HORSHAM, Pa., Aug. 9, 2006 (PRIMEZONE) -- Toll Brothers, Inc. (NYSE:TOL) (www.tollbrothers.com), the nation's leading builder of luxury homes, today reported preliminary results for home building revenues, backlog and contracts for the third-quarter and nine-month periods ended July 31, 2006.
For the third quarter, home building revenues were approximately $1.53 billion compared to the third-quarter record of $1.54 billion in FY 2005; quarter-end backlog was approximately $5.59 billion compared to the third-quarter record of $6.43 billion in FY 2005; and signed contracts were approximately $1.05 billion compared to the third-quarter record of $1.92 billion in FY 2005. Home building revenues, backlog and contracts declined 0.5%, 13% and 45%, respectively, compared to FY 2005's record third-quarter results.
For the nine-month period, home building revenues totaled approximately $4.31 billion compared to the previous nine-month record of $3.75 billion in FY 2005, while signed contracts totaled approximately $3.75 billion compared to the nine-month record of $5.56 billion in FY 2005. These totals represented a 15% increase in home building revenues and a 33% decline in contracts compared to FY 2005's record nine-month period. The results are preliminary and unaudited. The Company will announce final totals when it releases third-quarter and nine-month earnings results on August 22, 2006, at which time it will update its earnings guidance.
Based upon its current backlog, the Company expects to deliver between 2,500 and 2,800 homes in the fourth quarter of FY 2006 compared to its previous guidance of 2,900 to 3,300 deliveries. For its full 2006 fiscal year, the Company believes it will deliver between 8,600 and 8,900 homes.
Robert I. Toll, chairman and chief executive officer, stated: "It appears that the current housing slowdown, which we first saw in September 2005, is somewhat unique: It is the first downturn in the forty years since we entered the business that was not precipitated by high interest rates, a weak economy, job losses or other macroeconomic factors. Instead, it seems to be the result of an oversupply of inventory and a decline in confidence: Speculative buyers who spurred demand in 2004 and 2005 are now sellers; builders that built speculative homes must now move their specs; and nervous buyers are canceling contracts for homes already under construction. The resulting excess supply has exacerbated the drop in consumer confidence, which first appeared last September, that was already a drag on new home sales.
"Because much of the overhang of finished and near-finished product is being marketed using advertised price reductions and increased sales incentives, many anxious consumers are delaying their purchase decisions as they wonder about the direction of home prices. With interest rates still relatively low, the economy basically healthy and household formations still increasing, we believe that once the current oversupply of homes is absorbed and buyers become confident that home prices have stabilized, the market will return to firm footing.
"While we cannot predict when this will occur, we do believe the laws of supply and demand have not changed and the demographics are still very favorable. With the growth in households over the next ten years projected to outpace the record totals of the past ten years, demand for housing should remain strong. With many potential buyers on the sidelines right now, we believe there is growing pent-up demand that will come into the market once buyer sentiment improves.
"In addition, because many builders are abandoning lots under option, we expect land developers and land sellers may be less aggressive in pushing new lots through the approval process. This could result in a shortage of available home sites in many markets once demand rebounds.
"Faced with heavy discounting by many other builders, we generally have chosen to allow sales paces to slow rather than aggressively discount our home prices. Other than in our multi-family communities, in which we start a building after having sold some but not all of its units, we rarely start a single detached home without a buyer's signed agreement and a substantial down payment. Because we build few specs, we feel less pressure to discount homes to be built.
"Since we have taken most of the lots we now own through the entitlement process, we believe we've created significant value. On certain land deals that no longer work due to today's weaker market conditions and slower sales paces, we are willing to let options expire if we are unable to renegotiate the land purchase. When we announce earnings on August 22, 2006, we will announce our write-downs related to such options.
"We have seen an increase in our cancellation rates in a number of markets, including Orlando, Northern California, Palm Springs, Las Vegas, and Phoenix. While our current cancellation rate is significantly higher than our historical levels, we believe it is still the lowest in the industry, primarily because we require a significant non-refundable down payment before we start a buyer's home.
"We have a fantastic team that has managed through several past downturns. Our team was able to grow revenues and profits significantly coming out of the downturn of 1988-1990 thanks to opportunistic land buying and financial discipline during that period. Now, with a much deeper capital base, a national geographic presence, a well-established brand name and a much wider range of product lines to serve luxury buyers, we believe we are even better positioned to prosper in the future."
Toll Brothers' preliminary financial highlights for the three-month and nine-month periods ended July 31, 2006 (unaudited):
-- The Company's FY 2006 third-quarter contracts of approximately
$1.05 billion declined by 45% over FY 2005's third-quarter
contracts of $1.92 billion, the third-quarter record. In
addition, in FY 2006's third quarter, unconsolidated entities in
which the Company had an interest signed contracts of
approximately $19.2 million.
-- FY 2006's nine-month contracts of approximately $3.75 billion
declined by 33% over FY 2005's nine-month total of
$5.56 billion, the nine-month record. In addition, in FY 2006's
nine-month period, unconsolidated entities in which the Company
had an interest signed contracts of approximately $51.9 million.
-- In FY 2006, third-quarter-end backlog of approximately
$5.59 billion declined 13% over FY 2005's third-quarter-end
backlog of $6.43 billion, the third-quarter record. In
addition, at July 31, 2006, unconsolidated entities in which the
Company had an interest had a backlog of approximately
$12.6 million.
-- FY 2006's third-quarter home building revenues of approximately
$1.53 billion decreased 0.5% over FY 2005's third-quarter home
building revenues of $1.54 billion, the third-quarter record.
Revenues from land sales totaled approximately $1.2 million for
FY 2006's third quarter, compared to $10.6 million in FY 2005's
third quarter.
-- FY 2006's nine-month home building revenues of approximately
$4.31 billion increased 15% over FY 2005's nine-month home
building revenues of $3.75 billion, the previous nine-month
record. FY 2006 revenues from land sales for the nine-month
period totaled approximately $7.9 million, compared to
$21.6 million in the same period in FY 2005.
-- In addition, in the Company's fiscal 2006 third-quarter and
nine-month periods, unconsolidated entities in which the Company
had an interest, had revenues of approximately $14.3 million and
$95.3 million, respectively, compared to $25.7 million and
$90.5 million, respectively, in the same periods of FY 2005.
The Company's share of the profits from the delivery of these
homes is included in 'Equity Earnings in Unconsolidated
Entities' on the Company's Income Statement.
-- During the third quarter of FY 2006, the Company bought back
approximately 1.68 million shares of its stock at an average
price of approximately $28.43. For the first nine months of
FY 2006, the Company bought back approximately 3.62 million
shares of its stock at an average price of approximately $30.25.
This compares to purchases of approximately 9,000 and 830,000
shares in the third quarter and first nine months of FY 2005,
respectively.
Toll Brothers will be broadcasting live via the Investor Relations section of its website, www.tollbrothers.com, a conference call hosted by chairman and chief executive officer Robert I. Toll at 2:00 p.m. (EDT) today, August 9, 2006, to discuss these results and its outlook for the remainder of FY 2006. To access the call, enter the Toll Brothers website, then 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 on-line replay which will follow and continue through August 21, 2006.
Toll Brothers, Inc. 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 and the Pacific Exchange under the symbol "TOL". The Company serves move-up, empty-nester, active-adult and second-home home buyers and operates in 21 states: Arizona, California, Colorado, Connecticut, Delaware, Florida, Illinois, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, South Carolina, Texas, Virginia and West Virginia.
Toll Brothers builds luxury single-family detached and attached home communities, master planned luxury residential resort-style golf communities 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, landscape, cable T.V. and broadband Internet delivery subsidiaries. The Company also operates its own lumber distribution, and house component assembly and manufacturing operations.
Toll Brothers, a FORTUNE 500 Company and No. 102 on the Forbes Platinum 400 based on five-year annualized total return performance, is the only publicly traded national home building company to have won all three of the industry's highest honors: America's Best Builder from the National Association of Home Builders, the National Housing Quality Award, and Builder of the Year. Toll Brothers proudly supports the communities in which it builds; among other philanthropic pursuits, the Company now sponsors the Toll Brothers -- Metropolitan Opera International Radio Network, bringing opera to neighborhoods throughout the world. For more information, visit tollbrothers.com.
Certain information included herein and in other Company reports, SEC filings, statements and presentations is forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements concerning anticipated operating results, financial resources, changes in revenues, changes in profitability, interest expense, growth and expansion, anticipated income to be realized from our investments in unconsolidated entities, the ability to acquire land, the ability to secure governmental approvals and the ability to open new communities, the ability to sell homes and properties, the ability to deliver homes from backlog, the average delivered price of homes, the ability to secure materials and subcontractors, the ability to maintain the liquidity and capital necessary to expand and take advantage of future opportunities, and stock market valuations. 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 local, regional and national economic conditions, the demand for homes, domestic and international political events, uncertainties created by terrorist attacks, the effects of governmental regulation, the competitive environment in which the Company operates, fluctuations in interest rates, changes in home prices, the availability and cost of land for future growth, the availability of capital, uncertainties and fluctuations in capital and securities markets, changes in tax laws and their interpretation, legal proceedings, the availability of adequate insurance at reasonable cost, the ability of customers to finance the purchase of homes, the availability and cost of labor and materials, and weather conditions.
Three Months Ended July 31,
Numbers are preliminary UNITS $ (MILL)
-------------- ------------------
HOME BUILDING REVENUES 2006 2005 2006 2005
------------------------------ ---- ---- ---- ----
Northeast (CT, MA, NJ, NY, RI) 411 310 276.8 184.0
Mid-Atlantic (DE, MD, PA, VA) 678 886 447.4 554.4
Midwest (IL, MI, MN, OH) 105 178 74.6 110.7
Southeast (FL, NC, SC) 371 236 212.7 139.0
Southwest (AZ, CO, NV, TX) 459 361 308.2 239.2
West (CA) 133 339 169.4 309.2
----- ----- ------- -------
Total traditional 2,157 2,310 1,489.1 1,536.5
Percentage of completion(a) -- -- 40.0 --
----- ----- ------- -------
Total consolidated 2,157 2,310 1,529.1 1,536.5
Unconsolidated entities 23 57 14.3 25.7
----- ----- ------- -------
2,180 2,367 1,543.4 1,562.2
===== ===== ======= =======
CONTRACTS
------------------------------
Northeast (CT, MA, NJ, NY, RI) 222 431 146.4 280.0
Mid-Atlantic (DE, MD, PA, VA,
WVA) 476 758 309.5 522.9
Midwest (IL, MI, MN, OH) 130 149 90.4 108.4
Southeast (FL, NC, SC) 176 593 120.9 330.9
Southwest (AZ, CO, NV, TX) 238 544 197.5 391.7
West (CA) 158 230 149.5 238.2
----- ----- ------- -------
Total traditional 1,400 2,705 1,014.2 1,872.1
Percentage of completion(a) 43 41 36.3 44.1
----- ----- ------- -------
Total consolidated 1,443 2,746 1,050.5 1,916.2
Unconsolidated entities 30 111 19.2 63.4
----- ----- ------- -------
1,473 2,857 1,069.7 1,979.6
===== ===== ======= =======
At July 31,
UNITS $ (MILL)
-------------- ------------------
BACKLOG 2006 2005 2006 2005
------------------------------ ---- ---- ---- ----
Northeast (CT, MA, NJ, NY, RI) 1,013 1,420 697.2 922.0
Mid-Atlantic (DE, MD, PA, VA,
WVA) 1,951 2,639 1,306.5 1,750.8
Midwest (IL, MI, MN, OH) 482 505 329.4 358.3
Southeast (FL, NC, SC) 1,597 2,009 920.7 1,052.1
Southwest (AZ, CO, NV, TX) 1,651 1,926 1,246.1 1,315.1
West (CA) 668 831 677.1 893.0
----- ----- ------- -------
Total traditional 7,362 9,330 5,177.0 6,291.3
----- ----- ------- -------
Percentage of completion(a) -- -- -- --
Undelivered 663 160 552.3 142.5
Less, revenue recognized -- -- (137.6) --
----- ----- ------- -------
Net percentage of completion 663 160 414.7 142.5
----- ----- ------- -------
Total consolidated 8,025 9,490 5,591.7 6,433.8
Unconsolidated entities 19 237 12.6 149.4
----- ----- ------- -------
8,044 9,727 5,604.3 6,583.2
===== ===== ======= =======
Nine Months Ended July 31,
Numbers are preliminary UNITS $ (MILL)
-------------- ------------------
HOME BUILDING REVENUES 2006 2005 2006 2005
------------------------------ ---- ---- ---- ----
Northeast (CT, MA, NJ, NY, RI) 1,070 793 698.1 447.6
Mid-Atlantic (DE, MD, PA, VA) 1,954 2,308 1,295.5 1,400.0
Midwest (IL, MI, MN, OH) 329 414 232.6 256.8
Southeast (FL, NC, SC) 1,160 588 634.4 328.7
Southwest (AZ, CO, NV, TX) 1,177 914 821.9 584.0
West (CA) 409 795 485.8 734.5
----- ----- ------- -------
Total traditional 6,099 5,812 4,168.3 3,751.6
Percentage of completion(a) -- -- 137.6 --
----- ----- ------- -------
Total consolidated 6,099 5,812 4,305.9 3,751.6
Unconsolidated entities 167 207 95.3 90.5
----- ----- ------- -------
6,266 6,019 4,401.2 3,842.1
===== ===== ======= =======
CONTRACTS
------------------------------
Northeast (CT, MA, NJ, NY, RI) 731 1,185 493.5 770.0
Mid-Atlantic (DE, MD, PA, VA,
WVA) 1,575 2,702 1,035.6 1,778.5
Midwest (IL, MI, MN, OH) 368 473 243.0 330.8
Southeast (FL, NC, SC) 737 1,434 477.9 794.0
Southwest (AZ, CO, NV, TX) 979 1,489 758.9 1,049.5
West (CA) 481 713 492.7 762.9
----- ----- ------- -------
Total traditional 4,871 7,996 3,501.6 5,485.7
Percentage of completion(a) 283 104 253.0 78.2
----- ----- ------- -------
Total consolidated 5,154 8,100 3,754.6 5,563.9
Unconsolidated entities 83 270 51.9 164.1
----- ----- ------- -------
5,237 8,370 3,806.5 5,728.0
===== ===== ======= =======
(a) Mid- and High-Rise projects that are accounted for under the
percentage of completion accounting method. See details below.
PERCENTAGE OF COMPLETION
Three Months ended July 31,
---------------------------
Numbers are preliminary UNITS $ (MILL)
-------------- ------------------
HOME BUILDING REVENUES 2006 2005 2006 2005
------------------------------ ---- ---- ---- ----
Northeast 25.0
Southeast 15.0
Southwest --
------- -------
Total 40.0
======= =======
CONTRACTS
------------------------------
Northeast 34 28 32.2 15.0
Mid-Atlantic 4 -- 1.4 --
Midwest 4 -- 1.2 --
Southeast 1 13 1.5 29.1
Southwest -- -- -- --
----- ----- ------- -------
Total 43 41 36.3 44.1
===== ===== ======= =======
At July 31,
---------------------------
UNITS $ (MILL)
-------------- ------------------
BACKLOG 2006 2005 2006 2005
------------------------------ ---- ---- ---- ----
Northeast 507 88 396.3 44.5
Mid-Atlantic 52 -- 21.3 --
Midwest 4 -- 1.2 --
Southeast 77 72 115.8 98.0
Southwest 23 -- 17.7 --
Less, revenue recognized -- -- (137.6) --
----- ----- ------- -------
Total-Net 663 160 414.7 142.5
===== ===== ======= =======
Nine Months ended July 31,
--------------------------
UNITS $ (MILL)
-------------- ------------------
HOME BUILDING REVENUES 2006 2005 2006 2005
------------------------------ ---- ---- ---- ----
Northeast 87.2 N/A
Southeast 48.1
Southwest 2.3
------- -------
Total 137.6 N/A
======= =======
CONTRACTS
------------------------------
Northeast 236 88 213.4 44.5
Mid-Atlantic 22 8.4
Midwest 4 1.2
Southeast 5 16 17.8 33.7
Southwest 16 12.2
----- ----- ------- -------
Total 283 104 253.0 78.2
===== ===== ======= =======