Toll Brothers, Inc. (NYSE:TOL) (www.tollbrothers.com), the nation’s
leading builder of luxury homes, today announced results for its
second quarter and six months ended April 30, 2017.
FY 2017 Second Quarter Financial Highlights:
- FY 2017’s second-quarter net income was $124.6 million, or
$0.73 per share diluted, compared to net income of $89.1 million,
or $0.51 per share diluted, in FY 2016’s second quarter.
- Pre-tax income was $199.2 million, compared to pre-tax income
of $140.4 million in FY 2016’s second quarter. Second quarter
FY 2017 included inventory write-downs of $4.3 million, compared to
$6.4 million in FY 2016’s second quarter.
- Revenues of $1.36 billion and home building deliveries of 1,638
units increased 22% in dollars and 26% in units, compared to FY
2016’s second quarter. The average price of homes delivered
was $832,400, compared to $855,500 one year ago. The drop in the
average price of homes delivered, as well as in contracts and
backlog, was due to mix changes.
- Net signed contracts of $2.02 billion and 2,511 units rose 23%
in dollars and 26% in units, compared to FY 2016’s second
quarter. The average price of net signed contracts was
$804,200, compared to $825,500 one year ago.
- On a per-community basis, FY 2017’s second-quarter net signed
contracts was 7.82 units per community, compared to second-quarter
totals of 6.80 in FY 2016, 7.43 in FY 2015, and 7.14 in FY
2014.
- For the first three weeks of FY 2017’s third quarter, beginning
May 1, 2017, non-binding reservations deposits were up 12% in
units, compared to the same period in FY 2016.
- Backlog of $5.00 billion and 6,018 units rose 19% in dollars
and 22% in units, compared to FY 2016’s second-quarter-end
backlog. The average price of homes in backlog was $831,000,
compared to $848,600 one year ago.
- Gross margin, as a percentage of revenues, was 21.0% in FY 2017
second quarter, compared to 22.0% in FY 2016’s second
quarter. Adjusted Gross Margin, which excludes interest and
inventory write-downs (“Adjusted Gross Margins”), was 24.3%,
compared to 25.7% in FY 2016’s second
quarter.
- Other income and Income from unconsolidated entities totaled
$61.0 million, compared to $23.8 million one year ago.
- The Company ended its second quarter with 316 selling
communities, compared to 321 at FY 2017’s first-quarter end, and
299 at FY 2016’s second-quarter end.
- Based on FY 2017’s second-quarter-end backlog and the pace of
activity at its communities, the Company now estimates it will
deliver between 6,950 and 7,450 homes in FY 2017, compared to
previous guidance of 6,700 to 7,500 units, at an average delivered
price for FY 2017’s full year of between $775,000 and $825,000 per
home. This translates to projected revenues of between $5.4
billion and $6.1 billion in FY 2017, compared to $5.17 billion in
FY 2016.
- The Company reaffirms its previous guidance for full FY
Adjusted Gross Margin of between 24.8% to 25.3%, SG&A as a
percentage of revenues of 10.6%, Other income and Income from
unconsolidated entities of $160 million to $200 million and
effective tax rate of 37.5%.
- The Company expects FY 2017 third-quarter deliveries of between
1,675 and 1,975 units with an average price of between $790,000 and
$815,000.
- The Company expects its third-quarter FY 2017 Adjusted Gross
Margin to improve 10 basis points from FY 2017’s second-quarter
results.
- FY 2017 third-quarter SG&A is expected to be approximately
10.4% of third quarter revenues.
- The Company’s third-quarter FY 2017 Other income and Income
from unconsolidated entities is projected to be between $15 million
and $30 million.
- The FY 2017 third-quarter effective tax rate is projected to be
approximately 39.0%.
Douglas C. Yearley, Jr., Toll Brothers’ chief
executive officer, stated: “Solid and improving demand and the
financial strength of our affluent buyer base are driving our
growth. Second-quarter net income grew 40%, revenues
increased 22% in dollars and deliveries increased 26% in units, and
contracts rose 23% in dollars and 26% in units, compared to the
second quarter of FY 2016. This was our eleventh consecutive
quarter of year-over-year growth in contract dollars and units,
highlighted by double digit increases in each of the past four
quarters.
“This was the best spring selling season we have
had in over ten years. The number of contracts in FY 2017’s
second quarter was the highest since FY 2005’s third quarter and
the number of contracts per community was the highest since FY
2006’s second quarter.
“We believe we are benefiting from the appeal
and national recognition of the Toll Brothers brand and a lack of
large scale competition in the affordable end of the luxury new
home market. The breadth of products we offer, our beautiful
home designs and our ability to appeal to a wide range of
demographic groups, including affluent move-up, empty-nester and
millennial buyers, are also fueling our advantage.
“Increasingly, home buyers choose to buy new
over used homes, particularly in the luxury market where consumers
want, and can afford, to customize their homes. We think our
customization program differentiates us within our segment of the
luxury market. Every Toll Brothers buyer can create their
dream home to fit their current and future lifestyle. Our buyers
spend an additional $120,000, on average, in structural and
designer options to further customize their already well-appointed
homes.
“The supply of new and existing homes continues
to trail the growth in population and households. We are
producing strong results even with industry-wide home production
levels still well below historic norms. Our affluent
discerning buyer base, combined with our strong balance sheet, and
well located communities, is enabling us to outpace the industry in
many metrics. Based on our land supply and other competitive
advantages, we believe we are well positioned for the coming
years.”
Martin P. Connor, Toll Brothers’ chief financial
officer, stated: “We are very pleased with our results this
quarter. Earnings per share rose 43% and we hit the high end of our
projections in nearly all key metrics. Revenues, deliveries
and average delivered price were near the top of our range of
guidance. SG&A, as a percentage of revenues, was better
than we had previously projected. Gross Margin, as a
percentage of revenues, improved nearly 60 basis points over the
previous quarter. Adjusted Gross Margin also came in at the upper
boundary of our guidance, improving 34 basis points over the
previous quarter. Income from unconsolidated entities and
Other income combined were also well above the midpoint of our
guidance.
“Based on our strong results through FY 2017’s
first six months, we are revising upward our target of FY 2017
return-on-beginning-equity to 12.5% from 12% previously.
“In the second quarter, we issued $300 million
of 10-year bonds at a rate of 4.875%. With $691.3 million in cash
and $1.18 billion available under our credit facility at second
quarter end, we are opportunistically positioned to retire our $400
million of debt maturing in October 2017, as well as, potentially,
our $288 million convertible bonds in late calendar 2017. We
paid our first quarterly dividend on April 28, 2017 of $.08 per
share. We ended FY 2017’s second quarter with a
debt-to-capital ratio(1) of 45.4%, and our net debt-to-capital
ratio(1) dropped to 39.8%.
“Subject to our normal caveats regarding
forward-looking statements, we offer the following guidance:
Based on our strong first half results and our second-quarter-end
$5 billion backlog, up 19% in dollars and 22% in units, compared to
one year ago, 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 $5.4 billion and $6.1
billion, and between 6,950 and 7,450 units, at an average price per
unit of between $775,000 and $825,000. Adjusted Gross Margin is
expected to be between 24.8% and 25.3% while SG&A, as a
percentage of revenues, is projected to be about 10.6%. Other
income and Income from unconsolidated entities is projected to be
between $160 million and $200 million. We project the effective tax
rate for FY 2017 to be approximately 37.5%.
“For FY 2017’s third quarter, we project
deliveries of between 1,675 and 1,975 units at an average delivered
sales price of between $790,000 and $815,000. Adjusted Gross Margin
is expected to improve 10 basis points from FY 2017’s
second-quarter results, while SG&A, as a percentage of
revenues, is projected to be about 10.4% of revenues. Other income
and Income from unconsolidated entities is projected to be between
$15 million and $30 million. We project the effective tax rate for
our third quarter to be approximately 39.0%.”
Robert I. Toll, executive chairman, stated: “We
believe our strong results are being supported by the release of
pent-up demand. Single family housing starts, while rising to
835,000 in April, are still just half the previous peak of 1.72
million in 2005.
“Many factors are bringing buyers off the fence
right now, including low interest rates, urgency created by the
limited supply of resale and new homes, and improving personal
balance sheets and credit profiles. Our luxury buyers are further
benefiting from a solid employment picture, strong consumer
confidence, a robust stock market and increasing equity in their
existing homes. Additionally, as the Wall Street Journal recently
reported, the number of new-owner households was double the number
of new-renter households in the first calendar quarter of this
year. According to Trulia, this was the first time in a decade that
new buyers have exceeded new renters. Clearly, the new home market
is alive and well.”
The financial highlights for the second quarter
and six months ended April 30, 2017 (unaudited):
- FY 2017’s second-quarter net income was $124.6 million, or
$0.73 per share diluted, compared to FY 2016’s second-quarter net
income of $89.1 million, or $0.51 per share diluted.
- FY 2017’s second-quarter pre-tax income was $199.2 million,
compared to FY 2016’s second-quarter pre-tax income of $140.4
million. FY 2017’s second-quarter results included pre-tax
inventory write-downs totaling $4.3 million ($2.94 million of which
was attributable to operating communities, and $1.32 million of
which was attributable to future communities). FY 2016’s
second-quarter results included pre-tax inventory write-downs of
$6.4 million ($6.1 million of which was attributable to one
operating community, and $0.3 million of which was attributable to
future communities).
- FY 2017’s six-month net income was $195.1 million, or $1.15 per
share diluted, compared to FY 2016’s six-month net income of $162.2
million, or $0.91 per share diluted.
- FY 2017’s six-month pre-tax income was $309.0 million, compared
to FY 2016’s six-month pre-tax income of $257.2
million.
- FY 2017’s six-month pre-tax income results included pre-tax
inventory write-downs totaling $8.9 million ($8.1 million
attributable to operating communities and $0.8 million attributable
to future communities). FY 2016’s six-month results included
pre-tax inventory write-downs of $7.6 million ($6.7 million
attributable to operating communities and $0.9 million attributable
to future communities).
- FY 2017’s second-quarter total revenues of $1.36 billion and
1,638 units increased 22% in dollars and 26% in units, compared to
FY 2016’s second-quarter total revenues of $1.12 billion and 1,304
units. The average price of homes delivered was $832,400,
compared to $855,500 in FY 2016’s second quarter. The drop in the
average price of homes delivered was due to mix changes.
- FY 2017’s six-month total revenues of $2.28 billion and 2,828
units rose 12% in dollars and 19% in units, compared to FY 2016’s
same period totals of $2.04 billion and 2,367 units.
- The Company’s FY 2017 second-quarter net signed contracts of
$2.02 billion and 2,511 units rose by 23% in dollars and 26% in
units, compared to FY 2016’s second-quarter net contracts of $1.65
billion and 1,993 units. The average price of net signed contracts
was $804,200, compared to $825,500 in FY 2016’s second quarter. The
drop in the average price of net signed contracts was due to mix
changes.
- On a per-community basis, FY 2017’s second-quarter net signed
contracts were 7.82 units, compared to second-quarter totals of
6.80 units in FY 2016, 7.43 in FY 2015, and 7.14 in FY
2014.
- The Company’s FY 2017 six-month net signed contracts of $3.26
billion and 4,033 units increased 19% in dollars and 24% in units,
compared to net contracts of $2.73 billion and 3,243 units in FY
2016’s six-month period.
- In FY 2017, second-quarter-end backlog of $5.00 billion and
6,018 units increased 19% in dollars and 22% in units, compared to
FY 2016’s second-quarter-end backlog of $4.19 billion and 4,940
units. At second-quarter end, the average price of homes in
backlog was $831,000, compared to $848,600 at FY 2016’s
second-quarter end. The drop in the average price of homes in
backlog was due to mix changes.
- FY 2017’s second-quarter gross margin, as a percentage of
revenues, was 21.0%, compared to 22.0% in FY 2016’s second
quarter. FY 2017’s second-quarter Adjusted Gross Margin was
24.3% compared to 25.7% in FY 2016’s second quarter.
- Interest included in cost of sales was 3.0% of revenues in FY
2017’s second quarter, compared to 3.2% of revenues in FY 2016’s
second quarter.
- SG&A as a percentage of revenue was 10.8% in FY 2017’s
second quarter, compared to 11.5% in FY 2016’s second
quarter.
- Income from operations of $138.2 million represented 10.1% of
revenues in FY 2017’s second quarter, compared to $116.6 million
and 10.5% of revenues in FY 2016’s second quarter.
- Income from operations of $188.8 million represented 8.3% of
revenues in FY 2017’s six-month period, compared to $211.1 million
and 10.3% of revenues in FY 2016’s six-month period.
- Other income and Income from unconsolidated entities in FY
2017’s second quarter totaled $61.0 million, compared to $23.8
million in FY 2016’s same quarter. Contributing to Income from
unconsolidated entities was a $20.5 million gain on the disposition
of 50% of the Company’s 50% interest in a Toll Brothers Apartment
Living project - the Morgan at Provost Square, a 417-unit, 38-story
luxury rental project in Jersey City, New Jersey which the Company
continues to manage.
- Other income and Income from unconsolidated entities in FY
2017’s six-month period totaled $120.2 million, compared to $46.1
million in FY 2016’s same period. Contributing to Income from
unconsolidated entities was $26.7 million of gains on the
disposition of 50% of the Company’s 50% interest in two Toll
Brothers Apartment Living projects - the Morgan at Provost Square
(mentioned above) and Parc at Plymouth Meeting, a 398-unit,
garden style luxury rental project in Plymouth Meeting,
Pennsylvania.
- FY 2017’s second-quarter cancellation rate (current-quarter
cancellations divided by current-quarter signed contracts) was
3.5%, compared to 5.0% in FY 2016’s second quarter. As a percentage
of beginning-quarter backlog, FY 2017’s second-quarter cancellation
rate was 1.7%, compared to 2.5% in FY 2016’s second
quarter.
- The Company ended its FY 2017 second quarter with $691.3
million in cash, compared to $373.5 million at 2017’s first-quarter
end and $423.2 million at FY 2016's second-quarter end. At FY
2017’s second-quarter end, it had $1.18 billion available under its
$1.295 billion 20-bank credit facility, which is scheduled to
mature in May 2021.
- On March 7, 2017, the Company issued $300 million of 4.875%
10-year senior notes.
- On April 28, 2017, the Company paid its first quarterly
dividend of $0.08 per share to shareholders of record on the close
of business on April 14, 2017.
- The Company’s Stockholders’ Equity at FY 2017’s second-quarter
end was $4.45 billion, compared to $4.16 billion at FY 2016’s
second-quarter end.
- The Company ended FY 2017’s second quarter with a
debt-to-capital ratio(1) of 45.4%, compared to 45.7% at FY 2017’s
first-quarter end and 45.7% at FY 2016’s second-quarter end. The
Company ended FY 2017’s second quarter with a net debt-to-capital
ratio(1) of 39.8%, compared to 42.6% at FY 2017’s first-quarter end
and 41.7% at FY 2016’s second-quarter end.
- The Company ended FY 2017’s second quarter with approximately
46,600 lots owned and optioned, compared to 47,800 one quarter
earlier and 45,400 one year earlier. At 2017’s second-quarter end,
approximately 32,600 of these lots were owned, of which
approximately 18,000 lots, including those in backlog, were
substantially improved.
- In the second quarter of FY 2017, the Company purchased 623
lots for $107.0 million.
- The Company ended FY 2017’s second quarter with 316 selling
communities, compared to 321 at FY 2017’s first-quarter end and 299
at FY 2016’s second-quarter end.
- Based on FY 2017’s second-quarter-end backlog and the pace of
activity at its communities, the Company now estimates it will
deliver between 6,950 and 7,450 homes in FY 2017, compared to
previous guidance of 6,700 to 7,500 units. It believes the
average delivered price for FY 2017’s full year will be between
$775,000 and $825,000 per home. This translates to projected
revenues of between $5.4 billion and $6.1 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 of between 24.8% and 25.3%, SG&A as a
percentage of revenues of 10.6%, Other income and Income from
unconsolidated entities of $160 million to $200 million and
effective tax rate of 37.5%.
- The Company expects FY 2017 third-quarter deliveries of between
1,675 and 1,975 units with an average price of between $790,000 and
$815,000.
- The Company expects its third-quarter FY 2017 Adjusted Gross
Margin to improve 10 basis points from FY 2017’s second-quarter
results.
- FY 2017 third-quarter SG&A is expected to be approximately
10.4% of third quarter revenues.
- The Company’s third-quarter FY 2017 Other income and Income
from unconsolidated entities is expected to be between $15 million
and $30 million.
- The FY 2017 third-quarter effective tax rate is expected to be
approximately 39.0%.
(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.
(EDT) today, May 23, 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 second quarter ended April 30, 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) |
|
|
April 30, 2017 |
|
October 31, 2016 |
|
(Unaudited) |
|
|
ASSETS |
|
|
|
Cash and cash
equivalents |
$ |
691,266 |
|
|
$ |
633,715 |
|
Restricted cash and
investments |
797 |
|
|
31,291 |
|
Inventory |
7,602,695 |
|
|
7,353,967 |
|
Property, construction
and office equipment, net |
173,449 |
|
|
169,576 |
|
Receivables, prepaid
expenses and other assets |
536,514 |
|
|
582,758 |
|
Mortgage loans held for
sale |
89,485 |
|
|
248,601 |
|
Customer deposits held
in escrow |
74,493 |
|
|
53,057 |
|
Investments in
unconsolidated entities |
540,215 |
|
|
496,411 |
|
Deferred tax assets,
net of valuation allowances |
158,050 |
|
|
167,413 |
|
|
$ |
9,866,964 |
|
|
$ |
9,736,789 |
|
|
|
|
|
LIABILITIES AND
EQUITY |
|
|
|
Liabilities: |
|
|
|
Loans
payable |
$ |
637,931 |
|
|
$ |
871,079 |
|
Senior
notes |
2,993,882 |
|
|
2,694,372 |
|
Mortgage
company loan facility |
61,129 |
|
|
210,000 |
|
Customer
deposits |
387,940 |
|
|
309,099 |
|
Accounts
payable |
305,500 |
|
|
281,955 |
|
Accrued
expenses |
937,396 |
|
|
1,072,300 |
|
Income
taxes payable |
89,191 |
|
|
62,782 |
|
Total
liabilities |
5,412,969 |
|
|
5,501,587 |
|
|
|
|
|
Equity: |
|
|
|
Stockholders’ Equity |
|
|
|
Common
stock |
1,779 |
|
|
1,779 |
|
Additional paid-in capital |
716,124 |
|
|
728,464 |
|
Retained
earnings |
4,159,300 |
|
|
3,977,297 |
|
Treasury
stock, at cost |
(426,116 |
) |
|
(474,912 |
) |
Accumulated other comprehensive loss |
(2,999 |
) |
|
(3,336 |
) |
Total
stockholders' equity |
4,448,088 |
|
|
4,229,292 |
|
Noncontrolling interest |
5,907 |
|
|
5,910 |
|
Total
equity |
4,453,995 |
|
|
4,235,202 |
|
|
$ |
9,866,964 |
|
|
$ |
9,736,789 |
|
TOLL BROTHERS, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS(Amounts in thousands, except per share
data and percentages)(Unaudited) |
|
|
|
|
|
Six Months Ended April 30, |
|
Three Months Ended April 30, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
$ |
% |
|
$ |
% |
|
$ |
% |
|
$ |
% |
Revenues |
$ |
2,284,242 |
|
|
|
$ |
2,044,123 |
|
|
|
$ |
1,363,512 |
|
|
|
$ |
1,115,557 |
|
|
Cost of revenues |
1,810,443 |
|
79.3 |
% |
|
1,582,882 |
|
77.4 |
% |
|
1,077,441 |
|
79.0 |
% |
|
870,571 |
|
78.0 |
% |
Gross margin |
473,799 |
|
20.7 |
% |
|
461,241 |
|
22.6 |
% |
|
286,071 |
|
21.0 |
% |
|
244,986 |
|
22.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses |
284,971 |
|
12.5 |
% |
|
250,136 |
|
12.2 |
% |
|
147,876 |
|
10.8 |
% |
|
128,340 |
|
11.5 |
% |
Income from
operations |
188,828 |
|
8.3 |
% |
|
211,105 |
|
10.3 |
% |
|
138,195 |
|
10.1 |
% |
|
116,646 |
|
10.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Other: |
|
|
|
|
|
|
|
|
|
|
|
Income
from unconsolidated entities |
92,349 |
|
|
|
17,756 |
|
|
|
45,904 |
|
|
|
9,118 |
|
|
Other
income - net |
27,813 |
|
|
|
28,353 |
|
|
|
15,110 |
|
|
|
14,633 |
|
|
Income before income
taxes |
308,990 |
|
|
|
257,214 |
|
|
|
199,209 |
|
|
|
140,397 |
|
|
Income tax
provision |
113,936 |
|
|
|
94,980 |
|
|
|
74,571 |
|
|
|
51,343 |
|
|
Net income |
$ |
195,054 |
|
|
|
$ |
162,234 |
|
|
|
$ |
124,638 |
|
|
|
$ |
89,054 |
|
|
Per share: |
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings |
$ |
1.20 |
|
|
|
$ |
0.95 |
|
|
|
$ |
0.76 |
|
|
|
$ |
0.53 |
|
|
Diluted
earnings |
$ |
1.15 |
|
|
|
$ |
0.91 |
|
|
|
$ |
0.73 |
|
|
|
$ |
0.51 |
|
|
Cash
dividend declared |
$ |
0.08 |
|
|
|
|
|
|
$ |
0.08 |
|
|
|
|
|
Weighted-average number
of shares: |
|
|
|
|
|
|
|
|
|
|
|
Basic |
163,040 |
|
|
|
171,578 |
|
|
|
163,492 |
|
|
|
168,952 |
|
|
Diluted |
170,910 |
|
|
|
179,403 |
|
|
|
171,403 |
|
|
|
176,414 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate |
36.9 |
% |
|
|
36.9 |
% |
|
|
37.4 |
% |
|
|
36.6 |
% |
|
TOLL BROTHERS, INC. AND
SUBSIDIARIESSUPPLEMENTAL
DATA(Amounts in
thousands)(unaudited) |
|
|
|
|
|
Six Months Ended April 30, |
|
Three Months Ended April 30, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Impairment charges
recognized: |
|
|
|
|
|
|
|
Cost of
sales - land owned/controlled for future communities |
$ |
1,982 |
|
|
$ |
934 |
|
|
$ |
1,321 |
|
|
$ |
253 |
|
Cost of
sales - operating communities |
6,935 |
|
|
6,700 |
|
|
2,935 |
|
|
6,100 |
|
|
$ |
8,917 |
|
|
$ |
7,634 |
|
|
$ |
4,256 |
|
|
$ |
6,353 |
|
|
|
|
|
|
|
|
|
Depreciation and
amortization |
$ |
12,123 |
|
|
$ |
11,029 |
|
|
$ |
6,089 |
|
|
$ |
5,302 |
|
Interest incurred |
$ |
85,310 |
|
|
$ |
80,412 |
|
|
$ |
43,536 |
|
|
$ |
40,305 |
|
Interest expense: |
|
|
|
|
|
|
|
Charged
to cost of sales |
$ |
68,486 |
|
|
$ |
67,745 |
|
|
$ |
40,558 |
|
|
$ |
35,722 |
|
Charged
to other income - net |
1,995 |
|
|
309 |
|
|
1,953 |
|
|
34 |
|
|
$ |
70,481 |
|
|
$ |
68,054 |
|
|
$ |
42,511 |
|
|
$ |
35,756 |
|
|
|
|
|
|
|
|
|
Home sites
controlled: |
|
|
|
|
|
|
|
Owned |
32,561 |
|
|
34,612 |
|
|
|
|
|
Optioned |
14,031 |
|
|
10,827 |
|
|
|
|
|
|
46,592 |
|
|
45,439 |
|
|
|
|
|
|
Inventory at April 30, 2017 and October 31, 2016
consisted of the following (amounts in thousands):
|
April 30, 2017 |
|
October 31, 2016 |
Land and land
development costs |
$ |
2,324,856 |
|
|
$ |
2,497,603 |
|
Construction in
progress |
4,591,606 |
|
|
4,225,456 |
|
Sample homes |
506,165 |
|
|
460,948 |
|
Land deposits and costs
of future development |
155,034 |
|
|
144,417 |
|
Other |
25,034 |
|
|
25,543 |
|
|
$ |
7,602,695 |
|
|
$ |
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 April 30, |
|
Units |
|
$ (Millions) |
|
Average Price Per Unit $ |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
HOME BUILDING
REVENUES |
|
|
|
|
|
|
|
|
|
|
|
North |
277 |
|
|
235 |
|
|
$ |
189.3 |
|
|
$ |
165.7 |
|
|
$ |
683,600 |
|
|
$ |
705,000 |
|
Mid-Atlantic |
367 |
|
|
300 |
|
|
226.5 |
|
|
186.6 |
|
|
617,100 |
|
|
622,000 |
|
South |
274 |
|
|
239 |
|
|
195.1 |
|
|
192.5 |
|
|
712,100 |
|
|
805,200 |
|
West |
441 |
|
|
288 |
|
|
302.7 |
|
|
188.4 |
|
|
686,400 |
|
|
654,100 |
|
California |
248 |
|
|
216 |
|
|
373.3 |
|
|
328.4 |
|
|
1,505,300 |
|
|
1,520,500 |
|
Traditional Home Building |
1,607 |
|
|
1,278 |
|
|
1,286.9 |
|
|
1,061.6 |
|
|
800,800 |
|
|
830,600 |
|
City Living |
31 |
|
|
26 |
|
|
76.6 |
|
|
54.0 |
|
|
2,469,700 |
|
|
2,078,500 |
|
Total
consolidated |
1,638 |
|
|
1,304 |
|
|
$ |
1,363.5 |
|
|
$ |
1,115.6 |
|
|
$ |
832,400 |
|
|
$ |
855,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
CONTRACTS |
|
|
|
|
|
|
|
|
|
|
|
North |
408 |
|
|
327 |
|
|
$ |
264.2 |
|
|
$ |
230.4 |
|
|
$ |
647,400 |
|
|
$ |
704,500 |
|
Mid-Atlantic |
563 |
|
|
502 |
|
|
346.9 |
|
|
308.6 |
|
|
616,200 |
|
|
614,800 |
|
South |
406 |
|
|
367 |
|
|
294.1 |
|
|
266.0 |
|
|
724,500 |
|
|
724,700 |
|
West |
703 |
|
|
466 |
|
|
438.2 |
|
|
340.6 |
|
|
623,400 |
|
|
730,900 |
|
California |
388 |
|
|
275 |
|
|
594.1 |
|
|
408.5 |
|
|
1,531,200 |
|
|
1,485,500 |
|
Traditional Home Building |
2,468 |
|
|
1,937 |
|
|
1,937.5 |
|
|
1,554.1 |
|
|
785,100 |
|
|
802,300 |
|
City Living |
43 |
|
|
56 |
|
|
81.8 |
|
|
91.1 |
|
|
1,901,000 |
|
|
1,627,700 |
|
Total
consolidated |
2,511 |
|
|
1,993 |
|
|
$ |
2,019.3 |
|
|
$ |
1,645.2 |
|
|
$ |
804,200 |
|
|
$ |
825,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
BACKLOG |
|
|
|
|
|
|
|
|
|
|
|
North |
1,175 |
|
|
1,046 |
|
|
$ |
793.7 |
|
|
$ |
735.7 |
|
|
$ |
675,500 |
|
|
$ |
703,400 |
|
Mid-Atlantic |
1,265 |
|
|
1,034 |
|
|
782.9 |
|
|
658.2 |
|
|
618,900 |
|
|
636,600 |
|
South |
1,168 |
|
|
964 |
|
|
897.2 |
|
|
762.8 |
|
|
768,200 |
|
|
791,300 |
|
West |
1,427 |
|
|
1,073 |
|
|
975.9 |
|
|
788.7 |
|
|
683,900 |
|
|
735,100 |
|
California |
744 |
|
|
671 |
|
|
1,203.9 |
|
|
1,014.0 |
|
|
1,618,100 |
|
|
1,511,100 |
|
Traditional Home Building |
5,779 |
|
|
4,788 |
|
|
4,653.6 |
|
|
3,959.4 |
|
|
805,300 |
|
|
827,000 |
|
City Living |
239 |
|
|
152 |
|
|
347.3 |
|
|
232.7 |
|
|
1,453,000 |
|
|
1,530,700 |
|
Total
consolidated |
6,018 |
|
|
4,940 |
|
|
$ |
5,000.9 |
|
|
$ |
4,192.1 |
|
|
$ |
831,000 |
|
|
$ |
848,600 |
|
|
Six Months Ended April 30, |
|
Units |
|
$ (Millions) |
|
Average Price Per Unit $ |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
HOME BUILDING
REVENUES |
|
|
|
|
|
|
|
|
|
|
|
North |
486 |
|
|
415 |
|
|
$ |
335.0 |
|
|
$ |
286.5 |
|
|
$ |
689,300 |
|
|
$ |
690,400 |
|
Mid-Atlantic |
664 |
|
|
579 |
|
|
410.5 |
|
|
356.4 |
|
|
618,200 |
|
|
615,500 |
|
South |
464 |
|
|
437 |
|
|
337.3 |
|
|
339.3 |
|
|
726,900 |
|
|
776,400 |
|
West |
776 |
|
|
490 |
|
|
513.8 |
|
|
325.6 |
|
|
662,100 |
|
|
664,500 |
|
California |
403 |
|
|
375 |
|
|
593.1 |
|
|
545.3 |
|
|
1,471,700 |
|
|
1,454,100 |
|
Traditional Home Building |
2,793 |
|
|
2,296 |
|
|
2,189.7 |
|
|
1,853.1 |
|
|
784,000 |
|
|
807,100 |
|
City Living |
35 |
|
|
71 |
|
|
94.5 |
|
|
191.0 |
|
|
2,700,000 |
|
|
2,690,100 |
|
Total
consolidated |
2,828 |
|
|
2,367 |
|
|
$ |
2,284.2 |
|
|
$ |
2,044.1 |
|
|
$ |
807,700 |
|
|
$ |
863,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
CONTRACTS |
|
|
|
|
|
|
|
|
|
|
|
North |
684 |
|
|
571 |
|
|
$ |
435.9 |
|
|
$ |
403.0 |
|
|
$ |
637,300 |
|
|
$ |
705,800 |
|
Mid-Atlantic |
943 |
|
|
802 |
|
|
583.5 |
|
|
495.7 |
|
|
618,800 |
|
|
618,100 |
|
South |
672 |
|
|
577 |
|
|
498.1 |
|
|
432.9 |
|
|
741,200 |
|
|
750,300 |
|
West |
1,055 |
|
|
747 |
|
|
684.4 |
|
|
540.8 |
|
|
648,700 |
|
|
724,000 |
|
California |
614 |
|
|
437 |
|
|
929.3 |
|
|
661.6 |
|
|
1,513,500 |
|
|
1,514,000 |
|
Traditional Home Building |
3,968 |
|
|
3,134 |
|
|
3,131.2 |
|
|
2,534.0 |
|
|
789,100 |
|
|
808,600 |
|
City Living |
65 |
|
|
109 |
|
|
131.1 |
|
|
198.3 |
|
|
2,016,900 |
|
|
1,819,300 |
|
Total
consolidated |
4,033 |
|
|
3,243 |
|
|
$ |
3,262.3 |
|
|
$ |
2,732.3 |
|
|
$ |
808,900 |
|
|
$ |
842,500 |
|
|
Unconsolidated entities:
Information related to revenues and contracts of
entities in which we have an interest for the three-month and
six-month periods ended April 30, 2017 and 2016, and for
backlog at April 30, 2017 and 2016 is as follows:
|
Units |
|
$ (Millions) |
|
Average Price Per Unit $ |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Three months ended
April 30, |
|
|
|
|
|
|
|
|
|
|
|
Revenues |
56 |
|
|
21 |
|
|
$ |
153.2 |
|
|
$ |
21.5 |
|
|
$ |
2,736,100 |
|
|
$ |
1,022,100 |
|
Contracts |
41 |
|
|
38 |
|
|
$ |
36.5 |
|
|
$ |
57.6 |
|
|
$ |
889,600 |
|
|
$ |
1,514,900 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended April
30, |
|
|
|
|
|
|
|
|
|
|
|
Revenues |
143 |
|
|
40 |
|
|
$ |
370.6 |
|
|
$ |
37.5 |
|
|
$ |
2,591,700 |
|
|
$ |
937,600 |
|
Contracts |
69 |
|
|
68 |
|
|
$ |
79.9 |
|
|
$ |
105.2 |
|
|
$ |
1,158,400 |
|
|
$ |
1,547,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Backlog at April
30, |
110 |
|
|
214 |
|
|
$ |
180.8 |
|
|
$ |
534.3 |
|
|
$ |
1,643,600 |
|
|
$ |
2,496,700 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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(Amounts in thousands, except
percentages) |
|
|
|
|
|
|
|
|
|
Three |
|
|
Three Months Ended April 30, |
|
Months Ended |
|
|
2017 |
|
2016 |
|
January 31, 2017 |
Revenues |
$ |
1,363,512 |
|
|
$ |
1,115,557 |
|
|
$ |
920,730 |
|
Cost of
revenues |
1,077,441 |
|
|
870,571 |
|
|
733,002 |
|
Gross
margin |
286,071 |
|
|
244,986 |
|
|
187,728 |
|
Add: |
Interest recognized in
cost of sales |
40,558 |
|
|
35,722 |
|
|
27,928 |
|
|
Inventory
write-downs |
4,256 |
|
|
6,353 |
|
|
4,661 |
|
Adjusted
gross margin |
$ |
330,885 |
|
|
$ |
287,061 |
|
|
$ |
220,317 |
|
|
|
|
|
|
|
|
Gross
margin as a percentage of revenues |
20.98 |
% |
|
21.96 |
% |
|
20.39 |
% |
|
|
|
|
|
|
|
Adjusted
Gross Margin |
24.27 |
% |
|
25.73 |
% |
|
23.93 |
% |
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 third 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 third quarter or the full
fiscal year. The variability of these charges may have a
potentially unpredictable, and potentially significant, impact on
our third 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(Amounts in thousands, except
percentages) |
|
|
|
April 30, |
|
January 31 |
|
|
2017 |
|
2016 |
|
2017 |
Loans
payable |
$ |
637,931 |
|
|
$ |
711,293 |
|
|
$ |
879,894 |
|
Senior
notes |
2,993,882 |
|
|
2,692,061 |
|
|
2,695,524 |
|
Mortgage
company loan facility |
61,129 |
|
|
100,000 |
|
|
57,040 |
|
Total
debt |
3,692,942 |
|
|
3,503,354 |
|
|
3,632,458 |
|
Total
stockholders' equity |
4,448,088 |
|
|
4,159,139 |
|
|
4,315,114 |
|
Total
capital |
$ |
8,141,030 |
|
|
$ |
7,662,493 |
|
|
$ |
7,947,572 |
|
Ratio of
debt-to-capital |
45.4 |
% |
|
45.7 |
% |
|
45.7 |
% |
|
|
|
|
|
|
|
Total
debt |
$ |
3,692,942 |
|
|
$ |
3,503,354 |
|
|
$ |
3,632,458 |
|
Less: |
Mortgage company loan
facility |
(61,129 |
) |
|
(100,000 |
) |
|
(57,040 |
) |
|
Cash and cash
equivalents |
(691,266 |
) |
|
(423,178 |
) |
|
(373,469 |
) |
Total net
debt |
2,940,547 |
|
|
2,980,176 |
|
|
3,201,949 |
|
Total
stockholders' equity |
4,448,088 |
|
|
4,159,139 |
|
|
4,315,114 |
|
Total net
capital |
$ |
7,388,635 |
|
|
$ |
7,139,315 |
|
|
$ |
7,517,063 |
|
Net
debt-to-capital ratio |
39.8 |
% |
|
41.7 |
% |
|
42.6 |
% |
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@tollbrothers.com
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