Toll Brothers, Inc. (NYSE:TOL) (www.tollbrothers.com), the nation’s
leading builder of luxury homes, today announced results for
earnings, revenues, contracts, and backlog for its fourth quarter
and fiscal year ended October 31, 2016.
Fourth Quarter Financial Highlights:
- FY 2016’s fourth-quarter net income was $114.4 million, or
$0.67 per share diluted, compared to $147.2 million, or $0.80 per
share diluted, in FY 2015’s fourth quarter.
- Pre-tax income was $168.2 million, compared to $217.5 million
in FY 2015’s fourth quarter. Impacting FY 2016’s fourth-quarter
pre-tax income, reported in cost of sales, were $2.5 million of
inventory impairments and a $121.2 million warranty charge
primarily related to older stucco homes. FY 2015’s fourth-quarter
pre-tax income included $4.4 million of inventory impairments and a
comparable $14.7 million warranty charge.
- Adjusting for these items, FY 2016 fourth quarter adjusted
pre-tax income (“Adjusted Pre-Tax Income”) was $291.8 million,
compared to $236.7 million in FY 2015’s fourth quarter.
- Revenues of $1.86 billion and home building deliveries of 2,224
units rose 29% in dollars and 22% in units, compared to FY 2015’s
fourth-quarter totals of $1.44 billion and 1,820 units. The
average price of homes delivered was $834,000, compared to $790,000
in FY 2015’s fourth quarter.
- Net signed contracts of $1.47 billion and 1,728 units rose 17%
in dollars and 20% in units, compared to FY 2015’s fourth-quarter
totals of $1.25 billion and 1,437 units. The average price of net
signed contracts was $848,000, compared to $872,000 in FY 2015’s
fourth quarter.
- On a per-community basis, FY 2016’s fourth-quarter net signed
contracts were up 12% to 5.82 units, compared to fourth-quarter
totals of 5.21 units in FY 2015, 5.01 in FY 2014 and 5.17 in FY
2013. This was the highest fourth quarter per-community total
since FY 2005.
- For the first five weeks of FY 2017, beginning November 1,
2016, non-binding reservations deposits were up 10% in units,
compared to the same period in FY 2016. Adjusting for outstanding
Coleman Homes deposits inherited at the time of its acquisition in
early November 2016, deposits were up 14%.
- Backlog of $3.98 billion and 4,685 units increased 14% in
dollars and 15% in units, compared to FY 2015’s fourth-quarter-end
backlog of $3.50 billion and 4,064 units. The average price of
homes in FY 2016’s fourth-quarter-end backlog was $850,000,
compared to $862,000 at FY 2015’s fourth-quarter end.
- Gross margin, as a percentage of revenues, was 15.4% in FY
2016’s fourth quarter, compared to 22.3% in FY 2015’s fourth
quarter. Adjusted Gross Margin, which excludes interest and
inventory write-downs (“Adjusted Gross Margin”), further adjusted
for the warranty charge, was 24.9%, compared to 27.0% in FY 2015’s
fourth quarter.
- SG&A, as a percentage of revenues, improved to 8.1%,
compared to 8.7% in FY 2015’s fourth quarter.
- Other income and Income from unconsolidated entities totaled
$32.7 million, compared to $21.6 million in the fourth quarter of
FY 2015.
- The Company ended FY 2016 with 310 selling communities,
compared to 297 at FY 2016’s third-quarter end, and 288 at FYE
2015. The Company expects similar community count growth in
FY 2017.
- At FYE 2016, the Company had approximately 48,800 lots owned
and optioned, compared to approximately 48,700 at FY 2016’s
third-quarter end and approximately 44,300 one year ago.
- The Company ended FY 2016’s fourth quarter with a
debt-to-capital ratio of 47.2%, compared to 48.2% at FY 2016’s
third-quarter end and 47.3% at FY 2015’s fourth-quarter
end. The Company ended FY 2016’s fourth quarter with a net
debt-to-capital ratio(1) of 40.9%, compared to 44.9.% at FY 2016’s
third-quarter end and 39.5% at FY 2015’s fourth-quarter end.
- The Company ended FY 2016 with $633.7 million of cash and
marketable securities, compared to $351.9 million at FY 2016’s
third-quarter end and $929.0 million at FYE 2015. At FYE 2016, the
Company also had $961.8 million available under its $1.295 billion
20-bank credit facility, which matures in May 2021.
- During the fourth quarter of FY 2016, the Company repurchased
approximately 2.2 million shares of its common stock at an average
price of $29.00 per share for a total purchase price of
approximately $65.2 million. In FY 2016, the Company repurchased
approximately 13.7 million shares, representing approximately 8% of
outstanding shares, at an average price of $28.77 per share for a
total purchase price of approximately $392.8 million. Since the
start of FY 2017, the Company purchased an additional 550,000
shares of its common stock at an average price of $27.28 per share
for a total purchase price of approximately $15.0 million.
FY 2016 Financial Highlights
- In FY 2016, net income was $382.1 million, or $2.18 per share
diluted, compared to FY 2015’s net income of $363.2 million, or
$1.97 per share diluted.
- Pre-tax income was $589.0 million, compared to pre-tax income
of $535.6 million in FY 2015. Impacting FY 2016’s pre-tax income,
reported in cost of sales, were $13.8 million of inventory
impairments and $125.6 million of warranty charges primarily
related to older stucco homes. FY 2015’s pre-tax income included
$35.7 million of inventory impairments and a comparable $14.7
million warranty charge. Adjusted Pre-Tax Income was $728.4
million, compared to $586.0 million in FY 2015.
- Revenues of $5.17 billion and home building deliveries of 6,098
units rose 24% in dollars and 10% in units, compared to FY 2015’s
totals of $4.17 billion and 5,525 units.
- Net signed contracts of $5.65 billion and 6,719 units increased
14% in dollars and units, compared to net signed contracts of $4.96
billion and 5,910 units in FY 2015.
- Gross margin, as a percentage of revenues, was 19.8% in FY
2016, compared to 21.6% in FY 2015. Adjusted Gross Margin,
further adjusted for the warranty charge, was 25.6%, compared to
26.3% in FY 2015.
- SG&A, as a percentage of revenues, was 10.4% for FY 2016,
compared to 10.9% for FY 2015.
- Income from operations was 9.5% of revenue for FY 2016,
compared to 10.7% for FY 2015.
- Other income and Income from unconsolidated entities was $99.0
million, compared to $88.7 million in FY 2015.
FY 2017 Financial Guidance
- On November 7, 2016, just after the end of FY 2016, the Company
announced the acquisition of Coleman Homes in Boise, Idaho, which
involved the acquisition of approximately 1,400 lots owned, 350
lots controlled and the immediate addition of 15 selling
communities to the Company’s first quarter FY 2017 community count
total.
- In FY 2017, the Company expects Coleman to deliver
approximately 300 homes at an average delivered price of $300,000
to $325,000. Due to the impact of purchase accounting and Coleman’s
lower gross margins, the Company expects Coleman to reduce
company-wide FY 2017 Adjusted Gross Margin by 30 to 40 basis
points.
- The Company expects FY 2017 first quarter deliveries of between
1,000 and 1,250 units with an average price of between $750,000 and
$780,000, and full FY 2017 deliveries of between 6,500 and 7,500
units with an average price of between $775,000 and
$825,000.
- The Company expects its full FY 2017 Adjusted Gross Margin to
be between 24.8% and 25.3% of revenues, reflecting the above noted
impact from Coleman Homes and other changes in mix of product
deliveries.
- SG&A, as a percentage of FY 2017 revenues, is expected to
be approximately 10.6%. FY 2017 first quarter SG&A is expected
to be approximately 15.2% of first quarter revenues.
- The Company’s full FY 2017 Other income and Income from
unconsolidated entities is expected to be between $160 million and
$200 million, with approximately $50 million in the first
quarter.
- The Company’s FY 2017 tax rate is estimated at 36.2%.
Douglas C. Yearley, Jr., Toll Brothers’ chief
executive officer, stated: “With our strong fourth quarter
operating performance, double digit increase in year-end backlog,
and positive sales trends to jump start our new fiscal year, we see
growth in revenues and earnings and an improvement in return on
equity in FY 2017.
“This quarter’s results included a $121.2
million warranty charge primarily related to older stucco homes in
the Mid-Atlantic region. This has been an industry-wide
issue. We discontinued the use of stucco in our Mid-Atlantic and
North regions several years ago and are working with affected
customers to repair their homes.
“As the only national home building company
focused on the luxury market, we continue to benefit from healthy
demand, limited competition in many markets, superior land
positions, a financially strong buyer base and a highly
recognizable brand. These strategic advantages and a solid
financial foundation have propelled us to more than triple our
revenues and increase net income nine-fold in the past five
years. Based on these initiatives, we believe we are
well-positioned to continue to grow in a vibrant luxury new home
market.
“While there has been some debate about softness
in the luxury housing market, we continue to produce impressive
results by serving what we believe is the demographic sweet spot in
this market. We are not focused on super-luxury. With an
average delivered home price of approximately $850,000 company-wide
in FY 2016 – and $690,000 in markets other than New York City and
California - our product lines are affordable to many households in
the U.S.
“The value of our brand, our
demographically-targeted product lines and our well-located
communities all helped drive this year’s results. We achieved
double digit growth in EPS, revenues, contracts and backlog in FY
2016. We ended FY 2016 with our ninth consecutive quarter of
year-over-year growth in contract dollars and units. In our fourth
quarter, total net signed contracts rose 17% in dollars and 20% in
units, compared to FY 2015’s fourth quarter.
“As household formations increase, we continue to
pursue growth initiatives to amplify the value of the Toll Brothers
brand. Through our dual-pronged strategy of expanding and
diversifying our geographic footprint and broadening our platform
of residential product lines, we reach affluent buyers across the
demographic spectrum, from millennials to baby boomers and everyone
in between. Our for-sale products include luxury move-up,
empty-nester, active-adult, second home and urban high-rise
condominiums. On the rental side, we now have a portfolio of
urban and suburban projects completed, in construction or under
development that total over 10,000 units. We believe we are
creating significant shareholder value for the Company through Toll
Brothers Apartment Living.
“With the millennial generation now entering
their thirties and forming families, we are starting to benefit
from the desire for home ownership from the affluent leading edge
of this huge demographic wave. In FY 2016, approximately 22% of our
settlements included one primary buyer thirty-five years of age or
under. We are currently courting these customers with our core
suburban homes, urban condos and rental apartment properties.
We are also introducing a new product line, T|Select by Toll
Brothers, which incorporates the elegance and style of a higher-end
Toll Brothers home but with fewer structural options, a quicker
delivery time and a slightly lower price.
“California, where we build primarily in the
coastal suburbs of San Francisco, Los Angeles and San Diego,
remained our largest housing market. With a multi-year land
position in desirable coastal locations, we see this as a dynamic
region for us for years to come. We also enjoyed strong demand in
our other western markets of suburban Seattle, Phoenix, Reno, Las
Vegas and Denver, as well as in Dallas, Jacksonville, Orlando,
Northern Virginia, Philadelphia and New Jersey.
“With the goal of augmenting our footprint in
the Western United States, we expanded into the Boise, Idaho market
with the acquisition of Coleman Homes. Announced just after our
fiscal year end, Boise complements our significant presence in
coastal California and our other western markets, which accounted
for approximately 45% in dollars and 36% in units of signed
contracts in FY 2016.
“We are encouraged as we look to FY 2017. In
addition to a backlog that is up double digits in both dollars and
units compared to one year before, we are seeing positive demand
trends in many regions. Through the first five weeks of FY 2017,
our non-binding reservation deposits in units, a precursor to
signed contracts and, eventually, to home deliveries, were up 10%
compared to FY 2016’s same period. With this strong start, our
great brand, high quality land positions, diversified product lines
and strong buyer profile, we believe FY 2017 will be another year
of solid growth in revenues and profits.”
Martin P. Connor, Toll Brothers’ chief financial
officer, stated: “Our growth in revenues, deliveries, contracts and
earnings per share in FY 2016 reflect the benefit of our diverse
geographic and product mix. We project continued growth in
these financial metrics in FY 2017.
“We have undertaken a number of initiatives to
improve our return on equity including buying back stock, utilizing
lower rate variable borrowings and forming capital- and
risk-efficient joint ventures. We purchased $392.8 million (13.7
million shares) of stock during FY 2016 and an additional 550,000
shares for $15.0 million during the start of FY 2017. We
expect our FY 2017 average share count to be approximately 170.5
million shares, down from the 176 million share average for FY
2016.
“In May of 2016, we expanded our bank revolving
credit facility to $1.295 billion and 20 banks, and in August 2016,
we extended to five years our $500 million floating rate bank term
loan. We now have nearly $1.8 billion of long-term credit
facilities with 21 banks at an average interest cost under
Libor+150. We had approximately $750 million borrowed under
these facilities at FY 2016’s fourth-quarter end.
“Based on closings and commitments in place, by
December 31, 2016 we will have raised approximately $1 billion of
joint venture debt and equity for transactions since the start of
FY 2016. These involve three types of properties: our larger,
more capital intensive New York City high-rise condominium
projects; all of our urban and suburban rental projects; and a
number of our larger, longer-term master planned communities.
These financings, which encompass both project-specific
construction and permanent loans and project-specific third-party
equity investments, enable us to reduce our equity exposure,
generate fees and performance based promotes, and increase our
return on investment.
“We expect the combination of purchase
accounting and lower gross margin from our Coleman Homes
acquisition to reduce our overall Adjusted Gross Margin by 30 to 40
basis points in FY 2017. We also expect changes in our
mix of product deliveries to negatively impact Adjusted Gross
Margin in FY 2017 by 25 to 35 basis points in FY 2017.
Therefore, we expect FY 2017 Adjusted Gross Margin to be between
24.8% and 25.3% of revenues.
“We expect to deliver one of the highest
Adjusted Gross Margins in the industry in FY 2017 while improving
our return on equity to above 12% and growing earnings per share
significantly.”
Robert I. Toll, executive chairman, stated:
“Recent data highlights the continuing recovery of home prices to
pre-recession levels. This should translate into more equity for
current home owners looking to move up. We are encouraged by
surveys that indicate most millennials still believe home ownership
is a goal to aspire to. In Monday’s Wall Street Journal, an
Urban Land Institute study noted that suburbs are outstripping
cities in population growth. Don’t forget that more than 90% of our
business is transacted in the suburbs.
“Also yesterday, housing expert John Burns
released a report stating that: luxury home sales have increased,
that sales of homes priced above $600,000 had risen in 37 of the 43
counties he studied, and that home sales above $600,000 in the last
twelve months exceeded sales in the prior twelve months by
10%. These are positive data points.
“With the employment picture and the stock
market on positive trajectories, interest rates still extremely
attractive, significant pent-up demand and a dearth of supply in
many markets, we believe the new home market will remain on its
current course of steady growth.
“In FY 2016, we marked our thirtieth year as a
public company on the New York Stock Exchange, an impressive
milestone in our three-decade evolution from a local suburban
Philadelphia builder to a nationally diversified home building
corporation with a uniquely recognized brand. In June 2017,
we will celebrate the 50th year since our formation back in 1967
when we sold our first home for $17,990. I am so proud of
where our Company is today. Now, with a much more diversified array
of product offerings, a team of dedicated associates, a solid land
position and a growing customer base, we look forward to a bright
future for Toll Brothers, our shareholders and our associates.”
The financial highlights for the fourth quarter
and fiscal year ended October 31, 2016 (unaudited):
- FY 2016’s fourth-quarter net income was $114.4 million, or
$0.67 per share diluted, compared to FY 2015’s fourth-quarter net
income of $147.2 million, or $0.80 per share diluted.
- FY 2016’s fourth-quarter pre-tax income was $168.2 million,
compared to FY 2015’s fourth-quarter pre-tax income of $217.5
million. FY 2016’s fourth-quarter results included pre-tax
inventory impairments totaling $2.5 million and a $121.0 million
warranty charge primarily related to older stucco homes. FY
2015’s fourth-quarter results included pre-tax inventory
impairments of $4.4 and a comparable $14.7 million warranty charge.
FY 2016’s fourth-quarter Adjusted Pre-Tax Income was $291.8,
compared to $236.7 million in FY 2015’s fourth quarter.
- FY 2016’s net income was $382.1 million, or $2.18 per share
diluted, compared to FY 2015’s net income of $363.2 million, or
$1.97 per share diluted.
- FY 2016’s pre-tax income was $589.0 million, compared to FY
2015’s pre-tax income of $535.6 million. Impacting FY 2016’s
pre-tax income, reported in cost of sales, were $13.8 million of
inventory impairments and $125.6 million of warranty charges
primarily related to older stucco homes. FY 2015’s pre-tax
income included $35.7 million of inventory impairments and a
comparable $14.7 million warranty charge. FY 2016 Adjusted Pre-Tax
Income was $728.4 million, compared to $586.0 million in FY
2015.
- FY 2016’s fourth-quarter total revenues of $1.86 billion and
2,224 units rose 29% in dollars and 22% in units, compared to FY
2015’s fourth-quarter total revenues of $1.44 billion and 1,820
units.
- FY 2016’s total revenues of $5.17 billion and 6,098 units rose
24% in dollars and 10% in units, compared to FY 2015’s same period
totals of $4.17 billion and 5,525 units.
- The Company’s FY 2016 fourth-quarter net contracts of $1.47
billion and 1,728 units rose by 17% in dollars and 20% in units,
compared to FY 2015’s fourth-quarter net contracts of $1.25 billion
and 1,437 units.
- On a per-community basis, FY 2016’s fourth-quarter net signed
contracts were up 12% to 5.82 units, compared to fourth-quarter
totals of 5.21 units in FY 2015, 5.01 in FY 2014 and 5.17 in FY
2013. This was the highest fourth quarter per-community total
since FY 2005.
- The Company’s FY 2016 net contracts of $5.65 billion and 6,719
units increased 14% in dollars and units, compared to net contracts
of $4.96 billion and 5,910 units in FY 2015.
- FY 2016’s, fiscal-year-end backlog of $3.98 billion and 4,685
units increased 14% in dollars and 15% in units, compared to FY
2015’s fiscal-year-end backlog of $3.50 billion and 4,064 units.
- FY 2016’s fourth-quarter gross margin, as a percentage of
revenues, was 15.4%, compared to 22.3% in FY 2015’s fourth
quarter. FY 2016’s fourth-quarter Adjusted Gross Margin,
further adjusted for the warranty charge, was 24.9%, compared to
27.0% in FY 2015’s fourth quarter.
- FY 2016’s gross margin, as a percentage of revenues, was 19.8%,
compared to 21.6% in FY 2015. FY 2016’s Adjusted Gross
Margin, further adjusted for the warranty charge, was 25.6%,
compared to 26.3% in FY 2015.
- Interest included in cost of sales was 2.9% of revenues in FY
2016’s fourth quarter, compared to 3.3% in FY 2015’s fourth
quarter.
- Interest included in cost of sales was 3.1% of revenues in FY
2016, compared to 3.4% in FY 2015.
- SG&A, as a percentage of revenues, was 8.1% in FY 2016’s
fourth quarter, compared to 8.7% in FY 2015’s fourth
quarter.
- SG&A, as a percentage of revenues, was 10.4% in FY 2016,
compared to 10.9% in FY 2015.
- Income from operations of $135.4 million represented 7.3% of
revenues in FY 2016’s fourth quarter, compared to $195.9 million
and 13.6% of revenues in FY 2015’s fourth quarter.
- Income from operations of $490.1 million represented 9.5% of
revenues in FY 2016, compared to $446.9 million and 10.7% of
revenues in FY 2015.
- Other income and Income from unconsolidated entities in FY
2016’s fourth quarter totaled $32.7, compared to $21.6 million in
FY 2015’s same quarter.
- Other income and Income from unconsolidated entities in FY 2016
totaled $99.0 million, compared to $88.7 million in FY 2015.
- FY 2016’s fourth-quarter cancellation rate (current-quarter
cancellations divided by current-quarter signed contracts) was
4.9%, compared to 5.5% in FY 2015’s fourth quarter. As a
percentage of beginning-quarter backlog, FY 2016’s fourth-quarter
cancellation rate was 1.7%, compared to 1.9% in FY 2015’s fourth
quarter.
- In FY 2016’s fourth quarter, unconsolidated entities in which
the Company had an interest delivered $109.5 million of homes,
compared to $17.2 million in the fourth quarter of FY 2015. In FY
2016, unconsolidated entities in which the Company had an interest
delivered $164.9 million of homes, compared to $78.1 million in the
same period of FY 2015. The Company recorded its share of the
results from these entities’ operations in “Income from
Unconsolidated Entities” on the Company’s Statement of
Operations.
- In FY 2016’s fourth quarter, unconsolidated entities in which
the Company had an interest signed contracts for $28.0 million of
homes, compared to $74.6 million in the fourth quarter of FY 2015.
In FY 2016, unconsolidated entities in which the Company had an
interest signed contracts for $169.8 million of homes, compared to
$260.2 million in the same period of FY 2015.
- At October 31, 2016, unconsolidated entities in which the
Company had an interest had a backlog of $471.5 million, compared
to $466.6 million at October 31, 2015.
- The Company ended FY 2016 with $633.7 million of cash and
marketable securities, compared to $351.9 million at 2016’s
third-quarter end and $929.0 million at FYE 2015. At FYE 2016, the
Company also had $961.8 million available under its $1.295 billion
20-bank credit facility, which matures in May 2021.
- During the fourth quarter of FY 2016, the Company repurchased
approximately 2.2 million shares of its common stock at an average
price of $29.00 per share for a total purchase price of
approximately $65.2 million. In FY 2016, the Company repurchased
approximately 13.7 million shares, representing approximately 8% of
outstanding shares, at an average price of $28.77 per share for a
total purchase price of approximately $392.8 million. Since
the start of FY 2017, the Company purchased an additional 550,000
shares of its common stock at an average price of $27.28 per share
for a total purchase price of approximately $15.0 million.
- The Company’s Stockholders’ Equity at FYE 2016 was $4.24
billion, compared to $4.22 billion at FYE 2015.
- The Company ended FY 2016 with a debt-to-capital ratio of
47.2%, compared to 48.2% at FY 2016’s third-quarter end and 47.3%
at FYE 2015. The Company ended FY 2016’s fourth quarter with a net
debt-to-capital ratio(1) of 40.9 %, compared to 44.9% at FY 2016’s
third-quarter end, and 39.5% at FYE 2015.
- The Company ended FY 2016 with approximately 48,800 lots owned
and optioned, compared to 48,700 one quarter earlier, and 44,300
one year earlier. At FYE 2016’s, approximately 34,100 of these lots
were owned, of which approximately 17,100 lots, including those in
backlog, were substantially improved.
- In the fourth quarter of FY 2016, the Company spent
approximately $78.5 million on land to purchase 1,075 lots.
- In FY 2016, the Company spent approximately $700.4 million on
land to purchase 5,542 lots.
- The Company ended FY 2016 with 310 selling communities,
compared to 297 at FY 2016’s third-quarter end and 288 at FYE 2015.
The Company expects similar community count growth in FY
2017.
- On November 7, 2016, just after the end of FY 2016, the Company
announced the acquisition of Coleman Homes in Boise, Idaho, which
involved the acquisition of approximately 1,400 lots owned, 350
lots controlled, and the immediate addition of 15 selling
communities to the Company’s first quarter FY 2017 community count
total.
- In FY 2017 we expect Coleman to deliver approximately 300 homes
at an average delivered price of $300,000 to $325,000. Due to the
impact of purchase accounting and Coleman’s lower gross margins,
the Company expects Coleman to reduce FY 2017 Adjusted Gross
Margins by 30 to 40 basis points.
- The Company expects FY 2017 first quarter deliveries of between
1,000 and 1,250 units with an average price of between $750,000 and
$780,000, and full FY 2017 deliveries of between 6,500 and 7,500
units with an average price of between $775,000 and $825,000.
- The Company expects its full FY 2017 Adjusted Gross Margin to
be between 24.8% and 25.3% of revenues reflecting the above noted
impact from Coleman Homes and other changes in mix of product
deliveries.
- SG&A, as a percentage of full FY 2017 revenues, is
projected to be approximately 10.6%. FY 2017 first
quarter SG&A is projected to be approximately 15.2% of
first quarter FY 2017 revenues.
- The Company’s full FY 2017 Other income and Income from
unconsolidated entities is expected to be between $160 million and
$200 million with approximately $50 million occurring in the first
quarter.
- The Company expects its FY 2017 tax rate to be approximately
36.2%.
(1)
See “Reconciliation of Non-GAAP Measures” below for more
information on the calculation of the Company’s net debt-to-capital
ratio. Toll
Brothers will be broadcasting live via the Investor Relations
section of its website, www.tollbrothers.com, a conference call
hosted by CEO Douglas C. Yearley, Jr. at 11:00 a.m. (EST) today,
December 6, 2016, to discuss these results and its outlook for FY
2017. To access the call, enter the Toll Brothers website, click on
the Investor Relations page, and select "Conference Calls”.
Participants are encouraged to log on at least fifteen minutes
prior to the start of the presentation to register and download any
necessary software.
The call can be heard live with an online replay
which will follow. MP3 format replays will be available after the
conference call via the "Conference Calls" section of the Investor
Relations portion of the Toll Brothers website.
Toll Brothers, Inc., A FORTUNE 600 Company, is
the nation's leading builder of luxury homes. The Company began
business in 1967 and became a public company in 1986. Its
common stock is listed on the New York Stock Exchange under the
symbol “TOL.” The Company serves move-up, empty-nester,
active-adult, and second-home buyers and operates in 20 states:
Arizona, California, Colorado, Connecticut, Delaware, Florida,
Idaho, Illinois, Maryland, Massachusetts, Michigan, Minnesota,
Nevada, New Jersey, New York, North Carolina, Pennsylvania, Texas,
Virginia, and Washington, as well as in the District of
Columbia.
Toll Brothers builds an array of luxury
residential single-family detached, attached home, master planned
resort-style golf, and urban low-, mid-, and high-rise communities,
principally on land it develops and improves. The Company operates
its own architectural, engineering, mortgage, title, land
development and land sale, golf course development and management,
home security, and landscape subsidiaries. The Company also
operates its own lumber distribution, house component assembly, and
manufacturing operations. Through its Gibraltar Capital and
Asset Management joint venture, the Company provides builders and
developers with land banking and joint venture capital. The Company
acquires and develops commercial and apartment properties through
Toll Brothers Apartment Living, Toll Brothers Campus Living, and
the affiliated Toll Brothers Realty Trust, and develops urban
low-, mid-, and high-rise for-sale condominiums through Toll
Brothers City Living.
In 2016, Toll Brothers ranked #6 among all 1,500
companies in Fortune magazine’s survey of the World’s Most Admired
Companies in the Quality of Products/Services Offered category
behind only Apple, Walt Disney, Amazon, Alphabet, and Nordstrom.
The firm was also named as the Most Admired Home Building Company
for 2016, the second year in a row it has been so honored. Toll
Brothers was named 2014 Builder of the Year
by Builder magazine, and is honored to have been awarded
Builder of the Year in 2012 by Professional
Builder magazine, making it the first two-time
recipient. Toll Brothers proudly supports the communities in
which it builds; among other philanthropic pursuits, the Company
sponsors the Toll Brothers Metropolitan Opera International Radio
Network, bringing opera to neighborhoods throughout the world. For
more information, visit www.tollbrothers.com.
Toll Brothers discloses information about its
business and financial performance and other matters, and provides
links to its securities filings, notices of investor events, and
earnings and other news releases, on the Investor Relations section
of its website (tollbrothers.com/investor-relations).
Forward Looking StatementInformation presented
herein for the fourth quarter ended October 31, 2016 is subject to
finalization of the Company's regulatory filings, related financial
and accounting reporting procedures and external auditor
procedures.
Certain information included in this release is
forward-looking within the meaning of the Private Securities
Litigation Reform Act of 1995, including, but not limited to,
information related to: anticipated operating results; anticipated
financial performance, resources and condition; selling
communities; home deliveries; average home prices; consumer demand
and confidence; contract pricing; business and investment
opportunities; 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) |
|
|
|
October 31, 2016 |
|
October 31, 2015 |
|
|
(Unaudited) |
|
|
ASSETS |
|
|
|
|
Cash and cash
equivalents |
|
$ |
633,715 |
|
|
$ |
918,993 |
|
Marketable
securities |
|
— |
|
|
10,001 |
|
Restricted cash |
|
31,291 |
|
|
16,795 |
|
Inventory |
|
7,353,967 |
|
|
6,997,516 |
|
Property, construction
and office equipment, net |
|
169,576 |
|
|
136,755 |
|
Receivables, prepaid
expenses and other assets |
|
582,758 |
|
|
335,860 |
|
Mortgage loans held for
sale |
|
248,601 |
|
|
123,175 |
|
Customer deposits held
in escrow |
|
53,057 |
|
|
56,105 |
|
Investments in
unconsolidated entities |
|
496,411 |
|
|
412,860 |
|
Deferred tax assets,
net of valuation allowances |
|
167,413 |
|
|
198,455 |
|
|
|
$ |
9,736,789 |
|
|
$ |
9,206,515 |
|
|
|
|
|
|
LIABILITIES AND
EQUITY |
|
|
|
|
Liabilities: |
|
|
|
|
Loans payable |
|
$ |
871,079 |
|
|
$ |
1,000,439 |
|
Senior notes |
|
2,694,372 |
|
|
2,689,801 |
|
Mortgage company loan facility |
|
210,000 |
|
|
100,000 |
|
Customer deposits |
|
309,099 |
|
|
284,309 |
|
Accounts payable |
|
281,955 |
|
|
236,953 |
|
Accrued expenses |
|
1,072,300 |
|
|
608,066 |
|
Income taxes payable |
|
62,782 |
|
|
58,868 |
|
Total liabilities |
|
5,501,587 |
|
|
4,978,436 |
|
|
|
|
|
|
Equity: |
|
|
|
|
Stockholders’ equity |
|
|
|
|
Common stock |
|
1,779 |
|
|
1,779 |
|
Additional paid-in capital |
|
728,464 |
|
|
728,125 |
|
Retained earnings |
|
3,977,297 |
|
|
3,595,202 |
|
Treasury stock, at cost |
|
(474,912 |
) |
|
(100,040 |
) |
Accumulated other comprehensive
loss |
|
(3,336 |
) |
|
(2,509 |
) |
Total stockholders' equity |
|
4,229,292 |
|
|
4,222,557 |
|
Noncontrolling interest |
|
5,910 |
|
|
5,522 |
|
Total equity |
|
4,235,202 |
|
|
4,228,079 |
|
|
|
$ |
9,736,789 |
|
|
$ |
9,206,515 |
|
TOLL BROTHERS, INC. AND
SUBSIDIARIES |
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS |
(Amounts in thousands, except per share
data) |
(Unaudited) |
|
|
|
Twelve Months Ended October 31, |
|
Three Months Ended October 31, |
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
Revenues |
|
$ |
5,169,508 |
|
|
$ |
4,171,248 |
|
|
$ |
1,855,451 |
|
|
$ |
1,437,202 |
|
|
|
|
|
|
|
|
|
|
Cost of revenues |
|
4,144,065 |
|
|
3,269,270 |
|
|
1,569,767 |
|
|
1,116,332 |
|
Selling, general and
administrative expenses |
|
535,382 |
|
|
455,108 |
|
|
150,262 |
|
|
124,934 |
|
|
|
4,679,447 |
|
|
3,724,378 |
|
|
1,720,029 |
|
|
1,241,266 |
|
|
|
|
|
|
|
|
|
|
Income from
operations |
|
490,061 |
|
|
446,870 |
|
|
135,422 |
|
|
195,936 |
|
Other: |
|
|
|
|
|
|
|
|
Income from unconsolidated
entities |
|
40,748 |
|
|
21,119 |
|
|
17,994 |
|
|
4,039 |
|
Other income - net |
|
58,218 |
|
|
67,573 |
|
|
14,744 |
|
|
17,568 |
|
Income before income
taxes |
|
589,027 |
|
|
535,562 |
|
|
168,160 |
|
|
217,543 |
|
Income tax
provision |
|
206,932 |
|
|
172,395 |
|
|
53,782 |
|
|
70,380 |
|
Net income |
|
$ |
382,095 |
|
|
$ |
363,167 |
|
|
$ |
114,378 |
|
|
$ |
147,163 |
|
Income per share: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
2.27 |
|
|
$ |
2.06 |
|
|
$ |
0.70 |
|
|
$ |
0.83 |
|
Diluted |
|
$ |
2.18 |
|
|
$ |
1.97 |
|
|
$ |
0.67 |
|
|
$ |
0.80 |
|
Weighted-average number
of shares: |
|
|
|
|
|
|
|
|
Basic |
|
168,261 |
|
|
176,425 |
|
|
163,970 |
|
|
176,370 |
|
Diluted |
|
175,973 |
|
|
184,703 |
|
|
171,683 |
|
|
184,736 |
|
TOLL BROTHERS, INC. AND
SUBSIDIARIES |
SUPPLEMENTAL DATA |
(Amounts in thousands) |
(unaudited) |
|
|
|
Twelve Months Ended October 31, |
|
Three Months Ended October 31, |
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
Impairment charges
recognized: |
|
|
|
|
|
|
|
|
Cost of sales - land
owned/controlled for future communities |
|
$ |
3,442 |
|
|
$ |
13,409 |
|
|
$ |
39 |
|
|
$ |
130 |
|
Cost of sales - operating
communities |
|
10,365 |
|
|
22,300 |
|
|
2,415 |
|
|
4,300 |
|
|
|
$ |
13,807 |
|
|
$ |
35,709 |
|
|
$ |
2,454 |
|
|
$ |
4,430 |
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization |
|
$ |
23,121 |
|
|
$ |
23,557 |
|
|
$ |
6,283 |
|
|
$ |
5,890 |
|
Interest incurred |
|
$ |
164,001 |
|
|
$ |
155,170 |
|
|
$ |
41,922 |
|
|
$ |
37,274 |
|
Interest expense: |
|
|
|
|
|
|
|
|
Charged to cost of sales |
|
$ |
160,337 |
|
|
$ |
142,947 |
|
|
$ |
53,161 |
|
|
$ |
48,005 |
|
Charged to other income - net |
|
1,143 |
|
|
3,843 |
|
|
537 |
|
|
1,048 |
|
|
|
$ |
161,480 |
|
|
$ |
146,790 |
|
|
$ |
53,698 |
|
|
$ |
49,053 |
|
|
|
|
|
|
|
|
|
|
Home sites
controlled: |
|
|
|
|
|
|
|
|
Owned |
|
34,137 |
|
|
35,872 |
|
|
|
|
|
Optioned |
|
14,700 |
|
|
8,381 |
|
|
|
|
|
|
|
48,837 |
|
|
44,253 |
|
|
|
|
|
Inventory at October 31, 2016 and October 31, 2015
consisted of the following (amounts in thousands):
|
|
October 31, 2016 |
|
October 31, 2015 |
Land and land
development costs |
|
$ |
2,497,603 |
|
|
$ |
2,476,008 |
|
Construction in
progress |
|
4,225,456 |
|
|
3,977,542 |
|
Sample homes |
|
460,948 |
|
|
349,481 |
|
Land deposits and costs
of future development |
|
144,417 |
|
|
173,879 |
|
Other |
|
25,543 |
|
|
20,606 |
|
|
|
$ |
7,353,967 |
|
|
$ |
6,997,516 |
|
Toll Brothers operates in two segments:
Traditional Home Building and Urban Infill ("City Living").
Within Traditional Home Building, Toll operates in five geographic
segments:
North: |
|
Connecticut, Illinois, Massachusetts, Michigan, Minnesota, New
Jersey and New York |
Mid-Atlantic: |
|
Delaware,
Maryland, Pennsylvania and Virginia |
|
South: |
|
Florida,
North Carolina and Texas |
|
West: |
|
Arizona,
Colorado, Nevada, and Washington |
|
California: |
|
California |
|
|
|
Three Months Ended October 31, |
|
|
Units |
|
$ (Millions) |
|
Average Price Per Unit $ |
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
HOME BUILDING
REVENUES |
|
|
|
|
|
|
|
|
|
|
|
|
North |
|
444 |
|
|
391 |
|
|
$ |
322.8 |
|
|
$ |
239.0 |
|
|
$ |
727,100 |
|
|
$ |
611,300 |
|
Mid-Atlantic |
|
503 |
|
|
413 |
|
|
318.8 |
|
|
266.2 |
|
|
633,700 |
|
|
644,400 |
|
South |
|
362 |
|
|
351 |
|
|
278.2 |
|
|
281.0 |
|
|
768,500 |
|
|
800,600 |
|
West |
|
505 |
|
|
319 |
|
|
355.0 |
|
|
209.7 |
|
|
703,000 |
|
|
657,400 |
|
California |
|
404 |
|
|
269 |
|
|
566.8 |
|
|
310.2 |
|
|
1,402,900 |
|
|
1,153,200 |
|
Traditional Home Building |
|
2,218 |
|
|
1,743 |
|
|
1,841.6 |
|
|
1,306.1 |
|
|
830,300 |
|
|
749,300 |
|
City Living |
|
6 |
|
|
77 |
|
|
13.9 |
|
|
131.1 |
|
|
2,322,900 |
|
|
1,702,800 |
|
Total consolidated |
|
2,224 |
|
|
1,820 |
|
|
$ |
1,855.5 |
|
|
$ |
1,437.2 |
|
|
$ |
834,300 |
|
|
$ |
789,700 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONTRACTS |
|
|
|
|
|
|
|
|
|
|
|
|
North |
|
346 |
|
|
311 |
|
|
$ |
242.5 |
|
|
$ |
219.7 |
|
|
$ |
700,800 |
|
|
$ |
706,400 |
|
Mid-Atlantic |
|
409 |
|
|
331 |
|
|
248.6 |
|
|
216.3 |
|
|
607,900 |
|
|
653,300 |
|
South |
|
317 |
|
|
234 |
|
|
238.4 |
|
|
179.9 |
|
|
752,000 |
|
|
769,000 |
|
West |
|
374 |
|
|
291 |
|
|
279.1 |
|
|
211.5 |
|
|
746,400 |
|
|
726,700 |
|
California |
|
242 |
|
|
195 |
|
|
389.3 |
|
|
290.9 |
|
|
1,608,700 |
|
|
1,492,000 |
|
Traditional Home Building |
|
1,688 |
|
|
1,362 |
|
|
1,397.9 |
|
|
1,118.3 |
|
|
828,200 |
|
|
821,100 |
|
City Living |
|
40 |
|
|
75 |
|
|
67.1 |
|
|
134.6 |
|
|
1,676,600 |
|
|
1,794,300 |
|
Total consolidated |
|
1,728 |
|
|
1,437 |
|
|
$ |
1,465.0 |
|
|
$ |
1,252.9 |
|
|
$ |
847,800 |
|
|
$ |
871,900 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BACKLOG |
|
|
|
|
|
|
|
|
|
|
|
|
North |
|
977 |
|
|
890 |
|
|
$ |
692.8 |
|
|
$ |
619.2 |
|
|
$ |
709,100 |
|
|
$ |
695,800 |
|
Mid-Atlantic |
|
986 |
|
|
811 |
|
|
610.0 |
|
|
518.9 |
|
|
618,700 |
|
|
639,900 |
|
South |
|
960 |
|
|
824 |
|
|
736.4 |
|
|
669.2 |
|
|
767,100 |
|
|
812,100 |
|
West |
|
1,020 |
|
|
816 |
|
|
766.5 |
|
|
573.5 |
|
|
751,500 |
|
|
702,800 |
|
California |
|
533 |
|
|
609 |
|
|
867.7 |
|
|
897.8 |
|
|
1,627,900 |
|
|
1,474,200 |
|
Traditional Home Building |
|
4,476 |
|
|
3,950 |
|
|
3,673.4 |
|
|
3,278.6 |
|
|
820,700 |
|
|
830,000 |
|
City Living |
|
209 |
|
|
114 |
|
|
310.7 |
|
|
225.4 |
|
|
1,486,500 |
|
|
1,977,200 |
|
Total consolidated |
|
4,685 |
|
|
4,064 |
|
|
$ |
3,984.1 |
|
|
$ |
3,504.0 |
|
|
$ |
850,400 |
|
|
$ |
862,200 |
|
|
|
Twelve Months Ended October 31, |
|
|
Units |
|
$ (Millions) |
|
Average Price Per Unit $ |
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
HOME BUILDING
REVENUES |
|
|
|
|
|
|
|
|
|
|
|
|
North |
|
1,172 |
|
|
1,126 |
|
|
$ |
814.5 |
|
|
$ |
702.2 |
|
|
$ |
695,000 |
|
|
$ |
623,600 |
|
Mid-Atlantic |
|
1,432 |
|
|
1,342 |
|
|
895.7 |
|
|
845.3 |
|
|
625,500 |
|
|
629,900 |
|
South |
|
1,093 |
|
|
1,175 |
|
|
849.6 |
|
|
892.3 |
|
|
777,300 |
|
|
759,400 |
|
West |
|
1,304 |
|
|
994 |
|
|
903.7 |
|
|
665.3 |
|
|
693,000 |
|
|
669,300 |
|
California |
|
1,006 |
|
|
669 |
|
|
1,448.5 |
|
|
750.0 |
|
|
1,439,900 |
|
|
1,121,100 |
|
Traditional Home Building |
|
6,007 |
|
|
5,306 |
|
|
4,912.0 |
|
|
3,855.1 |
|
|
817,700 |
|
|
726,600 |
|
City Living |
|
91 |
|
|
219 |
|
|
257.5 |
|
|
316.1 |
|
|
2,829,700 |
|
|
1,443,400 |
|
Total consolidated |
|
6,098 |
|
|
5,525 |
|
|
$ |
5,169.5 |
|
|
$ |
4,171.2 |
|
|
$ |
847,700 |
|
|
$ |
755,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONTRACTS |
|
|
|
|
|
|
|
|
|
|
|
|
North |
|
1,259 |
|
|
1,138 |
|
|
$ |
888.0 |
|
|
$ |
756.8 |
|
|
$ |
705,300 |
|
|
$ |
665,000 |
|
Mid-Atlantic |
|
1,607 |
|
|
1,323 |
|
|
986.8 |
|
|
844.7 |
|
|
614,100 |
|
|
638,500 |
|
South |
|
1,229 |
|
|
1,036 |
|
|
916.8 |
|
|
838.3 |
|
|
746,000 |
|
|
809,200 |
|
West |
|
1,508 |
|
|
1,221 |
|
|
1,096.7 |
|
|
846.2 |
|
|
727,300 |
|
|
693,000 |
|
California |
|
930 |
|
|
1,003 |
|
|
1,418.5 |
|
|
1,343.2 |
|
|
1,525,300 |
|
|
1,339,200 |
|
Traditional Home Building |
|
6,533 |
|
|
5,721 |
|
|
5,306.8 |
|
|
4,629.2 |
|
|
812,300 |
|
|
809,200 |
|
City Living |
|
186 |
|
|
189 |
|
|
342.8 |
|
|
326.4 |
|
|
1,843,000 |
|
|
1,727,000 |
|
Total consolidated |
|
6,719 |
|
|
5,910 |
|
|
$ |
5,649.6 |
|
|
$ |
4,955.6 |
|
|
$ |
840,800 |
|
|
$ |
838,500 |
|
Unconsolidated entities:
Information related to revenues and contracts of
entities in which we have an interest for the three-month and
twelve-month periods ended October 31, 2016 and 2015, and for
backlog at October 31, 2016 and 2015 is as follows:
|
|
Units |
|
$ (Millions) |
|
Average Price Per Unit $ |
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
Three months ended
October 31, |
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
54 |
|
|
21 |
|
|
$ |
109.5 |
|
|
$ |
17.2 |
|
|
$ |
2,028,300 |
|
|
$ |
820,000 |
|
Contracts |
|
18 |
|
|
40 |
|
|
$ |
28.0 |
|
|
$ |
74.6 |
|
|
$ |
1,553,100 |
|
|
$ |
1,865,300 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve months ended
October 31, |
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
115 |
|
|
96 |
|
|
$ |
164.9 |
|
|
$ |
78.1 |
|
|
$ |
1,434,000 |
|
|
$ |
813,300 |
|
Contracts |
|
113 |
|
|
147 |
|
|
$ |
169.8 |
|
|
$ |
260.2 |
|
|
$ |
1,502,900 |
|
|
$ |
1,770,100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Backlog at October
31, |
|
184 |
|
|
186 |
|
|
$ |
471.5 |
|
|
$ |
466.6 |
|
|
$ |
2,562,400 |
|
|
$ |
2,508,500 |
|
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
Pre-tax Income; Adjusted Gross Margin, further adjusted for
warranty charges primarily related to older stucco homes; and the
Company’s net debt-to-capital ratio.
These three 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 they 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 Pre-tax IncomeThe following table
reconciles the Company’s Pre-tax Income (calculated in accordance
with GAAP) to the Company’s Adjusted Pre-tax Income (a non-GAAP
financial measure). Adjusted Pre-tax Income is calculated as
Pre-tax income plus inventory write-downs plus warranty charges
primarily related to older stucco homes.
Adjusted Pre-tax Income
Reconciliation |
|
|
|
|
Three Months Ended October 31, |
|
Twelve Months Ended October 31, |
|
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
Pre-tax
income |
$ |
168,160 |
|
|
$ |
217,543 |
|
|
$ |
589,027 |
|
|
$ |
535,562 |
|
Add: |
Inventory
write-downs |
|
2,454 |
|
|
4,430 |
|
|
13,807 |
|
|
35,709 |
|
|
Warranty charges
primarily related to older stucco homes |
|
$ |
121,231 |
|
|
$ |
14,685 |
|
|
$ |
125,576 |
|
|
$ |
14,685 |
|
Adjusted
pre-tax income |
$ |
291,845 |
|
|
$ |
236,658 |
|
|
$ |
728,410 |
|
|
$ |
585,956 |
|
The Company has not disclosed Adjusted Pre-tax
Income in prior periods in fiscal 2016. The Company’s
management believes Adjusted Pre-tax Income is a useful financial
measure to investors because it allows them to evaluate the
performance of our Company for the fourth quarter and fiscal year
2016 and its prospects for the future without the often varying
effects of inventory impairments and the impact of warranty charges
primarily related to older stucco homes. The use of Adjusted
Pre-tax Income also assists the Company’s management as a basis for
making internal budgets and operating decisions, as well as
planning and forecasting of future periods.
Adjusted Gross Margin (further adjusted for
warranty charges primarily related to older stucco homes)The
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, further adjusted for warranty
charges primarily related to older stucco homes (a non-GAAP
financial measure). Adjusted Gross Margin, further adjusted
for warranty charges primarily related to older stucco homes, is
calculated as (i) gross margin plus interest recognized in cost of
sales plus inventory write-downs plus warranty charges primarily
related to older stucco homes divided by (ii) revenues.
|
Adjusted Gross Margin
Reconciliation |
|
|
|
|
Three Months Ended October 31, |
|
Twelve Months Ended October 31, |
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
Revenues |
|
$ |
1,855,451 |
|
|
$ |
1,437,202 |
|
|
$ |
5,169,508 |
|
|
$ |
4,171,248 |
|
Cost of
revenues |
1,569,767 |
|
|
1,116,332 |
|
|
4,144,065 |
|
|
3,269,270 |
|
Gross
margin |
285,684 |
|
|
320,870 |
|
|
1,025,443 |
|
|
901,978 |
|
Add: |
Interest recognized in
cost of sales |
53,161 |
|
|
48,005 |
|
|
160,337 |
|
|
142,947 |
|
|
Inventory
write-downs |
2,454 |
|
|
4,430 |
|
|
13,807 |
|
|
35,709 |
|
Adjusted
gross margin |
341,299 |
|
|
373,305 |
|
|
1,199,587 |
|
|
1,080,634 |
|
Add: |
Warranty charges
primarily related to older stucco homes |
121,231 |
|
|
14,685 |
|
|
125,576 |
|
|
14,685 |
|
Adjusted
gross margin, further adjusted for warranty charges primarily
related to older stucco homes |
|
$ |
462,530 |
|
|
$ |
387,990 |
|
|
$ |
1,325,163 |
|
|
$ |
1,095,319 |
|
|
|
|
|
|
|
|
|
|
As a
percentage of revenue: |
|
|
|
|
|
|
|
Gross
margin |
15.4 |
% |
|
22.3 |
% |
|
19.8 |
% |
|
21.6 |
% |
|
|
|
|
|
|
|
|
|
Adjusted
Gross Margin |
18.4 |
% |
|
26.0 |
% |
|
23.2 |
% |
|
25.9 |
% |
|
|
|
|
|
|
|
|
|
Adjusted gross
margin, further adjusted for warranty charges primarily related to
older stucco homes |
24.9 |
% |
|
27.0 |
% |
|
25.6 |
% |
|
26.3 |
% |
The Company has disclosed Adjusted Gross Margin
for prior periods in fiscal 2016, but has not disclosed Adjusted
Gross Margin, further adjusted for warranty charges primarily
related to older stucco homes. The Company’s management believes
Adjusted Gross Margin, further adjusted warranty charges primarily
related to older stucco homes, is a useful financial measure to
investors because it allows them to evaluate the performance of our
Company for the fourth quarter and fiscal year 2016 and its
prospects for the future without the often varying effects of
capitalized interest costs, inventory impairments, and the impact
of warranty charges primarily related to older stucco homes. The
use of Adjusted Gross Margin also assists the Company’s management
in assessing the profitability of our homebuilding operations and
making strategic decisions regarding community location and product
mix.
Forward-looking Adjusted Gross MarginThe Company
has not provided projected full year fiscal 2017 gross margin or a
GAAP reconciliation for forward-looking Adjusted Gross Margin,
further adjusted for warranty charges primarily related to older
stucco homes, because such measure cannot be provided without
unreasonable efforts on a forward-looking basis, since inventory
write-downs are based on future activity and observation and
therefore cannot be projected for the full fiscal year. The
variability of these charges may have a potentially unpredictable,
and potentially significant, impact on our gross margin for fiscal
2017.
Net Debt-to-Capital RatioThe following table
reconciles the Company’s ratio of debt to capital (calculated in
accordance with GAAP) to the Company’s net debt-to-capital ratio (a
non-GAAP financial measure). The net debt-to-capital ratio is
calculated as (i) total debt minus mortgage warehouse loans minus
cash and cash equivalents and marketable securities divided by (ii)
total debt minus mortgage warehouse loans minus cash and cash
equivalents and marketable securities plus stockholders’
equity.
|
Net Debt-to-Capital Ratio
Reconciliation |
|
|
|
|
|
October 31, |
|
July 31, |
|
|
|
2016 |
|
2015 |
|
2016 |
Loans
payable |
$ |
871,079 |
|
|
$ |
1,000,439 |
|
|
$ |
1,058,656 |
|
Senior
notes |
2,694,372 |
|
|
2,689,801 |
|
|
2,693,221 |
|
Mortgage
company loan facility |
210,000 |
|
|
100,000 |
|
|
125,000 |
|
Total
debt |
3,775,451 |
|
|
3,790,240 |
|
|
3,876,877 |
|
Total
stockholders' equity |
4,229,292 |
|
|
4,222,557 |
|
|
4,174,151 |
|
Total
capital |
$ |
8,004,743 |
|
|
$ |
8,012,797 |
|
|
$ |
8,051,028 |
|
Ratio of
debt to capital |
47.2 |
% |
|
47.3 |
% |
|
48.2 |
% |
|
|
|
|
|
|
|
|
Total
debt |
$ |
3,775,451 |
|
|
$ |
3,790,240 |
|
|
$ |
3,876,877 |
|
Less: |
Mortgage company loan
facility |
|
(210,000 |
) |
|
(100,000 |
) |
|
(125,000 |
) |
|
Cash and cash
equivalents and marketable securities |
|
(633,715 |
) |
|
(928,994 |
) |
|
(351,854 |
) |
Total net
debt |
2,931,736 |
|
|
2,761,246 |
|
|
3,400,023 |
|
Total
stockholders' equity |
4,229,292 |
|
|
4,222,557 |
|
|
4,174,151 |
|
Total net
capital |
$ |
7,161,028 |
|
|
$ |
6,983,803 |
|
|
$ |
7,574,174 |
|
Net
debt-to-capital ratio |
40.9 |
% |
|
39.5 |
% |
|
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@tollbrothersinc.com
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