
619,800 |
|
|
644,500 |
|
South |
1,036 |
|
|
836 |
|
|
798.2 |
|
|
689.3 |
|
|
770,400 |
|
|
824,500 |
|
West |
1,165 |
|
|
895 |
|
|
840.4 |
|
|
636.5 |
|
|
721,400 |
|
|
711,200 |
|
California |
604 |
|
|
612 |
|
|
983.1 |
|
|
933.9 |
|
|
1,627,600 |
|
|
1,526,000 |
|
Traditional Home Building |
4,918 |
|
|
4,129 |
|
|
4,003.0 |
|
|
3,466.9 |
|
|
814,000 |
|
|
839,600 |
|
City Living |
227 |
|
|
122 |
|
|
342.1 |
|
|
195.6 |
|
|
1,507,000 |
|
|
1,602,900 |
|
Total
consolidated |
5,145 |
|
|
4,251 |
|
|
$ |
4,345.1 |
|
|
$ |
3,662.5 |
|
|
$ |
844,500 |
|
|
$ |
861,600 |
|
Unconsolidated entities:
Information related to revenues and contracts of
entities in which we have an interest for the three-month periods
ended January 31, 2017 and 2016, and for backlog at
January 31, 2017 and 2016 is as follows:
|
Units |
|
$ (Millions) |
|
Average Price Per Unit $ |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Three months ended
January 31, |
|
|
|
|
|
|
|
|
|
|
|
Revenues |
87 |
|
|
19 |
|
|
$ |
217.4 |
|
|
$ |
16.0 |
|
|
$ |
2,498,700 |
|
|
$ |
844,300 |
|
Contracts |
28 |
|
|
30 |
|
|
$ |
43.5 |
|
|
$ |
47.7 |
|
|
$ |
1,552,000 |
|
|
$ |
1,588,800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Backlog at January
31, |
125 |
|
|
197 |
|
|
$ |
297.6 |
|
|
$ |
498.2 |
|
|
$ |
2,380,400 |
|
|
$ |
2,528,900 |
|
RECONCILIATION OF NON-GAAP
MEASURES
This press release contains, and Company
management’s discussion of the results presented in this press
release may include, information about the Company’s Adjusted Gross
Margin and the Company’s net debt-to-capital ratio.
These two measures are non-GAAP financial
measures which are not calculated in accordance with generally
accepted accounting principles (“GAAP”). These non-GAAP financial
measures should not be considered a substitute for, or superior to,
the comparable GAAP financial measures, and may be different from
non-GAAP measures used by other companies in the homebuilding
business.
The Company’s management considers these
non-GAAP financial measures as we make operating and strategic
decisions and evaluate our performance, including against other
homebuilders that may use similar non-GAAP financial measures. The
Company’s management believes these non-GAAP financial measures are
useful to investors in understanding our operations and leverage
and may be helpful in comparing the Company to other homebuilders
to the extent they provide similar information.
Adjusted Gross MarginThe following table
reconciles the Company’s gross margin as a percentage of revenues
(calculated in accordance with GAAP) to the Company’s Adjusted
Gross Margin (a non-GAAP financial measure). Adjusted Gross Margin
is calculated as (i) gross margin plus interest recognized in cost
of sales plus inventory write-downs divided by (ii) revenues.
Adjusted Gross Margin
Reconciliation |
|
|
|
Three Months Ended January 31, |
|
|
2017 |
|
2016 |
Revenues |
$ |
920,730 |
|
|
$ |
928,566 |
|
Cost of
revenues |
733,002 |
|
|
712,311 |
|
Gross
margin |
187,728 |
|
|
216,255 |
|
Add: |
Interest recognized in
cost of sales |
27,928 |
|
|
32,023 |
|
|
Inventory
write-downs |
4,661 |
|
|
1,281 |
|
Adjusted
gross margin |
$ |
220,317 |
|
|
$ |
249,559 |
|
|
|
|
|
|
Gross
margin as a percentage of revenues |
20.4 |
% |
|
23.3 |
% |
|
|
|
|
|
Adjusted
Gross Margin |
23.9 |
% |
|
26.9 |
% |
The Company’s management believes Adjusted Gross
Margin is a useful financial measure to investors because it allows
them to evaluate the performance of our homebuilding operations
without the often varying effects of capitalized interest costs and
inventory impairments. The use of Adjusted Gross Margin also
assists the Company’s management in assessing the profitability of
our homebuilding operations and making strategic decisions
regarding community location and product mix.
Forward-looking Adjusted Gross MarginThe Company
has not provided projected second quarter and full year fiscal 2017
gross margin or a GAAP reconciliation for forward-looking Adjusted
Gross Margin because such measure cannot be provided without
unreasonable efforts on a forward-looking basis, since inventory
write-downs are based on future activity and observation and
therefore cannot be projected for the second quarter or the full
fiscal year. The variability of these charges may have a
potentially unpredictable, and potentially significant, impact on
our second quarter and full year fiscal 2017 gross margin.
Net Debt-to-Capital RatioThe following table
reconciles the Company’s ratio of debt to capital (calculated in
accordance with GAAP) to the Company’s net debt-to-capital ratio (a
non-GAAP financial measure). The net debt-to-capital ratio is
calculated as (i) total debt minus mortgage warehouse loans minus
cash and cash equivalents divided by (ii) total debt minus mortgage
warehouse loans minus cash and cash equivalents plus stockholders’
equity.
Net Debt-to-Capital Ratio
Reconciliation |
|
|
|
January 31, |
|
October 31 |
|
|
2017 |
|
2016 |
|
2016 |
Loans
payable |
$ |
879,894 |
|
|
$ |
615,298 |
|
|
$ |
871,079 |
|
Senior
notes |
2,695,524 |
|
|
2,690,889 |
|
|
2,694,372 |
|
Mortgage
company loan facility |
57,040 |
|
|
63,907 |
|
|
210,000 |
|
Total
debt |
3,632,458 |
|
|
3,370,094 |
|
|
3,775,451 |
|
Total
stockholders' equity |
4,315,114 |
|
|
4,150,149 |
|
|
4,229,292 |
|
Total
capital |
$ |
7,947,572 |
|
|
$ |
7,520,243 |
|
|
$ |
8,004,743 |
|
Ratio of
debt-to-capital |
45.7 |
% |
|
44.8 |
% |
|
47.2 |
% |
|
|
|
|
|
|
|
Total
debt |
$ |
3,632,458 |
|
|
$ |
3,370,094 |
|
|
$ |
3,775,451 |
|
Less: |
Mortgage company loan
facility |
(57,040 |
) |
|
(63,907 |
) |
|
(210,000 |
) |
|
Cash and cash
equivalents |
(373,469 |
) |
|
(336,244 |
) |
|
(633,715 |
) |
Total net
debt |
3,201,949 |
|
|
2,969,943 |
|
|
2,931,736 |
|
Total
stockholders' equity |
4,315,114 |
|
|
4,150,149 |
|
|
4,229,292 |
|
Total net
capital |
$ |
7,517,063 |
|
|
$ |
7,120,092 |
|
|
$ |
7,161,028 |
|
Net
debt-to-capital ratio |
42.6 |
% |
|
41.7 |
% |
|
40.9 |
% |
The Company’s management uses the net
debt-to-capital ratio as an indicator of its overall leverage and
believes it is a useful financial measure to investors in
understanding the leverage employed in the Company’s
operations.
CONTACT: Frederick N. Cooper (215) 938-8312
fcooper@tollbrothersinc.com
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