HORSHAM, Pa., Nov. 7, 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 fourth quarter and fiscal year ended October 31, 2006.
For the fourth quarter, home building revenues were approximately $1.81 billion compared to the fourth-quarter record of $2.01 billion in FY 2005; quarter-end backlog was approximately $4.49 billion compared to the fourth-quarter record of $6.01 billion in FY 2005; and signed contracts during the quarter were approximately $710 million compared to the fourth-quarter record of $1.59 billion in FY 2005. Home building revenues, backlog and contracts declined 10%, 25% and 55%, respectively, compared to FY 2005's record fourth-quarter results.
The Company's quarterly contract total was negatively impacted by a higher than normal 585 cancellations. Since most current cancellations are on contracts signed in previous quarters, cancellation rates are best measured as a percentage of backlog. The Company's fourth-quarter cancellations measured approximately 7% of beginning fourth-quarter backlog, compared to 4% in its third quarter FY 2006. Viewed as a percentage of contracts signed in the fourth quarter of FY 2006, cancellations totaled 37%, compared to 18% in FY 2006's third quarter. Nearly 25% of all fourth-quarter cancellations occurred in two markets -- Orlando (14%) and Northern California (11%) -- each of which produced a disproportionately higher rate of cancellations than its share of Company backlog, orders or communities.
For the full 2006 fiscal year, record home building revenues rose 6% to approximately $6.12 billion, compared to $5.76 billion in FY 2005, the previous record. Signed contracts were approximately $4.46 billion, a decline of 38% compared to the fiscal year record of $7.15 billion in FY 2005.
In response to current market conditions, the Company is reevaluating and renegotiating many of its optioned land positions. As a result, the Company reduced its land position by approximately 6,500 lots and ended FY 2006's fourth quarter with approximately 74,000 lots owned or controlled, a decline of 19% from its high of approximately 91,200 lots at FY 2006's second-quarter-end. The Company expects to take write-downs on optioned and owned land in FY 2006's fourth quarter of between $50 million and $100 million. This would reduce GAAP stockholders' equity by approximately 1% to 2% and after-tax fourth-quarter earnings by approximately $0.18 to $0.36 per share.
These results are preliminary and unaudited. The Company will announce final totals when it releases fourth-quarter and full fiscal year earnings results on December 5, 2006, with a conference call to follow that day.
The Company will provide updated earnings guidance for FY 2007 on its December 5, 2006 conference call. As the Company has previously stated, projecting revenues and earnings results are difficult in this environment. Based on its current backlog, the impact of lower fourth-quarter contracts and the increased rate of cancellations, the Company expects to deliver between 6,300 and 7,300 homes for FY 2007. This compares to its previous guidance of 7,000 to 8,000 deliveries. The Company expects it will deliver between 1,500 and 1,800 homes in its first quarter of FY 2007.
Robert I. Toll, chairman and chief executive officer, stated: "FY 2006 has certainly been a very tough and challenging year. It is worth noting that, atypically, this housing market is weak in an environment of low interest rates and low unemployment. We believe weak buyer confidence is keeping many customers on the sidelines.
"We continue to look for signs that a recovery is imminent but can't yet say that one is in sight. We see some signs of pent-up demand when we have special sales events or new community openings. And in some markets, good weeks are interspersed amongst weaker ones. With continued growth in households and population and fewer lots than usual making their way through the approval process, we believe that, once the current inventory overhang is absorbed and consumer sentiment turns positive, the market should improve more rapidly than is generally anticipated.
"Our nation's demographics haven't changed, and home ownership remains the American dream. With interest rates very attractive, the economy healthy and home builders motivated to move their product, it should be a great time to buy a new home. Our goal is to bring the quality of our brand to luxury buyers and to provide dream housing for them at all stages of their life cycles. With our broad geographic presence, diversified product lines and experienced team, we believe we will weather this challenging environment and emerge stronger."
Toll Brothers' preliminary financial highlights for the three-month and twelve-month periods ended October 31, 2006 (unaudited):
-- The Company's FY 2006 fourth-quarter contracts of approximately
$709.6 million declined by 55% over FY 2005's fourth-quarter
contracts of $1.59 billion, the fourth-quarter record. In
addition, in FY 2006's fourth quarter, unconsolidated entities in
which the Company had an interest signed contracts of
approximately $17.2 million.
-- FY 2006's twelve-month contracts of approximately $4.46 billion
declined by 38% over FY 2005's record total of $7.15 billion. In
addition, in FY 2006's twelve-month period, unconsolidated
entities in which the Company had an interest signed contracts of
approximately $69.1 million.
-- In FY 2006, fourth-quarter-end backlog of approximately $4.49
billion declined 25% over FY 2005's fourth-quarter-end backlog of
$6.01 billion, the fourth-quarter record. In addition, at October
31, 2006, unconsolidated entities in which the Company had an
interest had a backlog of approximately $18.0 million.
-- FY 2006's fourth-quarter home building revenues of approximately
$1.81 billion decreased 10% over FY 2005's fourth-quarter home
building revenues of $2.01 billion, the fourth-quarter record.
Revenues from land sales totaled approximately $0.3 million for
FY 2006's fourth quarter, compared to $12.5 million in FY 2005's
fourth quarter.
-- FY 2006's twelve-month home building revenues of approximately
$6.12 billion increased 6% over FY 2005's twelve-month home
building revenues of $5.76 billion, the previous twelve-month
record. FY 2006 revenues from land sales were approximately $8.2
million, compared to $34.1 million in the same period in FY 2005.
-- In the Company's fiscal 2006 fourth-quarter and fiscal year-end
periods, unconsolidated entities in which the Company had an
interest, had revenues of approximately $11.8 million and $107.1
million, respectively, compared to $63.4 million and $154.0
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 fourth quarter of FY 2006, the Company bought back
approximately 12 thousand shares of its stock at an average price
of approximately $27.29. For FY 2006, the Company bought back
approximately 3.63 million shares of its stock at an average
price of approximately $30.24. This compares to purchases of
approximately 1.98 million and 2.80 million shares in fourth
quarter and FY 2005, respectively.
-- In September 2006, the Emerging Issues Task Force (the "EITF") of
the Financial Accounting Standards Board (the "FASB") recommended
that the adequacy of a buyer's continuing investment as well as
initial investment should be evaluated when assessing the
collectibility of the sales price of condominium units. If the
FASB approves the EITF's recommendation, certain future
communities that the Company had expected to account for using
percentage of completion accounting, may be required to use the
completed contract method of accounting. Included in the
percentage of completion contract and backlog amounts in the
attached tables are $51.8 million (57 units) of contracts in the
three months ended October 31, 2006, $251.7 million (287 units)
of contracts in the twelve months ended October 31, 2006 and
$285.7 million (340 units) of backlog related to these future
communities. The Company does not expect that the recommendation
of the EITF, if approved as proposed, would affect any revenues
and costs reported under the percentage of completion accounting
method through October 31, 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 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 from joint ventures and the Toll Brothers Realty Trusts Group, 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 UNITS $ (MILL)
October 31, ------------- -----------------
CLOSINGS 2006 2005 2006 2005
--------------------- ----- ----- ------- -------
Northeast
(CT, MA, NJ, NY, RI) 439 450 307.1 274.0
Mid-Atlantic
(DE, MD, PA, VA) 743 982 482.4 656.6
Midwest
(IL, MI, MN, OH) 145 213 96.9 147.9
Southeast
(FL, NC, SC) 431 444 260.5 229.2
Southwest
(AZ, CO, NV, TX) 577 506 409.0 352.5
West
(CA) 167 362 224.5 347.5
----- ----- ------- -------
Total traditional 2,502 2,957 1,780.4 2,007.7
Percentage of
completion(a)(b) -- -- 28.5 --
----- ----- ------- -------
Total consolidated entities 2,502 2,957 1,808.9 2,007.7
Unconsolidated entities 19 123 11.8 63.4
----- ----- ------- -------
2,521 3,080 1,820.7 2,071.1
===== ===== ======= =======
CONTRACTS
---------------------
Northeast
(CT, MA, NJ, NY, RI) 179 382 107.8 253.9
Mid-Atlantic
(DE, MD, PA, VA, WVA) 339 673 217.1 472.2
Midwest
(IL, MI, MN, OH) 94 151 62.2 108.6
Southeast
(FL, NC, SC) 101 455 61.5 254.4
Southwest
(AZ, CO, NV, TX) 163 429 131.8 346.5
West
(CA) 65 127 71.4 124.6
----- ----- ------- -------
Total traditional 941 2,217 651.8 1,560.2
Percentage of
completion(a)(b) 69 55 57.8 28.4
----- ----- ------- -------
Total consolidated 1,010 2,272 709.6 1,588.6
Unconsolidated entities 25 154 17.2 98.4
----- ----- ------- -------
1,035 2,426 726.8 1,687.0
===== ===== ======= =======
At October 31,
---------------------------------
UNITS $ (MILL)
------------- -----------------
BACKLOG 2006 2005 2006 2005
---------------------- ----- ----- ------- -------
Northeast
(CT, MA, NJ, NY, RI) 753 1,352 497.9 901.9
Mid-Atlantic
(DE, MD, PA, VA, WVA) 1,547 2,330 1,041.1 1,566.4
Midwest
(IL, MI, MN, OH) 431 443 294.8 319.0
Southeast
(FL, NC, SC) 1,267 2,020 721.7 1,077.2
Southwest
(AZ, CO, NV, TX) 1,237 1,849 969.0 1,309.1
West
(CA) 566 596 523.9 670.1
----- ----- ------- -------
Total traditional 5,801 8,590 4,048.4 5,843.7
Percentage of
completion(a)(b)
Contracts 732 215 610.1 170.9
Revenue recognized -- -- (167.9) --
----- ----- ------- -------
Total consolidated entities 6,533 8,805 4,490.6 6,014.6
Unconsolidated entities 25 268 18.0 184.4
----- ----- ------- -------
6,558 9,073 4,508.6 6,199.0
===== ===== ======= =======
Twelve Months Ended UNITS $ (MILL)
October 31, ------------- -----------------
HOME BUILDING REVENUES 2006 2005 2006 2005
--------------------- ----- ----- ------- -------
Northeast
(CT, MA, NJ, NY, RI) 1,509 1,243 1,005.2 721.6
Mid-Atlantic
(DE, MD, PA, VA) 2,697 3,290 1,777.9 2,056.6
Midwest
(IL, MI, MN, OH) 474 627 329.5 404.7
Southeast
(FL, NC, SC) 1,591 1,032 894.9 558.0
Southwest
(AZ, CO, NV, TX) 1,754 1,420 1,230.7 936.4
West
(CA) 576 1,157 710.3 1,082.0
------ ------ ------- -------
Total traditional 8,601 8,769 5,948.5 5,759.3
Percentage of
completion(a)(b) -- -- 167.9 --
------ ------ ------- -------
Total consolidated 8,601 8,769 6,116.4 5,759.3
Unconsolidated entities 186 330 107.1 154.0
------ ------ ------- -------
8,787 9,099 6,223.5 5,913.3
====== ====== ======= =======
CONTRACTS
----------------------
Northeast
(CT, MA, NJ, NY, RI) 910 1,567 601.3 1,024.0
Mid-Atlantic
(DE, MD, PA, VA, WVA) 1,914 3,375 1,252.6 2,250.7
Midwest
(IL, MI, MN, OH) 462 624 305.3 439.3
Southeast
(FL, NC, SC) 838 1,889 539.4 1,048.4
Southwest
(AZ, CO, NV, TX) 1,142 1,918 890.6 1,395.9
West
(CA) 546 840 564.0 887.6
------ ------ ------- -------
Total traditional 5,812 10,213 4,153.2 7,045.9
Percentage of
completion(a)(b) 352 159 310.8 106.6
------ ------ ------- -------
Total consolidated 6,164 10,372 4,464.0 7,152.5
Unconsolidated entities 108 424 69.1 262.5
------ ------ ------- -------
6,272 10,796 4,533.1 7,415.0
====== ====== ======= =======
(a) Mid- and High-Rise projects that are accounted for under the
percentage of completion accounting method. See details below.
(b) In September 2006, the Emerging Issues Task Force (the "EITF") of
the Financial Accounting Standards Board (the "FASB") recommended
that the adequacy of a buyer's continuing investment as well as
initial investment should be evaluated when assessing the
collectibility of the sales price of condominium units. If the
FASB approves the EITF's recommendation, certain future
communities that the Company had expected to account for using
percentage of completion accounting, may be required to use the
completed contract method of accounting. Included in the
percentage of completion contract and backlog amounts above are
$51.8 million (57 units) of contracts in the three months ended
October 31, 2006, $251.7 million (287 units) of contracts in the
twelve months ended October 31, 2006 and $285.7 million (340
units) of backlog related to these future communities. The
Company does not expect that the recommendation of the EITF, if
approved as proposed, would affect any revenues and costs
reported under the percentage of completion accounting method
through October 31, 2006.
PERCENTAGE OF COMPLETION
Three Months ended October 31,
-------------------------------------
UNITS $ (MILL)
------------- ------------------
HOME BUILDING REVENUES 2006 2005 2006 2005
---------------------- ---- ---- ------ ------
Northeast 9.0
Southeast 22.5
Southwest (3.0)
------
Total 28.5
======
CONTRACTS
----------------------
Northeast 61 18 56.9 10.0
Mid-Atlantic 6 30 2.2 12.9
Southeast (1) 7 (1.8) 5.5
Southwest 3 -- .5 --
---- ---- ------ ------
Total 69 55 57.8 28.4
==== ==== ====== ======
At October 31,
-------------------------------------
UNITS $ (MILL)
------------- ------------------
BACKLOG 2006 2005 2006 2005
------------------------ ---- ---- ------ ------
Northeast 568 106 453.1 54.5
Mid-Atlantic 58 30 23.6 12.9
Midwest 4 -- 1.2 --
Southeast 76 72 114.0 98.0
Southwest 26 7 18.2 5.5
Less, revenue recognized -- -- (167.9) --
---- ---- ------ ------
Total-Net 732 215 442.2 170.9
==== ==== ====== ======
Twelve Months ended October 31,
-------------------------------------
UNITS $ (MILL)
------------- ------------------
HOME BUILDING REVENUES 2006 2005 2006 2005
---------------------- ---- ---- ------ ------
Northeast 110.5 N/A
Southeast 57.4
------ ------
Total 167.9 N/A
====== ======
CONTRACTS
----------------------
Northeast 297 106 270.3 54.5
Mid-Atlantic 28 30 10.6 12.9
Midwest 4 -- 1.2 --
Southeast 4 16 16.0 33.7
Southwest 19 7 12.7 5.5
---- ---- ------ ------
Total 352 159 310.8 106.6
==== ==== ====== ======