ITEM 1. FINANCIAL STATEMENTS
TOLL BROTHERS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
April 30,
2019
|
|
October 31,
2018
|
|
|
(unaudited)
|
|
|
|
ASSETS
|
|
|
|
|
Cash and cash equivalents
|
$
|
924,448
|
|
|
$
|
1,182,195
|
|
|
Inventory
|
7,790,840
|
|
|
7,598,219
|
|
|
Property, construction, and office equipment, net
|
289,186
|
|
|
193,281
|
|
|
Receivables, prepaid expenses, and other assets (1)
|
659,768
|
|
|
550,778
|
|
|
Mortgage loans held for sale
|
124,940
|
|
|
170,731
|
|
|
Customer deposits held in escrow
|
97,462
|
|
|
117,573
|
|
|
Investments in unconsolidated entities
|
390,085
|
|
|
431,813
|
|
|
|
$
|
10,276,729
|
|
|
$
|
10,244,590
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
Liabilities
|
|
|
|
|
Loans payable
|
$
|
1,027,408
|
|
|
$
|
686,801
|
|
|
Senior notes
|
2,512,404
|
|
|
2,861,375
|
|
|
Mortgage company loan facility
|
110,012
|
|
|
150,000
|
|
|
Customer deposits
|
419,479
|
|
|
410,864
|
|
|
Accounts payable
|
318,346
|
|
|
362,098
|
|
|
Accrued expenses
|
890,668
|
|
|
973,581
|
|
|
Income taxes payable
|
12,172
|
|
|
30,959
|
|
|
Total liabilities
|
5,290,489
|
|
|
5,475,678
|
|
|
Equity
|
|
|
|
|
Stockholders’ equity
|
|
|
|
|
Preferred stock, none issued
|
—
|
|
|
—
|
|
|
Common stock, 177,937 shares issued at April 30, 2019 and October 31, 2018
|
1,779
|
|
|
1,779
|
|
|
Additional paid-in capital
|
721,311
|
|
|
727,053
|
|
|
Retained earnings
|
5,352,424
|
|
|
5,161,551
|
|
|
Treasury stock, at cost — 31,907 and 31,774 shares at April 30, 2019 and October 31, 2018, respectively
|
(1,135,166
|
)
|
|
(1,130,878
|
)
|
|
Accumulated other comprehensive income
|
806
|
|
|
694
|
|
|
Total stockholders’ equity
|
4,941,154
|
|
|
4,760,199
|
|
|
Noncontrolling interest
|
45,086
|
|
|
8,713
|
|
|
Total equity
|
4,986,240
|
|
|
4,768,912
|
|
|
|
$
|
10,276,729
|
|
|
$
|
10,244,590
|
|
|
|
|
|
(1)
|
As of
April 30, 2019
and
October 31, 2018
, receivables, prepaid expenses, and other assets include
$138.5 million
and
$19.7 million
, respectively, of assets related to consolidated variable interest entities ("VIEs"). See Note 4, “Investments in Unconsolidated Entities” for additional information regarding VIEs.
|
See accompanying notes.
TOLL BROTHERS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Amounts in thousands, except per share data)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended April 30,
|
|
Three months ended April 30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
Revenues:
|
|
|
|
|
|
|
|
|
Home sales
|
$
|
3,031,365
|
|
|
$
|
2,774,667
|
|
|
$
|
1,712,057
|
|
|
$
|
1,599,199
|
|
|
Land sales
|
47,910
|
|
|
—
|
|
|
4,037
|
|
|
—
|
|
|
|
3,079,275
|
|
|
2,774,667
|
|
|
1,716,094
|
|
|
1,599,199
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues:
|
|
|
|
|
|
|
|
|
Home sales
|
2,416,592
|
|
|
2,232,637
|
|
|
1,374,347
|
|
|
1,298,157
|
|
|
Land sales
|
37,174
|
|
|
—
|
|
|
2,921
|
|
|
—
|
|
|
|
2,453,766
|
|
|
2,232,637
|
|
|
1,377,268
|
|
|
1,298,157
|
|
|
Selling, general and administrative
|
340,609
|
|
|
323,919
|
|
|
178,371
|
|
|
166,652
|
|
|
Income from operations
|
284,900
|
|
|
218,111
|
|
|
160,455
|
|
|
134,390
|
|
|
Other:
|
|
|
|
|
|
|
|
|
Income from unconsolidated entities
|
10,559
|
|
|
41,444
|
|
|
4,419
|
|
|
2,564
|
|
|
Other income – net
|
32,146
|
|
|
24,791
|
|
|
11,285
|
|
|
15,794
|
|
|
Income before income taxes
|
327,605
|
|
|
284,346
|
|
|
176,159
|
|
|
152,748
|
|
|
Income tax provision
|
86,231
|
|
|
40,429
|
|
|
46,835
|
|
|
40,938
|
|
|
Net income
|
$
|
241,374
|
|
|
$
|
243,917
|
|
|
$
|
129,324
|
|
|
$
|
111,810
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income, net of tax
|
112
|
|
|
341
|
|
|
56
|
|
|
170
|
|
|
Total comprehensive income
|
$
|
241,486
|
|
|
$
|
244,258
|
|
|
$
|
129,380
|
|
|
$
|
111,980
|
|
|
|
|
|
|
|
|
|
|
|
Per share:
|
|
|
|
|
|
|
|
|
Basic earnings
|
$
|
1.65
|
|
|
$
|
1.58
|
|
|
$
|
0.88
|
|
|
$
|
0.73
|
|
|
Diluted earnings
|
$
|
1.63
|
|
|
$
|
1.55
|
|
|
$
|
0.87
|
|
|
$
|
0.72
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of shares:
|
|
|
|
|
|
|
|
|
Basic
|
146,687
|
|
|
154,306
|
|
|
146,622
|
|
|
152,731
|
|
|
Diluted
|
148,081
|
|
|
157,013
|
|
|
148,129
|
|
|
155,129
|
|
See accompanying notes.
TOLL BROTHERS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Amounts in thousands)
(Unaudited)
For the
six
months ended
April 30, 2019
and
2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
|
Addi-
tional
Paid-in
Capital
|
|
Retained
Earnings
|
|
Treasury
Stock
|
|
Accum-
ulated
Other
Compre-
hensive (Loss)/Income
|
|
Non-controlling Interest
|
|
Total
Equity
|
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
Balance, October 31, 2018
|
1,779
|
|
|
727,053
|
|
|
5,161,551
|
|
|
(1,130,878
|
)
|
|
694
|
|
|
8,713
|
|
|
4,768,912
|
|
|
Cumulative effect adjustment upon adoption of ASC 606, net of tax
|
|
|
|
|
(17,987
|
)
|
|
|
|
|
|
|
|
(17,987
|
)
|
|
Net income
|
|
|
|
|
241,374
|
|
|
|
|
|
|
|
|
241,374
|
|
|
Purchase of treasury stock
|
|
|
|
|
|
|
(25,244
|
)
|
|
|
|
|
|
(25,244
|
)
|
|
Exercise of stock options and stock based compensation issuances
|
|
|
(19,667
|
)
|
|
|
|
20,245
|
|
|
|
|
|
|
578
|
|
|
Employee stock purchase plan issuances
|
|
|
9
|
|
|
|
|
711
|
|
|
|
|
|
|
720
|
|
|
Stock-based compensation
|
|
|
13,916
|
|
|
|
|
|
|
|
|
|
|
13,916
|
|
|
Dividends declared
|
|
|
|
|
(32,514
|
)
|
|
|
|
|
|
|
|
(32,514
|
)
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
112
|
|
|
|
|
112
|
|
|
Loss attributable to non-controlling interest
|
|
|
|
|
|
|
|
|
|
|
(4
|
)
|
|
(4
|
)
|
|
Capital contributions
|
|
|
|
|
|
|
|
|
|
|
36,377
|
|
|
36,377
|
|
|
Balance, April 30, 2019
|
1,779
|
|
|
721,311
|
|
|
5,352,424
|
|
|
(1,135,166
|
)
|
|
806
|
|
|
45,086
|
|
|
4,986,240
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, October 31, 2017
|
1,779
|
|
|
720,115
|
|
|
4,474,064
|
|
|
(662,854
|
)
|
|
(1,910
|
)
|
|
5,896
|
|
|
4,537,090
|
|
|
Cumulative effect adjustment upon adoption of ASU 2016-09 and ASU 2018-02, net of tax
|
|
|
374
|
|
|
1,502
|
|
|
|
|
(411
|
)
|
|
|
|
1,465
|
|
|
Net income
|
|
|
|
|
243,917
|
|
|
|
|
|
|
|
|
243,917
|
|
|
Purchase of treasury stock
|
|
|
|
|
|
|
(291,478
|
)
|
|
|
|
|
|
(291,478
|
)
|
|
Exercise of stock options and stock based compensation issuances
|
|
|
(19,984
|
)
|
|
|
|
28,520
|
|
|
|
|
|
|
8,536
|
|
|
Employee stock purchase plan issuances
|
|
|
98
|
|
|
|
|
495
|
|
|
|
|
|
|
593
|
|
|
Stock-based compensation
|
|
|
15,346
|
|
|
|
|
|
|
|
|
|
|
15,346
|
|
|
Dividends declared
|
|
|
|
|
(29,211
|
)
|
|
|
|
|
|
|
|
(29,211
|
)
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
341
|
|
|
|
|
341
|
|
|
Loss attributable to non-controlling interest
|
|
|
|
|
|
|
|
|
|
|
(3
|
)
|
|
(3
|
)
|
|
Balance, April 30, 2018
|
1,779
|
|
|
715,949
|
|
|
4,690,272
|
|
|
(925,317
|
)
|
|
(1,980
|
)
|
|
5,893
|
|
|
4,486,596
|
|
For the three months ended
April 30, 2019
and
2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
|
Addi-
tional
Paid-in
Capital
|
|
Retained
Earnings
|
|
Treasury
Stock
|
|
Accum-
ulated
Other
Compre-
hensive (Loss)/Income
|
|
Non-controlling Interest
|
|
Total
Equity
|
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
Balance, January 31, 2019
|
1,779
|
|
|
717,405
|
|
|
5,239,251
|
|
|
(1,139,623
|
)
|
|
750
|
|
|
41,627
|
|
|
4,861,189
|
|
|
Net income
|
|
|
|
|
129,324
|
|
|
|
|
|
|
|
|
129,324
|
|
|
Purchase of treasury stock
|
|
|
|
|
|
|
(101
|
)
|
|
|
|
|
|
(101
|
)
|
|
Exercise of stock options and stock based compensation issuances
|
|
|
(1,473
|
)
|
|
|
|
4,201
|
|
|
|
|
|
|
2,728
|
|
|
Employee stock purchase plan issuances
|
|
|
48
|
|
|
|
|
357
|
|
|
|
|
|
|
405
|
|
|
Stock-based compensation
|
|
|
5,331
|
|
|
|
|
|
|
|
|
|
|
5,331
|
|
|
Dividends declared
|
|
|
|
|
(16,151
|
)
|
|
|
|
|
|
|
|
(16,151
|
)
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
56
|
|
|
|
|
56
|
|
|
Loss attributable to non-controlling interest
|
|
|
|
|
|
|
|
|
|
|
(4
|
)
|
|
(4
|
)
|
|
Capital contributions
|
|
|
|
|
|
|
|
|
|
|
3,463
|
|
|
3,463
|
|
|
Balance, April 30, 2019
|
1,779
|
|
|
721,311
|
|
|
5,352,424
|
|
|
(1,135,166
|
)
|
|
806
|
|
|
45,086
|
|
|
4,986,240
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, January 31, 2018
|
1,779
|
|
|
709,800
|
|
|
4,595,233
|
|
|
(845,668
|
)
|
|
(2,150
|
)
|
|
5,896
|
|
|
4,464,890
|
|
|
Net income
|
|
|
|
|
111,810
|
|
|
|
|
|
|
|
|
111,810
|
|
|
Purchase of treasury stock
|
|
|
|
|
|
|
(81,508
|
)
|
|
|
|
|
|
(81,508
|
)
|
|
Exercise of stock options and stock based compensation issuances
|
|
|
(347
|
)
|
|
|
|
1,583
|
|
|
|
|
|
|
1,236
|
|
|
Employee stock purchase plan issuances
|
|
|
39
|
|
|
|
|
276
|
|
|
|
|
|
|
315
|
|
|
Stock-based compensation
|
|
|
6,457
|
|
|
|
|
|
|
|
|
|
|
6,457
|
|
|
Dividends declared
|
|
|
|
|
(16,771
|
)
|
|
|
|
|
|
|
|
(16,771
|
)
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
170
|
|
|
|
|
170
|
|
|
Loss attributable to non-controlling interest
|
|
|
|
|
|
|
|
|
|
|
(3
|
)
|
|
(3
|
)
|
|
Balance, April 30, 2018
|
1,779
|
|
|
715,949
|
|
|
4,690,272
|
|
|
(925,317
|
)
|
|
(1,980
|
)
|
|
5,893
|
|
|
4,486,596
|
|
See accompanying notes.
TOLL BROTHERS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended April 30,
|
|
|
2019
|
|
2018
|
|
Cash flow used in operating activities:
|
|
|
|
|
Net income
|
$
|
241,374
|
|
|
$
|
243,917
|
|
|
Adjustments to reconcile net income to net cash used in operating activities:
|
|
|
|
|
Depreciation and amortization
|
33,314
|
|
|
12,520
|
|
|
Stock-based compensation
|
13,916
|
|
|
15,347
|
|
|
Income from unconsolidated entities
|
(10,559
|
)
|
|
(41,444
|
)
|
|
Distributions of earnings from unconsolidated entities
|
13,835
|
|
|
39,508
|
|
|
Income from foreclosed real estate and distressed loans
|
(351
|
)
|
|
(1,026
|
)
|
|
Deferred tax provision (benefit)
|
2,557
|
|
|
(29,886
|
)
|
|
Inventory impairments and write-offs
|
26,956
|
|
|
17,685
|
|
|
Gain on sales of golf club property and an office building
|
(13,331
|
)
|
|
|
|
|
Other
|
254
|
|
|
754
|
|
|
Changes in operating assets and liabilities
|
|
|
|
|
Increase in inventory
|
(215,141
|
)
|
|
(540,898
|
)
|
|
Origination of mortgage loans
|
(673,032
|
)
|
|
(575,285
|
)
|
|
Sale of mortgage loans
|
720,231
|
|
|
594,933
|
|
|
Increase in receivables, prepaid expenses, and other assets
|
(94,837
|
)
|
|
(97,388
|
)
|
|
Increase in customer deposits – net
|
28,726
|
|
|
40,505
|
|
|
(Decrease) increase in accounts payable and accrued expenses
|
(142,959
|
)
|
|
14,204
|
|
|
Decrease in income taxes payable
|
(16,631
|
)
|
|
(19,714
|
)
|
|
Net cash used in operating activities
|
(85,678
|
)
|
|
(326,268
|
)
|
|
Cash flow provided by investing activities:
|
|
|
|
|
Purchase of property, construction, and office equipment – net
|
(44,941
|
)
|
|
(6,501
|
)
|
|
Investments in unconsolidated entities
|
(31,560
|
)
|
|
(10,800
|
)
|
|
Return of investments in unconsolidated entities
|
70,465
|
|
|
54,315
|
|
|
Investment in foreclosed real estate and distressed loans
|
(522
|
)
|
|
(195
|
)
|
|
Return of investments in foreclosed real estate and distressed loans
|
1,214
|
|
|
3,122
|
|
|
Proceeds from sales of golf club property and an office building
|
33,539
|
|
|
|
|
|
Net cash provided by investing activities
|
28,195
|
|
|
39,941
|
|
|
Cash flow (used in) provided by financing activities:
|
|
|
|
|
Proceeds from issuance of senior notes
|
|
|
|
400,000
|
|
|
Debt issuance costs for senior notes
|
|
|
|
(3,410
|
)
|
|
Proceeds from loans payable
|
1,339,641
|
|
|
1,238,283
|
|
|
Debt issuance costs for loans payable
|
(1,948
|
)
|
|
|
|
|
Principal payments of loans payable
|
(1,131,795
|
)
|
|
(1,276,148
|
)
|
|
Redemption of senior notes
|
(350,000
|
)
|
|
|
|
|
Proceeds from stock-based benefit plans, net
|
1,302
|
|
|
9,133
|
|
|
Purchase of treasury stock
|
(25,244
|
)
|
|
(291,478
|
)
|
|
Dividends paid
|
(32,434
|
)
|
|
(29,090
|
)
|
|
Receipts related to noncontrolling interest, net
|
13
|
|
|
|
|
|
Net cash (used in) provided by financing activities
|
(200,465
|
)
|
|
47,290
|
|
|
Net decrease in cash, cash equivalents, and restricted cash
|
(257,948
|
)
|
|
(239,037
|
)
|
|
Cash, cash equivalents, and restricted cash, beginning of period
|
1,182,939
|
|
|
715,311
|
|
|
Cash, cash equivalents, and restricted cash, end of period
|
$
|
924,991
|
|
|
$
|
476,274
|
|
See accompanying notes.
TOLL BROTHERS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Significant Accounting Policies
Basis of Presentation
The accompanying condensed consolidated financial statements include the accounts of Toll Brothers, Inc. (the “Company,” “we,” “us,” or “our”), a Delaware corporation, and its majority owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. Investments in 50% or less owned partnerships and affiliates are accounted for using the equity method unless it is determined that we have effective control of the entity, in which case we would consolidate the entity.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. The
October 31, 2018
balance sheet amounts and disclosures included herein have been derived from our
October 31, 2018
audited financial statements. Since the accompanying condensed consolidated financial statements do not include all the information and footnotes required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements, they should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended
October 31, 2018
(“
2018
Form 10-K”). In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, which are of a normal recurring nature, necessary to present fairly our financial position as of
April 30, 2019
; the results of our operations and changes in equity for the
six
-month and three-month periods ended
April 30, 2019
and
2018
; and our cash flows for the
six
-month periods ended
April 30, 2019
and
2018
. The results of operations for such interim periods are not necessarily indicative of the results to be expected for the full year.
Revenue Recognition
As discussed under “Recent Accounting Pronouncements” below, on November 1, 2018, we adopted Accounting Standards Codification (“ASC”) Topic 606 “Revenue from Contracts with Customers” (“ASC 606”). As a result of this adoption, we updated our revenue recognition policies effective November 1, 2018, as follows:
Home sales revenues:
Revenues and cost of revenues from home sales are recognized at the time each home is delivered and title and possession are transferred to the buyer. For the majority of our home closings, our performance obligation to deliver a home is satisfied in less than one year from the date a binding sale agreement is signed. In certain states that we build, we are not able to complete certain outdoor features prior to the closing of the home. Effective November 1, 2018, to the extent these separate performance obligations are not complete upon the home closing, we defer a portion of the home sales revenues related to these obligations and subsequently recognize the revenue upon completion of such obligations. As of
April 30, 2019
, we deferred home sales revenues and related costs of
$2.5 million
and
$1.9 million
, respectively, related to obligations not completed on closed homes. Our contract liabilities, consisting of deposits received from customers for sold but undelivered homes, totaled
$419.5 million
,
$406.4 million
, and
$410.9 million
at
April 30, 2019
, January 31, 2019, and
October 31, 2018
, respectively. Of the outstanding customer deposits held as of
October 31, 2018
, we recognized
$204.4 million
in home sales revenues during the
six
months ended
April 30, 2019
. Of the outstanding customer deposits held as of January 31, 2019, we recognized
$124.5 million
in home sales revenues during the three months ended
April 30, 2019
.
Land sales revenues:
Our revenues from land sales generally consist of the following: (1) lot sales to third-party builders within our master planned communities; (2) land sales to joint ventures in which we retain an interest; and (3) bulk land sales to third parties of land we have decided no longer meets our development criteria. In general, our performance obligation for each of these land sales is fulfilled upon the delivery of the land, which generally coincides with the receipt of cash consideration from the counterparty. Effective November 1, 2018, in land sale transactions that contain repurchase options, revenues and related costs are not recognized until the repurchase option expires. In addition, when we sell land to a joint venture in which we retain an interest, we do not recognize revenue or gains on the sale to the extent of our retained interest in such joint venture.
Forfeited Customer Deposits:
Effective November 1, 2018, forfeited customer deposits are recognized in “Home sales revenues” in our Condensed Consolidated Statements of Operations and Comprehensive Income in the period in which we determine that the customer will not complete the purchase of the home and we have the right to retain the deposit.
Sales Incentives:
In order to promote sales of our homes, we may grant our home buyers sales incentives. These incentives will vary by type of incentive and by amount on a community-by-community and home-by-home basis. Incentives are reflected as a reduction in home sales revenues. Incentives are recognized at the time the home is delivered to the home buyer and we receive the sales proceeds.
Recent Accounting Pronouncements
In May 2014, the FASB created ASC 606 with the issuance ASU No. 2014-09, “Revenue from Contracts with Customers,” which provides guidance for revenue recognition. ASC 606 affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets. ASC 606 supersedes the revenue recognition requirements in Accounting Standards Codification (“ASC”) Topic 605, “Revenue Recognition,” and most industry-specific guidance. ASC 606 also supersedes some cost guidance included in ASC Subtopic 605-35, “Revenue Recognition—Construction-Type and Production-Type Contracts.” The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which a company expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under the previous guidance. These judgments and estimates include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price, and allocating the transaction price to each separate performance obligation. In August 2015, the FASB issued ASU 2015-14 “Revenue from Contracts with Customers” (“ASU 2015-14”), which delayed the effective date of ASC 606 by one year. ASC 606, as amended by ASU 2015-14, became effective for our fiscal year beginning November 1, 2018, and we adopted the new standard under the modified retrospective transition method applied to contracts that were not completed as of November 1, 2018. We recognized the cumulative effect, net of tax, of applying ASC 606 as an adjustment to the opening balance of retained earnings. The comparative information has not been restated and continues to be reported under the previous accounting standards. The adoption of ASC 606 did not have a material impact on our Condensed Consolidated Balance Sheet or Condensed Consolidated Statement of Operations or Comprehensive Income, and there have been no significant changes to our internal controls, processes, or systems as a result of implementing this new standard. However, the adoption of ASC 606 resulted in the following changes:
|
|
|
|
•
|
Prior to adoption of ASC 606, we capitalized certain costs related to our marketing efforts, including sales offices and model home upgrades and furnishings within “Inventory” on our Condensed Consolidated Balance Sheets and amortized such costs through “Selling, general, and administrative” on our Condensed Consolidated Statements of Operations and Comprehensive Income. As of November 1, 2018, we reclassified
$104.8 million
to “Property, construction, and office equipment, net” on our Condensed Consolidated Balance Sheets, primarily related to sales offices and model home improvement costs. The amortization of such costs will remain unchanged and will continue to be included in “Selling, general, and administrative” on our Condensed Consolidated Statements of Operations and Comprehensive Income. Additionally, we recorded a net cumulative effect adjustment to retained earnings of approximately
$13.2 million
for certain other marketing costs that no longer qualify for capitalization under the new guidance, and such costs will be expensed as incurred in the future.
|
|
|
|
|
•
|
Prior to adoption of ASC 606, we recorded our land sale revenues, net of their related expenses, within “Other income – net” on our Condensed Consolidated Statements of Operations and Comprehensive Income. As of November 1, 2018, we are presenting this activity in income from operations and breaking out the components of land sales revenues and land sales cost of revenues on our Condensed Consolidated Statements of Operations and Comprehensive Income. In addition, due to the existence of certain repurchase options in existing agreements to sell lots to third party builders in our master planned communities, both for wholly owned projects as well as projects in which we are a joint venture partner, we recorded a net cumulative effect adjustment to retained earnings of approximately
$4.6 million
to account for previously settled lots for which the related repurchase option has not yet expired. Because the amount of the deferred earning is not material to our condensed consolidated financial statements, we have elected to recognize the revenue and related expenses for such lots in future periods when such repurchase options expire rather than account for them as leases under ASC 840, “Leases.”
|
|
|
|
|
•
|
Prior to adoption of ASC 606, retained customer deposits were classified in “Other income – net” on our Condensed Consolidated Statements of Operations and Comprehensive Income. As of November 1, 2018, retained customer deposits, which totaled
$6.4 million
and
$3.2 million
during the
six
months and three months ended
April 30, 2019
, respectively, are included in “Home sales revenue” on our Condensed Consolidated Statements of Operations and Comprehensive Income. Prior period balances for retained customer deposits have not been reclassified and are not material to our condensed consolidated financial statements.
|
In February 2017, the FASB issued ASU No. 2017-05, “Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets” (“ASU 2017-05”). ASU 2017-05 is meant to clarify the scope of the original guidance within Subtopic 610-20 that was issued in connection with ASC 606, which provides guidance for recognizing gains and losses from the transfer of nonfinancial assets in contracts with noncustomers. ASU 2017-05 also added guidance for partial sales of nonfinancial assets. ASU 2017-05 became effective for our fiscal year beginning November 1, 2018 and we adopted ASU
2017-05 concurrent with our adoption of ASC 606. The adoption of ASU 2017-05 did not have a material effect on our condensed consolidated financial statements and disclosures.
In November 2016, the FASB issued ASU No. 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash” (“ASU 2016-18”), which provides guidance on the classification of restricted cash in the statement of cash flows. ASU 2016-18 became effective for our fiscal year beginning November 1, 2018 and resulted in a change in the presentation to our Condensed Consolidated Statement of Cash Flows but did not have a material effect on our other condensed consolidated financial statements or disclosures.
In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments” (“ASU 2016-15”), which is intended to reduce diversity in practice in how certain transactions are classified and makes eight targeted changes to how cash receipts and cash payments are presented in the statement of cash flows. ASU 2016-15 became effective for our fiscal year beginning November 1, 2018 and did not have a material effect on our condensed consolidated financial statements and disclosures.
In February 2016, the FASB issued ASU No. 2016-02, “Leases” (“ASU 2016-02”), which requires an entity to recognize assets and liabilities on the balance sheet for the rights and obligations created by leased assets and provide additional disclosures. In July 2018, the FASB issued ASU No. 2018-11, “Leases: Targeted Improvements” (“ASU 2018-11”), which provides an entity with the option to apply the transition provisions of the new standard at its adoption date instead of at its earliest comparative period presented. ASU 2018-11 also provides an entity with a practical expedient that permits lessors to not separate nonlease components from the associated lease component if certain conditions are met. ASU 2016-02, as amended by ASU 2018-11, is effective for our fiscal year beginning November 1, 2019, at which time we will adopt the new standard using a modified retrospective approach. We are currently evaluating the impact that the adoption of ASU 2016-02, as amended by ASU 2018-11, may have on our consolidated financial statements and disclosures.
In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). ASU 2016-13 replaces the current incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to estimate credit losses. ASU 2016-13 is effective for our fiscal year beginning November 1, 2020, with early adoption permitted as of November 1, 2019. We are currently evaluating the impact that the adoption of ASU 2016-13 may have on our consolidated financial statements and disclosures.
2. Acquisition – Subsequent Event
In May 2019, we acquired substantially all of the assets and operations of
Sharp Residential, LLC
(“Sharp”), a builder in metropolitan Atlanta, Georgia, for approximately
$93.2 million
in cash. The assets acquired were primarily inventory, including approximately
950
home sites owned or controlled through land purchase agreements. In connection with this acquisition, we assumed contracts to deliver
125
homes with an aggregate value of
$66.1 million
. The average price of undelivered homes at the date of acquisition was approximately
$528,900
. As a result of this acquisition, our selling community count increased by
10
communities at the acquisition date.
3. Inventory
Inventory at
April 30, 2019
and
October 31, 2018
consisted of the following (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
April 30,
2019
|
|
October 31,
2018
|
|
Land controlled for future communities
|
$
|
174,116
|
|
|
$
|
139,985
|
|
|
Land owned for future communities
|
934,774
|
|
|
916,616
|
|
|
Operating communities
|
6,681,950
|
|
|
6,541,618
|
|
|
|
$
|
7,790,840
|
|
|
$
|
7,598,219
|
|
Operating communities include communities offering homes for sale; communities that have sold all available home sites but have not completed delivery of the homes; communities that were previously offering homes for sale but are temporarily closed due to business conditions or non-availability of improved home sites and that are expected to reopen within 12 months of the end of the fiscal period being reported on; and communities preparing to open for sale. The carrying value attributable to operating communities includes the cost of homes under construction, land and land development costs, the carrying cost of home sites in current and future phases of these communities, and the carrying cost of model homes.
Communities that were previously offering homes for sale but are temporarily closed due to business conditions, do not have any remaining backlog, and are not expected to reopen within 12 months of the end of the fiscal period being reported on have been classified as land owned for future communities.
Information regarding the classification, number, and carrying value of these temporarily closed communities, as of the dates indicated, is provided in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
April 30,
2019
|
|
October 31,
2018
|
|
Land owned for future communities:
|
|
|
|
|
Number of communities
|
15
|
|
|
17
|
|
|
Carrying value (in thousands)
|
$
|
105,281
|
|
|
$
|
124,426
|
|
|
Operating communities:
|
|
|
|
|
Number of communities
|
3
|
|
|
1
|
|
|
Carrying value (in thousands)
|
$
|
21,931
|
|
|
$
|
2,622
|
|
The amounts we have provided for inventory impairment charges and the expensing of costs that we believed not to be recoverable, for the periods indicated, are shown in the table below (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended April 30,
|
|
Three months ended April 30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
Land controlled for future communities
|
$
|
3,676
|
|
|
$
|
377
|
|
|
$
|
1,899
|
|
|
$
|
260
|
|
|
Land owned for future communities
|
|
|
|
247
|
|
|
|
|
|
247
|
|
|
Operating communities
|
23,280
|
|
|
17,061
|
|
|
17,495
|
|
|
13,325
|
|
|
|
$
|
26,956
|
|
|
$
|
17,685
|
|
|
$
|
19,394
|
|
|
$
|
13,832
|
|
See Note 12, “Fair Value Disclosures,” for information regarding the number of operating communities that we tested for potential impairment, the number of operating communities in which we recognized impairment charges, the amount of impairment charges recognized, and the fair values of those communities, net of impairment charges.
At
April 30, 2019
, we evaluated our land purchase contracts, including those to acquire land for apartment developments, to determine whether any of the selling entities were VIEs and, if they were, whether we were the primary beneficiary of any of them. Under these land purchase contracts, we do not possess legal title to the land; our risk is generally limited to deposits paid to the sellers and predevelopment costs incurred; and the creditors of the sellers generally have no recourse against us. At
April 30, 2019
, we determined that
130
land purchase contracts, with an aggregate purchase price of
$2.00 billion
, on which we had made aggregate deposits totaling
$130.1 million
, were VIEs, and that we were not the primary beneficiary of any VIE related to our land purchase contracts. At
October 31, 2018
, we determined that
110
land purchase contracts, with an aggregate purchase price of
$1.88 billion
, on which we had made aggregate deposits totaling
$120.5 million
, were VIEs and that we were not the primary beneficiary of any VIE related to our land purchase contracts.
Interest incurred, capitalized, and expensed, for the periods indicated, was as follows (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended April 30,
|
|
Three months ended April 30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
Interest capitalized, beginning of period
|
$
|
319,364
|
|
|
$
|
352,049
|
|
|
$
|
330,167
|
|
|
$
|
354,496
|
|
|
Interest incurred
|
87,862
|
|
|
81,269
|
|
|
43,440
|
|
|
42,582
|
|
|
Interest expensed to home sales cost of revenues
|
(79,227
|
)
|
|
(78,912
|
)
|
|
(44,786
|
)
|
|
(45,027
|
)
|
|
Interest expensed to land sales cost of revenues
|
(635
|
)
|
|
|
|
|
(283
|
)
|
|
|
|
|
Interest expensed in other income
|
|
|
(1,001
|
)
|
|
|
|
(285
|
)
|
|
Interest capitalized on investments in unconsolidated entities
|
(3,084
|
)
|
|
(3,602
|
)
|
|
(1,270
|
)
|
|
(1,891
|
)
|
|
Previously capitalized interest on investments in unconsolidated entities transferred to inventory
|
4,303
|
|
|
115
|
|
|
1,315
|
|
|
43
|
|
|
Interest capitalized, end of period
|
$
|
328,583
|
|
|
$
|
349,918
|
|
|
$
|
328,583
|
|
|
$
|
349,918
|
|
4. Investments in Unconsolidated Entities
We have investments in various unconsolidated entities. These entities, which are structured as joint ventures, (i) develop land for the joint venture participants and for sale to outside builders (“Land Development Joint Ventures”); (ii) develop for-sale homes (“Home Building Joint Ventures”); (iii) develop luxury for-rent residential apartments, commercial space, and a hotel (“Rental Property Joint Ventures”), which includes our investment in Toll Brothers Realty Trust (the “Trust”); and (iv) invest in
distressed loans and real estate and provide financing and land banking to residential builders and developers for the acquisition and development of land and home sites (“Gibraltar Joint Ventures”).
The table below provides information as of
April 30, 2019
, regarding active joint ventures that we are invested in, by joint venture category ($ amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land
Development
Joint Ventures
|
|
Home Building
Joint Ventures
|
|
Rental Property
Joint Ventures
|
|
Gibraltar
Joint Ventures
|
|
Total
|
|
Number of unconsolidated entities
|
7
|
|
4
|
|
18
|
|
8
|
|
37
|
|
Investment in unconsolidated entities
|
$
|
139,883
|
|
|
$
|
64,081
|
|
|
$
|
168,574
|
|
|
$
|
17,547
|
|
|
$
|
390,085
|
|
|
Number of unconsolidated entities with funding commitments by the Company
|
2
|
|
1
|
|
2
|
|
1
|
|
|
6
|
|
Company’s remaining funding commitment to unconsolidated entities
|
$
|
17,551
|
|
|
$
|
1,400
|
|
|
$
|
2,300
|
|
|
$
|
9,621
|
|
|
$
|
30,872
|
|
Certain joint ventures in which we have investments obtained debt financing to finance a portion of their activities. The table below provides information at
April 30, 2019
, regarding the debt financing obtained by category ($ amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land
Development
Joint Ventures
|
|
Home Building
Joint Ventures
|
|
Rental Property
Joint Ventures
|
|
Total
|
|
Number of joint ventures with debt financing
|
3
|
|
3
|
|
16
|
|
22
|
|
Aggregate loan commitments
|
$
|
100,877
|
|
|
$
|
280,118
|
|
|
$
|
1,191,229
|
|
|
$
|
1,572,224
|
|
|
Amounts borrowed under loan commitments
|
$
|
76,894
|
|
|
$
|
247,328
|
|
|
$
|
924,613
|
|
|
$
|
1,248,835
|
|
More specific and/or recent information regarding our investments in, advances to, and future commitments to these entities is provided below.
Land Development Joint Ventures
During the
six
months ended
April 30, 2019
, our Land Development Joint Ventures sold approximately
498
lots and recognized revenues of
$138.8 million
. We acquired
195
of these lots for
$96.5 million
. Our share of the joint venture income from the lots we acquired was insignificant. During the
six
months ended
April 30, 2018
, our Land Development Joint Ventures sold approximately
449
lots and recognized revenues of
$102.8 million
. We acquired
55
of these lots for
$7.3 million
. Our share of the income of
$0.9 million
from the lots we acquired was deferred by reducing our basis in those lots.
During the three months ended
April 30, 2019
, our Land Development Joint Ventures sold approximately
297
lots and recognized revenues of
$49.0 million
. We acquired
88
of these lots for
$25.3 million
. Our share of the joint venture income from the lots we acquired was insignificant. During the three months ended April 30, 2018, our Land Development Joint Ventures sold approximately
200
lots and recognized revenues of
$62.6 million
. We acquired
25
of these lots for
$4.2 million
. Our share of the income of
$0.4 million
from the lots we acquired was deferred by reducing our basis in those lots.
Home Building Joint Ventures
Our Home Building Joint Ventures are delivering homes in New York, New York, and Jupiter, Florida. During the
six
months ended
April 30, 2019
and
2018
, our Home Building Joint Ventures delivered
72
homes with a sales value of
$121.8 million
and
54
homes with a sales value of
$67.9 million
, respectively. During the three months ended
April 30, 2019
and
2018
, our Home Building Joint Ventures delivered
55
homes with a sales value of
$94.6 million
and
26
homes with a sales value of
$35.4 million
, respectively.
Rental Property Joint Ventures
As of
April 30, 2019
, our Rental Property Joint Ventures, including those that we consolidate, owned
21
for-rent apartment projects and a hotel, which are located in the metropolitan Boston, Massachusetts to metropolitan Washington, D.C. corridor; Tempe, Arizona; San Diego, California; Miami, Florida; Atlanta, Georgia; and Frisco, Texas. At
April 30, 2019
, these joint ventures had approximately
2,100
units that were occupied or ready for occupancy,
1,500
units in the lease-up stage, and
1,700
units under development. In addition, we either own, have under contract, or under a letter of intent approximately
13,200
units, including
1,700
units under active development; we intend to develop these units in joint ventures with unrelated parties in the future.
In the second quarter of fiscal 2019, we entered into a joint venture with unrelated parties to develop, build, and operate single-family rental communities. As of April 30, 2019, we have invested
$0.9 million
in this joint venture and have committed to invest up to
$60.0 million
.
In the first quarter of fiscal 2019, we entered into
two
separate joint ventures with unrelated parties to develop luxury for-rent residential apartment projects located in Harrison, New York and Frisco, Texas. Prior to the formation of these joint ventures, we acquired the properties and incurred approximately
$41.9 million
of land and land development costs. Our partners each acquired a
75%
interest in these entities for an aggregate amount of
$39.8 million
and we recognized a gain on land sale of
$8.4 million
in our first quarter of fiscal 2019. At
April 30, 2019
, we had an aggregate investment of
$13.6 million
in these joint ventures. Concurrent with their formation, these joint ventures entered into construction loan agreements for an aggregate amount of
$134.4 million
to finance the development of these projects. At
April 30, 2019
, the joint ventures had
$5.6 million
outstanding borrowings under these construction loan facilities.
In addition, during the six months ended
April 30, 2019
, we entered into
four
separate joint ventures with unrelated parties to develop luxury for-rent residential apartment projects and student housing communities located in Boston, Massachusetts, San Diego, California, Tempe, Arizona and Miami, Florida. We contributed an aggregate of
$79.4 million
for our initial ownership interests in these joint ventures, which ranged from
50%
to
98%
. Due to our controlling financial interest, our power to direct the activities that most significantly impact each joint venture’s performance, and/or our obligation to absorb expected losses or receive benefits from these joint ventures, we consolidated these joint ventures at
April 30, 2019
. The carrying value of these joint ventures’ assets totaling
$118.6 million
are reflected in “Receivables, prepaid expenses, and other assets” in our Condensed Consolidated Balance Sheet as of
April 30, 2019
. Our partners’ interests aggregating
$36.2 million
in the joint ventures are reflected as a component of “Noncontrolling interest” in our Condensed Consolidated Balance Sheet as of
April 30, 2019
. These joint ventures intend to obtain additional equity investors and secure third-party financing at a later date. At such time, it is expected that these entities would no longer be consolidated.
In the third quarter of fiscal 2018, we entered into a joint venture with an unrelated party to develop a
289
-unit luxury for-rent residential apartment project in a suburb of Boston, Massachusetts. We contributed cash of
$15.9 million
for our initial
85%
ownership interest in this joint venture. Due to our controlling financial interest, our power to direct the activities that most significantly impact the joint venture’s performance, and/or our obligation to absorb expected losses or receive benefits from the joint venture, we have consolidated this joint venture at
April 30, 2019
. The carrying value of the joint venture’s assets totaling
$19.9 million
are reflected in “Receivables, prepaid expenses, and other assets” in our Condensed Consolidated Balance Sheet as of
April 30, 2019
. Our partner’s
15%
interest of
$3.0 million
in the joint venture is reflected as a component of “Noncontrolling interest” in our Condensed Consolidated Balance Sheet as of
April 30, 2019
. The joint venture intends to obtain additional equity investors and secure third-party financing at a later date. At such time, it is expected that the entity would no longer be consolidated.
In the first quarter of fiscal 2018, one of our Rental Property Joint Ventures sold its assets to an unrelated party for
$219.0 million
. The joint venture had owned, developed, and operated a student housing community in College Park, Maryland. In connection with the sale, the joint venture’s existing
$110.0 million
loan was repaid. We received cash of
$39.3 million
and recognized a gain of
$30.8 million
in the three months ended January 31, 2018, which is included in “Income from unconsolidated entities” in our Condensed Consolidated Statements of Operations and Comprehensive Income.
In 1998, we formed the Trust to invest in commercial real estate opportunities. The Trust is effectively owned one-third by us; one-third by current and former members of our senior management; and one-third by an unrelated party. As of
April 30, 2019
, our investment in the Trust was
zero
as cumulative distributions received from the Trust have been in excess of the carrying amount of our net investment. We provide development, finance, and management services to the Trust and recognized fees under the terms of various agreements in the amount of
$0.5 million
and
$1.2 million
in the
six
-month periods ended
April 30, 2019
and
2018
, respectively.
Gibraltar Joint Ventures
We, through our wholly owned subsidiary, Gibraltar Capital and Asset Management, LLC (“Gibraltar”), have entered into
six
ventures with an institutional investor to provide builders and developers with land banking and venture capital. These ventures will finance builders’ and developers’ acquisition and development of land and home sites and pursue other complementary investment strategies. We also are a member in a separate venture with the same institutional investor, which purchased, from Gibraltar, certain foreclosed real estate owned and distressed loans in fiscal 2016. Our ownership interest in these ventures is approximately
25%
. We may invest up to
$100.0 million
in these ventures. As of
April 30, 2019
, we had an aggregate investment of
$17.5 million
in these ventures.
Guarantees
The unconsolidated entities in which we have investments generally finance their activities with a combination of partner equity and debt financing. In some instances, we and our partners have guaranteed debt of certain unconsolidated entities. These guarantees may include any or all of the following: (i) project completion guarantees, including any cost overruns; (ii) repayment guarantees, generally covering a percentage of the outstanding loan; (iii) carry cost guarantees, which cover costs such as interest, real estate taxes, and insurance; (iv) an environmental indemnity provided to the lender that holds the lender harmless from and against losses arising from the discharge of hazardous materials from the property and non-compliance with applicable environmental laws; and (v) indemnification of the lender from “bad boy acts” of the unconsolidated entity.
In some instances, the guarantees provided in connection with loans to an unconsolidated entity are joint and several. In these situations, we generally have a reimbursement agreement with our partner that provides that neither party is responsible for more than its proportionate share or agreed upon share of the guarantee; however, if a joint venture partner does not have adequate financial resources to meet its obligations under the reimbursement agreement, we may be liable for more than our proportionate share.
We believe that, as of
April 30, 2019
, in the event we become legally obligated to perform under a guarantee of an obligation of an unconsolidated entity due to a triggering event, the collateral in such entity should be sufficient to repay a significant portion of the obligation. If it is not, we and our partners would need to contribute additional capital to the venture. At
April 30, 2019
, certain unconsolidated entities have loan commitments aggregating
$1.23 billion
, of which, if the full amount of the debt obligations were borrowed, we estimate
$310.6 million
to be our maximum exposure related to repayment and carry cost guarantees. At
April 30, 2019
, the unconsolidated entities had borrowed an aggregate of
$903.5 million
, of which we estimate
$271.1 million
to be our maximum exposure related to repayment and carry cost guarantees. The terms of these guarantees generally range from
2 months
to
42 months
. These maximum exposure estimates do not take into account any recoveries from the underlying collateral or any reimbursement from our partners.
As of
April 30, 2019
, the estimated aggregate fair value of the guarantees provided by us related to debt and other obligations of certain unconsolidated entities was approximately
$5.4 million
. We have not made payments under any of the guarantees, nor have we been called upon to do so.
Variable Interest Entities
At
April 30, 2019
and
October 31, 2018
, we determined that
17
and
11
, respectively, of our joint ventures were VIEs under the guidance of ASC 810, “Consolidation.” For
12
and
10
of these VIEs as of
April 30, 2019
and
October 31, 2018
, respectively, we concluded that we were not the primary beneficiary of these VIEs because the power to direct the activities of such VIEs that most significantly impact their performance was either shared by us and such VIEs’ other partners or such activities were controlled by our partner. For VIEs where the power to direct significant activities is shared, business plans, budgets, and other major decisions are required to be unanimously approved by all members. Management and other fees earned by us are nominal and believed to be at market rates, and there is no significant economic disproportionality between us and the other members. The information presented below regarding the investments, commitments, and guarantees in unconsolidated entities deemed to be VIEs is also included in the information provided above.
As of
April 30, 2019
, we have consolidated
five
Rental Property Joint Ventures. The carrying value of these joint ventures’ assets totaling
$138.5 million
is reflected in “Receivables, prepaid expenses, and other assets” in our Condensed Consolidated Balance Sheet as of
April 30, 2019
. Our partners’ interests aggregating
$39.2 million
in the joint ventures are reflected as a component of “Noncontrolling interest” in our Condensed Consolidated Balance Sheet as of
April 30, 2019
. These joint ventures were determined to be VIEs due to their current inability to finance their activities without additional subordinated financial support as well as our partners’ inability to participate in the significant decisions of the joint venture and their lack of substantive kick-out rights. We further concluded that we are the primary beneficiary of these VIEs due to our controlling financial interest in such ventures as we have the power to direct the activities that most significantly impact the joint ventures’ performance and the obligation to absorb expected losses or receive benefits from the joint ventures. The assets of these VIEs can only be used to settle the obligations of the VIEs. In addition, in certain of the joint ventures, in the event additional contributions are required to be funded to the joint ventures prior to the admission of any additional investor at a future date, we will fund 100% of such contributions, including our partner’s pro rata share, which we expect would be funded through an interest-bearing loan.
At
April 30, 2019
and
October 31, 2018
, our investments in the unconsolidated entities deemed to be VIEs totaled
$36.3 million
and
$33.8 million
, respectively. At
April 30, 2019
and
October 31, 2018
, the maximum exposure of loss to our investments in these entities was limited to our investments in the unconsolidated VIEs, except with regard to
$70.0 million
of loan guarantees and
$10.4 million
and
$10.8 million
, respectively, of additional commitments to the VIEs. Of our potential
exposure for these loan guarantees,
$70.0 million
is related to loan repayment and carry cost guarantees, of which
$70.0 million
was borrowed at
April 30, 2019
and
October 31, 2018
.
Joint Venture Condensed Financial Information
The Condensed Balance Sheets, as of the dates indicated, and the Condensed Statements of Operations, for the periods indicated, for the unconsolidated entities in which we have an investment are included below (in thousands):
Condensed Balance Sheets:
|
|
|
|
|
|
|
|
|
|
|
|
|
April 30,
2019
|
|
October 31,
2018
|
|
Cash and cash equivalents
|
$
|
90,183
|
|
|
$
|
102,462
|
|
|
Inventory
|
803,161
|
|
|
973,990
|
|
|
Loans receivable, net
|
38,887
|
|
|
40,065
|
|
|
Rental properties
|
1,070,823
|
|
|
808,785
|
|
|
Rental properties under development
|
348,886
|
|
|
437,586
|
|
|
Real estate owned
|
14,860
|
|
|
14,838
|
|
|
Other assets
|
168,261
|
|
|
166,029
|
|
|
Total assets
|
$
|
2,535,061
|
|
|
$
|
2,543,755
|
|
|
Debt, net of deferred financing costs
|
$
|
1,240,577
|
|
|
$
|
1,145,998
|
|
|
Other liabilities
|
181,247
|
|
|
158,570
|
|
|
Members’ equity
|
1,110,319
|
|
|
1,235,974
|
|
|
Noncontrolling interest
|
2,918
|
|
|
3,213
|
|
|
Total liabilities and equity
|
$
|
2,535,061
|
|
|
$
|
2,543,755
|
|
|
Company’s net investment in unconsolidated entities (1)
|
$
|
390,085
|
|
|
$
|
431,813
|
|
|
|
|
|
(1)
|
Differences between our net investment in unconsolidated entities and our underlying equity in the net assets of the entities are primarily a result of impairments related to our investments in unconsolidated entities; interest capitalized on our investments; the estimated fair value of the guarantees provided to the joint ventures; unrealized gains on our retained joint venture interests; gains recognized from the sale of our ownership interests; and distributions from entities in excess of the carrying amount of our net investment.
|
Condensed Statements of Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended April 30,
|
|
Three months ended April 30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
Revenues
|
$
|
331,617
|
|
|
$
|
276,284
|
|
|
$
|
178,388
|
|
|
$
|
82,663
|
|
|
Cost of revenues
|
288,951
|
|
|
209,410
|
|
|
157,196
|
|
|
60,660
|
|
|
Other expenses
|
41,354
|
|
|
44,584
|
|
|
22,879
|
|
|
20,297
|
|
|
Total expenses
|
330,305
|
|
|
253,994
|
|
|
180,075
|
|
|
80,957
|
|
|
Gain on disposition of loans and real estate owned
|
3,694
|
|
|
26,480
|
|
|
—
|
|
|
11,809
|
|
|
Income (loss) from operations
|
5,006
|
|
|
48,770
|
|
|
(1,687
|
)
|
|
13,515
|
|
|
Other income
|
1,737
|
|
|
80,866
|
|
|
1,090
|
|
|
1,502
|
|
|
Income (loss) before income taxes
|
6,743
|
|
|
129,636
|
|
|
(597
|
)
|
|
15,017
|
|
|
Income tax provision (benefit)
|
225
|
|
|
349
|
|
|
(40
|
)
|
|
151
|
|
|
Net income (loss) including earnings from noncontrolling interests
|
6,518
|
|
|
129,287
|
|
|
(557
|
)
|
|
14,866
|
|
|
Less: income attributable to noncontrolling interest
|
(2,078
|
)
|
|
(11,937
|
)
|
|
31
|
|
|
(5,855
|
)
|
|
Net income (loss) attributable to controlling interest
|
$
|
4,440
|
|
|
$
|
117,350
|
|
|
$
|
(526
|
)
|
|
$
|
9,011
|
|
|
Company’s equity in earnings of unconsolidated entities (1)
|
$
|
10,559
|
|
|
$
|
41,444
|
|
|
$
|
4,419
|
|
|
$
|
2,564
|
|
|
|
|
|
(1)
|
Differences between our equity in earnings of unconsolidated entities and the underlying net income of the entities are primarily a result of a basis difference of an acquired joint venture interest; distributions from entities in excess of the carrying amount of our net investment; recoveries of previously incurred charges; unrealized gains on our retained joint venture interests; and our share of the entities’ profits related to home sites purchased by us which reduces our cost basis of the home sites acquired.
|
5. Receivables, Prepaid Expenses, and Other Assets
Receivables, prepaid expenses, and other assets at
April 30, 2019
and
October 31, 2018
, consisted of the following (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
April 30, 2019
|
|
October 31, 2018
|
|
Expected recoveries from insurance carriers and others
|
$
|
121,354
|
|
|
$
|
126,291
|
|
|
Improvement cost receivable
|
103,377
|
|
|
96,937
|
|
|
Escrow cash held by our captive title company
|
32,787
|
|
|
33,471
|
|
|
Properties held for rental apartment and commercial development
|
302,706
|
|
|
193,015
|
|
|
Prepaid expenses
|
19,418
|
|
|
23,065
|
|
|
Other
|
80,126
|
|
|
77,999
|
|
|
|
$
|
659,768
|
|
|
$
|
550,778
|
|
See Note 7, “Accrued Expenses,” for additional information regarding the expected recoveries from insurance carriers and others.
6. Loans Payable, Senior Notes, and Mortgage Company Loan Facility
Loans Payable
At
April 30, 2019
and
October 31, 2018
, loans payable consisted of the following (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
April 30,
2019
|
|
October 31,
2018
|
|
Senior unsecured term loan
|
$
|
800,000
|
|
|
$
|
500,000
|
|
|
Loans payable – other
|
230,305
|
|
|
188,115
|
|
|
Deferred issuance costs
|
(2,897
|
)
|
|
(1,314
|
)
|
|
|
$
|
1,027,408
|
|
|
$
|
686,801
|
|
Senior Unsecured Term Loan
At
April 30, 2019
, we had an
$800.0 million
,
five
-year senior unsecured term loan facility (the “Term Loan Facility”) with a syndicate of banks. On
November 1, 2018
, we entered into an amendment to the Term Loan Facility to, among other things, (i) increase the size of the outstanding term loan to
$800.0 million
; (ii) extend the maturity date to
November 1, 2023
, with no principal payments being required before the maturity date; (iii) provide an accordion feature under which we may, subject to certain conditions set forth in the agreement, increase the Term Loan Facility up to a maximum aggregate amount of
$1.0 billion
; (iv) revise certain provisions to reduce the interest rate applicable on outstanding borrowings; and (v) modify certain provisions relating to existing financial maintenance and negative covenants. At
April 30, 2019
, the interest rate on borrowings was
3.78%
per annum. We and substantially all of our
100%
-owned home building subsidiaries are guarantors under the Term Loan Facility.
Under the terms of the Term Loan Facility, at
April 30, 2019
, our maximum leverage ratio, as defined, may not exceed
1.75
to 1.00, and we are required to maintain a minimum tangible net worth, as defined, of no less than approximately
$2.76 billion
. Under the terms of the Term Loan Facility, at
April 30, 2019
, our leverage ratio was approximately
0.56
to 1.00, and our tangible net worth was approximately
$4.90 billion
. Based upon the limitations related to our repurchase of common stock in the Term Loan Facility, our ability to repurchase our common stock was limited to approximately
$3.35 billion
as of
April 30, 2019
. In addition, our ability to pay cash dividends was limited to approximately
$2.14 billion
as of
April 30, 2019
.
Credit Facility
We have a
$1.295 billion
,
five
-year senior unsecured revolving credit facility (the “Credit Facility”) with a syndicate of banks. The Credit Facility is scheduled to expire in
May 2021
. We and substantially all of our
100%
-owned home building subsidiaries are guarantors under the Credit Facility.
Under the terms of the Credit Facility, at
April 30, 2019
, our maximum leverage ratio, as defined, may not exceed
1.75
to 1.00, and we are required to maintain a minimum tangible net worth, as defined, of no less than approximately
$2.59 billion
. Under the terms of the Credit Facility, at
April 30, 2019
, our leverage ratio was approximately
0.56
to 1.00, and our tangible net worth was approximately
$4.90 billion
. Based upon the limitations related to our repurchase of common stock in the Credit Facility,
our ability to repurchase our common stock was limited to approximately
$3.00 billion
as of
April 30, 2019
. In addition, under the provisions of the Credit Facility, our ability to pay cash dividends was limited to approximately
$2.31 billion
as of
April 30, 2019
.
At
April 30, 2019
, we had
no
outstanding borrowings under the Credit Facility and had approximately
$179.3 million
of outstanding letters of credit that were issued under the Credit Facility. At
April 30, 2019
, the interest rate on borrowings under the Credit Facility would have been
3.98%
per annum.
Loans Payable – Other
“Loans payable – other” primarily represent purchase money mortgages on properties we acquired that the seller had financed and various revenue bonds that were issued by government entities on our behalf to finance community infrastructure and our manufacturing facilities. At
April 30, 2019
, the weighted-average interest rate on “Loans payable – other” was
4.81%
per annum.
Senior Notes
At
April 30, 2019
, we had
seven
issues of senior notes outstanding with an aggregate principal amount of
$2.52 billion
. In January 2018, we issued
$400.0 million
principal amount of
4.350%
Senior Notes due 2028. We received
$396.4 million
of net proceeds from the issuance of these senior notes. On
November 30, 2018
, we redeemed, prior to maturity, the
$350.0 million
of then-outstanding principal amount of
4.00%
Senior Notes due December 31, 2018, at par, plus accrued interest.
Mortgage Company Loan Facility
In October 2017, TBI Mortgage
®
Company (“TBI Mortgage”), our wholly owned mortgage subsidiary, entered into a mortgage warehousing agreement (the “Warehousing Agreement”) with a bank to finance the origination of mortgage loans by TBI Mortgage. The Warehousing Agreement is accounted for as a secured borrowing under ASC 860, “Transfers and Servicing.” In December 2018, the Warehousing Agreement was amended again to provide for loan purchases up to
$75.0 million
, subject to certain sublimits. In addition, the Warehousing Agreement, as amended, provides for an accordion feature under which TBI Mortgage may request that the aggregate commitments under the Warehousing Agreement be increased to an amount up to
$150.0 million
for a short period of time. The Warehousing Agreement, as amended, expires on
December 6, 2019
, and borrowings thereunder bear interest at LIBOR plus
1.90%
per annum. At
April 30, 2019
, the interest rate on the Warehousing Agreement, as amended, was
4.38%
per annum.
Prior to the December 2018 amendment, the Warehousing Agreement was operating pursuant to the December 2017 amendment which had substantially similar terms to the December 2018 amendment.
7. Accrued Expenses
Accrued expenses at
April 30, 2019
and
October 31, 2018
consisted of the following (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
April 30,
2019
|
|
October 31,
2018
|
|
Land, land development, and construction
|
$
|
178,474
|
|
|
$
|
213,641
|
|
|
Compensation and employee benefits
|
136,715
|
|
|
159,374
|
|
|
Escrow liability
|
31,809
|
|
|
32,543
|
|
|
Self-insurance
|
182,275
|
|
|
168,012
|
|
|
Warranty
|
223,655
|
|
|
258,831
|
|
|
Deferred income
|
43,993
|
|
|
42,179
|
|
|
Interest
|
37,882
|
|
|
40,325
|
|
|
Commitments to unconsolidated entities
|
8,653
|
|
|
10,553
|
|
|
Other
|
47,212
|
|
|
48,123
|
|
|
|
$
|
890,668
|
|
|
$
|
973,581
|
|
The table below provides, for the periods indicated, a reconciliation of the changes in our warranty accrual (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended April 30,
|
|
Three months ended April 30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
Balance, beginning of period
|
$
|
258,831
|
|
|
$
|
329,278
|
|
|
$
|
237,326
|
|
|
$
|
311,450
|
|
|
Additions – homes closed during the period
|
14,954
|
|
|
14,687
|
|
|
8,329
|
|
|
8,462
|
|
|
Increase in accruals for homes closed in prior years
|
272
|
|
|
3,154
|
|
|
963
|
|
|
1,211
|
|
|
Charges incurred
|
(50,402
|
)
|
|
(49,776
|
)
|
|
(22,963
|
)
|
|
(23,780
|
)
|
|
Balance, end of period
|
$
|
223,655
|
|
|
$
|
297,343
|
|
|
$
|
223,655
|
|
|
$
|
297,343
|
|
Since fiscal 2014, we have received water intrusion claims from owners of homes built since 2002 in communities located in Pennsylvania and Delaware (which are in our Mid-Atlantic region). During the first two quarters of fiscal
2019
, we continued to receive water intrusion claims from homeowners in this region, mostly related to older homes, and we continue to perform review procedures to assess, among other things, the number of affected homes, whether repairs are likely to be required, and the extent of such repairs.
Our review process, conducted quarterly, includes an analysis of many factors applicable to these communities to determine whether a claim is likely to be received and the estimated costs to resolve any such claim, including: the closing dates of the homes; the number of claims received; our inspection of homes; an estimate of the number of homes we expect to repair; the type and cost of repairs that have been performed in each community; the estimated costs to remediate pending and future claims; the expected recovery from our insurance carriers and suppliers; and the previously recorded amounts related to these claims. We also monitor legal developments relating to these types of claims and review the volume, relative merits and adjudication of claims in litigation or arbitration.
As of
April 30, 2019
, our recorded aggregate estimated repair costs to be incurred for known and unknown water intrusion claims was
$324.4 million
, which was unchanged from October 31, 2016, and our recorded aggregate expected recoveries from insurance carriers and suppliers were approximately
$152.6 million
, which was also unchanged from October 31, 2016. Our recorded remaining estimated repair costs, which reflects a reduction for the aggregate amount expended to resolve claims, were approximately
$148.1 million
at
April 30, 2019
and
$177.6 million
at
October 31, 2018
. Our recorded remaining expected recoveries from insurance carriers and suppliers were approximately
$104.1 million
at
April 30, 2019
and
$109.3 million
at
October 31, 2018
. As noted above, our review process includes a number of estimates that are based on assumptions with uncertain outcomes, including, but not limited to, the number of homes to be repaired, the extent of repairs needed, the repair procedures employed, the cost of those repairs, outcomes of litigation or arbitrations, and expected recoveries from insurance carriers and suppliers. Due to the degree of judgment required in making these estimates and the inherent uncertainty in potential outcomes, it is reasonably possible that our actual costs and recoveries could differ from those recorded and such differences could be material. In addition, due to such uncertainty, we are unable to estimate the range of any such differences. We believe collection of our recorded insurance receivables is probable based on the legal merits that support our pending insurance claims and the high credit ratings of our insurance carriers; however, due to the complexity of the underlying claims and the variability of the other factors described above, it is reasonably possible that our actual insurance recoveries could materially differ from those recorded. Resolution of these known and unknown claims is expected to take several years.
8. Income Taxes
We recorded income tax provisions of
$86.2 million
and
$40.4 million
for the
six
months ended
April 30, 2019
and
2018
, respectively. The effective tax rate was
26.3%
for the
six
months ended
April 30, 2019
, compared to
14.2%
for the
six
months ended
April 30, 2018
. For the three months ended
April 30, 2019
and
2018
, we recorded income tax provisions of
$46.8 million
and
$40.9 million
, respectively. The effective tax rate was
26.6%
for the
three
months ended
April 30, 2019
, compared to
26.8%
for the
three
months ended
April 30, 2018
. The lower effective tax rate for the
six
months ended
April 30, 2018
was primarily due to a
$31.2 million
income tax benefit from the remeasurement of the Company’s net deferred tax liability as a result of the Tax Cuts and Jobs Act (the “Tax Act”), which was enacted into law on December 22, 2017. The income tax provisions for both periods included a provision for state income taxes; interest accrued on anticipated tax assessments; excess tax benefits related to stock-based compensation; and other permanent differences. The income tax provisions for the fiscal 2018 periods also benefited from the domestic activities deduction. The Tax Act repealed the domestic production activities deduction effective for the fiscal 2019 period.
The Tax Act, among other changes, reduced the corporate income tax rate from
35%
to
21%
effective for tax years beginning after December 31, 2017. For companies with a fiscal year that does not end on December 31, the change in law required the application of a blended tax rate for the year of the change. Our blended tax rate for the fiscal 2018 periods was
23.3%
. For the fiscal 2019 periods and thereafter, the applicable statutory rate is
21%
.
We are subject to state tax in the jurisdictions in which we operate. We estimate our state tax liability based upon the individual taxing authorities’ regulations, estimates of income by taxing jurisdiction, and our ability to utilize certain tax-saving strategies. Based on our estimate of the allocation of income or loss among the various taxing jurisdictions and changes in tax regulations and their impact on our tax strategies, we estimate that our state income tax rate for the full fiscal year
2019
will be approximately
6.8%
. Our state income tax rate for the full fiscal year
2018
was
6.6%
.
At
April 30, 2019
, we had
$9.9 million
of gross unrecognized tax benefits, including interest and penalties. If these unrecognized tax benefits were to reverse in the future, they would have a beneficial impact on our effective tax rate at that time.
During the next 12 months, it is reasonably possible that our unrecognized tax benefits will change, but we are not able to provide a range of such change.
The possible changes would be principally due to the expiration of tax statutes, settlements with taxing jurisdictions, increases due to new tax positions taken, and the accrual of estimated interest and penalties.
9. Stock-Based Benefit Plans
We grant stock options and various types of restricted stock units to our employees and our nonemployee directors. Additionally, we have an employee stock purchase plan that allows employees to purchase our stock at a discount. Information regarding the amount of total stock-based compensation expense and tax benefit recognized by us, for the periods indicated, is as follows (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended April 30,
|
|
Three months ended April 30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
Total stock-based compensation expense recognized
|
$
|
13,916
|
|
|
$
|
15,347
|
|
|
$
|
5,331
|
|
|
$
|
6,458
|
|
|
Income tax benefit recognized
|
$
|
3,652
|
|
|
$
|
4,359
|
|
|
$
|
1,396
|
|
|
$
|
1,843
|
|
At
April 30, 2019
and
October 31, 2018
, the aggregate unamortized value of outstanding stock-based compensation awards was approximately
$30.1 million
and
$20.9 million
, respectively.
10. Stock Repurchase Program and Cash Dividends
Stock Repurchase Program
On December 12, 2018, our Board of Directors terminated our existing
20 million
share repurchase program, which was authorized in December 2017, and authorized, under a new repurchase program, the repurchase of
20 million
shares of our common stock in open market transactions or otherwise for general corporate purposes, including to obtain shares for the Company’s equity award and other employee benefit plans. Our Board of Directors did not fix any expiration date for this repurchase program.
The table below provides, for the periods indicated, information about our share repurchase programs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended April 30,
|
|
Three months ended April 30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
Number of shares purchased (in thousands)
|
788
|
|
|
6,221
|
|
|
3
|
|
|
1,794
|
|
|
Average price per share
|
$
|
32.04
|
|
|
$
|
46.86
|
|
|
$
|
36.95
|
|
|
$
|
45.44
|
|
|
Remaining authorization at April 30 (in thousands)
|
19,784
|
|
|
16,876
|
|
|
19,784
|
|
|
16,876
|
|
Subsequent to April 30, 2019 and through June 5, 2019, we repurchased approximately
2.5 million
shares of our common stock at an average price of
$35.70
per share.
Cash Dividends
On February 21, 2017, our Board of Directors approved the initiation of quarterly cash dividends to shareholders. During the
six
months ended
April 30, 2019
and
2018
, we declared and paid aggregate cash dividends of
$0.22
and
$0.19
per share, respectively, to our shareholders. During the
three
months ended
April 30, 2019
and
2018
, we declared and paid cash dividends
$0.11
and
$0.08
per share, respectively, to our shareholders.
11. Earnings per Share Information
The table below provides, for the periods indicated, information pertaining to the calculation of earnings per share, common stock equivalents, weighted-average number of antidilutive options, and shares issued (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended April 30,
|
|
Three months ended April 30,
|
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
Net income as reported
|
|
$
|
241,374
|
|
|
$
|
243,917
|
|
|
$
|
129,324
|
|
|
$
|
111,810
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
Basic weighted-average shares
|
|
146,687
|
|
|
154,306
|
|
|
146,622
|
|
|
152,731
|
|
|
Common stock equivalents (1)
|
|
1,394
|
|
|
2,707
|
|
|
1,507
|
|
|
2,398
|
|
|
Diluted weighted-average shares
|
|
148,081
|
|
|
157,013
|
|
|
148,129
|
|
|
155,129
|
|
|
|
|
|
|
|
|
|
|
|
|
Other information:
|
|
|
|
|
|
|
|
|
|
Weighted-average number of antidilutive options and restricted stock units (2)
|
|
1,690
|
|
|
823
|
|
|
756
|
|
|
278
|
|
|
Shares issued under stock incentive and employee stock purchase plans
|
|
654
|
|
|
880
|
|
|
144
|
|
|
57
|
|
|
|
|
|
(1)
|
Common stock equivalents represent the dilutive effect of outstanding in-the-money stock options using the treasury stock method and shares expected to be issued upon the conversion of restricted stock units under our equity award programs.
|
|
|
|
|
(2)
|
Weighted-average number of antidilutive options and restricted stock units are based upon the average closing price of our common stock on the New York Stock Exchange for the period.
|
12. Fair Value Disclosures
Financial Instruments
The table below provides, as of the dates indicated, a summary of assets/(liabilities) related to our financial instruments, measured at fair value on a recurring basis (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value
|
|
Financial Instrument
|
|
Fair value
hierarchy
|
|
April 30,
2019
|
|
October 31, 2018
|
|
Mortgage Loans Held for Sale
|
|
Level 2
|
|
$
|
124,940
|
|
|
$
|
170,731
|
|
|
Forward Loan Commitments — Mortgage Loans Held for Sale
|
|
Level 2
|
|
$
|
87
|
|
|
$
|
1,750
|
|
|
Interest Rate Lock Commitments (“IRLCs”)
|
|
Level 2
|
|
$
|
2,330
|
|
|
$
|
(4,366
|
)
|
|
Forward Loan Commitments — IRLCs
|
|
Level 2
|
|
$
|
(2,330
|
)
|
|
$
|
4,366
|
|
At
April 30, 2019
and
October 31, 2018
, the carrying value of cash and cash equivalents and customer deposits held in escrow approximated fair value.
Mortgage Loans Held for Sale
At the end of the reporting period, we determine the fair value of our mortgage loans held for sale and the forward loan commitments we have entered into as a hedge against the interest rate risk of our mortgage loans and commitments using the market approach to determine fair value.
The table below provides, as of the dates indicated, the aggregate unpaid principal and fair value of mortgage loans held for sale (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate unpaid
principal balance
|
|
Fair value
|
|
Excess
|
|
At April 30, 2019
|
$
|
123,529
|
|
|
$
|
124,940
|
|
|
$
|
1,411
|
|
|
At October 31, 2018
|
$
|
170,728
|
|
|
$
|
170,731
|
|
|
$
|
3
|
|
Inventory
We recognize inventory impairment charges based on the difference in the carrying value of the inventory and its fair value at the time of the evaluation. The fair value of inventory was determined using Level 3 criteria. See Note 1, “Significant Accounting Policies – Inventory,” in our
2018
Form 10-K for information regarding our methodology for determining fair value. The table below summarizes, for the periods indicated, the ranges of certain quantitative unobservable inputs utilized in determining the fair value of impaired operating communities:
|
|
|
|
|
|
|
|
|
|
Three months ended:
|
Selling price
per unit
($ in thousands)
|
|
Sales pace
per year
(in units)
|
|
Discount rate
|
|
Fiscal 2019:
|
|
|
|
|
|
|
January 31
|
836 - 13,495
|
|
2 - 12
|
|
12.5% - 15.8%
|
|
April 30
|
372 - 1,915
|
|
2 - 19
|
|
12.0% - 26.0%
|
|
|
|
|
|
|
|
|
Fiscal 2018:
|
|
|
|
|
|
|
January 31
|
381 - 1,029
|
|
7 - 10
|
|
13.8% - 19.0%
|
|
April 30
|
485 - 522
|
|
10 - 16
|
|
16.9%
|
|
July 31 (1)
|
–
|
|
–
|
|
–
|
|
October 31
|
470 - 1071
|
|
4 - 23
|
|
13.5% - 16.3%
|
|
|
|
|
(1)
|
The impairment charges recognized were related to our decisions to sell lots in a bulk sale in certain communities rather than sell and construct homes as previously intended. The sale price per lot used in the fair value determination for these bulk sales ranged from
$10,000
to
$155,000
.
|
The table below provides, for the periods indicated, the number of operating communities that we reviewed for potential impairment, the number of operating communities in which we recognized impairment charges, the amount of impairment charges recognized, and, as of the end of the period indicated, the fair value of those communities, net of impairment charges ($ amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired operating communities
|
|
Three months ended:
|
Number of
communities tested
|
|
Number of
communities
|
|
Fair value of
communities,
net of
impairment charges
|
|
Impairment charges recognized
|
|
Fiscal 2019:
|
|
|
|
|
|
|
|
|
January 31 (1)
|
49
|
|
5
|
|
$
|
37,282
|
|
|
$
|
5,785
|
|
|
April 30 (2)
|
64
|
|
6
|
|
$
|
36,159
|
|
|
17,495
|
|
|
|
|
|
|
|
|
|
$
|
23,280
|
|
|
Fiscal 2018:
|
|
|
|
|
|
|
|
|
January 31
|
64
|
|
5
|
|
$
|
13,318
|
|
|
$
|
3,736
|
|
|
April 30 (2)
|
65
|
|
4
|
|
$
|
21,811
|
|
|
13,325
|
|
|
July 31 (3)
|
55
|
|
5
|
|
$
|
43,063
|
|
|
9,065
|
|
|
October 31
|
43
|
|
6
|
|
$
|
24,692
|
|
|
4,025
|
|
|
|
|
|
|
|
|
|
$
|
30,151
|
|
|
|
|
|
(1)
|
Includes
$2.8 million
(
one
community),
$1.5 million
(
three
communities), and
$1.5 million
(
one
community) located in our City Living, North, and South segments, respectively.
|
|
|
|
|
(2)
|
Includes
$2.0 million
(
one
community),
$7.0 million
(
two
communities),
$8.0 million
(
two
communities), and
$0.5 million
(
one
community) located in our City Living, North, Mid-Atlantic, and South segments, respectively, in our fiscal 2019 period. Includes
$12.0 million
of impairments from
one
community located in our North segment in our fiscal 2018 period.
|
|
|
|
|
(3)
|
Includes
$7.3 million
of impairments from
two
communities located in our Mid-Atlantic segment.
|
Debt
The table below provides, as of the dates indicated, the book value and estimated fair value of our debt (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 30, 2019
|
|
October 31, 2018
|
|
|
Fair value
hierarchy
|
|
Book value
|
|
Estimated
fair value
|
|
Book value
|
|
Estimated
fair value
|
|
Loans payable (1)
|
Level 2
|
|
$
|
1,030,305
|
|
|
$
|
1,028,938
|
|
|
$
|
688,115
|
|
|
$
|
687,974
|
|
|
Senior notes (2)
|
Level 1
|
|
2,519,876
|
|
|
2,573,568
|
|
|
2,869,876
|
|
|
2,779,270
|
|
|
Mortgage company loan facility (3)
|
Level 2
|
|
110,012
|
|
|
110,012
|
|
|
150,000
|
|
|
150,000
|
|
|
|
|
|
$
|
3,660,193
|
|
|
$
|
3,712,518
|
|
|
$
|
3,707,991
|
|
|
$
|
3,617,244
|
|
|
|
|
|
(1)
|
The estimated fair value of loans payable was based upon contractual cash flows discounted at interest rates that we believed were available to us for loans with similar terms and remaining maturities as of the applicable valuation date.
|
|
|
|
|
(2)
|
The estimated fair value of our senior notes is based upon their market prices as of the applicable valuation date.
|
|
|
|
|
(3)
|
We believe that the carrying value of our mortgage company loan borrowings approximates their fair value.
|
13. Other Income – Net
The table below provides the significant components of other income – net (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended April 30,
|
|
Three months ended April 30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
Interest income
|
$
|
10,210
|
|
|
$
|
3,292
|
|
|
$
|
4,338
|
|
|
$
|
1,212
|
|
|
Income from ancillary businesses
|
18,086
|
|
|
7,456
|
|
|
4,242
|
|
|
4,873
|
|
|
Management fee income from home building unconsolidated entities, net
|
4,727
|
|
|
7,425
|
|
|
3,119
|
|
|
4,354
|
|
|
Retained customer deposits
|
|
|
4,155
|
|
|
|
|
3,071
|
|
|
Income from land sales
|
|
|
3,287
|
|
|
|
|
2,587
|
|
|
Other
|
(877
|
)
|
|
(824
|
)
|
|
(414
|
)
|
|
(303
|
)
|
|
Total other income – net
|
$
|
32,146
|
|
|
$
|
24,791
|
|
|
$
|
11,285
|
|
|
$
|
15,794
|
|
As a result of our adoption of ASC 606 as of November 1, 2018, revenues and cost of revenues from land sales are presented as separate components on our Condensed Consolidated Statement of Operations and Comprehensive Income. In addition, retained customer deposits are presented in home sales revenues on our Condensed Consolidated Statement of Operations and Comprehensive Income. Because we elected to apply the modified retrospective method of adoption, prior periods have not been restated to reflect these changes in presentation. See Note 1, “Significant Accounting Policies – Recent Accounting Pronouncements” for additional information regarding the impact of the adoption of ASC 606.
Management fee income from home building unconsolidated entities presented above primarily represents fees earned by Toll Brothers City Living
®
(“City Living”) and traditional home building operations. In addition, in the
six
-month periods ended
April 30, 2019
and
2018
, our apartment living operations earned fees from unconsolidated entities of
$4.7 million
and
$4.0 million
, respectively. In the three-month periods ended
April 30, 2019
and
2018
, our apartment living operations earned fees from unconsolidated entities of
$2.1 million
and
$1.7 million
, respectively. Fees earned by our apartment living operations are included in income from ancillary businesses.
Income from ancillary businesses is generated by our mortgage, title, landscaping, security monitoring, Gibraltar, and golf course and country club operations. The table below provides, for the periods indicated, revenues and expenses for our ancillary businesses (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended April 30,
|
|
Three months ended April 30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
Revenues
|
$
|
65,129
|
|
|
$
|
65,234
|
|
|
$
|
32,846
|
|
|
$
|
33,911
|
|
|
Expenses
|
$
|
60,374
|
|
|
$
|
57,778
|
|
|
$
|
29,749
|
|
|
$
|
29,038
|
|
|
Other income
|
$
|
13,331
|
|
|
|
|
|
$
|
1,145
|
|
|
|
|
In December 2018, we sold one of our golf club properties to a third party for
$18.2 million
and we recognized a gain of
$12.2 million
in the first quarter of fiscal 2019.
The table below provides revenues and expenses recognized from land sales for the periods indicated (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Six
months ended
April 30, 2018
|
|
Three
months ended
April 30, 2018
|
|
Revenues
|
$
|
41,352
|
|
|
$
|
34,384
|
|
|
Expenses
|
(38,065
|
)
|
|
(31,797
|
)
|
|
Income from land sales
|
$
|
3,287
|
|
|
$
|
2,587
|
|
14. Commitments and Contingencies
Legal Proceedings
We are involved in various claims and litigation arising principally in the ordinary course of business. We believe that adequate provision for resolution of all current claims and pending litigation has been made and that the disposition of these matters will not have a material adverse effect on our results of operations and liquidity or on our financial condition.
In March 2018, the Pennsylvania Attorney General informed the Company that it was conducting a review of our construction of stucco homes in Pennsylvania after January 1, 2005 and requested that we voluntarily produce documents and information. The Company has produced documents and information in response to this request and, in addition, has produced requested information and documents in response to a subpoena issued in the second quarter of fiscal 2019. Management cannot at this time predict the eventual scope or outcome of this matter.
Land Purchase Commitments
Generally, our agreements to acquire land parcels do not require us to purchase those land parcels, although we, in some cases, forfeit any deposit balance outstanding if and when we terminate an agreement. Information regarding our land purchase commitments, as of the dates indicated, is provided in the table below (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
April 30, 2019
|
|
October 31, 2018
|
|
Aggregate purchase commitments:
|
|
|
|
|
Unrelated parties
|
$
|
2,407,312
|
|
|
$
|
2,404,660
|
|
|
Unconsolidated entities that the Company has investments in
|
43,953
|
|
|
128,235
|
|
|
Total
|
$
|
2,451,265
|
|
|
$
|
2,532,895
|
|
|
|
|
|
|
|
Deposits against aggregate purchase commitments
|
$
|
180,724
|
|
|
$
|
168,421
|
|
|
Credits to be received from unconsolidated entities
|
46,233
|
|
|
79,168
|
|
|
Additional cash required to acquire land
|
2,224,308
|
|
|
2,285,306
|
|
|
Total
|
$
|
2,451,265
|
|
|
$
|
2,532,895
|
|
|
Amount of additional cash required to acquire land included in accrued expenses
|
$
|
12,553
|
|
|
$
|
40,103
|
|
In addition, we expect to purchase approximately
2,600
additional home sites over a number of years from several joint ventures in which we have interests; the purchase prices of these home sites will be determined at a future date.
At
April 30, 2019
, we also had purchase commitments to acquire land for apartment developments of approximately
$326.9 million
, of which we had outstanding deposits in the amount of
$14.3 million
. We intend to develop these projects in joint ventures with unrelated parties in the future.
We have additional land parcels under option that have been excluded from the aggregate purchase commitments since we do not believe that we will complete the purchase of these land parcels and no additional funds will be required from us to terminate these contracts.
Investments in Unconsolidated Entities
At
April 30, 2019
, we had investments in a number of unconsolidated entities, were committed to invest or advance additional funds, and had guaranteed a portion of the indebtedness and/or loan commitments of these entities. See Note 4, “Investments in Unconsolidated Entities,” for more information regarding our commitments to these entities.
Surety Bonds and Letters of Credit
At
April 30, 2019
, we had outstanding surety bonds amounting to
$734.2 million
, primarily related to our obligations to governmental entities to construct improvements in our communities. We estimate that approximately
$334.5 million
of work remains on these improvements. We have an additional
$175.4 million
of surety bonds outstanding that guarantee other obligations. We do not believe that it is probable that any outstanding bonds will be drawn upon.
At
April 30, 2019
, we had outstanding letters of credit of
$179.3 million
under our Credit Facility. These letters of credit were issued to secure various financial obligations, including insurance policy deductibles and other claims, land deposits, and security to complete improvements in communities in which we are operating. We do not believe that it is probable that any outstanding letters of credit will be drawn upon.
Backlog
At
April 30, 2019
, we had agreements of sale outstanding to deliver
6,467
homes with an aggregate sales value of
$5.66 billion
.
Mortgage Commitments
Information regarding our mortgage commitments, as of the dates indicated, is provided in the table below (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
April 30,
2019
|
|
October 31, 2018
|
|
Aggregate mortgage loan commitments:
|
|
|
|
|
IRLCs
|
$
|
813,497
|
|
|
$
|
614,255
|
|
|
Non-IRLCs
|
1,113,759
|
|
|
1,329,674
|
|
|
Total
|
$
|
1,927,256
|
|
|
$
|
1,943,929
|
|
|
Investor commitments to purchase:
|
|
|
|
|
IRLCs
|
$
|
813,497
|
|
|
$
|
614,255
|
|
|
Mortgage loans held for sale
|
115,107
|
|
|
163,208
|
|
|
Total
|
$
|
928,604
|
|
|
$
|
777,463
|
|
15. Information on Segments
We operate in
two
segments: traditional home building and urban infill. We build and sell detached and attached homes in luxury residential communities located in affluent suburban markets that cater to move-up, empty-nester, active-adult, age-qualified, and second-home buyers in the United States (“Traditional Home Building”). We also build and sell homes in urban infill markets through City Living.
We have determined that our Traditional Home Building operations operate in
five
geographic segments: North, Mid-Atlantic, South, West, and California. The states comprising each geographic segment are as follows:
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, Oregon, Utah, and Washington
California:
California
In fiscal 2018, we acquired land and commenced development activities in the Salt Lake City, Utah and Portland, Oregon markets. In the second quarter of fiscal 2019, we opened several communities in these markets.
Revenue and income (loss) before income taxes for each of our segments, for the periods indicated, were as follows (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended April 30,
|
|
Three months ended April 30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
Revenues:
|
|
|
|
|
|
|
|
|
Traditional Home Building:
|
|
|
|
|
|
|
|
|
North
|
$
|
391,397
|
|
|
$
|
360,494
|
|
|
$
|
221,896
|
|
|
$
|
226,214
|
|
|
Mid-Atlantic
|
461,388
|
|
|
461,865
|
|
|
255,692
|
|
|
254,907
|
|
|
South
|
492,499
|
|
|
412,206
|
|
|
284,352
|
|
|
240,714
|
|
|
West
|
665,314
|
|
|
607,421
|
|
|
364,884
|
|
|
349,388
|
|
|
California
|
870,559
|
|
|
725,446
|
|
|
500,541
|
|
|
438,342
|
|
|
Traditional Home Building
|
2,881,157
|
|
|
2,567,432
|
|
|
1,627,365
|
|
|
1,509,565
|
|
|
City Living
|
152,668
|
|
|
207,235
|
|
|
84,074
|
|
|
89,634
|
|
|
Corporate and other
|
(2,460
|
)
|
|
—
|
|
|
618
|
|
|
—
|
|
|
Total home sales revenue
|
3,031,365
|
|
|
2,774,667
|
|
|
1,712,057
|
|
|
1,599,199
|
|
|
Land sales revenue
|
47,910
|
|
|
—
|
|
|
4,037
|
|
|
—
|
|
|
Total revenue
|
$
|
3,079,275
|
|
|
$
|
2,774,667
|
|
|
$
|
1,716,094
|
|
|
$
|
1,599,199
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes:
|
|
|
|
|
|
|
|
|
Traditional Home Building:
|
|
|
|
|
|
|
|
|
North
|
$
|
17,962
|
|
|
$
|
2,036
|
|
|
$
|
7,226
|
|
|
$
|
1,657
|
|
|
Mid-Atlantic
|
18,952
|
|
|
34,344
|
|
|
7,580
|
|
|
20,444
|
|
|
South
|
47,363
|
|
|
39,278
|
|
|
31,595
|
|
|
27,130
|
|
|
West
|
87,422
|
|
|
78,653
|
|
|
43,808
|
|
|
48,049
|
|
|
California
|
180,173
|
|
|
146,518
|
|
|
106,552
|
|
|
85,661
|
|
|
Traditional Home Building
|
351,872
|
|
|
300,829
|
|
|
196,761
|
|
|
182,941
|
|
|
City Living
|
40,476
|
|
|
46,649
|
|
|
25,834
|
|
|
16,685
|
|
|
Corporate and other
|
(64,743
|
)
|
|
(63,132
|
)
|
|
(46,436
|
)
|
|
(46,878
|
)
|
|
Total
|
$
|
327,605
|
|
|
$
|
284,346
|
|
|
$
|
176,159
|
|
|
$
|
152,748
|
|
“Corporate and other” is comprised principally of general corporate expenses such as our executive offices; the corporate finance, accounting, audit, tax, human resources, risk management, information technology, marketing, and legal groups; interest income; income from certain of our ancillary businesses, including Gibraltar; and income from our Rental Property Joint Ventures and Gibraltar Joint Ventures.
Total assets for each of our segments, as of the dates indicated, are shown in the table below (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
April 30,
2019
|
|
October 31,
2018
|
|
Traditional Home Building:
|
|
|
|
|
North
|
$
|
968,396
|
|
|
$
|
970,854
|
|
|
Mid-Atlantic
|
1,202,321
|
|
|
1,130,417
|
|
|
South
|
1,289,163
|
|
|
1,237,744
|
|
|
West
|
1,782,581
|
|
|
1,580,199
|
|
|
California
|
2,697,809
|
|
|
2,733,956
|
|
|
Traditional Home Building
|
7,940,270
|
|
|
7,653,170
|
|
|
City Living
|
502,406
|
|
|
516,238
|
|
|
Corporate and other
|
1,834,053
|
|
|
2,075,182
|
|
|
Total
|
$
|
10,276,729
|
|
|
$
|
10,244,590
|
|
“Corporate and other” is comprised principally of cash and cash equivalents, restricted cash, deferred tax assets, investments in our Rental Property Joint Ventures, expected recoveries from insurance carriers and suppliers, our Gibraltar investments and operations, manufacturing facilities, and our mortgage and title subsidiaries.
16. Supplemental Disclosure to Condensed Consolidated Statements of Cash Flows
The following are supplemental disclosures to the Condensed Consolidated Statements of Cash Flows, for the periods indicated (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended April 30,
|
|
|
|
2019
|
|
2018
|
|
Cash flow information:
|
|
|
|
|
|
Interest paid, net of amount capitalized
|
|
$
|
13,999
|
|
|
$
|
5,878
|
|
|
Income tax payments
|
|
$
|
101,232
|
|
|
$
|
90,352
|
|
|
Income tax refunds
|
|
$
|
927
|
|
|
$
|
322
|
|
|
Noncash activity:
|
|
|
|
|
|
Cost of inventory acquired through seller financing, municipal bonds, or included in accrued expenses, net
|
|
$
|
110,269
|
|
|
$
|
46,575
|
|
|
(Increase) decrease in inventory for capitalized interest, our share of earnings, and allocation of basis difference in land purchased from unconsolidated entities, net
|
|
$
|
(4,276
|
)
|
|
$
|
861
|
|
|
Reclassification from inventory to property, construction, and office equipment, net due to the adoption of ASC 606
|
|
$
|
104,807
|
|
|
|
|
|
Net decrease in inventory and retained earnings due to the adoption of ASC 606
|
|
$
|
8,989
|
|
|
|
|
|
Net increase in accrued expenses and decrease in retained earnings due to the adoption of ASC 606
|
|
$
|
6,541
|
|
|
|
|
|
Net decrease in investment in unconsolidated entities and retained earnings due to the adoption of ASC 606
|
|
$
|
2,457
|
|
|
|
|
|
Non-controlling interest
|
|
$
|
36,362
|
|
|
|
|
|
Transfer of other assets to inventory
|
|
$
|
7,100
|
|
|
$
|
21,189
|
|
|
Transfer of other assets to investment in unconsolidated entities, net
|
|
$
|
11,656
|
|
|
$
|
21,546
|
|
|
Reclassification of deferred income from accrued expenses to investment in unconsolidated entities
|
|
|
|
|
$
|
5,995
|
|
|
|
|
|
|
|
|
|
|
At April 30,
|
|
|
|
2019
|
|
2018
|
|
Cash, cash equivalents, and restricted cash
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
924,448
|
|
|
$
|
475,113
|
|
|
Restricted cash included in receivables, prepaid expenses, and other assets
|
|
543
|
|
|
1,161
|
|
|
Total cash, cash equivalents, and restricted cash shown in the Condensed Consolidated
Statements of Cash Flows
|
|
$
|
924,991
|
|
|
$
|
476,274
|
|
17. Supplemental Guarantor Information
At
April 30, 2019
, our
100%
-owned subsidiary, Toll Brothers Finance Corp. (the “Subsidiary Issuer”), has issued the following outstanding Senior Notes (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
Original amount issued and amount outstanding
|
|
6.75% Senior Notes due November 1, 2019
|
|
$
|
250,000
|
|
|
5.875% Senior Notes due February 15, 2022
|
|
$
|
419,876
|
|
|
4.375% Senior Notes due April 15, 2023
|
|
$
|
400,000
|
|
|
5.625% Senior Notes due January 15, 2024
|
|
$
|
250,000
|
|
|
4.875% Senior Notes due November 15, 2025
|
|
$
|
350,000
|
|
|
4.875% Senior Notes due March 15, 2027
|
|
$
|
450,000
|
|
|
4.350% Senior Notes due February 15, 2028
|
|
$
|
400,000
|
|
The obligations of the Subsidiary Issuer to pay principal, premiums, if any, and interest are guaranteed jointly and severally on a senior basis by us and substantially all of our
100%
-owned home building subsidiaries (the “Guarantor Subsidiaries”). The guarantees are full and unconditional. Our non-home building subsidiaries and several of our home building subsidiaries (together, the “Nonguarantor Subsidiaries”) do not guarantee these Senior Notes. The Subsidiary Issuer generates no operating revenues and does not have any independent operations other than the financing of our other subsidiaries by lending the proceeds from the above-described debt issuances. The indentures under which the Senior Notes were issued provide that any of our subsidiaries that provide a guarantee of our obligations under the Credit Facility will guarantee the Senior Notes. The indentures further provide that any Guarantor Subsidiary may be released from its guarantee so long as (i) no default or event of default exists or would result from release of such guarantee; (ii) the Guarantor Subsidiary being released has consolidated net worth of less than 5% of the Company’s consolidated net worth as of the end of our most recent fiscal quarter; (iii) the Guarantor Subsidiaries released from their guarantees in any fiscal year comprise in the aggregate less than 10% (or 15% if and to the extent necessary to permit the cure of a default) of our consolidated net worth as of the end of our most recent fiscal quarter; (iv) such release would not have a material adverse effect on our and our subsidiaries’ home building business; and (v) the Guarantor Subsidiary is released from its guaranty under the Credit Facility. If there are no guarantors under the Credit Facility, all Guarantor Subsidiaries under the indentures will be released from their guarantees.
Separate financial statements and other disclosures concerning the Guarantor Subsidiaries are not presented because management has determined that such disclosures would not be material to investors.
Supplemental consolidating financial information of Toll Brothers, Inc., the Subsidiary Issuer, the Guarantor Subsidiaries, the Nonguarantor Subsidiaries, and the eliminations to arrive at Toll Brothers, Inc. on a consolidated basis is presented below ($ amounts in thousands).
Condensed Consolidating Balance Sheet at
April 30, 2019
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Toll
Brothers,
Inc.
|
|
Subsidiary
Issuer
|
|
Guarantor
Subsidiaries
|
|
Nonguarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
—
|
|
|
—
|
|
|
701,016
|
|
|
223,432
|
|
|
—
|
|
|
924,448
|
|
|
Inventory
|
|
|
|
|
7,713,940
|
|
|
76,900
|
|
|
|
|
7,790,840
|
|
|
Property, construction and office equipment, net
|
|
|
|
|
273,870
|
|
|
15,316
|
|
|
|
|
289,186
|
|
|
Receivables, prepaid expenses and other assets
|
1,585
|
|
|
|
|
|
269,886
|
|
|
470,437
|
|
|
(82,140
|
)
|
|
659,768
|
|
|
Mortgage loans held for sale
|
|
|
|
|
|
|
124,940
|
|
|
|
|
124,940
|
|
|
Customer deposits held in escrow
|
|
|
|
|
96,419
|
|
|
1,043
|
|
|
|
|
97,462
|
|
|
Investments in unconsolidated entities
|
|
|
|
|
46,092
|
|
|
343,993
|
|
|
|
|
390,085
|
|
|
Investments in and advances to consolidated entities
|
4,970,319
|
|
|
2,562,921
|
|
|
149,657
|
|
|
148,993
|
|
|
(7,831,890
|
)
|
|
—
|
|
|
|
4,971,904
|
|
|
2,562,921
|
|
|
9,250,880
|
|
|
1,405,054
|
|
|
(7,914,030
|
)
|
|
10,276,729
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans payable
|
|
|
|
|
1,025,599
|
|
|
1,809
|
|
|
|
|
1,027,408
|
|
|
Senior notes
|
|
|
2,512,404
|
|
|
|
|
|
|
|
|
2,512,404
|
|
|
Mortgage company loan facility
|
|
|
|
|
|
|
110,012
|
|
|
|
|
110,012
|
|
|
Customer deposits
|
|
|
|
|
415,831
|
|
|
3,648
|
|
|
|
|
419,479
|
|
|
Accounts payable
|
|
|
|
|
317,922
|
|
|
424
|
|
|
|
|
318,346
|
|
|
Accrued expenses
|
592
|
|
|
32,676
|
|
|
532,744
|
|
|
411,498
|
|
|
(86,842
|
)
|
|
890,668
|
|
|
Advances from consolidated entities
|
|
|
|
|
|
1,120,299
|
|
|
472,324
|
|
|
(1,592,623
|
)
|
|
—
|
|
|
Income taxes payable
|
12,172
|
|
|
|
|
|
|
|
|
|
|
|
12,172
|
|
|
Total liabilities
|
12,764
|
|
|
2,545,080
|
|
|
3,412,395
|
|
|
999,715
|
|
|
(1,679,465
|
)
|
|
5,290,489
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
1,779
|
|
|
|
|
48
|
|
|
3,006
|
|
|
(3,054
|
)
|
|
1,779
|
|
|
Additional paid-in capital
|
721,311
|
|
|
49,400
|
|
|
|
|
|
151,651
|
|
|
(201,051
|
)
|
|
721,311
|
|
|
Retained earnings (deficit)
|
5,370,410
|
|
|
(31,559
|
)
|
|
5,838,437
|
|
|
205,596
|
|
|
(6,030,460
|
)
|
|
5,352,424
|
|
|
Treasury stock, at cost
|
(1,135,166
|
)
|
|
|
|
|
|
|
|
|
|
(1,135,166
|
)
|
|
Accumulated other comprehensive income
|
806
|
|
|
|
|
|
|
|
|
|
|
|
|
806
|
|
|
Total stockholders’ equity
|
4,959,140
|
|
|
17,841
|
|
|
5,838,485
|
|
|
360,253
|
|
|
(6,234,565
|
)
|
|
4,941,154
|
|
|
Noncontrolling interest
|
|
|
|
|
|
|
45,086
|
|
|
|
|
45,086
|
|
|
Total equity
|
4,959,140
|
|
|
17,841
|
|
|
5,838,485
|
|
|
405,339
|
|
|
(6,234,565
|
)
|
|
4,986,240
|
|
|
|
4,971,904
|
|
|
2,562,921
|
|
|
9,250,880
|
|
|
1,405,054
|
|
|
(7,914,030
|
)
|
|
10,276,729
|
|
Condensed Consolidating Balance Sheet at
October 31, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Toll
Brothers,
Inc.
|
|
Subsidiary
Issuer
|
|
Guarantor
Subsidiaries
|
|
Nonguarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
—
|
|
|
—
|
|
|
1,011,863
|
|
|
170,332
|
|
|
—
|
|
|
1,182,195
|
|
|
Inventory
|
|
|
|
|
7,493,205
|
|
|
105,014
|
|
|
|
|
7,598,219
|
|
|
Property, construction and office equipment, net
|
|
|
|
|
169,265
|
|
|
24,016
|
|
|
|
|
193,281
|
|
|
Receivables, prepaid expenses and other assets
|
|
|
|
|
|
|
291,299
|
|
|
392,559
|
|
|
(133,080
|
)
|
|
550,778
|
|
|
Mortgage loans held for sale
|
|
|
|
|
|
|
170,731
|
|
|
|
|
170,731
|
|
|
Customer deposits held in escrow
|
|
|
|
|
116,332
|
|
|
1,241
|
|
|
|
|
117,573
|
|
|
Investments in unconsolidated entities
|
|
|
|
|
44,329
|
|
|
387,484
|
|
|
|
|
431,813
|
|
|
Investments in and advances to consolidated entities
|
4,791,629
|
|
|
2,916,557
|
|
|
91,740
|
|
|
126,872
|
|
|
(7,926,798
|
)
|
|
—
|
|
|
|
4,791,629
|
|
|
2,916,557
|
|
|
9,218,033
|
|
|
1,378,249
|
|
|
(8,059,878
|
)
|
|
10,244,590
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans payable
|
|
|
|
|
686,801
|
|
|
|
|
|
|
|
686,801
|
|
|
Senior notes
|
|
|
2,861,375
|
|
|
|
|
|
|
|
|
2,861,375
|
|
|
Mortgage company loan facility
|
|
|
|
|
|
|
150,000
|
|
|
|
|
150,000
|
|
|
Customer deposits
|
|
|
|
|
405,318
|
|
|
5,546
|
|
|
|
|
410,864
|
|
|
Accounts payable
|
|
|
|
|
361,655
|
|
|
443
|
|
|
|
|
362,098
|
|
|
Accrued expenses
|
471
|
|
|
37,341
|
|
|
600,907
|
|
|
462,128
|
|
|
(127,266
|
)
|
|
973,581
|
|
|
Advances from consolidated entities
|
|
|
|
|
|
1,551,196
|
|
|
476,040
|
|
|
(2,027,236
|
)
|
|
—
|
|
|
Income taxes payable
|
30,959
|
|
|
|
|
|
|
|
|
|
|
|
30,959
|
|
|
Total liabilities
|
31,430
|
|
|
2,898,716
|
|
|
3,605,877
|
|
|
1,094,157
|
|
|
(2,154,502
|
)
|
|
5,475,678
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
1,779
|
|
|
|
|
48
|
|
|
3,006
|
|
|
(3,054
|
)
|
|
1,779
|
|
|
Additional paid-in capital
|
727,053
|
|
|
49,400
|
|
|
|
|
|
93,734
|
|
|
(143,134
|
)
|
|
727,053
|
|
|
Retained earnings (deficit)
|
5,161,551
|
|
|
(31,559
|
)
|
|
5,612,108
|
|
|
178,639
|
|
|
(5,759,188
|
)
|
|
5,161,551
|
|
|
Treasury stock, at cost
|
(1,130,878
|
)
|
|
|
|
|
|
|
|
|
|
(1,130,878
|
)
|
|
Accumulated other comprehensive income
|
694
|
|
|
|
|
|
|
|
|
|
|
|
|
694
|
|
|
Total stockholders’ equity
|
4,760,199
|
|
|
17,841
|
|
|
5,612,156
|
|
|
275,379
|
|
|
(5,905,376
|
)
|
|
4,760,199
|
|
|
Noncontrolling interest
|
|
|
|
|
|
|
8,713
|
|
|
|
|
8,713
|
|
|
Total equity
|
4,760,199
|
|
|
17,841
|
|
|
5,612,156
|
|
|
284,092
|
|
|
(5,905,376
|
)
|
|
4,768,912
|
|
|
|
4,791,629
|
|
|
2,916,557
|
|
|
9,218,033
|
|
|
1,378,249
|
|
|
(8,059,878
|
)
|
|
10,244,590
|
|
Condensed Consolidating Statement of Operations and Comprehensive Income for the
six
months ended
April 30, 2019
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Toll
Brothers,
Inc.
|
|
Subsidiary
Issuer
|
|
Guarantor
Subsidiaries
|
|
Nonguarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Home sales
|
|
|
|
|
2,967,351
|
|
|
64,014
|
|
|
|
|
3,031,365
|
|
|
Land sales and other
|
|
|
|
|
30,793
|
|
|
107,644
|
|
|
(90,527
|
)
|
|
47,910
|
|
|
|
—
|
|
|
—
|
|
|
2,998,144
|
|
|
171,658
|
|
|
(90,527
|
)
|
|
3,079,275
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Home sales
|
|
|
|
|
2,365,786
|
|
|
50,965
|
|
|
(159
|
)
|
|
2,416,592
|
|
|
Land sales and other
|
|
|
|
|
|
|
7,979
|
|
|
62,801
|
|
|
(33,606
|
)
|
|
37,174
|
|
|
|
—
|
|
|
—
|
|
|
2,373,765
|
|
|
113,766
|
|
|
(33,765
|
)
|
|
2,453,766
|
|
|
Selling, general and administrative
|
491
|
|
|
1,395
|
|
|
355,050
|
|
|
36,095
|
|
|
(52,422
|
)
|
|
340,609
|
|
|
Income (loss) from operations
|
(491
|
)
|
|
(1,395
|
)
|
|
269,329
|
|
|
21,797
|
|
|
(4,340
|
)
|
|
284,900
|
|
|
Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from unconsolidated entities
|
|
|
|
|
8,541
|
|
|
2,018
|
|
|
|
|
10,559
|
|
|
Other income
–
net
|
|
|
|
|
|
12,255
|
|
|
14,250
|
|
|
5,641
|
|
|
32,146
|
|
|
Intercompany interest income
|
|
|
67,004
|
|
|
870
|
|
|
2,980
|
|
|
(70,854
|
)
|
|
—
|
|
|
Interest expense
|
|
|
(65,609
|
)
|
|
(2,980
|
)
|
|
(964
|
)
|
|
69,553
|
|
|
—
|
|
|
Income from subsidiaries
|
328,096
|
|
|
|
|
40,081
|
|
|
|
|
(368,177
|
)
|
|
—
|
|
|
Income before income taxes
|
327,605
|
|
|
—
|
|
|
328,096
|
|
|
40,081
|
|
|
(368,177
|
)
|
|
327,605
|
|
|
Income tax provision
|
86,231
|
|
|
|
|
86,355
|
|
|
10,549
|
|
|
(96,904
|
)
|
|
86,231
|
|
|
Net income
|
241,374
|
|
|
—
|
|
|
241,741
|
|
|
29,532
|
|
|
(271,273
|
)
|
|
241,374
|
|
|
Other comprehensive income
|
112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
112
|
|
|
Total comprehensive income
|
241,486
|
|
|
—
|
|
|
241,741
|
|
|
29,532
|
|
|
(271,273
|
)
|
|
241,486
|
|
Condensed Consolidating Statement of Operations and Comprehensive Income for the
six
months ended
April 30, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Toll
Brothers,
Inc.
|
|
Subsidiary
Issuer
|
|
Guarantor
Subsidiaries
|
|
Nonguarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|
Revenues
|
|
|
|
|
2,627,343
|
|
|
237,658
|
|
|
(90,334
|
)
|
|
2,774,667
|
|
|
Cost of revenues
|
|
|
|
|
2,093,152
|
|
|
171,743
|
|
|
(32,258
|
)
|
|
2,232,637
|
|
|
Selling, general and administrative
|
32
|
|
|
1,627
|
|
|
333,128
|
|
|
40,334
|
|
|
(51,202
|
)
|
|
323,919
|
|
|
|
32
|
|
|
1,627
|
|
|
2,426,280
|
|
|
212,077
|
|
|
(83,460
|
)
|
|
2,556,556
|
|
|
Income (loss) from operations
|
(32
|
)
|
|
(1,627
|
)
|
|
201,063
|
|
|
25,581
|
|
|
(6,874
|
)
|
|
218,111
|
|
|
Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from unconsolidated entities
|
|
|
|
|
6,733
|
|
|
34,711
|
|
|
|
|
41,444
|
|
|
Other income
–
net
|
|
|
|
|
|
12,683
|
|
|
4,066
|
|
|
8,042
|
|
|
24,791
|
|
|
Intercompany interest income
|
|
|
69,203
|
|
|
389
|
|
|
2,081
|
|
|
(71,673
|
)
|
|
—
|
|
|
Interest expense
|
|
|
(67,576
|
)
|
|
(2,081
|
)
|
|
(786
|
)
|
|
70,443
|
|
|
—
|
|
|
Income from subsidiaries
|
284,378
|
|
|
|
|
65,653
|
|
|
|
|
(350,031
|
)
|
|
—
|
|
|
Income before income taxes
|
284,346
|
|
|
—
|
|
|
284,440
|
|
|
65,653
|
|
|
(350,093
|
)
|
|
284,346
|
|
|
Income tax provision
|
40,429
|
|
|
|
|
40,442
|
|
|
9,335
|
|
|
(49,777
|
)
|
|
40,429
|
|
|
Net income
|
243,917
|
|
|
—
|
|
|
243,998
|
|
|
56,318
|
|
|
(300,316
|
)
|
|
243,917
|
|
|
Other comprehensive income
|
341
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
341
|
|
|
Total comprehensive income
|
244,258
|
|
|
—
|
|
|
243,998
|
|
|
56,318
|
|
|
(300,316
|
)
|
|
244,258
|
|
Condensed Consolidating Statement of Operations and Comprehensive Income for the
three
months ended
April 30, 2019
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Toll
Brothers,
Inc.
|
|
Subsidiary
Issuer
|
|
Guarantor
Subsidiaries
|
|
Nonguarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Home sales
|
|
|
|
|
1,675,155
|
|
|
36,902
|
|
|
|
|
1,712,057
|
|
|
Land sales and other
|
|
|
|
|
15,460
|
|
|
34,329
|
|
|
(45,752
|
)
|
|
4,037
|
|
|
|
—
|
|
|
—
|
|
|
1,690,615
|
|
|
71,231
|
|
|
(45,752
|
)
|
|
1,716,094
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home sales
|
|
|
|
|
1,344,891
|
|
|
29,616
|
|
|
(160
|
)
|
|
1,374,347
|
|
|
Land sales and other
|
|
|
|
|
|
|
3,841
|
|
|
16,909
|
|
|
(17,829
|
)
|
|
2,921
|
|
|
|
—
|
|
|
—
|
|
|
1,348,732
|
|
|
46,525
|
|
|
(17,989
|
)
|
|
1,377,268
|
|
|
Selling, general and administrative
|
101
|
|
|
662
|
|
|
185,133
|
|
|
17,342
|
|
|
(24,867
|
)
|
|
178,371
|
|
|
Income (loss) from operations
|
(101
|
)
|
|
(662
|
)
|
|
156,750
|
|
|
7,364
|
|
|
(2,896
|
)
|
|
160,455
|
|
|
Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from unconsolidated entities
|
|
|
|
|
3,154
|
|
|
1,265
|
|
|
|
|
4,419
|
|
|
Other income
–
net
|
|
|
|
|
|
6,758
|
|
|
1,019
|
|
|
3,508
|
|
|
11,285
|
|
|
Intercompany interest income
|
|
|
32,883
|
|
|
343
|
|
|
1,475
|
|
|
(34,701
|
)
|
|
—
|
|
|
Interest expense
|
|
|
(32,221
|
)
|
|
(1,475
|
)
|
|
(393
|
)
|
|
34,089
|
|
|
—
|
|
|
Income from subsidiaries
|
176,260
|
|
|
|
|
10,730
|
|
|
|
|
(186,990
|
)
|
|
—
|
|
|
Income before income taxes
|
176,159
|
|
|
—
|
|
|
176,260
|
|
|
10,730
|
|
|
(186,990
|
)
|
|
176,159
|
|
|
Income tax provision
|
46,835
|
|
|
|
|
46,859
|
|
|
2,914
|
|
|
(49,773
|
)
|
|
46,835
|
|
|
Net income
|
129,324
|
|
|
—
|
|
|
129,401
|
|
|
7,816
|
|
|
(137,217
|
)
|
|
129,324
|
|
|
Other comprehensive income
|
56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56
|
|
|
Total comprehensive income
|
129,380
|
|
|
—
|
|
|
129,401
|
|
|
7,816
|
|
|
(137,217
|
)
|
|
129,380
|
|
Condensed Consolidating Statement of Operations and Comprehensive Income for the
three
months ended
April 30, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Toll
Brothers,
Inc.
|
|
Subsidiary
Issuer
|
|
Guarantor
Subsidiaries
|
|
Nonguarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|
Revenues
|
|
|
|
|
1,511,989
|
|
|
133,544
|
|
|
(46,334
|
)
|
|
1,599,199
|
|
|
Cost of revenues
|
|
|
|
|
1,218,344
|
|
|
94,256
|
|
|
(14,443
|
)
|
|
1,298,157
|
|
|
Selling, general and administrative
|
14
|
|
|
787
|
|
|
171,049
|
|
|
20,161
|
|
|
(25,359
|
)
|
|
166,652
|
|
|
|
14
|
|
|
787
|
|
|
1,389,393
|
|
|
114,417
|
|
|
(39,802
|
)
|
|
1,464,809
|
|
|
Income (loss) from operations
|
(14
|
)
|
|
(787
|
)
|
|
122,596
|
|
|
19,127
|
|
|
(6,532
|
)
|
|
134,390
|
|
|
Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from unconsolidated entities
|
|
|
|
|
1,601
|
|
|
963
|
|
|
|
|
2,564
|
|
|
Other income
–
net
|
|
|
|
|
|
6,798
|
|
|
3,022
|
|
|
5,974
|
|
|
15,794
|
|
|
Intercompany interest income
|
|
|
36,508
|
|
|
389
|
|
|
1,058
|
|
|
(37,955
|
)
|
|
—
|
|
|
Interest expense
|
|
|
(35,721
|
)
|
|
(1,058
|
)
|
|
(418
|
)
|
|
37,197
|
|
|
—
|
|
|
Income from subsidiaries
|
152,762
|
|
|
|
|
23,752
|
|
|
|
|
(176,514
|
)
|
|
—
|
|
|
Income before income taxes
|
152,748
|
|
|
—
|
|
|
154,078
|
|
|
23,752
|
|
|
(177,830
|
)
|
|
152,748
|
|
|
Income tax provision (benefit)
|
40,938
|
|
|
|
|
52,971
|
|
|
(2,527
|
)
|
|
(50,444
|
)
|
|
40,938
|
|
|
Net income
|
111,810
|
|
|
—
|
|
|
101,107
|
|
|
26,279
|
|
|
(127,386
|
)
|
|
111,810
|
|
|
Other comprehensive income
|
170
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
170
|
|
|
Total comprehensive income
|
111,980
|
|
|
—
|
|
|
101,107
|
|
|
26,279
|
|
|
(127,386
|
)
|
|
111,980
|
|
Condensed Consolidating Statement of Cash Flows for the
six
months ended
April 30, 2019
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Toll
Brothers,
Inc.
|
|
Subsidiary
Issuer
|
|
Guarantor
Subsidiaries
|
|
Nonguarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|
Net cash used in operating activities
|
(525
|
)
|
|
(3,635
|
)
|
|
(69,339
|
)
|
|
(1,854
|
)
|
|
(10,325
|
)
|
|
(85,678
|
)
|
|
Cash flow provided by (used in) investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment - net
|
|
|
|
|
(45,805
|
)
|
|
864
|
|
|
|
|
(44,941
|
)
|
|
Investments in unconsolidated entities
|
|
|
|
|
(3,091
|
)
|
|
(28,469
|
)
|
|
|
|
(31,560
|
)
|
|
Return of investments in unconsolidated entities
|
|
|
|
|
|
|
|
70,465
|
|
|
|
|
70,465
|
|
|
Investment in foreclosed real estate and distressed loans
|
|
|
|
|
|
|
|
(522
|
)
|
|
|
|
(522
|
)
|
|
Return of investments in foreclosed real estate and distressed loans
|
|
|
|
|
|
|
1,214
|
|
|
|
|
1,214
|
|
|
Proceeds from sales of golf club property and an office building
|
|
|
|
|
15,319
|
|
|
18,220
|
|
|
|
|
33,539
|
|
|
Investment paid - intercompany
|
|
|
|
|
(57,917
|
)
|
|
|
|
57,917
|
|
|
—
|
|
|
Intercompany advances
|
56,901
|
|
|
353,635
|
|
|
|
|
|
|
|
(410,536
|
)
|
|
—
|
|
|
Net cash provided by (used in) investing activities
|
56,901
|
|
|
353,635
|
|
|
(91,494
|
)
|
|
61,772
|
|
|
(352,619
|
)
|
|
28,195
|
|
|
Cash flow provided by (used in) financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from loans payable
|
|
|
|
|
300,000
|
|
|
1,039,641
|
|
|
|
|
1,339,641
|
|
|
Debt issuance costs for loans payable
|
|
|
|
|
(1,948
|
)
|
|
|
|
|
|
|
(1,948
|
)
|
|
Principal payments of loans payable
|
|
|
|
|
(52,165
|
)
|
|
(1,079,630
|
)
|
|
|
|
(1,131,795
|
)
|
|
Redemption of senior notes
|
|
|
|
(350,000
|
)
|
|
|
|
|
|
|
|
(350,000
|
)
|
|
Proceeds from stock-based benefit plans, net
|
1,302
|
|
|
|
|
|
|
|
|
|
|
1,302
|
|
|
Purchase of treasury stock
|
(25,244
|
)
|
|
|
|
|
|
|
|
|
|
(25,244
|
)
|
|
Dividends paid
|
(32,434
|
)
|
|
|
|
|
|
|
|
|
|
(32,434
|
)
|
|
Receipts related to noncontrolling interest, net
|
|
|
|
|
|
|
|
13
|
|
|
|
|
13
|
|
|
Investment received - intercompany
|
|
|
|
|
|
|
|
57,917
|
|
|
(57,917
|
)
|
|
—
|
|
|
Intercompany advances
|
|
|
|
|
|
(395,905
|
)
|
|
(24,956
|
)
|
|
420,861
|
|
|
—
|
|
|
Net cash (used in) provided by financing activities
|
(56,376
|
)
|
|
(350,000
|
)
|
|
(150,018
|
)
|
|
(7,015
|
)
|
|
362,944
|
|
|
(200,465
|
)
|
|
Net (decrease) increase in cash, cash equivalents, and restricted cash
|
—
|
|
|
—
|
|
|
(310,851
|
)
|
|
52,903
|
|
|
—
|
|
|
(257,948
|
)
|
|
Cash, cash equivalents, and restricted cash, beginning of period
|
—
|
|
|
—
|
|
|
1,011,867
|
|
|
171,072
|
|
|
—
|
|
|
1,182,939
|
|
|
Cash and cash equivalents, end of period
|
—
|
|
|
—
|
|
|
701,016
|
|
|
223,975
|
|
|
—
|
|
|
924,991
|
|
Condensed Consolidating Statement of Cash Flows for the
six
months ended
April 30, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Toll
Brothers,
Inc.
|
|
Subsidiary
Issuer
|
|
Guarantor
Subsidiaries
|
|
Nonguarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
|
Net cash (used in) provided by operating activities
|
(34,719
|
)
|
|
5,576
|
|
|
(357,136
|
)
|
|
61,072
|
|
|
(1,061
|
)
|
|
(326,268
|
)
|
|
Cash flow provided by (used in) investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment — net
|
|
|
|
|
(6,660
|
)
|
|
159
|
|
|
|
|
(6,501
|
)
|
|
Investments in unconsolidated entities
|
|
|
|
|
(1,393
|
)
|
|
(9,407
|
)
|
|
|
|
(10,800
|
)
|
|
Return of investments in unconsolidated entities
|
|
|
|
|
23,421
|
|
|
30,894
|
|
|
|
|
54,315
|
|
|
Investment in foreclosed real estate and distressed loans
|
|
|
|
|
|
|
|
(195
|
)
|
|
|
|
(195
|
)
|
|
Return of investments in foreclosed real estate and distressed loans
|
|
|
|
|
|
|
|
3,122
|
|
|
|
|
3,122
|
|
|
Intercompany advances
|
346,154
|
|
|
(402,166
|
)
|
|
|
|
|
|
56,012
|
|
|
—
|
|
|
Net cash provided by (used in) investing activities
|
346,154
|
|
|
(402,166
|
)
|
|
15,368
|
|
|
24,573
|
|
|
56,012
|
|
|
39,941
|
|
|
Cash flow provided by (used in) financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of senior notes
|
|
|
400,000
|
|
|
|
|
|
|
|
|
|
400,000
|
|
|
Debt issuance costs for senior notes
|
|
|
(3,410
|
)
|
|
|
|
|
|
|
|
|
(3,410
|
)
|
|
Proceeds from loans payable
|
|
|
|
|
450,000
|
|
|
788,283
|
|
|
|
|
1,238,283
|
|
|
Principal payments of loans payable
|
|
|
|
|
(471,270
|
)
|
|
(804,878
|
)
|
|
|
|
(1,276,148
|
)
|
|
Proceeds from stock-based benefit plans, net
|
9,133
|
|
|
|
|
|
|
|
|
|
|
9,133
|
|
|
Purchase of treasury stock
|
(291,478
|
)
|
|
|
|
|
|
|
|
|
|
(291,478
|
)
|
|
Dividends paid
|
(29,090
|
)
|
|
|
|
|
|
|
|
|
|
(29,090
|
)
|
|
Intercompany advances
|
|
|
|
|
|
112,935
|
|
|
(57,984
|
)
|
|
(54,951
|
)
|
|
—
|
|
|
Net cash provided by (used in) financing activities
|
(311,435
|
)
|
|
396,590
|
|
|
91,665
|
|
|
(74,579
|
)
|
|
(54,951
|
)
|
|
47,290
|
|
|
Net (decrease) increase in cash, cash equivalents, and restricted cash
|
—
|
|
|
—
|
|
|
(250,103
|
)
|
|
11,066
|
|
|
—
|
|
|
(239,037
|
)
|
|
Cash, cash equivalents, and restricted cash, beginning of period
|
—
|
|
|
—
|
|
|
534,704
|
|
|
180,607
|
|
|
—
|
|
|
715,311
|
|
|
Cash, cash equivalents, and restricted cash, end of period
|
—
|
|
|
—
|
|
|
284,601
|
|
|
191,673
|
|
|
—
|
|
|
476,274
|
|
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (“MD&A”)
This discussion and analysis is based on, should be read together with, and is qualified in its entirety by, the accompanying unaudited condensed consolidated financial statements and related notes, as well as our consolidated financial statements, notes thereto, and the related MD&A contained in our Annual Report on Form 10-K for the fiscal year ended
October 31, 2018
(“
2018
Form 10-K”). It also should be read in conjunction with the disclosure under “Statement on Forward-Looking Information” in this report.
Unless otherwise stated in this report, net contracts signed represents a number or value equal to the gross number or value of contracts signed during the relevant period, less the number or value of contracts canceled during the relevant period, which includes contracts that were signed during the relevant period and in prior periods. Backlog consists of homes under contract but not yet delivered to our home buyers (“backlog”). Backlog conversion represents the percentage of homes delivered in the period from backlog at the beginning of the period (“backlog conversion”).
We operate in
two
segments: Traditional Home Building and City Living. We conduct our Traditional Home Building operations in five geographic areas around the United States: (1) the North, consisting of Connecticut, Illinois, Massachusetts, Michigan, Minnesota, New Jersey, and New York; (2) the Mid-Atlantic, consisting of Delaware, Maryland, Pennsylvania, and Virginia; (3) the South, consisting of Florida, North Carolina, and Texas; (4) the West, consisting of Arizona, Colorado, Idaho, Nevada, Oregon, Utah, and Washington; and (5) California.
On November 1, 2018, we adopted Accounting Standards Codification (“ASC”) Topic 606 “Revenue from Contracts with Customers” (“ASC 606”). Upon adoption, land sale activity is presented as part of income from operations where previously it was included in “Other income – net.” Prior periods are not restated. See Note 1, “Significant Accounting Policies – Recent Accounting Pronouncements” in Notes to Condensed Consolidated Financial Statements in this Form 10-Q for additional information regarding the impact of the adoption of ASC 606.
OVERVIEW
Financial and Operational Highlights
In the
six
-month period ended
April 30, 2019
, we recognized
$3.08 billion
of revenues, consisting of
$3.03 billion
of home sales revenue and
$47.9 million
of land sales revenue, and net income of
$241.4 million
, as compared to
$2.77 billion
of revenues and net income of
$243.9 million
in the
six
-month period ended
April 30, 2018
. In the three-month period ended
April 30, 2019
, we recognized
$1.72 billion
of revenues, consisting of
$1.71 billion
of home sales revenue and
$4.0 million
of land sales revenue, and net income of
$129.3 million
, as compared to
$1.60 billion
of revenues and net income of
$111.8 million
in the three-month period ended
April 30, 2018
.
In the
six
-month periods ended
April 30, 2019
and
2018
, the value of net contracts signed was
$3.17 billion
(
3,803
homes) and
$4.07 billion
(
4,488
homes), respectively. In the three-month periods ended
April 30, 2019
and
2018
, the value of net contracts signed was
$2.00 billion
(
2,424
homes) and
$2.38 billion
(
2,666
homes), respectively.
The value of our backlog at
April 30, 2019
was
$5.66 billion
(
6,467
homes), as compared to our backlog at
April 30, 2018
of
$6.36 billion
(
7,030
homes). Our backlog at
October 31, 2018
was
$5.52 billion
(
6,105
homes), as compared to backlog of
$5.06 billion
(
5,851
homes) at
October 31, 2017
.
At
April 30, 2019
, we had
$924.4 million
of cash and cash equivalents on hand and approximately
$1.12 billion
available under our
$1.295 billion
revolving credit facility (the “Credit Facility”) that matures in May 2021. At
April 30, 2019
, we had
no
outstanding borrowings and we had approximately
$179.3 million
of outstanding letters of credit under the Credit Facility.
At
April 30, 2019
, we owned or controlled through options approximately
54,600
home sites, as compared to approximately
53,400
at October 31, 2018; and approximately
48,300
at October 31, 2017. Of the approximately
54,600
total home sites that we owned or controlled through options at
April 30, 2019
, we owned approximately
33,500
and controlled approximately
21,100
through options. Of the
33,500
home sites owned, approximately
16,000
were substantially improved. In addition, at
April 30, 2019
, we expected to purchase approximately
2,600
additional home sites over a number of years from several joint ventures in which we have interests, at prices not yet determined.
At
April 30, 2019
, we were selling from
311
communities, compared to
315
at October 31, 2018; and
305
at October 31, 2017.
At
April 30, 2019
, our total stockholders’ equity and our debt to total capitalization ratio were
$4.94 billion
and
0.42
to 1.00, respectively.
Our Business Environment and Current Outlook
In the three months ended
April 30, 2019
, we signed
2,424
contracts for the sale of Traditional Home Building Product and City Living units with an aggregate value of
$2.00 billion
, compared to
2,666
contracts with an aggregate value of
$2.38 billion
in the three months ended
April 30, 2018
, and 2,511 contracts with an aggregate value of $2.02 billion in the three months ended
April 30, 2017
. In our fourth quarter of fiscal 2018 and first quarter of fiscal 2019, we experienced a moderation in demand, in particular in California, which continued into the second quarter of fiscal 2019, although we experienced an improvement in demand late in our second fiscal quarter. We attribute this decline in demand to an industry-wide slowdown that began in the second half of fiscal 2018 arising from the cumulative impact of rising interest rates, increased prices, and a shift in buyer sentiment.
We continue to believe that many of our communities are in desirable locations that are difficult to replace and in markets where approvals have been increasingly difficult to achieve. We believe that many of these communities have substantial embedded value that may be realized in the future.
Acquisition – Subsequent Event
In May 2019, we acquired substantially all of the assets and operations of Sharp Residential, LLC (“Sharp”), a builder in metropolitan Atlanta, Georgia, for approximately
$93.2 million
in cash. The assets acquired were primarily inventory, including approximately
950
home sites owned or controlled through land purchase agreements. In connection with this acquisition, we assumed contracts to deliver
125
homes with an aggregate value of
$66.1 million
. The average price of undelivered homes at the date of acquisition was approximately
$528,900
. As a result of this acquisition, our selling community count increased by
10
communities at the acquisition date.
Tax Reform
On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was enacted into law, which changed many longstanding foreign and domestic corporate and individual tax rules, as well as rules pertaining to the deductibility of employee compensation and benefits. As required under accounting rules, we remeasured our net deferred tax liability for the tax law change, which resulted in an income tax benefit of
$31.2 million
in the
six
months ended
April 30, 2018
. See Note 8, “Income Taxes” in Notes to Condensed Consolidated Financial Statements in this Form 10-Q for additional information regarding the impact of the Tax Act.
RESULTS OF OPERATIONS – OVERVIEW
The following table compares certain items in our Condensed Consolidated Statements of Operations and Comprehensive Income and other supplemental information for the
six
months and three months ended
April 30, 2019
and
2018
($ amounts in millions, unless otherwise stated). For more information regarding results of operations by segment, see “Segments” in this MD&A.
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|
|
|
|
|
|
Six months ended April 30,
|
|
Three months ended April 30,
|
|
|
2019
|
|
2018
|
|
% Change
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|
2019
|
|
2018
|
|
% Change
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Revenues:(1)
|
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|
|
|
|
|
|
|
|
|
|
Home sales
|
$
|
3,031.4
|
|
|
$
|
2,774.7
|
|
|
9
|
%
|
|
$
|
1,712.1
|
|
|
$
|
1,599.2
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|
|
7
|
%
|
|
Land sales
|
47.9
|
|
|
—
|
|
|
|
|
|
4.0
|
|
|
—
|
|
|
|
|
|
3,079.3
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|
|
2,774.7
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|
|
11
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%
|
|
1,716.1
|
|
|
1,599.2
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|
|
|
|
Cost of revenues:(1)
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|
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|
|
|
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|
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|
Home sales
|
2,416.6
|
|
|
2,232.6
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|
|
8
|
%
|
|
1,374.3
|
|
|
1,298.2
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|
|
6
|
%
|
|
Land sales
|
37.2
|
|
|
—
|
|
|
|
|
|
2.9
|
|
|
—
|
|
|
|
|
|
2,453.8
|
|
|
2,232.6
|
|
|
10
|
%
|
|
1,377.3
|
|
|
1,298.2
|
|
|
|
|
Selling, general and administrative
|
340.6
|
|
|
323.9
|
|
|
5
|
%
|
|
178.4
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|
|
166.7
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|
|
7
|
%
|
|
Income from operations
|
284.9
|
|
|
218.1
|
|
|
31
|
%
|
|
160.5
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|
|
134.4
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|
|
19
|
%
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|
Other
|
|
|
|
|
|
|
|
|
|
|
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Income from unconsolidated entities
|
10.6
|
|
|
41.4
|
|
|
(75
|
)%
|
|
4.4
|
|
|
2.6
|
|
|
72
|
%
|
|
Other income – net
|
32.1
|
|
|
24.8
|
|
|
30
|
%
|
|
11.3
|
|
|
15.8
|
|
|
(28
|
)%
|
|
Income before income taxes
|
327.6
|
|
|
284.3
|
|
|
15
|
%
|
|
176.2
|
|
|
152.7
|
|
|
15
|
%
|
|
Income tax provision
|
86.2
|
|
|
40.4
|
|
|
113
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%
|
|
46.8
|
|
|
40.9
|
|
|
14
|
%
|
|
Net income
|
$
|
241.4
|
|
|
$
|
243.9
|
|
|
(1
|
)%
|
|
$
|
129.3
|
|
|
$
|
111.8
|
|
|
16
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental information:
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|
|
|
|
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|
Home sales cost of revenues as a percentage of home sales revenues
|
79.7
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%
|
|
80.5
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%
|
|
|
|
80.3
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%
|
|
81.2
|
%
|
|
|
|
Land sales cost of revenues as a percentage of land sales revenues (1)
|
77.6
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%
|
|
|
|
|
|
72.4
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%
|
|
|
|
|
|
SG&A as a percentage of home sale revenues
|
11.2
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%
|
|
11.7
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%
|
|
|
|
10.4
|
%
|
|
10.4
|
%
|
|
|
|
Effective tax rate
|
26.3
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%
|
|
14.2
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%
|
|
|
|
26.6
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%
|
|
26.8
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%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deliveries – units
|
3,441
|
|
|
3,309
|
|
|
4
|
%
|
|
1,911
|
|
|
1,886
|
|
|
1
|
%
|
|
Deliveries – average delivered price (2)
|
$
|
881.0
|
|
|
$
|
838.5
|
|
|
5
|
%
|
|
$
|
895.9
|
|
|
$
|
847.9
|
|
|
6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net contracts signed – value
|
$
|
3,166.6
|
|
|
$
|
4,073.6
|
|
|
(22
|
)%
|
|
$
|
2,003.3
|
|
|
$
|
2,383.2
|
|
|
(16
|
)%
|
|
Net contracts signed – units
|
3,803
|
|
|
4,488
|
|
|
(15
|
)%
|
|
2,424
|
|
|
2,666
|
|
|
(9
|
)%
|
|
Net contracts signed – average selling price (2)
|
$
|
832.7
|
|
|
$
|
907.7
|
|
|
(8
|
)%
|
|
$
|
826.4
|
|
|
$
|
893.9
|
|
|
(8
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 30, 2019
|
|
April 30, 2018
|
|
%
Change
|
|
October 31, 2018
|
|
October 31, 2017
|
|
%
Change
|
|
Backlog – value
|
$
|
5,661.7
|
|
|
$
|
6,360.4
|
|
|
(11
|
)%
|
|
$
|
5,522.5
|
|
|
$
|
5,061.5
|
|
|
9
|
%
|
|
Backlog – units
|
6,467
|
|
|
7,030
|
|
|
(8
|
)%
|
|
6,105
|
|
|
5,851
|
|
|
4
|
%
|
|
Backlog – average selling price (2)
|
$
|
875.5
|
|
|
$
|
904.8
|
|
|
(3
|
)%
|
|
$
|
904.6
|
|
|
$
|
865.1
|
|
|
5
|
%
|
|
|
|
|
(1)
|
On November 1, 2018, we adopted ASC 606. Upon adoption, land sale activity is presented as part of income from operations where previously it was included in “Other income – net.” During the six months ended
April 30, 2018
, we recognized land sales revenues and land sales cost of revenues of
$41.4 million
and
$38.1 million
, respectively. During the three months ended
April 30, 2018
, we recognized land sales revenues and land sales cost of revenues of
$34.4 million
and
$31.8 million
, respectively. Further, retained customer deposits, which totaled
$6.4 million
and
$3.2 million
during the
six
months and three months ended
April 30, 2019
, respectively, are included in “Home sales revenue” where previously they were included in “Other income – net.” During the
six
months and three months ended
April 30, 2018
, retained customer deposits were
$4.2 million
and
$3.1 million
, respectively. Prior period balances have not been restated.
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|
|
(2)
|
$ amounts in thousands.
|
Note: Due to rounding, amounts may not add.
Home Sales Revenues and Home Sales Cost of Revenues
The
increase
in home sale revenues for the
six
months ended
April 30, 2019
, as compared to the
six
months ended
April 30, 2018
, was attributable to a
4%
increase
in the number of homes delivered and a
5%
increase in the average price of the homes delivered. The increase in the number of homes delivered was primarily due to an increase in the number of homes that signed and settled in the fiscal
2019
period, as compared to the fiscal
2018
period, and an increase in the number of homes in backlog at October 31, 2018, as compared to the number of homes in backlog at October 31, 2017, offset, in part, by a decrease in backlog conversion in the fiscal
2019
period, as compared to the fiscal
2018
period. The increase in the average delivered home price was mainly due to an increase in the number of homes delivered in California, where home prices were higher; price increases in homes delivered in California and the West region; and a shift in the number of homes delivered to more expensive areas and/or products in California, New Jersey, Virginia, and the West region in the fiscal
2019
period, as compared to the fiscal
2018
period. These increases were partially offset by a shift in the number of homes delivered to less expensive areas in City Living in the fiscal
2019
period, as compared to the fiscal
2018
period. The decrease in home sales cost of revenues, as a percentage of home sales revenues, in the
six
months ended
April 30, 2019
, as compared to the
six
months ended
April 30, 2018
, was principally due to an increase in home sales revenues generated in California, where home sales cost of revenues, as a percentage of home sales revenues, was lower than the Company average; a shift to higher margin products/areas in City Living and the West region; a state reimbursement of $6.5 million of previously expensed environmental clean-up costs received in the fiscal
2019
period; and lower interest expense. These decreases were offset, in part, by higher material and labor costs and higher inventory impairment charges. In the
six
months ended
April 30, 2019
and
2018
, interest expense as a percentage of home sales revenues was 2.6% and 2.8%, respectively, and we recognized inventory impairments and write-offs of
$27.0 million
and
$17.7 million
, respectively.
The
increase
in home sale revenues for the three months ended
April 30, 2019
, as compared to the three months ended
April 30, 2018
, was attributable to a 6% increase in the average price of the homes delivered and a
1%
increase in the number of homes delivered. The increase in the average delivered home price was mainly due to price increases in homes delivered in California and the West region and a shift in the number of homes delivered to more expensive areas and/or products in California, New Jersey, Virginia, and the West region in the fiscal
2019
period, as compared to the fiscal
2018
period. These increases were partially offset by a shift in the number of homes delivered to less expensive areas in City Living in the fiscal 2019 period, as compared to the fiscal 2018 period. The increase in the number of homes delivered was primarily due to an increase in the number of homes that signed and settled in the fiscal
2019
period, as compared to the fiscal
2018
period, partially offset by a decrease in backlog conversion in the fiscal
2019
period, as compared to the fiscal
2018
period. The decrease in home sales cost of revenues, as a percentage of home sales revenues, in the three months ended April 30, 2019, as compared to the three months ended April 30, 2018, was principally due to an increase in home sales revenues generated in California, where home sales cost of revenues, as a percentage of home sales revenues, was lower than the Company average; a shift to higher margin products/areas in City Living and the West region; a state reimbursement of $6.5 million of previously expensed environmental clean-up costs received in the fiscal
2019
period; and lower interest expense. These decreases were offset, in part, by higher material and labor costs and higher inventory impairment charges. In the three months ended April 30, 2019 and 2018, interest expense as a percentage of home sales revenues was 2.6% and 2.8%, respectively, and we recognized inventory impairments and write-offs of $19.4 million and $13.8 million, respectively.
Land Sales Revenues and Land Sales Cost of Revenues
Our revenues from land sales generally consist of the following: (1) lot sales to third-party builders within our master planned communities; (2) land sales to joint ventures in which we retain an interest; and (3) bulk land sales to third parties of land we have decided no longer meets our development criteria. In the
six
months ended
April 30, 2019
, we recognized a gain of $8.4 million from the sale of land to a newly formed Rental Property Joint Venture in which we have an interest of 25%.
Prior to the adoption of ASC 606, land sales activity was reported within “Other income – net” in our Condensed Consolidated Statements of Operations and Comprehensive Income. During the six months ended
April 30, 2018
, we recognized land sales revenues and land sales cost of revenues in “Other income – net” of
$41.4 million
and
$38.1 million
, respectively. During the three months ended
April 30, 2018
, we recognized land sales revenues and land sales cost of revenues in “Other income – net” of
$34.4 million
and
$31.8 million
, respectively.
Selling, General and Administrative Expenses (“SG&A”)
SG&A spending increased by
$16.7 million
and
$11.7 million
in the
six
-month and three month periods ended
April 30, 2019
, respectively, as compared to the
six
-month and three months periods ended
April 30, 2018
. As a percentage of home sales revenues, SG&A was
11.2%
and
11.7%
in the six months ended
April 30, 2019
and
2018
, respectively. As a percentage of home sales revenues, SG&A was
10.4%
in each of the three-month periods ended
April 30, 2019
and
2018
. The dollar increases in SG&A was due primarily to increased compensation costs due to a higher number of employees, increased sales and marketing costs, and costs related to the implementation of new enterprise information technology systems. The higher
sales and marketing costs were the result of the increased number of homes delivered, increased spending on advertising, and higher design studio operating costs. The increased number of employees was due primarily to the greater number of home delivered in the fiscal
2019
periods, as compared to the fiscal
2018
periods, and the implementation of the new enterprise information technology systems. The decrease in SG&A as a percentage of revenues in the six-month period ended
April 30, 2019
, as compared to the
six
-month period ended
April 30, 2018
, was due to a lower increase in SG&A spending, at
5%
, relative to revenues, which increased
9%
from the fiscal
2018
period.
Income from Unconsolidated Entities
We have investments in various unconsolidated entities. These entities, which are structured as joint ventures, (i) develop land for the joint venture participants and for sale to outside builders (“Land Development Joint Ventures”); (ii) develop for-sale homes (“Home Building Joint Ventures”); (iii) develop luxury for-rent residential apartments, commercial space, and a hotel (“Rental Property Joint Ventures”); and (iv) invest in distressed loans and real estate and provide financing and land banking to residential builders and developers for the acquisition and development of land and home sites (“Gibraltar Joint Ventures”).
We recognize our proportionate share of the earnings and losses from these various unconsolidated entities. Many of our unconsolidated entities are land development projects, high-rise/mid-rise condominium construction projects, or for-rent apartments projects, which do not generate revenues and earnings for a number of years during the development of the property. Once development is complete for land development projects and high-rise/mid-rise condominium construction projects, these unconsolidated entities will generally, over a relatively short period of time, generate revenues and earnings until all of the assets of the entity are sold. Further, once for-rent apartments projects are complete and stabilized, we may monetize a portion of these projects through a recapitalization or a sale of all or a portion of our ownership interest in the joint venture, generally resulting in an income producing event. Because of the long development periods associated with these entities, the earnings recognized from these entities may vary significantly from quarter to quarter and year to year.
Income from unconsolidated entities decreased by $30.8 million and increased by $1.8 million in the
six
-month and three-month periods ended
April 30, 2019
, respectively, as compared to the
six
-month and three-month periods ended
April 30, 2018
. The decrease in the
six
-month period ended
April 30, 2019
, as compared to the
six
-month period ended
April 30, 2018
, was due mainly to a $30.8 million gain recognized in the fiscal 2018 period from an asset sale by one of our Rental Property Joint Ventures located in College Park, Maryland.
Other Income – Net
The table below provides, for the periods indicated, the components of “Other income – net” (amounts in thousands):
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended April 30,
|
|
Three months ended April 30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
Income from ancillary businesses
|
$
|
18,086
|
|
|
$
|
7,456
|
|
|
$
|
4,242
|
|
|
$
|
4,873
|
|
|
Management fee income from home building unconsolidated entities, net
|
4,727
|
|
|
7,425
|
|
|
3,119
|
|
|
4,354
|
|
|
Income from land sales
|
|
|
3,287
|
|
|
|
|
2,587
|
|
|
Retained customer deposits
|
|
|
4,155
|
|
|
|
|
3,071
|
|
|
Other
|
9,333
|
|
|
2,468
|
|
|
3,924
|
|
|
909
|
|
|
Total other income – net
|
$
|
32,146
|
|
|
$
|
24,791
|
|
|
$
|
11,285
|
|
|
$
|
15,794
|
|
As a result of our adoption of ASC 606 on November 1, 2018, land sale activity is presented as part of income from operations where previously it was included in “Other income – net.” In addition, retained customer deposits are included in “Home sales revenue” where previously they were included in “Other income – net.” Prior periods are not restated. See Note 1, “Significant Accounting Policies – Recent Accounting Pronouncements” in Notes to Condensed Consolidated Financial Statements in this Form 10-Q for additional information regarding the adoption of ASC 606.
The increase in income from ancillary businesses in the
six
months ended
April 30, 2019
, as compared to the
six
months ended
April 30, 2018
, was mainly due to a $12.2 million gain recognized from the sale of a golf club in the fiscal 2019 period.
Management fee income from home building unconsolidated entities presented above includes fees earned by our City Living and Traditional Home Building operations. In addition, in the
six
-month periods ended
April 30, 2019
and
2018
, our apartment living operations earned fees from unconsolidated entities of
$4.7 million
and
$4.0 million
, respectively. In the three-month periods ended
April 30, 2019
and
2018
, our apartment living operations earned fees from unconsolidated entities of
$2.1 million
and
$1.7 million
, respectively. Fees earned by our apartment living operations are included in income from ancillary businesses.
The increases in “other” in the fiscal
2019
periods, as compared to the fiscal
2018
periods, were primarily due to higher interest income earned in the fiscal
2019
periods, as compared to the fiscal
2018
periods.
Income Before Income Taxes
For the
six
-month period ended
April 30, 2019
, we reported income before income taxes of
$327.6 million
, as compared to
$284.3 million
in the
six
-month period ended
April 30, 2018
. For the three-month period ended
April 30, 2019
, we reported income before income taxes of
$176.2 million
, as compared to
$152.7 million
in the three-month period ended
April 30, 2018
.
Income Tax Provision
We recognized income tax provisions of
$86.2 million
and
$46.8 million
in the
six
-month and three-month periods ended
April 30, 2019
, respectively. Based upon the federal statutory rate of
21.0%
for the fiscal 2019 periods, our federal tax provision would have been
$68.8 million
and
$37.0 million
in the
six
-month and three-month periods ended
April 30, 2019
, respectively. The differences between the tax provisions recognized and the tax provisions based on the federal statutory rate in the
six
-month and three-month periods ended
April 30, 2019
were mainly due to the provision for state income taxes.
In the six-month and three-month periods ended April 30, 2018, we recognized income tax provisions of $40.4 million and $40.9 million, respectively. Based upon the blended federal statutory rate of 23.3% for the fiscal 2018 periods, our federal tax provisions would have been $66.3 million and $35.6 million in the six-month and three-month periods ended April 30, 2018, respectively. The difference between the tax provisions recognized and the tax provisions based on the federal statutory rate in the six-month period ended April 30, 2018 was mainly due to the impact of the Tax Act, excess tax benefits related to stock-based compensation, and tax benefits related to the utilization of domestic production activities deductions, offset, in part, by the provision for state income taxes. See Note 8, “Income Taxes” in Notes to Condensed Consolidated Financial Statements in this Form 10-Q for additional information regarding the impact of the Tax Act. The difference between the tax provision recognized and the tax provision based on the federal statutory rate in the three-month period ended April 30, 2018 was primarily due to the provision for state income taxes partially offset by tax benefits related to the utilization of domestic production activities deductions.
Contracts
The aggregate value of net contracts signed
decrease
d
$907.0 million
, or
22%
, in the
six
-month period ended
April 30, 2019
, as compared to the prior year period. In the
six
-month periods ended
April 30, 2019
and
2018
, the value of net contracts signed was
$3.17 billion
(
3,803
homes) and
$4.07 billion
(
4,488
homes), respectively.
The aggregate value of net contracts signed
decrease
d
$379.9 million
, or
16%
, in the three-month period ended
April 30, 2019
, as compared to the prior year period. In the three-month periods ended
April 30, 2019
and
2018
, the value of net contracts signed was
$2.00 billion
(
2,424
homes) and
$2.38 billion
(
2,666
homes), respectively.
The
decrease
s in the aggregate value of net contracts signed in the fiscal
2019
periods, as compared to the fiscal
2018
periods, were the result of decreases of
15%
and
9%
, respectively, in the number of net contracts signed and a decrease of
8%
in the average value of each contract signed in each of the
six
-month and three month periods ended
April 30, 2019
, as compared to the
six
-month and three-month periods ended
April 30, 2018
. The decreases in the number of net contracts signed were the result of decreased demand and a lack of inventory in certain locations in the fiscal
2019
periods, as compared to the fiscal
2018
periods. The decreases in average price of net contracts signed in the fiscal
2019
periods, as compared to the fiscal
2018
periods, were principally due to a shift in the number of contracts signed to less expensive areas and/or products and a decrease in home prices in certain markets in the fiscal
2019
periods, as compared to the fiscal
2018
periods.
Backlog
The value of our backlog at
April 30, 2019
decreased
11%
to
$5.66 billion
(
6,467
homes), as compared to the value of our backlog at
April 30, 2018
of
$6.36 billion
(
7,030
homes). Our backlog at
October 31, 2018
and
2017
was
$5.52 billion
(
6,105
homes) and
$5.06 billion
(
5,851
homes), respectively.
The decrease in the value of our backlog at
April 30, 2019
, as compared to the backlog at
April 30, 2018
, was primarily attributable to a decrease in net contracts signed and an increase in deliveries in the
six
months ended
April 30, 2019
, as compared the three months ended
April 30, 2018
, partially offset by a higher backlog of homes at October 31, 2018, as compared to October 31, 2017.
For more information regarding results of operations by segment, see “Segments” in this MD&A.
CAPITAL RESOURCES AND LIQUIDITY
Funding for our business has been, and continues to be, provided principally by cash flow from operating activities before inventory additions, unsecured bank borrowings, and the public capital markets.
Fiscal 2019
At
April 30, 2019
and
October 31, 2018
, we had
$924.4 million
and
$1,182.2 million
, respectively, of cash and cash equivalents. Cash used in operating activities during the
six
-month period ended
April 30, 2019
was
$85.7 million
. Cash used in operating activities during the fiscal
2019
period was primarily related to the purchase of inventory; decreases in accounts payable, accrued expenses, and income taxes payable; and an increase in receivables, prepaid expenses, and other assets; offset, in part, by net income (adjusted for stock-based compensation, inventory impairments, depreciation and amortization, and deferred taxes); an increase in mortgage loans sold, net of mortgage loans originated; and an increase in customer deposits – net.
In the
six
-month period ended
April 30, 2019
, cash provided by investing activities was
$28.2 million
, which was primarily related to
$70.5 million
of cash received as returns of our investments in unconsolidated entities and proceeds of
$33.5 million
of cash received from the sale of one of our golf club properties and an office building in two separate transactions with unrelated third parties. This activity was offset, in part, by
$44.9 million
for the purchase of property and equipment and
$31.6 million
used to fund our investments in unconsolidated entities.
We used
$200.5 million
of cash in financing activities in the
six
-month period ended
April 30, 2019
, primarily for the repayment of
$350.0 million
of senior notes; the repurchase of
$25.2 million
of our common stock; and the payment of dividends on our common stock of
$32.4 million
; offset, in part, by borrowings of
$207.8 million
of loans payable, net of repayments.
Fiscal 2018
At April 30, 2018 and October 31, 2017, we had $475.1 million and $712.8 million, respectively, of cash and cash equivalents. Cash used in operating activities during the six-month period ended April 30, 2018 was
$326.3 million
. Cash used in operating activities during the fiscal 2018 period was primarily related to the purchase of inventory; an increase in receivables, prepaid expenses, and other assets; and a decrease in income taxes payable; offset, in part, by net income adjusted for stock-based compensation, inventory impairments, depreciation and amortization, and deferred taxes; an increase in mortgage loans sold, net of mortgage loans originated; and increases in customer deposits, accounts payable, and accrued expenses.
In the six-month period ended April 30, 2018, cash provided by investing activities was
$39.9 million
, which was primarily related to $57.4 million of cash received as returns on our investments in unconsolidated entities, foreclosed real estate, and distressed loans. This was offset, in part, by $10.8 million used to fund our investments in unconsolidated entities and by $6.5 million for the purchase of property and equipment.
We generated
$47.3 million
of cash from financing activities in the six-month period ended April 30, 2018, primarily from the net proceeds of $396.6 million from the issuance of $400.0 million aggregate principal amount of 4.350% Senior Notes due 2028 and the proceeds of $9.1 million from our stock-based benefit plans; offset, in part, by the repurchase of $291.5 million of our common stock; the repayment of $37.9 million of loans payable, net of borrowings; and the payment of dividends on our common stock of $29.1 million.
Other
In general, our cash flow from operating activities assumes that, as each home is delivered, we will purchase a home site to replace it. Because we own a supply of several years of home sites, we do not need to buy home sites immediately to replace those that we deliver. In addition, we generally do not begin construction of our detached homes until we have a signed contract with the home buyer. Should our business decline, we believe that our inventory levels would decrease as we complete and deliver the homes under construction but do not commence construction of as many new homes, as we complete the improvements on the land we already own, and as we sell and deliver the speculative homes that are currently in inventory, resulting in additional cash flow from operations. In addition, we might delay, decrease, or curtail our acquisition of additional land, which would further reduce our inventory levels and cash needs. At
April 30, 2019
, we owned or controlled through options approximately
54,600
home sites, of which we owned approximately
33,500
. Of our owned home sites at
April 30, 2019
, significant improvements were completed on approximately
16,000
of them.
At
April 30, 2019
, the aggregate purchase price of land parcels under option and purchase agreements was approximately
$2.45 billion
(including
$44.0 million
of land to be acquired from joint ventures in which we have invested). Of the
$2.45 billion
of land purchase commitments, we paid or deposited
$180.7 million
, and, if we acquire all of these land parcels, we will be required to pay an additional
$2.22 billion
. The purchases of these land parcels are scheduled to occur over the next several
years. In addition, we expect to purchase approximately
2,600
additional home sites over a number of years from several joint ventures in which we have interests. We have additional land parcels under option that have been excluded from the aforementioned aggregate purchase amounts since we do not believe that we will complete the purchase of these land parcels and no additional funds will be required from us to terminate these contracts.
During the past several years, we have made a number of investments in unconsolidated entities related to the acquisition and development of land for future home sites, the construction of luxury for-sale condominiums, and for-rent apartments. Our investment activities related to investments in and distributions of investments from unconsolidated entities are contained in the Condensed Consolidated Statements of Cash Flows under “
Net cash provided by investing activities
.” At
April 30, 2019
, we had purchase commitments to acquire land for apartment developments of approximately
$326.9 million
, of which we had outstanding deposits in the amount of
$14.3 million
. We generally intend to develop these apartment projects in joint ventures with unrelated parties in the future.
We have a
$1.295 billion
, unsecured, five-year revolving credit facility (the “Credit Facility”) that is scheduled to expire in May 2021. Under the terms of the Credit Facility, our maximum leverage ratio (as defined in the credit agreement) may not exceed
1.75
to 1.00, and we are required to maintain a minimum tangible net worth (as defined in the credit agreement) of no less than approximately
$2.59 billion
. Under the terms of the Credit Facility, at
April 30, 2019
, our leverage ratio was approximately
0.56
to 1.00, and our tangible net worth was approximately
$4.90 billion
. At
April 30, 2019
, we had
no
outstanding borrowings under our Credit Facility and had outstanding letters of credit thereunder of approximately
$179.3 million
.
At
April 30, 2019
, we had an
$800.0 million
,
five
-year senior unsecured term loan facility (the “Term Loan Facility”) with a syndicate of banks. On
November 1, 2018
, we entered into an amendment to the Term Loan Facility to, among other things, (i) increase the size of the outstanding term loan to
$800.0 million
; (ii) extend the maturity date to
November 1, 2023
, with no principal payments being required before the maturity date; (iii) provide an accordion feature under which we may, subject to certain conditions set forth in the agreement, increase the Term Loan Facility up to a maximum aggregate amount of
$1.0 billion
; (iv) revise certain provisions to reduce the interest rate applicable on outstanding borrowings; and (v) modify certain provisions relating to existing financial maintenance and negative covenants. Under the terms of the Term Loan Facility, at
April 30, 2019
, our maximum leverage ratio, as defined, may not exceed
1.75
to 1.00, and we are required to maintain a minimum tangible net worth, as defined, of no less than approximately
$2.76 billion
. Under the terms of the Term Loan Facility, at
April 30, 2019
, our leverage ratio was approximately
0.56
to 1.00, and our tangible net worth was approximately
$4.90 billion
.
Under the most restrictive provisions of the Credit Facility and Term Loan Facility, our ability to repurchase our common stock was limited to approximately
$3.00 billion
and our ability to pay cash dividends was limited to approximately
$2.14 billion
as of
April 30, 2019
.
We believe that we will have adequate resources and sufficient access to the capital markets and external financing sources to continue to fund our current operations and meet our contractual obligations. Due to the uncertainties in the economy and for home builders in general, we cannot be certain that we will be able to replace existing financing or find sources of additional financing in the future.
OFF-BALANCE SHEET ARRANGEMENTS
We have investments in Land Development Joint Ventures; Home Building Joint Ventures; Rental Property Joint Ventures; and Gibraltar Joint Ventures.
Our investments in these entities are accounted for using the equity method of accounting. We are a party to several joint ventures with unrelated parties to develop and sell land that is owned by the joint ventures. We recognize our proportionate share of the earnings from the sale of home sites to other builders, including our joint venture partners. We do not recognize earnings from the home sites we purchase from these ventures at the time of our purchase; instead, our cost basis in the home sites is reduced by our share of the earnings realized by the joint venture from sales of those home sites to us.
At
April 30, 2019
, we had investments in these entities of
$390.1 million
and were committed to invest or advance up to an additional
$30.9 million
to these entities if they require additional funding. At
April 30, 2019
, we had agreed to terms for the acquisition of
124
home sites from
two
joint ventures for an estimated aggregate purchase price of
$44.0 million
. In addition, we expect to purchase approximately
2,600
additional home sites over a number of years from several joint ventures in which we have interests; the purchase price of these home sites will be determined at a future date.
The unconsolidated entities in which we have investments generally finance their activities with a combination of partner equity and debt financing. In some instances, we and our partners have guaranteed debt of certain unconsolidated entities. These guarantees may include any or all of the following: (i) project completion guarantees, including any cost overruns; (ii) repayment guarantees, generally covering a percentage of the outstanding loan; (iii) carry cost guarantees, which cover costs such as interest, real estate taxes, and insurance; (iv) an environmental indemnity provided to the lender that holds the lender harmless from and against losses arising from the discharge of hazardous materials from the property and non-compliance with applicable environmental laws; and (v) indemnification of the lender from “bad boy acts” of the unconsolidated entity.
In some instances, the guarantees provided in connection with loans to an unconsolidated entity are joint and several. In these situations, we generally have a reimbursement agreement with our partner that provides that neither party is responsible for more than its proportionate share or agreed-upon share of the guarantee; however, if the joint venture partner does not have adequate financial resources to meet its obligations under the reimbursement agreement, we may be liable for more than our proportionate share.
We believe that, as of
April 30, 2019
, in the event we become legally obligated to perform under a guarantee of the obligation of an unconsolidated entity due to a triggering event, the collateral in such entity should be sufficient to repay all or a significant portion of the obligation. If it is not, we and our partners would need to contribute additional capital to the entity. At
April 30, 2019
, certain unconsolidated entities have loan commitments aggregating
$1.23 billion
, of which, if the full amount of the debt obligations were borrowed, we estimate
$310.6 million
to be our maximum exposure related to repayment and carry cost guarantees. At
April 30, 2019
, the unconsolidated entities had borrowed an aggregate of
$903.5 million
, of which we estimate
$271.1 million
to be our maximum exposure related to repayment and carry cost guarantees. The terms of these guarantees generally range from
two months
to
42 months
. These maximum exposure estimates do not take into account any recoveries from the underlying collateral or any reimbursement from our partners.
For more information regarding these joint ventures, see Note 4, “Investments in Unconsolidated Entities,” in the Notes to Condensed Consolidated Financial Statements in this Form 10-Q.
CRITICAL ACCOUNTING POLICIES
As disclosed in our
2018
Form 10-K, our most critical accounting policies relate to inventory, income taxes–valuation allowances, revenue and cost recognition, and warranty and self-insurance. Since
October 31, 2018
, there have been no material changes to those critical accounting policies, except that we updated our revenue recognition policies due to our adoption of ASC 606, as follows:
Revenue Recognition
Home sales revenues:
Revenues and cost of revenues from home sales are recognized at the time each home is delivered and title and possession are transferred to the buyer. For the majority of our home closings, our performance obligation to deliver a home is satisfied in less than one year from the date a binding sale agreement is signed. In certain states that we build, we are not able to complete certain outdoor features prior to the closing of the home. To the extent these separate performance obligations are not complete upon the home closing, we defer a portion of the home sales revenue related to these obligations and subsequently recognize the revenue upon completion of such obligations.
Land sales revenues:
Our revenues from land sales generally consist of the following: (1) lot sales to third-party builders within our master planned communities; (2) land sales to joint ventures in which we retain an interest; and (3) bulk land sales to third parties of land we have decided no longer meets our development criteria. In general, our performance obligation for each of these land sales are fulfilled upon the delivery of the land, which generally coincides with the receipt of cash consideration from the counterparty. In land sale transactions that contain repurchase options, revenues and related costs are not recognized until the repurchase option expires. In addition, when we sell land to a joint venture in which we retain an interest, we do not recognize revenue or gains on the sale to the extent of our retained interest in such joint venture.
Forfeited Customer Deposits:
Forfeited customer deposits are recognized in “Home sales revenues” in our Condensed Consolidated Statements of Operations and Comprehensive Income in the period in which we determine that the customer will not complete the purchase of the home and we have the right to retain the deposit.
Sales Incentives:
In order to promote sales of our homes, from time to time we grant our home buyers sales incentives. These incentives will vary by type of incentive and by amount on a community-by-community and home-by-home basis. Incentives are reflected as a reduction in home sales revenues. Incentives are recognized at the time the home is delivered to the home buyer and we receive the sales proceeds.
See Note 1, “Significant Accounting Policies – Recent Accounting Pronouncements” in Notes to Condensed Consolidated Financial Statements in this Form 10-Q for additional information regarding the impact of the adoption of ASC 606.
SEGMENTS
The tables below summarize information related to units delivered and revenues, net contracts signed, and income (loss) before income taxes, by segment, for the periods indicated, and information related to backlog, by segment, as of the dates indicated.
Units Delivered and Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended April 30,
|
|
|
Revenues
($ in millions)
|
|
Units Delivered
|
|
Average Delivered Price
($ in thousands)
|
|
|
2019
|
|
2018
|
|
% Change
|
|
2019
|
|
2018
|
|
% Change
|
|
2019
|
|
2018
|
|
% Change
|
|
Traditional Home Building:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
|
$
|
391.4
|
|
|
$
|
360.5
|
|
|
9
|
%
|
|
553
|
|
|
547
|
|
|
1
|
%
|
|
$
|
707.8
|
|
|
$
|
659.0
|
|
|
7
|
%
|
|
Mid-Atlantic
|
461.4
|
|
|
461.9
|
|
|
—
|
%
|
|
692
|
|
|
730
|
|
|
(5
|
)%
|
|
$
|
666.8
|
|
|
$
|
632.7
|
|
|
5
|
%
|
|
South
|
492.5
|
|
|
412.2
|
|
|
19
|
%
|
|
661
|
|
|
540
|
|
|
22
|
%
|
|
$
|
745.1
|
|
|
$
|
763.3
|
|
|
(2
|
)%
|
|
West
|
665.3
|
|
|
607.4
|
|
|
10
|
%
|
|
922
|
|
|
944
|
|
|
(2
|
)%
|
|
$
|
721.6
|
|
|
$
|
643.4
|
|
|
12
|
%
|
|
California
|
870.6
|
|
|
725.5
|
|
|
20
|
%
|
|
477
|
|
|
455
|
|
|
5
|
%
|
|
$
|
1,825.2
|
|
|
$
|
1,594.5
|
|
|
14
|
%
|
|
Traditional Home Building
|
2,881.2
|
|
|
2,567.5
|
|
|
12
|
%
|
|
3,305
|
|
|
3,216
|
|
|
3
|
%
|
|
$
|
871.8
|
|
|
$
|
798.4
|
|
|
9
|
%
|
|
City Living
|
152.7
|
|
|
207.2
|
|
|
(26
|
)%
|
|
136
|
|
|
93
|
|
|
46
|
%
|
|
$
|
1,122.8
|
|
|
$
|
2,228.0
|
|
|
(50
|
)%
|
|
Other
|
(2.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total home sales revenue
|
3,031.4
|
|
|
2,774.7
|
|
|
9
|
%
|
|
3,441
|
|
|
3,309
|
|
|
4
|
%
|
|
$
|
881.0
|
|
|
$
|
838.5
|
|
|
5
|
%
|
|
Land sales revenue
|
47.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
$
|
3,079.3
|
|
|
$
|
2,774.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended April 30,
|
|
|
Revenues
($ in millions)
|
|
Units Delivered
|
|
Average Delivered Price
($ in thousands)
|
|
|
2019
|
|
2018
|
|
% Change
|
|
2019
|
|
2018
|
|
% Change
|
|
2019
|
|
2018
|
|
% Change
|
|
Traditional Home Building:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
|
$
|
221.9
|
|
|
$
|
226.2
|
|
|
(2
|
)%
|
|
316
|
|
|
338
|
|
|
(7
|
)%
|
|
$
|
702.2
|
|
|
$
|
669.3
|
|
|
5
|
%
|
|
Mid-Atlantic
|
255.7
|
|
|
254.9
|
|
|
—
|
%
|
|
387
|
|
|
398
|
|
|
(3
|
)%
|
|
$
|
660.7
|
|
|
$
|
640.5
|
|
|
3
|
%
|
|
South
|
284.4
|
|
|
240.7
|
|
|
18
|
%
|
|
380
|
|
|
319
|
|
|
19
|
%
|
|
$
|
748.3
|
|
|
$
|
754.6
|
|
|
(1
|
)%
|
|
West
|
364.9
|
|
|
349.4
|
|
|
4
|
%
|
|
488
|
|
|
532
|
|
|
(8
|
)%
|
|
$
|
747.7
|
|
|
$
|
656.7
|
|
|
14
|
%
|
|
California
|
500.5
|
|
|
438.4
|
|
|
14
|
%
|
|
268
|
|
|
270
|
|
|
(1
|
)%
|
|
$
|
1,867.7
|
|
|
$
|
1,623.5
|
|
|
15
|
%
|
|
Traditional Home Building
|
1,627.4
|
|
|
1,509.6
|
|
|
8
|
%
|
|
1,839
|
|
|
1,857
|
|
|
(1
|
)%
|
|
$
|
884.9
|
|
|
$
|
812.9
|
|
|
9
|
%
|
|
City Living
|
84.1
|
|
|
89.6
|
|
|
(6
|
)%
|
|
72
|
|
|
29
|
|
|
148
|
%
|
|
$
|
1,167.7
|
|
|
$
|
3,090.8
|
|
|
(62
|
)%
|
|
Other
|
0.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total home sales revenue
|
1,712.1
|
|
|
1,599.2
|
|
|
7
|
%
|
|
1,911
|
|
|
1,886
|
|
|
1
|
%
|
|
$
|
895.9
|
|
|
$
|
847.9
|
|
|
6
|
%
|
|
Land sales revenue
|
4.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
$
|
1,716.1
|
|
|
$
|
1,599.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Contracts Signed:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended April 30,
|
|
|
Net Contract Value
($ in millions)
|
|
Net Contracted Units
|
|
Average Contracted Price
($ in thousands)
|
|
|
2019
|
|
2018
|
|
% Change
|
|
2019
|
|
2018
|
|
% Change
|
|
2019
|
|
2018
|
|
% Change
|
|
Traditional Home Building:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
|
$
|
457.0
|
|
|
$
|
450.0
|
|
|
2
|
%
|
|
648
|
|
|
634
|
|
|
2
|
%
|
|
$
|
705.2
|
|
|
$
|
709.8
|
|
|
(1
|
)%
|
|
Mid-Atlantic
|
567.5
|
|
|
559.9
|
|
|
1
|
%
|
|
877
|
|
|
872
|
|
|
1
|
%
|
|
$
|
647.1
|
|
|
$
|
642.1
|
|
|
1
|
%
|
|
South
|
543.5
|
|
|
578.5
|
|
|
(6
|
)%
|
|
766
|
|
|
769
|
|
|
—
|
%
|
|
$
|
709.5
|
|
|
$
|
752.3
|
|
|
(6
|
)%
|
|
West
|
721.3
|
|
|
779.0
|
|
|
(7
|
)%
|
|
994
|
|
|
1,149
|
|
|
(13
|
)%
|
|
$
|
725.7
|
|
|
$
|
678.0
|
|
|
7
|
%
|
|
California
|
774.6
|
|
|
1,547.2
|
|
|
(50
|
)%
|
|
454
|
|
|
952
|
|
|
(52
|
)%
|
|
$
|
1,706.2
|
|
|
$
|
1,625.2
|
|
|
5
|
%
|
|
Traditional Home Building
|
3,063.9
|
|
|
3,914.6
|
|
|
(22
|
)%
|
|
3,739
|
|
|
4,376
|
|
|
(15
|
)%
|
|
$
|
819.4
|
|
|
$
|
894.6
|
|
|
(8
|
)%
|
|
City Living
|
102.7
|
|
|
159.0
|
|
|
(35
|
)%
|
|
64
|
|
|
112
|
|
|
(43
|
)%
|
|
$
|
1,604.7
|
|
|
$
|
1,419.6
|
|
|
13
|
%
|
|
Total
|
$
|
3,166.6
|
|
|
$
|
4,073.6
|
|
|
(22
|
)%
|
|
3,803
|
|
|
4,488
|
|
|
(15
|
)%
|
|
$
|
832.7
|
|
|
$
|
907.7
|
|
|
(8
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended April 30,
|
|
|
Net Contract Value
($ in millions)
|
|
Net Contracted Units
|
|
Average Contracted Price
($ in thousands)
|
|
|
2019
|
|
2018
|
|
% Change
|
|
2019
|
|
2018
|
|
% Change
|
|
2019
|
|
2018
|
|
% Change
|
|
Traditional Home Building:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
|
$
|
285.5
|
|
|
$
|
252.5
|
|
|
13
|
%
|
|
407
|
|
|
363
|
|
|
12
|
%
|
|
$
|
701.4
|
|
|
$
|
695.6
|
|
|
1
|
%
|
|
Mid-Atlantic
|
346.5
|
|
|
347.8
|
|
|
—
|
%
|
|
530
|
|
|
548
|
|
|
(3
|
)%
|
|
$
|
653.7
|
|
|
$
|
634.6
|
|
|
3
|
%
|
|
South
|
348.1
|
|
|
339.5
|
|
|
3
|
%
|
|
498
|
|
|
466
|
|
|
7
|
%
|
|
$
|
698.9
|
|
|
$
|
728.4
|
|
|
(4
|
)%
|
|
West
|
454.4
|
|
|
445.1
|
|
|
2
|
%
|
|
643
|
|
|
660
|
|
|
(3
|
)%
|
|
$
|
706.8
|
|
|
$
|
674.4
|
|
|
5
|
%
|
|
California
|
505.7
|
|
|
901.2
|
|
|
(44
|
)%
|
|
305
|
|
|
564
|
|
|
(46
|
)%
|
|
$
|
1,657.9
|
|
|
$
|
1,597.9
|
|
|
4
|
%
|
|
Traditional Home Building
|
1,940.2
|
|
|
2,286.1
|
|
|
(15
|
)%
|
|
2,383
|
|
|
2,601
|
|
|
(8
|
)%
|
|
$
|
814.2
|
|
|
$
|
878.9
|
|
|
(7
|
)%
|
|
City Living
|
63.1
|
|
|
97.1
|
|
|
(35
|
)%
|
|
41
|
|
|
65
|
|
|
(37
|
)%
|
|
$
|
1,538.9
|
|
|
$
|
1,494.3
|
|
|
3
|
%
|
|
Total
|
$
|
2,003.3
|
|
|
$
|
2,383.2
|
|
|
(16
|
)%
|
|
2,424
|
|
|
2,666
|
|
|
(9
|
)%
|
|
$
|
826.4
|
|
|
$
|
893.9
|
|
|
(8
|
)%
|
Backlog:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At April 30,
|
|
|
Backlog Value
($ in millions)
|
|
Backlog Units
|
|
Average Backlog Price
($ in thousands)
|
|
|
2019
|
|
2018
|
|
% Change
|
|
2019
|
|
2018
|
|
% Change
|
|
2019
|
|
2018
|
|
% Change
|
|
Traditional Home Building:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
|
$
|
834.8
|
|
|
$
|
905.6
|
|
|
(8
|
)%
|
|
1,193
|
|
|
1,304
|
|
|
(9
|
)%
|
|
$
|
699.7
|
|
|
$
|
694.5
|
|
|
1
|
%
|
|
Mid-Atlantic
|
865.5
|
|
|
839.7
|
|
|
3
|
%
|
|
1,327
|
|
|
1,285
|
|
|
3
|
%
|
|
$
|
652.2
|
|
|
$
|
653.4
|
|
|
—
|
%
|
|
South
|
955.5
|
|
|
982.2
|
|
|
(3
|
)%
|
|
1,271
|
|
|
1,284
|
|
|
(1
|
)%
|
|
$
|
751.8
|
|
|
$
|
765.0
|
|
|
(2
|
)%
|
|
West
|
1,088.3
|
|
|
1,143.6
|
|
|
(5
|
)%
|
|
1,472
|
|
|
1,602
|
|
|
(8
|
)%
|
|
$
|
739.3
|
|
|
$
|
713.8
|
|
|
4
|
%
|
|
California
|
1,789.9
|
|
|
2,316.8
|
|
|
(23
|
)%
|
|
1,110
|
|
|
1,384
|
|
|
(20
|
)%
|
|
$
|
1,612.6
|
|
|
$
|
1,674.0
|
|
|
(4
|
)%
|
|
Traditional Home Building
|
5,534.0
|
|
|
6,187.9
|
|
|
(11
|
)%
|
|
6,373
|
|
|
6,859
|
|
|
(7
|
)%
|
|
$
|
868.4
|
|
|
$
|
902.2
|
|
|
(4
|
)%
|
|
City Living
|
127.7
|
|
|
172.5
|
|
|
(26
|
)%
|
|
94
|
|
|
171
|
|
|
(45
|
)%
|
|
$
|
1,358.4
|
|
|
$
|
1,009.0
|
|
|
35
|
%
|
|
Total
|
$
|
5,661.7
|
|
|
$
|
6,360.4
|
|
|
(11
|
)%
|
|
6,467
|
|
|
7,030
|
|
|
(8
|
)%
|
|
$
|
875.5
|
|
|
$
|
904.8
|
|
|
(3
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At October 31,
|
|
|
Backlog Value
($ in millions)
|
|
Backlog Units
|
|
Average Backlog Price
($ in thousands)
|
|
|
2018
|
|
2017
|
|
% Change
|
|
2018
|
|
2017
|
|
% Change
|
|
2018
|
|
2017
|
|
% Change
|
|
Traditional Home Building:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
|
$
|
768.5
|
|
|
$
|
816.1
|
|
|
(6
|
)%
|
|
1,098
|
|
|
1,217
|
|
|
(10
|
)%
|
|
$
|
699.9
|
|
|
$
|
670.6
|
|
|
4
|
%
|
|
Mid-Atlantic
|
758.8
|
|
|
741.6
|
|
|
2
|
%
|
|
1,142
|
|
|
1,143
|
|
|
—
|
%
|
|
$
|
664.4
|
|
|
$
|
648.8
|
|
|
2
|
%
|
|
South
|
903.2
|
|
|
815.9
|
|
|
11
|
%
|
|
1,166
|
|
|
1,055
|
|
|
11
|
%
|
|
$
|
774.6
|
|
|
$
|
773.4
|
|
|
—
|
%
|
|
West
|
1,031.1
|
|
|
972.0
|
|
|
6
|
%
|
|
1,400
|
|
|
1,397
|
|
|
—
|
%
|
|
$
|
736.5
|
|
|
$
|
695.7
|
|
|
6
|
%
|
|
California
|
1,883.3
|
|
|
1,495.1
|
|
|
26
|
%
|
|
1,133
|
|
|
887
|
|
|
28
|
%
|
|
$
|
1,662.2
|
|
|
$
|
1,685.6
|
|
|
(1
|
)%
|
|
Traditional Home Building
|
5,344.9
|
|
|
4,840.7
|
|
|
10
|
%
|
|
5,939
|
|
|
5,699
|
|
|
4
|
%
|
|
$
|
900.0
|
|
|
$
|
849.4
|
|
|
6
|
%
|
|
City Living
|
177.6
|
|
|
220.8
|
|
|
(20
|
)%
|
|
166
|
|
|
152
|
|
|
9
|
%
|
|
$
|
1,069.7
|
|
|
$
|
1,452.7
|
|
|
(26
|
)%
|
|
Total
|
$
|
5,522.5
|
|
|
$
|
5,061.5
|
|
|
9
|
%
|
|
6,105
|
|
|
5,851
|
|
|
4
|
%
|
|
$
|
904.6
|
|
|
$
|
865.1
|
|
|
5
|
%
|
Income (Loss) Before Income Taxes ($ amounts in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended April 30,
|
|
Three months ended April 30,
|
|
|
2019
|
|
2018
|
|
% Change
|
|
2019
|
|
2018
|
|
% Change
|
|
Traditional Home Building:
|
|
|
|
|
|
|
|
|
|
|
|
|
North
|
$
|
18.0
|
|
|
$
|
2.0
|
|
|
800
|
%
|
|
$
|
7.3
|
|
|
$
|
1.7
|
|
|
329
|
%
|
|
Mid-Atlantic
|
18.9
|
|
|
34.3
|
|
|
(45
|
)%
|
|
7.5
|
|
|
20.4
|
|
|
(63
|
)%
|
|
South
|
47.3
|
|
|
39.3
|
|
|
20
|
%
|
|
31.5
|
|
|
27.1
|
|
|
16
|
%
|
|
West
|
87.4
|
|
|
78.7
|
|
|
11
|
%
|
|
43.8
|
|
|
48.0
|
|
|
(9
|
)%
|
|
California
|
180.2
|
|
|
146.5
|
|
|
23
|
%
|
|
106.6
|
|
|
85.7
|
|
|
24
|
%
|
|
Traditional Home Building
|
351.8
|
|
|
300.8
|
|
|
17
|
%
|
|
196.7
|
|
|
182.9
|
|
|
8
|
%
|
|
City Living
|
40.5
|
|
|
46.6
|
|
|
(13
|
)%
|
|
25.9
|
|
|
16.7
|
|
|
55
|
%
|
|
Corporate and other
|
(64.7
|
)
|
|
(63.1
|
)
|
|
(3
|
)%
|
|
(46.4
|
)
|
|
(46.9
|
)
|
|
(1
|
)%
|
|
Total
|
$
|
327.6
|
|
|
$
|
284.3
|
|
|
15
|
%
|
|
$
|
176.2
|
|
|
$
|
152.7
|
|
|
15
|
%
|
“Corporate and other” is comprised principally of general corporate expenses such as our executive offices; the corporate finance, accounting, audit, tax, human resources, risk management, information technology, marketing, and legal groups; interest income; income from certain of our ancillary businesses, including Gibraltar; and income from our Rental Property Joint Ventures and Gibraltar Joint Ventures.
Traditional Home Building
North
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended April 30,
|
|
Three months ended April 30,
|
|
|
2019
|
|
2018
|
|
Change
|
|
2019
|
|
2018
|
|
Change
|
|
Units Delivered and Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Home sales revenues ($ in millions)
|
$
|
391.4
|
|
|
$
|
360.5
|
|
|
9
|
%
|
|
$
|
221.9
|
|
|
$
|
226.2
|
|
|
(2
|
)%
|
|
Units delivered
|
553
|
|
|
547
|
|
|
1
|
%
|
|
316
|
|
|
338
|
|
|
(7
|
)%
|
|
Average delivered price ($ in thousands)
|
$
|
707.8
|
|
|
$
|
659.0
|
|
|
7
|
%
|
|
$
|
702.2
|
|
|
$
|
669.3
|
|
|
5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Contracts Signed:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net contract value ($ in millions)
|
$
|
457.0
|
|
|
$
|
450.0
|
|
|
2
|
%
|
|
$
|
285.5
|
|
|
$
|
252.5
|
|
|
13
|
%
|
|
Net contracted units
|
648
|
|
|
634
|
|
|
2
|
%
|
|
407
|
|
|
363
|
|
|
12
|
%
|
|
Average contracted price ($ in thousands)
|
$
|
705.2
|
|
|
$
|
709.8
|
|
|
(1
|
)%
|
|
$
|
701.4
|
|
|
$
|
695.6
|
|
|
1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home sales cost of revenues as a percentage of home sale revenues
|
85.8
|
%
|
|
90.1
|
%
|
|
|
|
88.2
|
%
|
|
91.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes ($ in millions)
|
$
|
18.0
|
|
|
$
|
2.0
|
|
|
800
|
%
|
|
$
|
7.3
|
|
|
$
|
1.7
|
|
|
329
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of selling communities at April 30,
|
53
|
|
|
48
|
|
|
10
|
%
|
|
|
|
|
|
|
The increase in the number of homes delivered in the
six
months ended
April 30, 2019
, as compared to the
six
months ended
April 30, 2018
, was mainly due to higher backlog conversion and an increase in the number of homes signed and settled in the fiscal 2019 period, as compared to the fiscal 2018 period. These increases were partially offset by a decrease in the number of homes in backlog at October 31, 2018, as compared to the number of homes in backlog at October 31, 2017. The decrease in the number of homes delivered in the three months ended
April 30, 2019
, as compared to the three months ended
April 30, 2018
, was due primarily to a decrease in the number of homes in backlog at October 31, 2018, as compared to the number of homes in backlog at October 31, 2017, offset, in part, by an increase in the number of homes signed and settled in the fiscal 2019 period, as compared to the fiscal 2018 period. The increases in the average price of homes delivered in the fiscal
2019
periods, as compared to the fiscal
2018
periods, were mainly due to a shift in the number of homes delivered to more expensive areas and/or products in the fiscal
2019
periods, as compared to the fiscal
2018
periods, particularly in New Jersey.
The increases in the number of net contracts signed in the fiscal
2019
periods, as compared to the fiscal
2018
periods, were principally due to an increase in demand and an increase in the average number of selling communities in the fiscal
2019
periods, as compared to the fiscal
2018
periods.
The increases in income before income taxes in the fiscal
2019
periods, as compared to the fiscal
2018
periods, were principally attributable to lower home sales cost of revenues, as a percentage of home sale revenues. The increase in the six-month period ended
April 30, 2019
also benefited from higher earnings from increased revenues in the fiscal
2019
period, as compared to the fiscal
2018
period. The decreases in home sales cost of revenues, as a percentage of home sales revenues, in the fiscal
2019
periods, as compared to the fiscal
2018
periods, were primarily due to a shift in product mix/areas to higher-margin areas and lower inventory impairment charges in the fiscal
2019
periods, as compared to the fiscal
2018
periods.
Inventory impairment charges were $9.7 million and $8.0 million in the
six
months and three months ended
April 30, 2019
, respectively, as compared to $16.5 million and $13.4 million in the
six
months and three months ended
April 30, 2018
, respectively. During our review of operating communities for impairment in the three months ended
April 30, 2019
, primarily due to a lack of improvement and/or a decrease in customer demand as a result of weaker-than-expected market conditions, we determined that the pricing assumptions used in prior impairment reviews for one operating community located in Illinois needed to be reduced. As a result of this reduction in expected sales prices, we determined that this community was impaired. Accordingly, the carrying value of this community was written down in the fiscal 2019 period to its estimated fair value resulting in a charge to income before income taxes of $6.6 million. During the review in the three months ended April 30, 2018, primarily due to a lack of improvement and/or a decrease in customer demand as a result of weaker-than-expected market conditions, we determined that the pricing assumptions used in prior impairment reviews for one operating community located in Connecticut also needed to be reduced. As a result of this reduction in expected sales prices, we determined that this community was impaired. Accordingly, the carrying value of this community was written down in the three months ended April 30, 2018 to its estimated fair value resulting in a charge to income before income taxes of $12.0 million. In addition, during the review in the three months ended January 31, 2018, primarily due to a lack of improvement and/or a decrease in customer demand, we decided to sell the remaining lots in a bulk sale in one community located in Illinois rather than sell and
construct homes as previously intended. The carrying value of this community was written down to its estimated fair value resulting in a charge to income before income taxes in the three months ended January 31, 2018 of $2.2 million.
Mid-Atlantic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended April 30,
|
|
Three months ended April 30,
|
|
|
2019
|
|
2018
|
|
Change
|
|
2019
|
|
2018
|
|
Change
|
|
Units Delivered and Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Home sales revenues ($ in millions)
|
$
|
461.4
|
|
|
$
|
461.9
|
|
|
—
|
%
|
|
$
|
255.7
|
|
|
$
|
254.9
|
|
|
—
|
%
|
|
Units delivered
|
692
|
|
|
730
|
|
|
(5
|
)%
|
|
387
|
|
|
398
|
|
|
(3
|
)%
|
|
Average delivered price ($ in thousands)
|
$
|
666.8
|
|
|
$
|
632.7
|
|
|
5
|
%
|
|
$
|
660.7
|
|
|
$
|
640.5
|
|
|
3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Contracts Signed:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net contract value ($ in millions)
|
$
|
567.5
|
|
|
$
|
559.9
|
|
|
1
|
%
|
|
$
|
346.5
|
|
|
$
|
347.8
|
|
|
—
|
%
|
|
Net contracted units
|
877
|
|
|
872
|
|
|
1
|
%
|
|
530
|
|
|
548
|
|
|
(3
|
)%
|
|
Average contracted price ($ in thousands)
|
$
|
647.1
|
|
|
$
|
642.1
|
|
|
1
|
%
|
|
$
|
653.7
|
|
|
$
|
634.6
|
|
|
3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home sales cost of revenues as a percentage of home sale revenues
|
86.8
|
%
|
|
84.0
|
%
|
|
|
|
88.8
|
%
|
|
84.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes ($ in millions)
|
$
|
18.9
|
|
|
$
|
34.3
|
|
|
(45
|
)%
|
|
$
|
7.5
|
|
|
$
|
20.4
|
|
|
(63
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of selling communities at April 30,
|
54
|
|
|
57
|
|
|
(5
|
)%
|
|
|
|
|
|
|
The decreases in the number of homes delivered in the fiscal
2019
periods, as compared to the fiscal
2018
periods, were mainly due to lower backlog conversion in the fiscal
2019
periods, as compared to the fiscal
2018
periods. The increases in the average price of homes delivered in the fiscal
2019
periods, as compared to the fiscal
2018
periods, were primarily due to a shift in the number of homes delivered to more expensive areas and/or products in the fiscal
2019
periods, as compared to the fiscal
2018
periods.
The decrease in the number of net contracts signed in the three months ended
April 30, 2019
, as compared to the three months ended
April 30, 2018
, was principally due to a decrease in demand in Virginia, offset, in part, by an increase in the average number of selling communities in Pennsylvania. The increases in the average value of each contract signed in the fiscal
2019
periods, as compared to the fiscal
2018
periods, were mainly due to shifts in the number of contracts signed to more expensive areas and/or products in the fiscal
2019
periods, as compared to the fiscal
2018
periods.
The decreases in income before income taxes in the fiscal
2019
periods, as compared to the fiscal
2018
periods, were mainly due to increases in home sales costs of revenues, as a percentage of home sale revenues, and increases in SG&A in the fiscal
2019
periods, as compared to the fiscal
2018
periods. The increases in home sales costs of revenues, as a percentage of home sale revenues, in the fiscal
2019
periods, as compared to the fiscal
2018
periods, were primarily due to higher inventory impairment charges and higher material and labor costs in the fiscal
2019
periods, as compared to the fiscal
2018
periods.
Inventory impairment charges were $8.0 million in each of the
six
-month and three-month periods ended
April 30, 2019
, as compared to $54,000 and $50,000, respectively, in the
six
months and three months ended
April 30, 2018
. During our review of operating communities for impairment in the three months ended
April 30, 2019
, primarily due to a lack of improvement and/or a decrease in customer demand as a result of weaker-than-expected market conditions, we determined that the pricing assumptions used in prior impairment reviews for two operating communities located in Pennsylvania needed to be reduced. As a result of this reduction in expected sales prices, we determined that these communities were impaired. Accordingly, the carrying value of these communities were written down in the three months ended April 30, 2019 to their estimated fair values resulting in a charge to income before income taxes of $8.0 million.
South
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended April 30,
|
|
Three months ended April 30,
|
|
|
2019
|
|
2018
|
|
Change
|
|
2019
|
|
2018
|
|
Change
|
|
Units Delivered and Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Home sales revenues ($ in millions)
|
$
|
492.5
|
|
|
$
|
412.2
|
|
|
19
|
%
|
|
$
|
284.4
|
|
|
$
|
240.7
|
|
|
18
|
%
|
|
Units delivered
|
661
|
|
|
540
|
|
|
22
|
%
|
|
380
|
|
|
319
|
|
|
19
|
%
|
|
Average delivered price ($ in thousands)
|
$
|
745.1
|
|
|
$
|
763.3
|
|
|
(2
|
)%
|
|
$
|
748.3
|
|
|
$
|
754.6
|
|
|
(1
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Contracts Signed:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net contract value ($ in millions)
|
$
|
543.5
|
|
|
$
|
578.5
|
|
|
(6
|
)%
|
|
$
|
348.1
|
|
|
$
|
339.5
|
|
|
3
|
%
|
|
Net contracted units
|
766
|
|
|
769
|
|
|
—
|
%
|
|
498
|
|
|
466
|
|
|
7
|
%
|
|
Average contracted price ($ in thousands)
|
$
|
709.5
|
|
|
$
|
752.3
|
|
|
(6
|
)%
|
|
$
|
698.9
|
|
|
$
|
728.4
|
|
|
(4
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home sales cost of revenues as a percentage of home sale revenues
|
83.6
|
%
|
|
83.3
|
%
|
|
|
|
82.8
|
%
|
|
82.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes ($ in millions)
|
$
|
47.3
|
|
|
$
|
39.3
|
|
|
20
|
%
|
|
$
|
31.5
|
|
|
$
|
27.1
|
|
|
16
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of selling communities at April 30,
|
71
|
|
|
62
|
|
|
15
|
%
|
|
|
|
|
|
|
The increases in the number of homes delivered in the fiscal
2019
periods, as compared to the fiscal
2018
periods, were mainly due to an increase in the number of homes closed in Texas, which was mainly attributable to an increase in the number of homes in backlog in Texas at October 31, 2018, as compared to the number of homes in backlog at October 31, 2017. The decreases in the average price of homes delivered in the fiscal
2019
periods, as compared to the fiscal
2018
periods, were primarily due to a shift in the number of homes delivered to less expensive areas and/or products in the fiscal
2019
periods, as compared to the fiscal
2018
periods.
The increase in the number of net contracts signed in the three months ended
April 30, 2019
, as compared to the three months ended
April 30, 2018
, was mainly due to increases in demand in Florida and North Carolina in the fiscal
2019
period, as compared to the fiscal
2018
period.
The increases in income before income taxes in the fiscal
2019
periods, as compared to the fiscal
2018
periods, were principally due to higher earnings from increased revenues, offset, in part, by higher home sales cost of revenues, as a percentage of home sales revenues in the fiscal
2019
periods, as compared to the fiscal
2018
periods. The increases in home sales cost of revenues, as a percentage of home sales revenues, were primarily due to higher inventory impairment charges, offset, in part, by a shift in product mix/areas to higher-margin areas in the fiscal
2019
periods, as compared to the fiscal
2018
periods.
Inventory impairment charges in the
six
months and three months ended
April 30, 2019
were $4.4 million and $1.4 million, respectively, as compared to $0.6 million and $54,000 in the
six
months and three months ended
April 30, 2018
, respectively. During our review of operating communities for impairment in the three months ended January 31, 2019, primarily due to a lack of improvement and/or a decrease in customer demand, we decided to sell the remaining lots in a bulk sale in one community located in Texas rather than sell and construct homes as previously intended. The carrying value of this community was written down to its estimated fair value resulting in a charge to income before income taxes of $1.5 million in the fiscal
2019
period. In addition, during the six months ended April 30, 2019, we terminated two purchase agreements to acquire land parcels in Texas and forfeited the deposit balances outstanding. We wrote off the deposits resulting in a charges to income before income taxes of $2.1 million and $0.8 million in the
six
months and three months ended
April 30, 2019
, respectively.
West
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended April 30,
|
|
Three months ended April 30,
|
|
|
2019
|
|
2018
|
|
Change
|
|
2019
|
|
2018
|
|
Change
|
|
Units Delivered and Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Home sales revenues ($ in millions)
|
$
|
665.3
|
|
|
$
|
607.4
|
|
|
10
|
%
|
|
$
|
364.9
|
|
|
$
|
349.4
|
|
|
4
|
%
|
|
Units delivered
|
922
|
|
|
944
|
|
|
(2
|
)%
|
|
488
|
|
|
532
|
|
|
(8
|
)%
|
|
Average delivered price ($ in thousands)
|
$
|
721.6
|
|
|
$
|
643.4
|
|
|
12
|
%
|
|
$
|
747.7
|
|
|
$
|
656.7
|
|
|
14
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Contracts Signed:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net contract value ($ in millions)
|
$
|
721.3
|
|
|
$
|
779.0
|
|
|
(7
|
)%
|
|
$
|
454.4
|
|
|
$
|
445.1
|
|
|
2
|
%
|
|
Net contracted units
|
994
|
|
|
1,149
|
|
|
(13
|
)%
|
|
643
|
|
|
660
|
|
|
(3
|
)%
|
|
Average contracted price ($ in thousands)
|
$
|
725.7
|
|
|
$
|
678.0
|
|
|
7
|
%
|
|
$
|
706.8
|
|
|
$
|
674.4
|
|
|
5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home sales cost of revenues as a percentage of home sale revenues
|
78.2
|
%
|
|
79.2
|
%
|
|
|
|
79.5
|
%
|
|
79.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes ($ in millions)
|
$
|
87.4
|
|
|
$
|
78.7
|
|
|
11
|
%
|
|
$
|
43.8
|
|
|
$
|
48.0
|
|
|
(9
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of selling communities at April 30,
|
89
|
|
|
72
|
|
|
24
|
%
|
|
|
|
|
|
|
The decreases in the number of homes delivered in the fiscal
2019
periods, as compared to the fiscal
2018
periods, were mainly due to lower backlog conversion partially offset by increases in the number of homes that signed and settled in the fiscal
2019
periods, as compared to the fiscal
2018
periods. The increases in the average price of homes delivered in the fiscal
2019
periods, as compared to the fiscal
2018
periods, were primarily due to a shift in the number of homes delivered to more expensive areas and/or products and price increases in the fiscal
2019
periods, as compared to the fiscal
2018
periods. The increase in the average price of homes delivered in six-month period ended
April 30, 2019
, as compared to the six-month period ended
April 30, 2018
, was offset, in part, by an increase in deliveries in Idaho, where average delivered home prices are lower than the Company average.
The decreases in the number of net contracts signed in the fiscal
2019
periods, as compared to the fiscal
2018
periods, were principally due to an decrease in demand partially offset by an increase in the average number of selling communities. The increases in the average value of each contract signed in the fiscal
2019
periods, as compared to the fiscal
2018
periods, were mainly due to a shift in the number of contracts signed to more expensive areas and/or products in the fiscal
2019
periods.
The increase in income before income taxes in the six months ended
April 30, 2019
, as compared to the six months ended
April 30, 2018
, was due mainly to higher earnings from the increased revenues and lower home sales cost of revenues, as a percentage of home sales revenues in the fiscal
2019
period, as compared to the fiscal
2018
period. This increase was partially offset by higher SG&A costs in the fiscal
2019
period as compared to the fiscal
2018
period. The decrease in home sales cost of revenues, as a percentage of home sales revenues, was primarily due to a shift in the number of homes delivered to higher margin products and/or locations and higher sales prices, offset, in part, by higher material and labor costs in the fiscal
2019
period, as compared to the fiscal
2018
period.
The decrease in income before income taxes in the three months ended
April 30, 2019
, as compared to the three months ended
April 30, 2018
, was due mainly to higher SG&A costs, offset, in part, by higher earnings from the increased revenues in the fiscal
2019
period, as compared to the fiscal
2018
period.
California
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended April 30,
|
|
Three months ended April 30,
|
|
|
2019
|
|
2018
|
|
Change
|
|
2019
|
|
2018
|
|
Change
|
|
Units Delivered and Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Home sales revenues ($ in millions)
|
$
|
870.6
|
|
|
$
|
725.5
|
|
|
20
|
%
|
|
$
|
500.5
|
|
|
$
|
438.4
|
|
|
14
|
%
|
|
Units delivered
|
477
|
|
|
455
|
|
|
5
|
%
|
|
268
|
|
|
270
|
|
|
(1
|
)%
|
|
Average delivered price ($ in thousands)
|
$
|
1,825.2
|
|
|
$
|
1,594.5
|
|
|
14
|
%
|
|
$
|
1,867.7
|
|
|
$
|
1,623.5
|
|
|
15
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Contracts Signed:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net contract value ($ in millions)
|
$
|
774.6
|
|
|
$
|
1,547.2
|
|
|
(50
|
)%
|
|
$
|
505.7
|
|
|
$
|
901.2
|
|
|
(44
|
)%
|
|
Net contracted units
|
454
|
|
|
952
|
|
|
(52
|
)%
|
|
305
|
|
|
564
|
|
|
(46
|
)%
|
|
Average contracted price ($ in thousands)
|
$
|
1,706.2
|
|
|
$
|
1,625.2
|
|
|
5
|
%
|
|
$
|
1,657.9
|
|
|
$
|
1,597.9
|
|
|
4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home sales cost of revenues as a percentage of home sale revenues
|
73.8
|
%
|
|
73.6
|
%
|
|
|
|
73.7
|
%
|
|
74.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes ($ in millions)
|
$
|
180.2
|
|
|
$
|
146.5
|
|
|
23
|
%
|
|
$
|
106.6
|
|
|
$
|
85.7
|
|
|
24
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of selling communities at April 30,
|
40
|
|
|
38
|
|
|
5
|
%
|
|
|
|
|
|
|
The increase in the number of homes delivered in the six months ended
April 30, 2019
, as compared to the six months ended
April 30, 2018
, was mainly due to the increased number of homes in backlog at October 31, 2018, as compared to the number of homes in backlog at October 31, 2017, offset, in part, by lower backlog conversion in the fiscal
2019
period, as compared to the fiscal
2018
period. The increases in the average price of homes delivered in fiscal
2019
periods, as compared to the fiscal
2018
periods, were primarily due to a shift in the number of homes delivered to more expensive areas and/or products and increased selling prices of homes delivered in fiscal
2019
periods, as compared to the fiscal
2018
periods.
The decreases in the number of net contracts signed in the fiscal
2019
periods, as compared to the fiscal
2018
periods, were principally due to a decrease in demand and reduced availability of lots in the fiscal
2019
periods, as compared to the fiscal
2018
periods. The increases in the average value of each contract signed in the fiscal
2019
periods, as compared to the fiscal
2018
periods, were mainly due to a shift in the number of contracts signed to more expensive areas and/or products in the fiscal
2019
periods, as compared to the fiscal
2018
periods.
The increases in income before income taxes in the fiscal
2019
periods, as compared to the fiscal
2018
periods, were primarily due to higher earnings from the increased revenues. The increase in the six months ended April 30, 2019, as compared to the six months ended April 30, 2018, was offset, in part, by a decrease in earnings from unconsolidated entities in the fiscal
2019
period, as compared to the fiscal
2018
period. The decrease in earnings from unconsolidated entities in the six months ended April 30, 2019, as compared to the six months ended April 30, 2018, was mainly due to one Land Development Joint Venture which completed the sale of its lots in the fiscal 2018 period.
City Living
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended April 30,
|
|
Three months ended April 30,
|
|
|
2019
|
|
2018
|
|
Change
|
|
2019
|
|
2018
|
|
Change
|
|
Units Delivered and Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Home sales revenues ($ in millions)
|
$
|
152.7
|
|
|
$
|
207.2
|
|
|
(26
|
)%
|
|
$
|
84.1
|
|
|
$
|
89.6
|
|
|
(6
|
)%
|
|
Units delivered
|
136
|
|
|
93
|
|
|
46
|
%
|
|
72
|
|
|
29
|
|
|
148
|
%
|
|
Average delivered price ($ in thousands)
|
$
|
1,122.8
|
|
|
$
|
2,228.0
|
|
|
(50
|
)%
|
|
$
|
1,167.7
|
|
|
$
|
3,090.8
|
|
|
(62
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Contracts Signed:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net contract value ($ in millions)
|
$
|
102.7
|
|
|
$
|
159.0
|
|
|
(35
|
)%
|
|
$
|
63.1
|
|
|
$
|
97.1
|
|
|
(35
|
)%
|
|
Net contracted units
|
64
|
|
|
112
|
|
|
(43
|
)%
|
|
41
|
|
|
65
|
|
|
(37
|
)%
|
|
Average contracted price ($ in thousands)
|
$
|
1,604.7
|
|
|
$
|
1,419.6
|
|
|
13
|
%
|
|
$
|
1,538.9
|
|
|
$
|
1,494.3
|
|
|
3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home sales cost of revenues as a percentage of home sale revenues
|
70.3
|
%
|
|
76.6
|
%
|
|
|
|
65.6
|
%
|
|
81.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes ($ in millions)
|
$
|
40.5
|
|
|
$
|
46.6
|
|
|
(13
|
)%
|
|
$
|
25.9
|
|
|
$
|
16.7
|
|
|
55
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of selling communities at April 30,
|
4
|
|
|
6
|
|
|
(33
|
)%
|
|
|
|
|
|
|
The decreases in the average price of homes delivered in the fiscal
2019
periods, as compared to the fiscal
2018
periods, were primarily due to a shift in the number of homes delivered to less expensive buildings. In the
six
months and three months ended
April 30, 2019
, 7% and 8%, respectively, of the units delivered were located in New York City, where average home prices were higher, as compared to 43% and 69% in the
six
months and three months ended
April 30, 2018
, respectively.
The decreases in the number of net contracts signed in the fiscal
2019
periods, as compared to the fiscal
2018
periods, were primarily due to a decrease in demand. The increase in the average sales price of net contracts signed in the
six
months ended
April 30, 2019
, as compared to the
six
months ended
April 30, 2018
, was principally due to a shift to more expensive buildings in the fiscal
2019
period, as compared to the fiscal
2018
period. In the
six
months ended
April 30, 2019
, 38% of the net contracts signed were in buildings located in New York, New York, where average home prices were higher, as compared to 27% in the
six
months ended
April 30, 2018
. The increase in the average sales price of net contracts signed in the three months ended
April 30, 2019
, as compared to the three months ended
April 30, 2018
, was principally due to a shift to more expensive units in the fiscal
2019
period, as compared to the fiscal
2018
period.
The decrease in income before income taxes in the
six
months ended
April 30, 2019
, as compared to the
six
months ended
April 30, 2018
, was mainly due to lower earnings from decreased revenues in the fiscal
2019
period, as compared to the fiscal
2018
period, offset, in part, by lower home sales cost of revenues, as a percentage of home sale revenues, and lower interest expense in the fiscal
2019
period, as compared to the fiscal
2018
period. The increase in income before income taxes in the three months ended
April 30, 2019
, as compared to the three months ended
April 30, 2018
, was mainly due to lower home sales cost of revenues, as a percentage of home sale revenues, and lower interest expense offset, in part, by lower earnings from decreased revenues in the fiscal
2019
period, as compared to the fiscal
2018
period. The lower home sales cost of revenues, as a percentage of home sale revenues, in the fiscal
2019
periods, as compared to the fiscal
2018
periods, was due primarily to a shift in the number of homes delivered to buildings with higher margins, and a state reimbursement of $6.5 million of previously expensed environmental clean-up costs received in the fiscal
2019
periods, offset, in part, by impairment charges of $4.8 million and $2.0 million in the
six
months and three months ended
April 30, 2019
, respectively. As result of decreased demand, in the second quarter of fiscal 2019, we wrote down the carrying value of units in one building located in Maryland to their estimated fair value resulting in an impairment charge of $2.0 million. In addition, in the first quarter of fiscal 2019, we wrote down the carrying value of units in one building located in New York, New York, to their estimated fair value resulting in an impairment charge of $2.8 million.
In the
six
months and three months ended
April 30, 2019
and
2018
, earnings from our investments in unconsolidated entities decreased $1.0 million, as compared to the
six
months and three months ended
April 30, 2018
. The tables below provide information related to deliveries, revenues, and net contracts signed by our City Living Home Building Joint Ventures, for the periods indicated, and the related backlog for the dates indicated ($ amounts in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended April 30,
|
|
Three months ended April 30,
|
|
|
2019
Units
|
|
2018
Units
|
|
2019
$
|
|
2018
$
|
|
2019
Units
|
|
2018
Units
|
|
2019
$
|
|
2018
$
|
|
Deliveries
|
42
|
|
|
5
|
|
|
$
|
91.5
|
|
|
$
|
21.5
|
|
|
38
|
|
|
2
|
|
|
$
|
74.3
|
|
|
$
|
10.8
|
|
|
Net contracts signed
|
15
|
|
|
74
|
|
|
$
|
53.4
|
|
|
$
|
148.4
|
|
|
13
|
|
|
18
|
|
|
$
|
43.8
|
|
|
$
|
45.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At April 30,
|
|
At October 31,
|
|
|
2019
Units
|
|
2018
Units
|
|
2019
$
|
|
2018
$
|
|
2018
Units
|
|
2017
Units
|
|
2018
$
|
|
2017
$
|
|
Backlog
|
107
|
|
|
115
|
|
|
$
|
240.9
|
|
|
$
|
226.0
|
|
|
134
|
|
|
46
|
|
|
$
|
279.0
|
|
|
$
|
99.1
|
|
Corporate and Other
In the
six
months ended
April 30, 2019
and
2018
, loss before income taxes was
$64.7 million
and
$63.1 million
, respectively. The increase in the loss before income taxes in the fiscal
2019
period, as compared to the fiscal
2018
period, was principally attributable to a $30.8 million gain recognized in the fiscal 2018 period from an asset sale by one of our Rental Property Joint Ventures located in College Park, Maryland, partially offset by a $12.2 million gain recognized from the sale of a golf club in the fiscal 2019 period; an $8.4 million gain recognized from the sale of land to a newly formed Rental Property Joint Venture in the fiscal 2019 period; a change in allocation of certain SG&A from corporate and other to home building segments; and higher interest income in the fiscal
2019
period, as compared to the fiscal
2018
period.
In the three months ended
April 30, 2019
and
2018
, loss before income taxes was
$46.4 million
and
$46.9 million
, respectively. The decrease in the loss before income taxes in the fiscal
2019
period, as compared to the fiscal
2018
period, was primarily due to higher interest and other income partially offset by higher SG&A expenses in the fiscal
2019
period, as compared to the fiscal
2018
period.
AVAILABLE INFORMATION
Our principal Internet address is www.tollbrothers.com, and our Investor Relations website is located at www.tollbrothers.com/investor-relations. We make our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 available through our Investor Relations website, free of charge, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
We provide information about our business and financial performance, including our corporate profile, on our Investor Relations website. Additionally, we webcast our earnings calls and certain events we participate in with members of the investment community on our Investor Relations website. Corporate governance information, including our codes of ethics, corporate governance guidelines, and board committee charters, is also available on our Investor Relations website. The content of our websites is not incorporated by reference into this Quarterly Report on Form 10-Q or in any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only.