Toll Brothers, Inc. (NYSE:TOL) (www.tollbrothers.com), the nation’s
leading builder of luxury homes, today announced results for its
third quarter and nine months ended July 31, 2017.
FY 2017 Third Quarter Financial Highlights:
- FY 2017’s third-quarter net income was $148.6 million, or $0.87
per share diluted, compared to net income of $105.5 million, or
$0.61 per share diluted, in FY 2016’s third quarter.
- Pre-tax income was $203.6 million, compared to pre-tax income
of $163.7 million in FY 2016’s third quarter. Third-quarter FY 2017
included inventory write-downs of $2.4 million, compared to $3.7
million in FY 2016’s third quarter.
- FY 2017’s third-quarter tax expense was positively impacted by
a net $27.9 million benefit associated primarily with the reversal
of a state deferred tax asset valuation allowance.
- Revenues of $1.50 billion and home building deliveries of 1,899
units increased 18% in dollars and 26% in units, compared to FY
2016’s third quarter. The average price of homes delivered was
$791,400, compared to $842,700 one year ago. The drop in
average price was due to a change in mix, as was expected.
- Net signed contracts of $1.81 billion and 2,163 units rose 25%
in dollars and 24% in units, compared to FY 2016’s third quarter.
The average price of net signed contracts was $837,300, compared to
$830,800 one year ago.
- This was the Company’s twelfth consecutive quarter of
year-over-year growth in contract dollars and units, including 20%
or higher year-over-year unit growth in each of the past four
quarters.
- On a per-community basis, FY 2017’s third-quarter net signed
contracts were 6.89 units per community, compared to a
third-quarter total of 5.85 in FY 2016. This was the 11th
consecutive quarter of improved contracts per community, compared
to the prior year’s same quarter.
- Backlog of $5.31 billion and 6,282 units rose 21% in dollars
and units, compared to FY 2016’s third-quarter-end backlog. The
average price of homes in backlog was $845,100, compared to
$844,300 one year ago.
- Gross margin was 21.7% of revenues in FY 2017’s third quarter,
compared to 21.9% in FY 2016’s third quarter. Adjusted gross
margin, which excludes interest and inventory write-downs
(“Adjusted Gross Margin”), was 25.0% of revenues, compared to 25.3%
in FY 2016’s third quarter.
- SG&A, as a percentage of revenues, was 10.3% in FY 2017’s
third quarter, compared to 10.6% in FY 2016’s third quarter.
- Other income and Income from unconsolidated entities totaled
$31.9 million, compared to $20.1 million one year ago.
- The Company ended its third quarter with 312 selling
communities, compared to 316 at FY 2017’s second-quarter end and
297 at FY 2016’s third-quarter end.
- During the third quarter of FY 2017, the Company repurchased
approximately 1.9 million shares of its common stock at an average
price of $39.02 per share for a total purchase price of
approximately $75.3 million.
- On June 12, 2017, the Company issued an additional $150 million
of its 4.875% Senior Notes due 2027, priced at a yield of
4.4%.
- On August 15, 2017, the Company notified holders that it had
elected to redeem its 0.5% convertible securities due 2032. These
bonds will be retired with a $287.5 million payment on September
15, 2017, resulting in the elimination of approximately 5.9 million
shares from the Company’s fully diluted share count.
- The Company now estimates it will deliver between 7,000 and
7,300 homes in FY 2017, compared to previous guidance of 6,950 to
7,450 units, at an average delivered price for FY 2017’s full year
of between $800,000 and $825,000 per home. This translates to
projected revenues of between $5.6 billion and $6.0 billion in FY
2017, compared to $5.17 billion in FY 2016.
- The Company’s full FY 2017 and fourth-quarter delivery
projections reflect approximately 150 homes that it had estimated
would be delivered in FY 2017 but will instead be delivered in FY
2018 due to the floor joist recall by a major lumber
manufacturer.
- The Company expects FY 2017 fourth-quarter deliveries of
between 2,275 and 2,575 units with an average price of between
$840,000 and $860,000.
- The Company has updated its previous guidance for full FY 2017
Adjusted Gross Margin to between 24.8% and 25.0% of revenues, for
SG&A to 10.4% of revenues, for Other income and Income from
unconsolidated entities to between $160 million and $180 million
and for its effective tax rate to approximately 35.0%.
- The Company expects its fourth-quarter FY 2017 Adjusted Gross
Margin to improve 35 to 50 basis points from FY 2017’s
third-quarter results.
- FY 2017, fourth-quarter SG&A is expected to be
approximately 8.0% of fourth-quarter revenues.
- The Company’s fourth-quarter FY 2017 Other income and Income
from unconsolidated entities is projected to be between $10 million
and $30 million.
- The FY 2017 fourth-quarter effective tax rate is projected to
be approximately 38.0%.
- Due to the strong pace of sales at many of its current
communities, the Company is selling through some communities more
quickly than anticipated and now expects to end FY 2017 with
between 300 and 310 selling communities.
- The Company ended FY 2017’s third quarter with approximately
47,800 lots owned and optioned, compared to 46,600 one quarter
earlier, and 48,700 one year earlier. At FY 2017’s third-quarter
end, approximately 32,400 of these lots were owned, of which
approximately 17,600 lots, including those in backlog, were
substantially improved.
Douglas C. Yearley, Jr., Toll Brothers’ chief
executive officer, stated: “Thanks to our broad geographic
presence, diverse product offerings, unique brand, robust demand
from affluent buyers, and our great team, we continue to produce
strong results. Our third-quarter net income increased 41%,
revenues rose 18% in dollars and deliveries rose 26% in units,
contracts grew 25% in dollars and 24% in units, and backlog
increased 21% in both dollars and units, compared to third-quarter
FY 2016. Our expansion in the western markets since 2011, now
encompassing California, Washington, Arizona, Nevada Colorado and
Idaho, has helped drive these strong results.
“This was our twelfth consecutive quarter of
year-over-year growth in contract dollars and units, highlighted by
20% or higher year-over year unit growth in each of the past four
quarters. FY 2017’s third-quarter contracts, in both units
and dollars, were the highest third-quarter totals in twelve years.
While California and the other western states are leading our
growth, backlog, in both dollars and units, was up in all our
geographic regions compared to one year ago.
“Our diverse offerings enable us to expand our
presence within our many markets. In addition to our core move-up
communities, our Active Living communities targeted to 55+ aged
buyers represented 21%, in units, of net signed contracts to-date
in FY 2017, while millennial households, in which one buyer is 35
years of age or under, represented 23%.
“Our Apartment Living platform continues to
grow. We are at 95% occupancy in the roughly 3,000 units in
six projects that have reached stabilization, which is a component
of a nationwide pipeline of 12,600 units that also includes
projects in construction, under development or in approvals.
“The unemployment rate is at a 15-year low, the
economy is growing, the stock market is strong, and home prices
continue to rise, putting equity in the pockets of those who may
want to sell their existing home and move to a new one. New home
prices are significantly outpacing existing home
prices. Many buyers want new and they want it their
way: That’s exactly what we provide. This bodes well for Toll
Brothers over the coming years.”
Martin P. Connor, Toll Brothers’ chief financial
officer, stated: “We are very pleased with our financial
performance this quarter. Earnings per share grew by 42.6%
compared to a year ago, and we exceeded our guidance on Adjusted
Gross Margin, SG&A, Other income and Income from unconsolidated
entities, and our tax rate.
“With more than $946 million of cash on hand as
we enter the fourth quarter, we are well positioned to pay off the
$687.5 million of debt maturing or to be redeemed in the fourth
quarter. The retirement of $400 million of our 8.91% Senior
Notes and elimination of approximately 5.9 million shares from our
share count associated with the retirement of our convertible debt
will positively contribute to our earnings per share in FY 2018 and
beyond.
“Subject to our normal caveats regarding
forward-looking statements, we offer the following guidance:
For full FY 2017, we now project revenues of between $5.6 billion
and $6.0 billion compared to $5.17 billion in FY 2016, based on
deliveries of between 7,000 and 7,300 units at an average price of
between $800,000 and $825,000. We had been prepared to
increase the mid-point of our FY 2017 delivery guidance by 100
units, from a mid-point of 7,200 units to 7,300, but our full year
delivery projection was negatively impacted by 150 homes which will
now be delivered in FY 2018 due to the floor joist recall by a
major lumber manufacturer that has affected many builders in the
industry.
“Adjusted Gross Margin for full FY 2017 is now
expected to be between 24.8% and 25.0% of revenues, while SG&A
is projected to be approximately 10.4% of revenues.
Other income and Income from unconsolidated entities is now
projected to be between $160 million and $180 million as we will
have fewer deliveries in our New York City joint venture projects
than previously anticipated. We expect our FY 2017 effective
tax rate to be approximately 35.0%.
“For FY 2017’s fourth quarter, we project
deliveries of between 2,275 and 2,575 units at an average delivered
sales price of between $840,000 and $860,000. Adjusted Gross Margin
is expected to improve 35 to 50 basis points from FY 2017’s
third-quarter results, while SG&A is projected to be about 8.0%
of revenues. Other income and Income from unconsolidated entities
is projected to be between $10 million and $30 million. We
expect our FY 2017’s fourth-quarter effective tax rate to be
approximately 38.0%.”
Robert I. Toll, executive chairman, stated: “In
early June, we celebrated the 50th anniversary of the founding of
our Company. I am so proud of how we have evolved from a
local suburban Philadelphia home builder into America’s Luxury Home
Builder, a national Fortune 500 company operating across 50
suburban and urban markets in 20 states.
“Our growth has been driven by a relentless
focus on quality, value, and service, the establishment of a great
brand and reputation in the luxury market, our broad geographic
presence, and our diversified platform of for-sale and rental
communities serving everyone from baby boomers to
millennials.
“We believe our industry has room to run.
Single-family housing starts, at 811,000, are still well below the
50-year industry average of 1.02 million units. The home ownership
rate is on the rise but also still below historic norms. Interest
rates remain low, unemployment is low, and more and more buyers are
entering the upscale market. Based on these trends, we
believe Toll Brothers is well positioned for future growth.”
The financial highlights for the third quarter
and nine months ended July 31, 2017 (unaudited):
- FY 2017’s third-quarter net income was $148.6 million, or $0.87
per share diluted, compared to FY 2016’s third-quarter net income
of $105.5 million, or $0.61 per share diluted.
- FY 2017’s third-quarter pre-tax income was $203.6 million,
compared to FY 2016’s third-quarter pre-tax income of $163.7
million. FY 2017’s third-quarter results included pre-tax
inventory write-downs totaling $2.4 million ($1.4 million
attributable to operating communities and $1.0 million attributable
to future communities). FY 2016’s third-quarter results
included pre-tax inventory write-downs of $3.7 million ($1.2
million attributable to operating communities and $2.5 million
attributable to future communities).
- FY 2017’s third-quarter tax expense was positively impacted by
a net $27.9 million benefit associated primarily with the reversal
of a state deferred tax asset valuation allowance.
- FY 2017’s nine-month net income was $343.6 million, or $2.01
per share diluted, compared to FY 2016’s nine-month net income of
$267.7 million, or $1.52 per share diluted.
- FY 2017’s nine-month pre-tax income was $512.6 million,
compared to FY 2016’s nine-month pre-tax income of $420.9
million.
- FY 2017’s nine-month pre-tax income results included pre-tax
inventory write-downs totaling $11.3 million ($8.3 million
attributable to operating communities and $3.0 million attributable
to future communities). FY 2016’s nine-month results included
pre-tax inventory write-downs of $11.4 million ($8.0 million
attributable to operating communities and $3.4 million attributable
to future communities).
- FY 2017’s third-quarter total revenues of $1.50 billion and
1,899 units rose 18% in dollars and 26% in units, compared to FY
2016’s third-quarter total revenues of $1.27 billion and 1,507
units. The average price of homes delivered was $791,400,
compared to $842,700 in FY 2016’s third quarter. The drop in
average price was due a change in mix.
- FY 2017’s nine-month total revenues of $3.79 billion and 4,727
units rose 14% in dollars and 22% in units, compared to FY 2016’s
same period totals of $3.31 billion and 3,874 units.
- The Company’s FY 2017 third-quarter net signed contracts of
$1.81 billion and 2,163 units rose by 25% in dollars and 24% in
units, compared to FY 2016’s third-quarter net signed contracts of
$1.45 billion and 1,748 units. The average price of net signed
contracts was $837,300, compared to $830,800 in FY 2016’s third
quarter.
- This was the Company’s twelfth consecutive quarter of
year-over-year growth in contract dollars and units, including 20%
or higher year-over-year unit growth each of the past four
quarters.
- On a per-community basis, FY 2017’s third-quarter net signed
contracts were 6.89 units, compared to third-quarter totals of 5.85
units in FY 2016, 5.50 in FY 2015, 5.25 in FY 2014 and 6.24 in FY
2013. This was the 11th consecutive quarter of improved
contracts per community, compared to the prior year’s same
quarter.
- The Company’s FY 2017 nine-month net signed contracts of $5.07
billion and 6,196 units increased 21% in dollars and 24% in units,
compared to net contracts of $4.18 billion and 4,991 units in FY
2016’s nine-month period.
- In FY 2017, third-quarter-end backlog of $5.31 billion and
6,282 units increased 21% in both dollars and units, compared to FY
2016’s third-quarter-end backlog of $4.37 billion and 5,181 units.
At third-quarter end, the average price of homes in backlog was
$845,100, compared to $844,300 at FY 2016’s third-quarter end.
- FY 2017’s third-quarter gross margin was 21.7% of revenues,
compared to 21.9% in FY 2016’s third quarter. FY 2017’s
third-quarter Adjusted Gross Margin was 25.0%, compared to 25.3% in
FY 2016’s third quarter.
- Interest included in cost of sales was 3.1% of revenues in FY
2017’s third quarter, the same as FY 2016’s third
quarter.
- SG&A, as a percentage of revenues, was 10.3% in FY 2017’s
third quarter, compared to 10.6% in FY 2016’s third
quarter.
- Income from operations of $171.7 million represented 11.4% of
revenues in FY 2017’s third quarter, compared to $143.5 million and
11.3% of revenues in FY 2016’s third quarter.
- Income from operations of $360.5 million represented 9.5% of
revenues in FY 2017’s nine-month period, compared to $354.6 million
and 10.7% of revenues in FY 2016’s nine-month period.
- Other income and Income from unconsolidated entities in FY
2017’s third quarter totaled $31.9 million, compared to $20.1
million in FY 2016’s same quarter.
- Other income and Income from unconsolidated entities in FY
2017’s nine-month period totaled $152.1 million, compared to $66.2
million in FY 2016’s same period.
- FY 2017’s third-quarter cancellation rate (current-quarter
cancellations divided by current-quarter signed contracts) was
5.8%, compared to 4.8% in FY 2016’s third quarter. As a
percentage of beginning-quarter backlog, FY 2017’s third-quarter
cancellation rate was 2.2%, compared to 1.8% in FY 2016’s third
quarter.
- The Company ended its FY 2017 third quarter with $946.2 million
of cash and cash equivalents, compared to $691.3 million at 2017’s
second-quarter end and $351.9 million at FY 2016’s third-quarter
end. At FY 2017’s third-quarter end, it had $1.15 billion
available under its $1.295 billion 20-bank credit facility, which
is scheduled to mature in May 2021.
- On June 12, 2017, the Company issued an additional $150 million
of its 4.875% Senior Notes due 2027, priced at a yield of
4.4%.
- On August 15, 2017, the Company notified holders that it had
elected to redeem its 0.5% convertible securities due 2032. These
bonds will be retired with a $287.5 million payment on September
15, 2017, resulting in the elimination of approximately 5.9 million
shares from the Company’s fully diluted share count.
- During the third quarter of FY 2017, the Company repurchased
approximately 1.9 million shares of its common stock at an average
price of $39.02 per share for a total purchase price of
approximately $75.3 million. Since the beginning of FY 2017’s
fourth quarter, the Company repurchased approximately 580,000
shares of its common stock at an average price of $38.49 per share
for a total purchase price of approximately $22.3 million.
Cumulatively, since the start of FY 2017, the Company has
repurchased approximately 3.1 million shares at an average price of
$36.80 per share for a total purchase price of approximately $113.0
million.
- On July 28, 2017, the Company paid its quarterly dividend of
$0.08 per share to shareholders of record on the close of business
on July 14, 2017.
- The Company’s Stockholders’ Equity at FY 2017’s third-quarter
end was $4.53 billion, compared to $4.17 billion at FY 2016’s
third-quarter end.
- The Company ended FY 2017’s third quarter with a
debt-to-capital ratio of 45.8%, compared to 45.4% at FY 2017’s
second-quarter end and 48.2% at FY 2016’s third-quarter end. The
Company ended FY 2017’s third quarter with an adjusted net
debt-to-capital ratio(1) of 38.4%, compared to 39.8% at FY 2017’s
second-quarter end, and 44.9% at FY 2016’s third-quarter end.
- The Company ended FY 2017’s third quarter with approximately
47,800 lots owned and optioned, compared to 46,600 one quarter
earlier, and 48,700 one year earlier. At FY 2017’s third-quarter
end, approximately 32,400 of these lots were owned, of which
approximately 17,600 lots, including those in backlog, were
substantially improved.
- In the third quarter of FY 2017, the Company spent
approximately $172.0 million on land to purchase 1,819
lots.
- The Company ended FY 2017’s third quarter with 312 selling
communities, compared to 316 at FY 2017’s second-quarter end, and
297 at FY 2016’s third-quarter end.
- The Company now estimates it will deliver between 7,000 and
7,300 homes in FY 2017, compared to previous guidance of 6,950 to
7,450 units. It believes the average delivered price for FY
2017’s full year will be between $800,000 and $825,000 per
home. This translates to projected revenues of between $5.6
billion and $6.0 billion in FY 2017, compared to $5.17 billion in
FY 2016.
- The Company has updated its previous guidance for full FY 2017
Adjusted Gross Margin to between 24.8% and 25.0% of revenues, for
SG&A to 10.4% of revenues, for Other income and Income from
unconsolidated entities to between $160 million and $180 million
and for its effective tax rate to approximately 35.0%.
- The Company expects FY 2017 fourth-quarter deliveries of
between 2,275 and 2,575 units with an average price of between
$840,000 and $860,000.
- The Company’s full FY 2017 and fourth quarter delivery
projections reflect approximately 150 impacted homes that it had
estimated would be delivered in FY 2017, but will instead be
delivered in FY 2018 due to the floor joist recall by a major
lumber manufacturer that has affected many builders in the
industry.
- The Company expects its fourth-quarter FY 2017 Adjusted Gross
Margin to improve 35 to 50 basis points from FY 2017’s
third-quarter results.
- FY 2017 fourth-quarter SG&A is expected to be approximately
8.0% of fourth quarter revenues.
- The Company’s fourth-quarter FY 2017 Other income and Income
from unconsolidated entities is projected to be between $10 million
and $30 million.
- The FY 2017 fourth-quarter effective tax rate is projected to
be approximately 38.0%.
- Due to the strong pace of sales at many of its current
communities, the Company is selling through some communities more
quickly than anticipated and now expects to end FY 2017 with
between 300 and 310 selling communities.
(1) See “Reconciliation of Non-GAAP Measures” below for more
information on the calculation of the Company’s net debt-to-capital
ratio.
Toll Brothers will be broadcasting live via the Investor
Relations section of its website, www.tollbrothers.com, a
conference call hosted by CEO Douglas C. Yearley, Jr. at 11:00 a.m.
(EDT) today, August 22, 2017, to discuss these results and its
outlook for FY 2017. To access the call, enter the Toll Brothers
website, click on the Investor Relations page, and select
"Conference Calls.” Participants are encouraged to log on at least
fifteen minutes prior to the start of the presentation to register
and download any necessary software.
The call can be heard live with an online replay
which will follow. MP3 format replays will be available after the
conference call via the "Conference Calls" section of the Investor
Relations portion of the Toll Brothers website.
Toll Brothers, Inc., A FORTUNE 500 Company, is
the nation's leading builder of luxury homes. The Company began
business fifty years ago in 1967 and became a public company in
1986. Its common stock is listed on the New York Stock
Exchange under the symbol “TOL.” The Company serves move-up,
empty-nester, active-adult, and second-home buyers and operates in
20 states: Arizona, California, Colorado, Connecticut, Delaware,
Florida, Idaho, Illinois, Maryland, Massachusetts, Michigan,
Minnesota, Nevada, New Jersey, New York, North Carolina,
Pennsylvania, Texas, Virginia, and Washington, as well as in the
District of Columbia.
Toll Brothers builds an array of luxury
residential single-family detached, attached home, master planned
resort-style golf, and urban low-, mid-, and high-rise communities,
principally on land it develops and improves. The Company operates
its own architectural, engineering, mortgage, title, land
development and land sale, golf course development and management,
home security, and landscape subsidiaries. The Company also
operates its own lumber distribution, house component assembly, and
manufacturing operations. Through its Gibraltar Capital and
Asset Management joint venture, the Company provides builders and
developers with land banking and joint venture capital. The Company
acquires and develops rental apartment and commercial properties
through Toll Brothers Apartment Living, Toll Brothers Campus
Living, and the affiliated Toll Brothers Realty Trust, and develops
urban low-, mid-, and high-rise for-sale condominiums through
Toll Brothers City Living.
In 2017, Toll Brothers was named World’s Most Admired Home
Building Company in Fortune magazine’s survey of the World’s Most
Admired Companies, the third year in a row it has been so honored.
Toll Brothers was named 2014 Builder of the Year by Builder
magazine, and is honored to have been awarded Builder of the Year
in 2012 by Professional Builder magazine, making it the first
two-time recipient. Toll Brothers proudly supports the
communities in which it builds; among other philanthropic pursuits,
the Company sponsors the Toll Brothers Metropolitan Opera
International Radio Network, bringing opera to neighborhoods
throughout the world. For more information, visit
www.tollbrothers.com.
Toll Brothers discloses information about its
business and financial performance and other matters, and provides
links to its securities filings, notices of investor events, and
earnings and other news releases, on the Investor Relations section
of its website (tollbrothers.com/investor-relations).
Forward Looking StatementInformation presented
herein for the third quarter ended July 31, 2017 is subject to
finalization of the Company's regulatory filings, related financial
and accounting reporting procedures and external auditor
procedures.
Certain information included in this release is
forward-looking within the meaning of the Private Securities
Litigation Reform Act of 1995, including, but not limited to,
information related to: anticipated operating results; anticipated
financial performance, resources and condition; selling
communities; home deliveries; average home prices; consumer demand
and confidence; contract pricing; business and investment
opportunities; market and industry trends; and the anticipated
benefits to be realized from the acquisition of Coleman Homes.
Such forward-looking information involves
important risks and uncertainties that could significantly affect
actual results and cause them to differ materially from
expectations expressed herein and in other Company reports, SEC
filings, statements and presentations. These risks and
uncertainties include, among others: local, regional, national and
international economic conditions; fluctuating consumer demand and
confidence; interest and unemployment rates; changes in sales
conditions, including home prices, in the markets where we build
homes; conditions in our newly entered markets and newly acquired
operations; the competitive environment in which we operate; the
availability and cost of land for future growth; conditions that
could result in inventory write-downs or write-downs associated
with investments in unconsolidated entities; the ability to recover
our deferred tax assets; the availability of capital; uncertainties
in the capital and securities markets; liquidity in the credit
markets; changes in tax laws and their interpretation; effects of
governmental legislation and regulation; the outcome of various
legal proceedings; the availability of adequate insurance at
reasonable cost; the impact of construction defect, product
liability and home warranty claims, including the adequacy of
self-insurance accruals, and the applicability and sufficiency of
our insurance coverage; the ability of customers to obtain
financing for the purchase of homes; the ability of home buyers to
sell their existing homes; the ability of the participants in
various joint ventures to honor their commitments; the availability
and cost of labor and building and construction materials; the cost
of raw materials; construction delays; domestic and international
political events; weather conditions; and the anticipated benefits
to be realized from the acquisition of Coleman Homes. For a more
detailed discussion of these factors, see the information under the
captions "Risk Factors" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" in our most
recent annual report on Form 10-K and our subsequent quarterly
reports on Form 10-Q filed with the Securities and Exchange
Commission.
Any or all of the forward-looking statements
included in this release are not guarantees of future performance
and may turn out to be inaccurate. Forward-looking statements
speak only as of the date they are made. The Company
undertakes no obligation to publicly update any forward-looking
statements, whether as a result of new information, future events
or otherwise.
TOLL BROTHERS, INC. AND
SUBSIDIARIES |
CONDENSED CONSOLIDATED BALANCE
SHEETS |
(Amounts in thousands) |
|
|
July 31, 2017 |
|
October 31, 2016 |
|
(Unaudited) |
|
|
ASSETS |
|
|
|
Cash and cash
equivalents |
$ |
946,195 |
|
|
$ |
633,715 |
|
Restricted cash and
investments |
781 |
|
|
31,291 |
|
Inventory |
7,633,568 |
|
|
7,353,967 |
|
Property, construction
and office equipment, net |
179,476 |
|
|
169,576 |
|
Receivables, prepaid
expenses and other assets |
536,524 |
|
|
582,758 |
|
Mortgage loans held for
sale |
89,419 |
|
|
248,601 |
|
Customer deposits held
in escrow |
93,851 |
|
|
53,057 |
|
Investments in
unconsolidated entities |
514,265 |
|
|
496,411 |
|
Deferred tax assets,
net of valuation allowances |
134,857 |
|
|
167,413 |
|
|
$ |
10,128,936 |
|
|
$ |
9,736,789 |
|
|
|
|
|
LIABILITIES AND
EQUITY |
|
|
|
Liabilities: |
|
|
|
Loans
payable |
$ |
619,574 |
|
|
$ |
871,079 |
|
Senior
notes |
3,148,905 |
|
|
2,694,372 |
|
Mortgage
company loan facility |
57,921 |
|
|
210,000 |
|
Customer
deposits |
414,145 |
|
|
309,099 |
|
Accounts
payable |
276,766 |
|
|
281,955 |
|
Accrued
expenses |
956,121 |
|
|
1,072,300 |
|
Income
taxes payable |
116,883 |
|
|
62,782 |
|
Total
liabilities |
5,590,315 |
|
|
5,501,587 |
|
|
|
|
|
Equity: |
|
|
|
Stockholders’ Equity |
|
|
|
Common
stock |
1,779 |
|
|
1,779 |
|
Additional paid-in capital |
713,624 |
|
|
728,464 |
|
Retained
earnings |
4,294,808 |
|
|
3,977,297 |
|
Treasury
stock, at cost |
(474,665 |
) |
|
(474,912 |
) |
Accumulated other comprehensive loss |
(2,832 |
) |
|
(3,336 |
) |
Total
stockholders' equity |
4,532,714 |
|
|
4,229,292 |
|
Noncontrolling interest |
5,907 |
|
|
5,910 |
|
Total
equity |
4,538,621 |
|
|
4,235,202 |
|
|
$ |
10,128,936 |
|
|
$ |
9,736,789 |
|
TOLL BROTHERS, INC. AND
SUBSIDIARIES |
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS |
(Amounts in thousands, except per share data
and percentages) |
(Unaudited) |
|
|
Nine Months Ended July 31, |
|
Three Months Ended July 31, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
$ |
% |
|
$ |
% |
|
$ |
% |
|
$ |
% |
Revenues |
$ |
3,787,151 |
|
|
|
$ |
3,314,057 |
|
|
|
$ |
1,502,909 |
|
|
|
$ |
1,269,934 |
|
|
Cost of revenues |
2,986,471 |
|
78.9 |
% |
|
2,574,298 |
|
77.7 |
% |
|
1,176,028 |
|
78.3 |
% |
|
991,416 |
|
78.1 |
% |
Gross margin |
800,680 |
|
21.1 |
% |
|
739,759 |
|
22.3 |
% |
|
326,881 |
|
21.7 |
% |
|
278,518 |
|
21.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses |
440,183 |
|
11.6 |
% |
|
385,120 |
|
11.6 |
% |
|
155,212 |
|
10.3 |
% |
|
134,984 |
|
10.6 |
% |
Income from
operations |
360,497 |
|
9.5 |
% |
|
354,639 |
|
10.7 |
% |
|
171,669 |
|
11.4 |
% |
|
143,534 |
|
11.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Other: |
|
|
|
|
|
|
|
|
|
|
|
Income
from unconsolidated entities |
112,274 |
|
|
|
22,754 |
|
|
|
19,925 |
|
|
|
4,998 |
|
|
Other
income - net |
39,793 |
|
|
|
43,474 |
|
|
|
11,980 |
|
|
|
15,121 |
|
|
Income before income
taxes |
512,564 |
|
|
|
420,867 |
|
|
|
203,574 |
|
|
|
163,653 |
|
|
Income tax
provision |
168,947 |
|
|
|
153,150 |
|
|
|
55,011 |
|
|
|
58,170 |
|
|
Net income |
$ |
343,617 |
|
|
|
$ |
267,717 |
|
|
|
$ |
148,563 |
|
|
|
$ |
105,483 |
|
|
Per share: |
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings |
$ |
2.11 |
|
|
|
$ |
1.58 |
|
|
|
$ |
0.91 |
|
|
|
$ |
0.64 |
|
|
Diluted
earnings |
$ |
2.01 |
|
|
|
$ |
1.52 |
|
|
|
$ |
0.87 |
|
|
|
$ |
0.61 |
|
|
Cash
dividend declared |
$ |
0.16 |
|
|
|
|
|
|
$ |
0.08 |
|
|
|
|
|
Weighted-average number
of shares: |
|
|
|
|
|
|
|
|
|
|
|
Basic |
163,186 |
|
|
|
169,692 |
|
|
|
163,478 |
|
|
|
165,919 |
|
|
Diluted |
171,127 |
|
|
|
177,403 |
|
|
|
171,562 |
|
|
|
173,405 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate |
33.0 |
% |
|
|
36.4 |
% |
|
|
27.0 |
% |
|
|
35.5 |
% |
|
TOLL BROTHERS, INC. AND
SUBSIDIARIES |
SUPPLEMENTAL DATA |
(Amounts in thousands) |
(unaudited) |
|
|
Nine Months Ended July 31, |
|
Three Months Ended July 31, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Impairment charges
recognized: |
|
|
|
|
|
|
|
Cost of
sales - land owned/controlled for future communities |
$ |
3,019 |
|
|
$ |
3,403 |
|
|
$ |
1,037 |
|
|
$ |
2,469 |
|
Cost of
sales - operating communities |
8,295 |
|
|
7,950 |
|
|
1,360 |
|
|
1,250 |
|
|
$ |
11,314 |
|
|
$ |
11,353 |
|
|
$ |
2,397 |
|
|
$ |
3,719 |
|
|
|
|
|
|
|
|
|
Depreciation and
amortization |
$ |
18,437 |
|
|
$ |
16,838 |
|
|
$ |
6,314 |
|
|
$ |
5,809 |
|
Interest incurred |
$ |
130,887 |
|
|
$ |
122,079 |
|
|
$ |
45,577 |
|
|
$ |
41,667 |
|
Interest expense: |
|
|
|
|
|
|
|
Charged
to cost of sales |
$ |
114,365 |
|
|
$ |
107,176 |
|
|
$ |
45,879 |
|
|
$ |
39,431 |
|
Charged
to other income - net |
2,097 |
|
|
606 |
|
|
102 |
|
|
297 |
|
|
$ |
116,462 |
|
|
$ |
107,782 |
|
|
$ |
45,981 |
|
|
$ |
39,728 |
|
|
|
|
|
|
|
|
|
Home sites
controlled: |
|
|
|
|
|
|
|
Owned |
32,392 |
|
|
35,594 |
|
|
|
|
|
Optioned |
15,448 |
|
|
13,103 |
|
|
|
|
|
|
47,840 |
|
|
48,697 |
|
|
|
|
|
Inventory at July 31, 2017 and October 31, 2016
consisted of the following (amounts in thousands):
|
July 31, 2017 |
|
October 31, 2016 |
Land and land
development costs |
$ |
2,343,706 |
|
|
$ |
2,497,603 |
|
Construction in
progress |
4,577,199 |
|
|
4,225,456 |
|
Sample homes |
523,872 |
|
|
460,948 |
|
Land deposits and costs
of future development |
163,332 |
|
|
144,417 |
|
Other |
25,459 |
|
|
25,543 |
|
|
$ |
7,633,568 |
|
|
$ |
7,353,967 |
|
Toll Brothers operates in two segments:
Traditional Home Building and Urban Infill ("City Living").
Within Traditional Home Building, Toll operates in five geographic
segments:
North: |
Connecticut, Illinois, Massachusetts, Michigan, Minnesota, New
Jersey and New York |
Mid-Atlantic: |
Delaware,
Maryland, Pennsylvania and Virginia |
South: |
Florida,
North Carolina and Texas |
West: |
Arizona,
Colorado, Idaho, Nevada, and Washington |
California: |
California |
|
Three Months Ended July 31, |
|
Units |
|
$ (Millions) |
|
Average Price Per Unit $ |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
HOME BUILDING
REVENUES |
|
|
|
|
|
|
|
|
|
|
|
North |
326 |
|
|
313 |
|
|
$ |
225.8 |
|
|
$ |
205.2 |
|
|
$ |
692,700 |
|
|
$ |
655,600 |
|
Mid-Atlantic |
469 |
|
|
350 |
|
|
281.9 |
|
|
220.6 |
|
|
601,100 |
|
|
630,300 |
|
South |
344 |
|
|
294 |
|
|
253.9 |
|
|
232.1 |
|
|
738,100 |
|
|
789,500 |
|
West |
464 |
|
|
309 |
|
|
307.4 |
|
|
223.1 |
|
|
662,500 |
|
|
721,900 |
|
California |
218 |
|
|
227 |
|
|
335.2 |
|
|
336.4 |
|
|
1,537,700 |
|
|
1,482,100 |
|
Traditional Home Building |
1,821 |
|
|
1,493 |
|
|
1,404.2 |
|
|
1,217.4 |
|
|
771,200 |
|
|
815,400 |
|
City Living |
78 |
|
|
14 |
|
|
98.7 |
|
|
52.5 |
|
|
1,264,500 |
|
|
3,750,500 |
|
Total
consolidated |
1,899 |
|
|
1,507 |
|
|
$ |
1,502.9 |
|
|
$ |
1,269.9 |
|
|
$ |
791,400 |
|
|
$ |
842,700 |
|
|
|
|
|
|
|
|
|
|
|
|
|
CONTRACTS |
|
|
|
|
|
|
|
|
|
|
|
North |
368 |
|
|
342 |
|
|
$ |
239.9 |
|
|
$ |
242.6 |
|
|
$ |
651,800 |
|
|
$ |
709,300 |
|
Mid-Atlantic |
473 |
|
|
396 |
|
|
300.8 |
|
|
242.5 |
|
|
636,000 |
|
|
612,300 |
|
South |
330 |
|
|
335 |
|
|
251.9 |
|
|
245.5 |
|
|
763,400 |
|
|
732,900 |
|
West |
537 |
|
|
387 |
|
|
335.3 |
|
|
276.7 |
|
|
624,400 |
|
|
715,100 |
|
California |
408 |
|
|
251 |
|
|
642.7 |
|
|
367.6 |
|
|
1,575,300 |
|
|
1,464,600 |
|
Traditional Home Building |
2,116 |
|
|
1,711 |
|
|
1,770.6 |
|
|
1,374.9 |
|
|
836,800 |
|
|
803,600 |
|
City Living |
47 |
|
|
37 |
|
|
40.4 |
|
|
77.4 |
|
|
858,500 |
|
|
2,091,700 |
|
Total
consolidated |
2,163 |
|
|
1,748 |
|
|
$ |
1,811.0 |
|
|
$ |
1,452.3 |
|
|
$ |
837,300 |
|
|
$ |
830,800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
BACKLOG |
|
|
|
|
|
|
|
|
|
|
|
North |
1,217 |
|
|
1,075 |
|
|
$ |
807.7 |
|
|
$ |
773.1 |
|
|
$ |
663,700 |
|
|
$ |
719,200 |
|
Mid-Atlantic |
1,269 |
|
|
1,080 |
|
|
801.9 |
|
|
680.1 |
|
|
631,900 |
|
|
629,700 |
|
South |
1,154 |
|
|
1,005 |
|
|
895.2 |
|
|
776.2 |
|
|
775,700 |
|
|
772,400 |
|
West |
1,500 |
|
|
1,151 |
|
|
1,003.8 |
|
|
842.4 |
|
|
669,200 |
|
|
731,900 |
|
California |
934 |
|
|
695 |
|
|
1,511.4 |
|
|
1,045.1 |
|
|
1,618,200 |
|
|
1,503,800 |
|
Traditional Home Building |
6,074 |
|
|
5,006 |
|
|
5,020.0 |
|
|
4,116.9 |
|
|
826,500 |
|
|
822,400 |
|
City Living |
208 |
|
|
175 |
|
|
289.0 |
|
|
257.6 |
|
|
1,389,400 |
|
|
1,471,700 |
|
Total
consolidated |
6,282 |
|
|
5,181 |
|
|
$ |
5,309.0 |
|
|
$ |
4,374.5 |
|
|
$ |
845,100 |
|
|
$ |
844,300 |
|
|
Nine Months Ended July 31, |
|
Units |
|
$ (Millions) |
|
Average Price Per Unit $ |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
HOME BUILDING
REVENUES |
|
|
|
|
|
|
|
|
|
|
|
North |
812 |
|
|
728 |
|
|
$ |
560.8 |
|
|
$ |
491.7 |
|
|
$ |
690,600 |
|
|
$ |
675,400 |
|
Mid-Atlantic |
1,133 |
|
|
929 |
|
|
692.5 |
|
|
577.0 |
|
|
611,200 |
|
|
621,100 |
|
South |
808 |
|
|
731 |
|
|
591.2 |
|
|
571.4 |
|
|
731,700 |
|
|
781,700 |
|
West |
1,240 |
|
|
799 |
|
|
821.3 |
|
|
548.7 |
|
|
662,300 |
|
|
686,700 |
|
California |
621 |
|
|
602 |
|
|
928.3 |
|
|
881.8 |
|
|
1,494,800 |
|
|
1,464,800 |
|
Traditional Home Building |
4,614 |
|
|
3,789 |
|
|
3,594.1 |
|
|
3,070.6 |
|
|
779,000 |
|
|
810,400 |
|
City Living |
113 |
|
|
85 |
|
|
193.1 |
|
|
243.5 |
|
|
1,708,800 |
|
|
2,864,700 |
|
Total
consolidated |
4,727 |
|
|
3,874 |
|
|
$ |
3,787.2 |
|
|
$ |
3,314.1 |
|
|
$ |
801,200 |
|
|
$ |
855,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
CONTRACTS |
|
|
|
|
|
|
|
|
|
|
|
North |
1,052 |
|
|
913 |
|
|
$ |
675.8 |
|
|
$ |
645.6 |
|
|
$ |
642,400 |
|
|
$ |
707,100 |
|
Mid-Atlantic |
1,416 |
|
|
1,198 |
|
|
884.3 |
|
|
738.2 |
|
|
624,500 |
|
|
616,200 |
|
South |
1,002 |
|
|
912 |
|
|
750.0 |
|
|
678.4 |
|
|
748,500 |
|
|
743,900 |
|
West |
1,592 |
|
|
1,134 |
|
|
1,019.7 |
|
|
817.6 |
|
|
640,500 |
|
|
721,000 |
|
California |
1,022 |
|
|
688 |
|
|
1,572.0 |
|
|
1,029.1 |
|
|
1,538,200 |
|
|
1,495,800 |
|
Traditional Home Building |
6,084 |
|
|
4,845 |
|
|
4,901.8 |
|
|
3,908.9 |
|
|
805,700 |
|
|
806,800 |
|
City Living |
112 |
|
|
146 |
|
|
171.5 |
|
|
275.7 |
|
|
1,531,300 |
|
|
1,888,400 |
|
Total
consolidated |
6,196 |
|
|
4,991 |
|
|
$ |
5,073.3 |
|
|
$ |
4,184.6 |
|
|
$ |
818,800 |
|
|
$ |
838,400 |
|
Unconsolidated entities:
Information related to revenues and contracts of
entities in which we have an interest for the three-month and
nine-month periods ended July 31, 2017 and 2016, and for
backlog at July 31, 2017 and 2016 is as follows:
|
Units |
|
$ (Millions) |
|
Average Price Per Unit $ |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Three months ended July
31, |
|
|
|
|
|
|
|
|
|
|
|
Revenues |
33 |
|
|
21 |
|
|
$ |
81.0 |
|
|
$ |
17.9 |
|
|
$ |
2,455,300 |
|
|
$ |
851,300 |
|
Contracts |
38 |
|
|
27 |
|
|
$ |
58.1 |
|
|
$ |
36.6 |
|
|
$ |
1,528,900 |
|
|
$ |
1,357,100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended July
31, |
|
|
|
|
|
|
|
|
|
|
|
Revenues |
176 |
|
|
61 |
|
|
$ |
451.6 |
|
|
$ |
55.4 |
|
|
$ |
2,566,100 |
|
|
$ |
907,900 |
|
Contracts |
107 |
|
|
95 |
|
|
$ |
138.0 |
|
|
$ |
141.9 |
|
|
$ |
1,290,000 |
|
|
$ |
1,493,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Backlog at July
31, |
115 |
|
|
220 |
|
|
$ |
157.9 |
|
|
$ |
553.1 |
|
|
$ |
1,372,800 |
|
|
$ |
2,513,900 |
|
RECONCILIATION OF NON-GAAP
MEASURES
This press release contains, and Company
management’s discussion of the results presented in this press
release may include, information about the Company’s Adjusted Gross
Margin and the Company’s net debt-to-capital ratio.
These two measures are non-GAAP financial
measures which are not calculated in accordance with generally
accepted accounting principles (“GAAP”). These non-GAAP financial
measures should not be considered a substitute for, or superior to,
the comparable GAAP financial measures, and may be different from
non-GAAP measures used by other companies in the homebuilding
business.
The Company’s management considers these
non-GAAP financial measures as we make operating and strategic
decisions and evaluate our performance, including against other
homebuilders that may use similar non-GAAP financial measures. The
Company’s management believes these non-GAAP financial measures are
useful to investors in understanding our operations and leverage
and may be helpful in comparing the Company to other homebuilders
to the extent they provide similar information.
Adjusted Gross MarginThe following table
reconciles the Company’s gross margin as a percentage of revenues
(calculated in accordance with GAAP) to the Company’s Adjusted
Gross Margin (a non-GAAP financial measure). Adjusted Gross Margin
is calculated as (i) gross margin plus interest recognized in cost
of sales plus inventory write-downs divided by (ii) revenues.
Adjusted Gross Margin
Reconciliation |
(Amounts in thousands, except
percentages) |
|
|
|
Three Months Ended July 31, |
|
|
2017 |
|
2016 |
Revenues |
$ |
1,502,909 |
|
|
$ |
1,269,934 |
|
Cost of
revenues |
1,176,028 |
|
|
991,416 |
|
Gross
margin |
326,881 |
|
|
278,518 |
|
Add: |
Interest recognized in
cost of sales |
45,879 |
|
|
39,431 |
|
|
Inventory
write-downs |
2,397 |
|
|
3,719 |
|
Adjusted
gross margin |
$ |
375,157 |
|
|
$ |
321,668 |
|
|
|
|
|
|
Gross
margin as a percentage of revenues |
21.7 |
% |
|
21.9 |
% |
|
|
|
|
|
Adjusted
Gross Margin |
25.0 |
% |
|
25.3 |
% |
The Company’s management believes Adjusted Gross
Margin is a useful financial measure to investors because it allows
them to evaluate the performance of our homebuilding operations
without the often varying effects of capitalized interest costs and
inventory impairments. The use of Adjusted Gross Margin also
assists the Company’s management in assessing the profitability of
our homebuilding operations and making strategic decisions
regarding community location and product mix.
Forward-looking Adjusted Gross MarginThe Company
has not provided projected fourth quarter and full year fiscal 2017
gross margin or a GAAP reconciliation for forward-looking Adjusted
Gross Margin because such measure cannot be provided without
unreasonable efforts on a forward-looking basis, since inventory
write-downs are based on future activity and observation and
therefore cannot be projected for the fourth quarter or the full
fiscal year. The variability of these charges may have a
potentially unpredictable, and potentially significant, impact on
our fourth quarter and full year fiscal 2017 gross margin.
Net Debt-to-Capital RatioThe following table
reconciles the Company’s ratio of debt to capital (calculated in
accordance with GAAP) to the Company’s net debt-to-capital ratio (a
non-GAAP financial measure). The net debt-to-capital ratio is
calculated as (i) total debt minus mortgage warehouse loans minus
cash and cash equivalents divided by (ii) total debt minus mortgage
warehouse loans minus cash and cash equivalents plus stockholders’
equity.
Net Debt-to-Capital Ratio
Reconciliation |
(Amounts in thousands, except
percentages) |
|
|
|
July 31, 2017 |
|
April 30, 2017 |
|
July 31, 2016 |
Loans
payable |
$ |
619,574 |
|
|
$ |
637,931 |
|
|
$ |
1,058,656 |
|
Senior
notes |
3,148,905 |
|
|
2,993,882 |
|
|
2,693,221 |
|
Mortgage
company loan facility |
57,921 |
|
|
61,129 |
|
|
125,000 |
|
Total
debt |
3,826,400 |
|
|
3,692,942 |
|
|
3,876,877 |
|
Total
stockholders' equity |
4,532,714 |
|
|
4,448,088 |
|
|
4,174,151 |
|
Total
capital |
$ |
8,359,114 |
|
|
$ |
8,141,030 |
|
|
$ |
8,051,028 |
|
Ratio of
debt-to-capital |
45.8 |
% |
|
45.4 |
% |
|
48.2 |
% |
|
|
|
|
|
|
|
Total
debt |
$ |
3,826,400 |
|
|
$ |
3,692,942 |
|
|
$ |
3,876,877 |
|
Less: |
Mortgage company loan
facility |
(57,921 |
) |
|
(61,129 |
) |
|
(125,000 |
) |
|
Cash and cash
equivalents |
(946,195 |
) |
|
(691,266 |
) |
|
(351,854 |
) |
Total net
debt |
2,822,284 |
|
|
2,940,547 |
|
|
3,400,023 |
|
Total
stockholders' equity |
4,532,714 |
|
|
4,448,088 |
|
|
4,174,151 |
|
Total net
capital |
$ |
7,354,998 |
|
|
$ |
7,388,635 |
|
|
$ |
7,574,174 |
|
Net
debt-to-capital ratio |
38.4 |
% |
|
39.8 |
% |
|
44.9 |
% |
The Company’s management uses the net
debt-to-capital ratio as an indicator of its overall leverage and
believes it is a useful financial measure to investors in
understanding the leverage employed in the Company’s
operations.
CONTACT:
Frederick N. Cooper (215) 938-8312
fcooper@tollbrothers.com
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