Toll Brothers, Inc. (NYSE:TOL) (www.tollbrothers.com), the nation’s
leading builder of luxury homes, today announced results for its
third quarter and nine months ended July 31, 2016.
FY 2016 Third Quarter Financial Highlights:
- FY 2016’s third-quarter net income increased 58% to $105.5
million, or $0.61 per share diluted, compared to net income of
$66.7 million, or $0.36 per share diluted, in FY 2015’s third
quarter.
- Pre-tax income of $163.7 million increased 52%, compared to
pre-tax income of $107.5 million in FY 2015’s third quarter.
Included in FY 2016’s third-quarter cost of sales were impairments
of $3.7 million, compared to impairments of $18.0 million in FY
2015’s third quarter.
- Revenues of $1.27 billion and home building deliveries of 1,507
units rose 24% in dollars and 6% in units, compared to FY 2015’s
third quarter. The average price of homes delivered was $843,000,
compared to $724,000 in FY 2015’s third quarter.
- Net signed contracts of $1.45 billion and 1,748 units rose 18%
in dollars and units, compared to FY 2015’s third quarter. The
average price of net signed contracts was $831,000, compared to
$834,000 in FY 2015’s third quarter.
- Backlog of $4.37 billion and 5,181 units rose 19% in dollars
and 17% in units, compared to FY 2015’s third-quarter-end backlog.
At FY 2016’s third-quarter end, the average price of homes in
backlog was $844,000, compared to $829,000 at FY 2015’s
third-quarter end.
- Gross margin, as a percentage of revenues, was 21.9% in FY
2016’s third quarter, compared to 19.8% in FY 2015’s third quarter.
Adjusted gross margin, which excludes interest and inventory
write-downs, as a percentage of revenues (“Adjusted Gross Margin”),
was 25.3%, compared to 25.2% in FY 2015’s third quarter.
- SG&A, as a percentage of revenue, was 10.6%, compared to
11.3% in FY 2015’s third quarter.
- Income from operations was 11.3% of revenue, compared to 8.5%
of revenue in FY 2015’s third quarter.
- Other income and Income from unconsolidated entities totaled
$20.1 million, compared to $20.0 million in FY 2015’s third
quarter.
- The Company ended its third quarter with 297 selling
communities, compared to 299 at FY 2016’s second-quarter end, and
267 at FY 2015’s third-quarter end. The Company expects to end FY
2016 with between 305 and 315 selling communities.
- At FY 2016’s third-quarter end, the Company had approximately
48,700 lots owned and optioned, compared to approximately 45,400
one quarter earlier and 45,400 one year ago.
- The Company ended its FY 2016 third quarter with $351.9 million
of cash and marketable securities, compared to $423.2 million at
2016’s second-quarter end and $404.8 million at FY 2015’s
third-quarter end.
- During the third quarter of FY 2016, the Company repurchased
approximately 3.7 million shares, representing approximately 2% of
outstanding shares, of its common stock at an average price of
$26.33 per share for a total purchase price of approximately $97.3
million. Cumulatively, since the start of FY 2016, the Company has
repurchased approximately 11.4 million shares, representing
approximately 7% of outstanding shares, at an average price of
$28.72 per share for a total purchase price of approximately $327.6
million.
- The Company expects FY 2016 fourth quarter deliveries of
between 2,025 and 2,325 units with an average price of between
$815,000 and $835,000. This range results in projected full
FY 2016 deliveries of between 5,900 and 6,200 units with an average
delivered price of between $840,000 and $850,000. This would
result in FY 2016 revenues of between $4.96 billion and $5.27
billion, up approximately 19% to 26% over FY 2015.
- Due primarily to a shift in its mix of deliveries, the Company
now expects its full FY 2016 Adjusted Gross Margin to be between
25.6% and 25.8% of revenues, which is 30 basis points below
the mid-point of its previous guidance.
- The Company’s full FY 2016 Other income and Income from
unconsolidated entities is now expected to be between $88.5 million
and $93.5 million, down from its previous guidance of $105 million
to $130 million, as some of the closings of sold units in joint
ventures originally projected for this fourth quarter will instead
be delivered early in FY 2017.
Douglas C. Yearley, Jr., Toll Brothers’ chief
executive officer, stated: “Our net income rose 58% this quarter
versus one year ago, driven by a 24% increase in revenue, a 210
basis point improvement in gross margin and a 70 basis point
decline in SG&A, as a percentage of revenue, compared to the
third quarter of FY 2015.
“We are particularly pleased with this quarter’s
18% growth in contracts, in both dollars and units. And, through
the first three weeks of August, the beginning of our fourth
quarter, our non-binding reservation deposits are up 23%, compared
to one year ago.
“Our strategy to be the premiere brand in luxury
home building, and to provide a wide variety of product lines,
price points and geographic locations, continues to pay off.
In our third quarter, every region showed growth in contracts of
anywhere from 9% to 29% in dollars and 7% to 36% in units. Each
region contributed significantly. Of the $1.45 billion in
contracts signed this quarter, the North contributed 17%, the
Mid-Atlantic 17%, the South 17%, the West 19%, California 25% and
City Living 5%.
“It appears that buyers in the luxury market
continue to be drawn to our great brand name and nationwide
reputation. This February we were #6 among global brands in
the quality of our products/services offered according to Fortune
Magazine’s survey of the World’s Most Admired Companies. The
only companies in the world that ranked above us were Apple, Walt
Disney, Amazon, Alphabet and Nordstrom.
“Given our land holdings, geographic diversity,
variety of product offerings and brand name recognition, we believe
we will continue to benefit from our strong position within the
luxury new home market.”
Martin P. Connor, Toll Brothers’ chief financial
officer, stated: “Once again, virtually every income statement
metric improved this quarter compared, to a year ago, including
revenues, earnings and margins. Increases in new contracts and
backlog point to continuing growth in earnings.
“During the third quarter we expanded our
20-bank revolving credit facility to $1.295 billion and extended
its maturity to May 2021. We also extended our $500
million bank term loan effective August 2, 2016 until August
2021. Combined, this gives us approximately $1.8 billion
in capacity for variable rate borrowings, which, at the current
interest rate and spread, is about 2%.
“In the third quarter, we deployed $97.3 million
in cash to buy back 3.7 million shares at an average price of
$26.33 per share, effectively lowering our share count in the third
quarter by slightly more than 2%. This brings our spending on
share buybacks in the first nine months of FY 2016 to $327.6
million for 11.4 million shares (7% of shares outstanding) at an
average price of $28.72. We plan to continue to opportunistically
buy back stock.
“In deploying this cash for buybacks, we did not
limit our opportunities to invest in future growth.
During the third quarter, we purchased 3,494 lots for an aggregate
purchase price of $459.2 million and also placed 4,695 lots under
option. We ended this quarter with approximately 48,700 lots owned
and optioned, compared to 45,400 last quarter.
“Subject to the caveats in our Statement on
Forward-Looking Information included in this release, we offer the
following limited guidance.
“We expect to end FY 2016 with between 305 and
315 selling communities. In FY 2016’s fourth quarter, we
expect to deliver between 2,025 and 2,325 homes at an average price
of between $815,000 and $835,000. This narrows our previous
guidance on deliveries for full FY 2016 to between 5,900 and 6,200
homes at an average price of between $840,000 and $850,000 per
home. This would result in FY 2016 revenues of between $4.96
billion and $5.27 billion, up approximately 19% to 26% over FY
2015.
“We believe our product and geographic
diversification strategy is working. While each quarter some
segments may go up or down in volume or profitability, we continue
to maintain solid margins. For example, the Adjusted Gross
Margin on our traditional home building business, which represented
96% of this quarter’s revenues, rose to 24.7%, up 70 basis points
compared to one year ago. Our City Living business, at 4% of
revenue, saw its margin go from 43.2% one year ago to 39.8% this
quarter, but still remains our most profitable segment. Due to a
shift in mix, we now expect full FY 2016’s Adjusted Gross Margin to
be between 25.6% and 25.8%.
“Our full FY 2016 Other income and Income from
unconsolidated entities is now expected to be between $88.5 million
and $93.5 million, compared to previous guidance of $105 to $130
million as some of the closings of sold units in joint ventures
originally projected for this fourth quarter will instead be
delivered early in FY 2017.
“SG&A continues to grow in dollars but
decrease as a percentage of revenues, in line with expectations set
for the full fiscal year and reiterated on our second-quarter
earnings call. The growth in our backlog, contracts, community
count and joint ventures is adding costs prior to recognition of
revenue. We expect FY 2016’s fourth quarter SG&A, as a
percentage of revenue, to be approximately 8.3%, which translates
into full FY 2016 SG&A, as a percentage of revenue, of
approximately 10.4%.”
Robert I. Toll, executive chairman, stated: “Our
growth in contracts this quarter and the solid demand across most
of our markets reflects our brand recognition, our product quality
and our strong community locations in land-constrained markets.
“The National Association of Realtors recently
reported that sales of existing homes in June rose to the strongest
pace since February 2007. This would suggest that those who do own
homes have been building up more equity, which would enable them to
move up (for growing families), move down (for seniors buying in
the active adult and empty nester markets) or acquire a second
home. The solid economy and employment picture are also benefiting
our target customers. These factors, combined with continuing low
interest rates, a favorable supply-demand equation and limited
competition in the luxury market, position us for continued
growth.”
The financial highlights for the third quarter
and nine months ended July 31, 2016 (unaudited):
- FY 2016’s third-quarter net income was $105.5 million, or $0.61
per share diluted, compared to FY 2015’s third-quarter net income
of $66.7 million, or $0.36 per share diluted.
- FY 2016’s third-quarter pre-tax income was $163.7 million,
compared to FY 2015’s third-quarter pre-tax income of $107.5
million. FY 2016’s third-quarter results included pre-tax
inventory impairments totaling $3.72 million ($1.25 million
attributable to operating communities and $2.47 million
attributable to future communities). FY 2015’s third-quarter
results included pre-tax inventory impairments of $18.0 million
($6.0 million attributable to an operating community and $12.0
million attributable to future communities).
- FY 2016’s nine-month net income was $267.7 million, or $1.52
per share diluted, compared to FY 2015’s nine-month net income of
$216.0 million, or $1.18 per share diluted.
- FY 2016’s nine-month pre-tax income was $420.9 million,
compared to FY 2015’s nine-month pre-tax income of $318.0
million.
- FY 2016’s third-quarter total revenues of $1.27 billion and
1,507 units rose 24% in dollars and 6% in units, compared to FY
2015’s third-quarter total revenues of $1.03 billion and 1,419
units.
- FY 2016’s nine-month total revenues of $3.31 billion and 3,874
units rose 21% in dollars and 5% in units, compared to FY 2015’s
same period totals of $2.73 billion and 3,705 units.
- The Company’s FY 2016 third-quarter net contracts of $1.45
billion and 1,748 units rose by 18% in dollars and units, compared
to FY 2015’s third-quarter net contracts of $1.23 billion and 1,479
units.
- On a per-community basis, FY 2016’s third-quarter net signed
contracts were up 6% to 5.85 units, compared to third-quarter
totals of 5.50 units in FY 2015, 5.25 in FY 2014 and 6.24 in FY
2013.
- The Company’s FY 2016 nine-month net contracts of $4.18 billion
and 4,991 units increased 13% in dollars and 12% in units, compared
to net contracts of $3.70 billion and 4,473 units in FY 2015’s
nine-month period.
- FY 2016, third-quarter-end backlog of $4.37 billion and 5,181
units increased 19% in dollars and 17% in units, compared to FY
2015’s third-quarter-end backlog of $3.69 billion and 4,447
units.
- FY 2016’s third-quarter gross margin, as a percentage of
revenue, was 21.9%, compared to 19.8% in FY 2015’s third
quarter. FY 2016’s third-quarter Adjusted Gross Margin was
25.3 %, compared to 25.2% in FY 2015’s third quarter.
- Interest included in cost of sales was 3.1% of revenues in FY
2016’s third quarter, compared to 3.6% in FY 2015’s third
quarter.
- SG&A, as a percentage of revenue, was 10.6% in FY 2016’s
third quarter, compared to 11.3% in FY 2015’s third
quarter.
- Income from operations of $143.5 million represented 11.3% of
revenues in FY 2016’s third quarter, compared to $87.4 million and
8.5% of revenues in FY 2015’s third quarter.
- Income from operations of $354.6 million represented 10.7% of
revenues in FY 2016’s nine-month period, compared to $250.9 million
and 9.2% of revenues in FY 2015’s nine-month period.
- Other income and Income from unconsolidated entities in FY
2016’s third quarter totaled $20.1, compared to $20.0 million in FY
2015’s same quarter.
- Other income and Income from unconsolidated entities in FY
2016’s nine-month period totaled $66.2 million, compared to $67.1
million in FY 2015’s same period, which included an $8.1 million
gain from the sale of home security accounts to a third party by
the Company’s wholly-owned Westminster Security Company.
- FY 2016’s third-quarter cancellation rate (current-quarter
cancellations divided by current-quarter signed contracts) was
4.8%, compared to 5.9% in FY 2015’s third quarter. As a
percentage of beginning-quarter backlog, FY 2016’s third-quarter
cancellation rate was 1.8%, compared to 2.1% in FY 2015’s third
quarter.
- In FY 2016’s third quarter, unconsolidated entities in which
the Company had an interest delivered $17.9 million of homes,
compared to $24.6 million in the third quarter of FY 2015. In FY
2016’s first nine months, unconsolidated entities in which the
Company had an interest delivered $55.4 million of homes, compared
to $60.9 million in the same nine-month period of FY 2015. The
Company recorded its share of the results from these entities’
operations in “Income from Unconsolidated Entities” on the
Company’s Statement of Operations.
- In FY 2016’s third quarter, unconsolidated entities in which
the Company had an interest signed contracts for $36.6 million of
homes, compared to $72.4 million in the third quarter of FY 2015.
In FY 2016’s first nine months, unconsolidated entities in which
the Company had an interest signed contracts for $141.9 million of
homes, compared to $185.6 million in the same nine-month period of
FY 2015.
- At July 31, 2016, unconsolidated entities in which the Company
had an interest had a backlog of $553.1 million, compared to $409.2
million at July 31, 2015.
- The Company ended its FY 2016 third quarter with $351.9 million
of cash and marketable securities, compared to $423.2 million at
2016’s second-quarter end and $404.8 million at FY 2015’s
third-quarter end. During its third quarter, the Company expanded
its revolving credit facility to 20 banks and $1.295 billion, and
extended its maturity to May 2021. At FY 2016’s third-quarter end,
it had $765.8 million available under this facility.
- On August 2, 2016, the Company extended its $500 million,
5-year term loan from a February 2019 maturity to an August 2021
maturity.
- During the third quarter of FY 2016, the Company repurchased
approximately 3.7 million shares, representing approximately 2% of
outstanding shares, of its common stock at an average price of
$26.33 for a total purchase price of $97.3 million.
Cumulatively, since the start of FY 2016, the Company has purchased
approximately 11.4 million shares, representing approximately 7% of
outstanding shares, at an average price of $28.72 per share for a
total purchase price of approximately $327.6 million.
- The Company’s Stockholders’ Equity at FY 2016’s third-quarter
end was $4.17 billion, compared to $4.12 billion at FY 2015’s
third-quarter end.
- The Company ended FY 2016’s third quarter with a
debt-to-capital ratio of 48.2%, compared to 45.7% at FY 2016’s
second-quarter end and 44.5% at FY 2015’s third-quarter end. The
Company ended FY 2016’s third quarter with an adjusted net
debt-to-capital ratio(1) of 44.9%, compared to 41.7% at FY 2016’s
second-quarter end, and 40.5% at FY 2015’s third-quarter end.
- The Company ended FY 2016’s third quarter with approximately
48,700 lots owned and optioned, compared to 45,400 one quarter
earlier, and 45,400 one year earlier. At 2016’s third-quarter end,
approximately 35,600 of these lots were owned, of which
approximately 17,600 lots, including those in backlog, were
substantially improved.
- In the third quarter of FY 2016, the Company spent
approximately $459.2 million on land to purchase 3,494 lots.
- The Company ended FY 2016’s third quarter with 297 selling
communities, compared to 299 at FY 2016’s second-quarter end and
267 at FY 2015’s third-quarter end. The Company expects to
end FY 2016 with between 305 and 315 selling communities.
- Based on FY 2016’s third-quarter-end backlog and the pace of
activity at its communities, the Company expects FY 2016
fourth-quarter deliveries of between 2,025 and 2,325 units with an
average price of between $815,000 and $835,000. This range results
in narrowed delivery guidance of between 5,900 and 6,200 homes in
full FY 2016, with an average price of between $840,000 and
$850,000 per home, which would result in FY 2016 revenues of
between $4.96 billion to $5.27 billion, up approximately 19% to 26%
over FY 2015.
- The Company now expects full FY 2016’s Adjusted Gross Margin to
be between 25.6% and 25.8%, compared to previous guidance of 25.8%
to 26.2%. This is the result of a shift in mix.
- Full FY 2016 Other income and Income from unconsolidated
entities is now expected to be between $88.5 million and $93.5
million, down from its previous guidance of $105 million to $130
million, as some of the closings of sold units in joint ventures
originally projected for this fourth quarter will instead be
delivered early in FY 2017.
- The Company expects FY 2016’s fourth quarter SG&A, as a
percentage of revenue, to be approximately 8.3%, which would result
in full FY 2016 SG&A, as a percentage of revenue, of
approximately 10.4%.
(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, August 23, 2016, to discuss these results and its
outlook for FY 2016. 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 1000 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 19 states:
Arizona, California, Colorado, Connecticut, Delaware, Florida,
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. The Company purchases distressed
loan and real estate asset portfolios through its wholly owned
subsidiary, Gibraltar Capital and Asset Management. 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 2016, Toll Brothers ranked #6 among all 1,500
companies in Fortune magazine’s survey of the World’s Most Admired
Companies in the Quality of Products/Services Offered category
behind only Apple, Walt Disney, Amazon, Alphabet, and Nordstrom.
The firm was also named as the Most Admired Home Building Company
for 2016, the second 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 Statement
Information presented herein for the third
quarter ended July 31, 2016 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; and market and industry trends.
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; and weather conditions. 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 SUBSIDIARIES |
CONDENSED
CONSOLIDATED BALANCE SHEETS |
(Amounts in
thousands) |
|
|
July 31, 2016 |
|
October 31, 2015 |
|
(Unaudited) |
|
|
ASSETS |
|
|
|
Cash and cash
equivalents |
$ |
351,854 |
|
|
$ |
918,993 |
|
Marketable
securities |
|
|
10,001 |
|
Restricted cash |
43,183 |
|
|
16,795 |
|
Inventory |
7,670,523 |
|
|
6,997,516 |
|
Property, construction
and office equipment, net |
148,804 |
|
|
136,755 |
|
Receivables, prepaid
expenses and other assets |
280,277 |
|
|
284,130 |
|
Mortgage loans held for
sale |
170,937 |
|
|
123,175 |
|
Customer deposits held
in escrow |
66,846 |
|
|
56,105 |
|
Investments in
unconsolidated entities |
461,604 |
|
|
412,860 |
|
Investments in
foreclosed real estate and distressed loans |
13,687 |
|
|
51,730 |
|
Deferred tax assets,
net of valuation allowances |
197,984 |
|
|
198,455 |
|
|
$ |
9,405,699 |
|
|
$ |
9,206,515 |
|
|
|
|
|
LIABILITIES AND
EQUITY |
|
|
|
Liabilities: |
|
|
|
Loans payable |
$ |
1,058,656 |
|
|
$ |
1,000,439 |
|
Senior notes |
2,693,221 |
|
|
2,689,801 |
|
Mortgage company loan facility |
125,000 |
|
|
100,000 |
|
Customer deposits |
338,457 |
|
|
284,309 |
|
Accounts payable |
276,213 |
|
|
236,953 |
|
Accrued expenses |
628,684 |
|
|
608,066 |
|
Income taxes payable |
105,508 |
|
|
58,868 |
|
Total liabilities |
5,225,739 |
|
|
4,978,436 |
|
|
|
|
|
Equity: |
|
|
|
Stockholders’ Equity |
|
|
|
Common stock |
1,779 |
|
|
1,779 |
|
Additional paid-in capital |
724,151 |
|
|
728,125 |
|
Retained earnings |
3,862,919 |
|
|
3,595,202 |
|
Treasury stock, at cost |
(412,243 |
) |
|
(100,040 |
) |
Accumulated other comprehensive
loss |
(2,455 |
) |
|
(2,509 |
) |
Total stockholders' equity |
4,174,151 |
|
|
4,222,557 |
|
Noncontrolling interest |
5,809 |
|
|
5,522 |
|
Total equity |
4,179,960 |
|
|
4,228,079 |
|
|
$ |
9,405,699 |
|
|
$ |
9,206,515 |
|
TOLL BROTHERS,
INC. AND SUBSIDIARIES |
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS |
(Amounts in
thousands, except per share data) |
(Unaudited) |
|
|
Nine Months Ended July 31, |
|
Three Months Ended July 31, |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
Revenues |
$ |
3,314,057 |
|
|
$ |
2,734,046 |
|
|
$ |
1,269,934 |
|
|
$ |
1,028,011 |
|
|
|
|
|
|
|
|
|
Cost of revenues |
2,574,298 |
|
|
2,152,938 |
|
|
991,416 |
|
|
824,394 |
|
Selling, general and
administrative expenses |
385,120 |
|
|
330,174 |
|
|
134,984 |
|
|
116,175 |
|
|
2,959,418 |
|
|
2,483,112 |
|
|
1,126,400 |
|
|
940,569 |
|
|
|
|
|
|
|
|
|
Income from
operations |
354,639 |
|
|
250,934 |
|
|
143,534 |
|
|
87,442 |
|
Other: |
|
|
|
|
|
|
|
Income from unconsolidated
entities |
22,754 |
|
|
17,080 |
|
|
4,998 |
|
|
5,952 |
|
Other income - net |
43,474 |
|
|
50,005 |
|
|
15,121 |
|
|
14,070 |
|
Income before income
taxes |
420,867 |
|
|
318,019 |
|
|
163,653 |
|
|
107,464 |
|
Income tax
provision |
153,150 |
|
|
102,015 |
|
|
58,170 |
|
|
40,715 |
|
Net income |
$ |
267,717 |
|
|
$ |
216,004 |
|
|
$ |
105,483 |
|
|
$ |
66,749 |
|
Income per share: |
|
|
|
|
|
|
|
Basic |
$ |
1.58 |
|
|
$ |
1.22 |
|
|
$ |
0.64 |
|
|
$ |
0.38 |
|
Diluted |
$ |
1.52 |
|
|
$ |
1.18 |
|
|
$ |
0.61 |
|
|
$ |
0.36 |
|
Weighted-average number
of shares: |
|
|
|
|
|
|
|
Basic |
169,692 |
|
|
176,443 |
|
|
165,919 |
|
|
176,797 |
|
Diluted |
177,403 |
|
|
184,692 |
|
|
173,405 |
|
|
185,133 |
|
TOLL BROTHERS,
INC. AND SUBSIDIARIES |
SUPPLEMENTAL
DATA |
(Amounts in
thousands) |
(unaudited) |
|
|
Nine Months Ended July 31, |
|
Three Months Ended July 31, |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
Impairment charges
recognized: |
|
|
|
|
|
|
|
Cost of sales - land
owned/controlled for future communities |
$ |
3,403 |
|
|
$ |
13,279 |
|
|
$ |
2,469 |
|
|
$ |
11,969 |
|
Cost of sales - operating
communities |
7,950 |
|
|
18,000 |
|
|
1,250 |
|
|
6,000 |
|
|
$ |
11,353 |
|
|
$ |
31,279 |
|
|
$ |
3,719 |
|
|
$ |
17,969 |
|
|
|
|
|
|
|
|
|
Depreciation and
amortization |
$ |
16,838 |
|
|
$ |
17,667 |
|
|
$ |
5,809 |
|
|
$ |
5,895 |
|
Interest incurred |
$ |
122,079 |
|
|
$ |
117,896 |
|
|
$ |
41,667 |
|
|
$ |
37,438 |
|
Interest expense: |
|
|
|
|
|
|
|
Charged to cost of sales |
$ |
107,176 |
|
|
$ |
94,942 |
|
|
$ |
39,431 |
|
|
$ |
36,989 |
|
Charged to other income - net |
606 |
|
|
2,795 |
|
|
297 |
|
|
1,057 |
|
|
$ |
107,782 |
|
|
$ |
97,737 |
|
|
$ |
39,728 |
|
|
$ |
38,046 |
|
|
|
|
|
|
|
|
|
Home sites
controlled: |
|
|
|
|
|
|
|
Owned |
35,594 |
|
|
35,713 |
|
|
|
|
|
Optioned |
13,103 |
|
|
9,662 |
|
|
|
|
|
|
48,697 |
|
|
45,375 |
|
|
|
|
|
Inventory at July 31, 2016 and October 31, 2015
consisted of the following (amounts in thousands):
|
July 31, 2016 |
|
October 31, 2015 |
Land and land
development costs |
$ |
2,506,203 |
|
|
$ |
2,476,008 |
|
Construction in
progress |
4,534,045 |
|
|
3,977,542 |
|
Sample homes |
457,044 |
|
|
349,481 |
|
Land deposits and costs
of future development |
148,939 |
|
|
173,879 |
|
Other |
24,292 |
|
|
20,606 |
|
|
$ |
7,670,523 |
|
|
$ |
6,997,516 |
|
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, Nevada, and Washington |
California: |
California |
|
Three Months Ended July 31, |
|
Units |
|
$ (Millions) |
|
Average Price Per Unit $ |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
HOME BUILDING
REVENUES |
|
|
|
|
|
|
|
|
|
|
|
North |
313 |
|
|
287 |
|
|
$ |
205.2 |
|
|
$ |
180.7 |
|
|
$ |
655,600 |
|
|
$ |
629,600 |
|
Mid-Atlantic |
350 |
|
|
364 |
|
|
220.6 |
|
|
228.3 |
|
|
630,300 |
|
|
627,200 |
|
South |
294 |
|
|
299 |
|
|
232.1 |
|
|
233.5 |
|
|
789,500 |
|
|
780,900 |
|
West |
309 |
|
|
264 |
|
|
223.1 |
|
|
179.2 |
|
|
721,900 |
|
|
678,600 |
|
California |
227 |
|
|
125 |
|
|
336.4 |
|
|
145.8 |
|
|
1,482,100 |
|
|
1,166,700 |
|
Traditional Home Building |
1,493 |
|
|
1,339 |
|
|
1,217.4 |
|
|
967.5 |
|
|
815,400 |
|
|
722,600 |
|
City Living |
14 |
|
|
80 |
|
|
52.5 |
|
|
60.5 |
|
|
3,750,500 |
|
|
756,400 |
|
Total consolidated |
1,507 |
|
|
1,419 |
|
|
$ |
1,269.9 |
|
|
$ |
1,028.0 |
|
|
$ |
842,700 |
|
|
$ |
724,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
CONTRACTS |
|
|
|
|
|
|
|
|
|
|
|
North |
342 |
|
|
271 |
|
|
$ |
242.6 |
|
|
$ |
190.1 |
|
|
$ |
709,300 |
|
|
$ |
701,400 |
|
Mid-Atlantic |
396 |
|
|
353 |
|
|
242.5 |
|
|
221.8 |
|
|
612,300 |
|
|
628,300 |
|
South |
335 |
|
|
247 |
|
|
245.5 |
|
|
200.5 |
|
|
732,900 |
|
|
812,000 |
|
West |
387 |
|
|
363 |
|
|
276.7 |
|
|
247.6 |
|
|
715,100 |
|
|
682,000 |
|
California |
251 |
|
|
215 |
|
|
367.6 |
|
|
314.0 |
|
|
1,464,600 |
|
|
1,460,600 |
|
Traditional Home Building |
1,711 |
|
|
1,449 |
|
|
1,374.9 |
|
|
1,174.0 |
|
|
803,600 |
|
|
810,200 |
|
City Living |
37 |
|
|
30 |
|
|
77.4 |
|
|
59.9 |
|
|
2,091,700 |
|
|
1,995,500 |
|
Total consolidated |
1,748 |
|
|
1,479 |
|
|
$ |
1,452.3 |
|
|
$ |
1,233.9 |
|
|
$ |
830,800 |
|
|
$ |
834,300 |
|
|
|
|
|
|
|
|
|
|
|
|
|
BACKLOG |
|
|
|
|
|
|
|
|
|
|
|
North |
1,075 |
|
|
970 |
|
|
$ |
773.1 |
|
|
$ |
638.6 |
|
|
$ |
719,200 |
|
|
$ |
658,300 |
|
Mid-Atlantic |
1,080 |
|
|
893 |
|
|
680.1 |
|
|
568.8 |
|
|
629,700 |
|
|
637,000 |
|
South |
1,005 |
|
|
941 |
|
|
776.2 |
|
|
770.2 |
|
|
772,400 |
|
|
818,500 |
|
West |
1,151 |
|
|
844 |
|
|
842.4 |
|
|
571.8 |
|
|
731,900 |
|
|
677,400 |
|
California |
695 |
|
|
683 |
|
|
1,045.1 |
|
|
917.0 |
|
|
1,503,800 |
|
|
1,342,700 |
|
Traditional Home Building |
5,006 |
|
|
4,331 |
|
|
4,116.9 |
|
|
3,466.4 |
|
|
822,400 |
|
|
800,400 |
|
City Living |
175 |
|
|
116 |
|
|
257.6 |
|
|
221.9 |
|
|
1,471,700 |
|
|
1,913,300 |
|
Total consolidated |
5,181 |
|
|
4,447 |
|
|
$ |
4,374.5 |
|
|
$ |
3,688.3 |
|
|
$ |
844,300 |
|
|
$ |
829,400 |
|
|
Nine Months Ended July 31, |
|
Units |
|
$ (Millions) |
|
Average Price Per Unit $ |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
HOME BUILDING
REVENUES |
|
|
|
|
|
|
|
|
|
|
|
North |
728 |
|
|
735 |
|
|
$ |
491.7 |
|
|
$ |
463.1 |
|
|
$ |
675,400 |
|
|
$ |
630,100 |
|
Mid-Atlantic |
929 |
|
|
929 |
|
|
577.0 |
|
|
579.2 |
|
|
621,100 |
|
|
623,500 |
|
South |
731 |
|
|
824 |
|
|
571.4 |
|
|
611.3 |
|
|
781,700 |
|
|
741,900 |
|
West |
799 |
|
|
675 |
|
|
548.7 |
|
|
455.6 |
|
|
686,700 |
|
|
675,000 |
|
California |
602 |
|
|
400 |
|
|
881.8 |
|
|
439.8 |
|
|
1,464,800 |
|
|
1,099,500 |
|
Traditional Home Building |
3,789 |
|
|
3,563 |
|
|
3,070.6 |
|
|
2,549.0 |
|
|
810,400 |
|
|
715,400 |
|
City Living |
85 |
|
|
142 |
|
|
243.5 |
|
|
185.0 |
|
|
2,864,700 |
|
|
1,302,800 |
|
Total consolidated |
3,874 |
|
|
3,705 |
|
|
$ |
3,314.1 |
|
|
$ |
2,734.0 |
|
|
$ |
855,500 |
|
|
$ |
737,900 |
|
|
|
|
|
|
|
|
|
|
|
|
|
CONTRACTS |
|
|
|
|
|
|
|
|
|
|
|
North |
913 |
|
|
827 |
|
|
$ |
645.6 |
|
|
$ |
537.1 |
|
|
$ |
707,100 |
|
|
$ |
649,500 |
|
Mid-Atlantic |
1,198 |
|
|
992 |
|
|
738.2 |
|
|
628.5 |
|
|
616,200 |
|
|
633,600 |
|
South |
912 |
|
|
802 |
|
|
678.4 |
|
|
658.3 |
|
|
743,900 |
|
|
820,800 |
|
West |
1,134 |
|
|
930 |
|
|
817.6 |
|
|
634.7 |
|
|
721,000 |
|
|
682,500 |
|
California |
688 |
|
|
808 |
|
|
1,029.1 |
|
|
1,052.3 |
|
|
1,495,800 |
|
|
1,302,400 |
|
Traditional Home Building |
4,845 |
|
|
4,359 |
|
|
3,908.9 |
|
|
3,510.9 |
|
|
806,800 |
|
|
805,400 |
|
City Living |
146 |
|
|
114 |
|
|
275.7 |
|
|
191.8 |
|
|
1,888,400 |
|
|
1,682,500 |
|
Total consolidated |
4,991 |
|
|
4,473 |
|
|
$ |
4,184.6 |
|
|
$ |
3,702.7 |
|
|
$ |
838,400 |
|
|
$ |
827,800 |
|
Unconsolidated entities:
Information related to revenues and contracts of entities in
which we have an interest for the three-month and nine-month
periods ended July 31, 2016 and 2015, and for backlog at
July 31, 2016 and 2015 is as follows:
|
Units |
|
$ (Millions) |
|
Average Price Per Unit $ |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
Three months ended July
31, |
|
|
|
|
|
|
|
|
|
|
|
Revenues |
21 |
|
|
26 |
|
|
$ |
17.9 |
|
|
$ |
24.6 |
|
|
$ |
851,300 |
|
|
$ |
946,000 |
|
Contracts |
27 |
|
|
42 |
|
|
$ |
36.6 |
|
|
$ |
72.4 |
|
|
$ |
1,357,100 |
|
|
$ |
1,723,900 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended July
31, |
|
|
|
|
|
|
|
|
|
|
|
Revenues |
61 |
|
|
75 |
|
|
$ |
55.4 |
|
|
$ |
60.9 |
|
|
$ |
907,900 |
|
|
$ |
811,400 |
|
Contracts |
95 |
|
|
107 |
|
|
$ |
141.9 |
|
|
$ |
185.6 |
|
|
$ |
1,493,400 |
|
|
$ |
1,734,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Backlog at July
31, |
220 |
|
|
167 |
|
|
$ |
553.1 |
|
|
$ |
409.2 |
|
|
$ |
2,513,900 |
|
|
$ |
2,450,200 |
|
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 July 31, |
|
Twelve Months Ended October 31, 2015 |
|
|
2016 |
|
2015 |
|
Revenues |
$ |
1,269,934 |
|
|
$ |
1,028,011 |
|
|
$ |
4,171,248 |
|
Cost of
revenues |
991,416 |
|
|
824,394 |
|
|
3,269,270 |
|
Gross
margin |
278,518 |
|
|
203,617 |
|
|
901,978 |
|
Add: |
Interest recognized in
cost of sales |
39,431 |
|
|
36,989 |
|
|
142,947 |
|
|
Inventory
write-downs |
3,719 |
|
|
17,969 |
|
|
35,709 |
|
Adjusted
gross margin |
$ |
321,668 |
|
|
$ |
258,575 |
|
|
$ |
1,080,634 |
|
|
|
|
|
|
|
|
Gross
margin as a percentage of revenues |
21.9 |
% |
|
19.8 |
% |
|
21.6 |
% |
|
|
|
|
|
|
|
Adjusted
Gross Margin |
25.3 |
% |
|
25.2 |
% |
|
25.9 |
% |
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 full year FY 2016 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 full fiscal year. The variability of these charges may have
a potentially unpredictable, and potentially significant, impact on
our gross margin for FY 2016.
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 and marketable securities divided by (ii)
total debt minus mortgage warehouse loans minus cash and cash
equivalents and marketable securities plus stockholders’
equity.
Net Debt-to-Capital Ratio
Reconciliation |
|
|
|
July 31, |
|
April 30, |
|
|
2016 |
|
2015 |
|
2016 |
Loans
payable |
$ |
1,058,656 |
|
|
$ |
865,516 |
|
|
$ |
711,293 |
|
Senior
notes |
2,693,221 |
|
|
2,341,904 |
|
|
2,692,061 |
|
Mortgage
company loan facility |
125,000 |
|
|
100,000 |
|
|
100,000 |
|
Total
debt |
3,876,877 |
|
|
3,307,420 |
|
|
3,503,354 |
|
Total
stockholders' equity |
4,174,151 |
|
|
4,120,981 |
|
|
4,159,139 |
|
Total
capital |
$ |
8,051,028 |
|
|
$ |
7,428,401 |
|
|
$ |
7,662,493 |
|
Ratio of
debt to capital |
48.2 |
% |
|
44.5 |
% |
|
45.7 |
% |
|
|
|
|
|
|
|
Total
debt |
$ |
3,876,877 |
|
|
$ |
3,307,420 |
|
|
$ |
3,503,354 |
|
Less: |
Mortgage company loan
facility |
(125,000 |
) |
|
(100,000 |
) |
|
(100,000 |
) |
|
Cash and cash
equivalents and marketable securities |
(351,854 |
) |
|
(404,816 |
) |
|
(423,178 |
) |
Total net
debt |
3,400,023 |
|
|
2,802,604 |
|
|
2,980,176 |
|
Total
stockholders' equity |
4,174,151 |
|
|
4,120,981 |
|
|
4,159,139 |
|
Total net
capital |
$ |
7,574,174 |
|
|
$ |
6,923,585 |
|
|
$ |
7,139,315 |
|
Net
debt-to-capital ratio |
44.9 |
% |
|
40.5 |
% |
|
41.7 |
% |
Note: Certain July 31, 2015 amounts have been
restated due to the adoption of the Financial Accounting Standards
Board Accounting Standards Update No. 2015-03, "Interest—Imputation
of Interest (Subtopic 835-30): Simplifying the Presentation of Debt
Issuance Costs." See Note 1, "Significant Accounting Policies
- Recent Accounting Pronouncements" in our 2015 Annual Report on
Form 10-K for additional information.
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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