HORSHAM, Pa., May 28, 2014 (GLOBE NEWSWIRE) -- Toll Brothers, Inc. (NYSE:TOL) (www.tollbrothers.com), the nation's leading builder of luxury homes, today announced results for its second quarter and six months ended April 30, 2014.
Second Quarter Financial Highlights:
Douglas C. Yearley, Jr., Toll Brothers' chief executive officer, stated: "Two weeks ago, Toll Brothers was honored by BUILDER Magazine with the national Builder of the Year award. We are proud to receive this award not only for our quality homes and luxury brand, but also for the strategic initiatives we implemented during the past year. This honor is the second significant industry-wide award we have won in the past two years.
"As the nation's leading builder of luxury homes, we are pursuing a program of prudent expansion supported by our strong liquidity. In the affluent Boston-to-Washington D.C. corridor we are expanding our suburban footprint and continuing the successful growth of our City Living brand, which develops for-sale condominium projects in New York City, the Northern New Jersey Gold Coast, Washington, D.C. and Philadelphia.
"Our significant expansion over the past year in key California and Texas markets will be a major source of future growth. These are among the strongest housing markets in the U.S. The Shapell Homes acquisition, which gives us a portfolio of spectacularly located, well-established communities in affluent Coastal California, is already proving better than we originally expected based on our early operating results. We have been systematically raising prices across the board in both our Shapell and other Coastal California communities. In Texas, we now control three major master planned communities in Houston, we are about to open our first new master planned community in Austin, and we continue to grow our presence in Dallas.
"Our Apartment Living brand is also growing. In the Northeast and Mid-Atlantic regions, we currently have four projects – two in suburban markets and two in urban locations – totaling approximately 1,500 rental units under construction with joint venture partners. We own or control sites for another 3,800 rental units in the same corridor and have additional expansion plans on the horizon.
"Demand over the past year has been solid, although relatively flat, compared to the strong growth we initially experienced beginning in 2011, coming off the bottom of this housing cycle. We note that last cycle's recovery, in the early 1990's, began with a period of rapid acceleration, followed by leveling, before further upward momentum. We believe that we are in a similar leveling period in the early stages of the housing recovery with significant pent-up demand building."
Martin P. Connor, Toll Brothers' chief financial officer, stated: "As expected, we saw significant positive leverage in our operating margin, which grew to nearly 8%, as our SG&A as a percentage of revenues improved to 11.5%, excluding Shapell acquisition costs, compared to 15.4% one year ago. We note that the average price of new signed contracts in the current quarter declined from last quarter as a result of some changes in geographic and product mix, but not from additional incentives.
"At closing in February, we acquired 126 homes in backlog from our Shapell communities. We delivered 119 Shapell homes in FY 2014's second quarter, generating $102 million of revenues. Due to purchase accounting these deliveries negatively impacted our gross margin (after interest) by approximately 150 basis points.
"Our joint venture income reflected a gain in FY 2014's second quarter of $12.0 million associated with the refinancing of one of our mature stabilized apartment communities. This refinancing, combined with approximately $90 million in land sales and cash flow from various other initiatives, has resulted in the production of more than approximately $150 million in cash toward our previously stated goal of reducing leverage following the Shapell acquisition.
"This quarter we saw a large increase in contracts and backlog from unconsolidated entities in which we had an interest. These contracts in FY 2014's second quarter rose to $160 million from $16 million one year ago and backlog rose to $190.7 million from $29.5 million one year ago. These increases were primarily driven by strong demand at two communities: Pierhouse at Brooklyn Bridge Park and Jupiter Country Club in Florida.
"Subject to the caveats in our Statement on Forward-Looking Information included in this release, we offer the following limited guidance. We reaffirm our previous guidance that we will deliver between 5,100 and 5,850 homes in FY 2014, that we expect to end FY 2014 with between 250 and 290 selling communities and that full year gross margin (after interest) will improve 175 to 200 basis points compared to FY 2013. We now believe the average price of deliveries for the full FY 2014 will be between $690,000 and $720,000 per home, an increase from $675,000 at the bottom end of the range in our previous guidance. Unit backlog conversion for the third quarter is estimated at 31%."
Robert I. Toll, executive chairman, stated: "According to the April 2014 U.S. Census Bureau's New Home Sales Report, new home inventory stands at just 5.3 months' supply, based on current sales paces. If demand and pace increase, the 5.3 months' supply could quickly be drawn down. Current demographics seem to suggest that new home sales should pick up. If the tight supply bumps into increasing demand, prices could rapidly rise.
"Our Builder of the Year award is a tribute to the tremendous hard work, dedication to quality, and devotion to our customers by the entire Toll Brothers team. The thoughtful expansion in growth markets and the broadening of our urban and rental footprints, our active-adult product lines and our large scale master plans, will continue to spread our brand across the upscale housing market."
The financial highlights for the second quarter and six months ended April 30, 2014 (unaudited):
(1) Net debt-to-capital is calculated as total debt minus mortgage warehouse loans minus cash and marketable securities, divided by total debt minus mortgage warehouse loans minus cash and marketable securities plus stockholders' equity.
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 2:00 p.m. (EDT) today, May 28 2014, to discuss these results and its outlook for the remainder of FY 2014. 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. Podcast (iTunes required) and 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 1000 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 19 states: Arizona, California, Colorado, Connecticut, Delaware, Florida, Illinois, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New York, North Carolina, Pennsylvania, Texas, Virginia, and Washington. The Company also operates 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. The Company purchases distressed loan and real estate asset portfolios through its wholly owned subsidiary, Gibraltar Capital and Asset Management.
The Company acquires and develops commercial and apartment properties through Toll Commercial and Toll Apartment Living, and the affiliated Toll Brothers Realty Trust, and develops urban low-, mid- and high-rise for-sale condominiums through Toll Brothers City Living.
Toll Brothers is honored to have won the three most coveted awards in the homebuilding industry: America's Best Builder from the National Association of Home Builders, the National Housing Quality Award, and Builder of the Year. Toll Brothers was awarded Builder of the Year in 2012 as well as in 1988, and is the first two-time recipient. Toll Brothers was named in 2014 as Builder of the Year by BUILDER Magazine. 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.
Information presented herein for the second quarter ended April 30, 2014 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; the anticipated benefits to be realized from the consummation of the Shapell acquisition; and post-closing asset sales.
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; the anticipated benefits to be realized from the consummation of the Shapell acquisition; and post-closing asset sales. 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) | ||
April 30, 2014 |
October 31, 2013 |
|
(Unaudited) | ||
ASSETS | ||
Cash and cash equivalents | $ 351,821 | $ 772,972 |
Marketable securities | 13,000 | 52,508 |
Restricted cash | 22,542 | 32,036 |
Inventory | 6,548,024 | 4,650,412 |
Property, construction and office equipment, net | 131,222 | 131,320 |
Receivables, prepaid expenses and other assets | 249,934 | 229,295 |
Mortgage loans held for sale | 68,642 | 113,517 |
Customer deposits held in escrow | 54,417 | 46,888 |
Investments in and advances to unconsolidated entities | 441,842 | 403,133 |
Investment in distressed loans | 18,799 | 36,374 |
Investment in foreclosed real estate | 76,652 | 72,972 |
Deferred tax assets, net of valuation allowances | 268,171 | 286,032 |
$ 8,245,066 | $ 6,827,459 | |
LIABILITIES AND EQUITY | ||
Liabilities: | ||
Loans payable | $ 747,088 | $ 107,222 |
Senior notes | 2,654,438 | 2,321,442 |
Mortgage company warehouse loan | 56,842 | 75,000 |
Customer deposits | 254,621 | 212,669 |
Accounts payable | 204,728 | 167,787 |
Accrued expenses | 539,673 | 522,987 |
Income taxes payable | 84,619 | 81,188 |
Total liabilities | 4,542,009 | 3,488,295 |
Equity: | ||
Stockholders' Equity | ||
Common stock | 1,778 | 1,694 |
Additional paid-in capital | 694,335 | 441,677 |
Retained earnings | 3,002,805 | 2,892,003 |
Treasury stock, at cost | (79) | — |
Accumulated other comprehensive loss | (2,030) | (2,387) |
Total stockholders' equity | 3,696,809 | 3,332,987 |
Noncontrolling interest | 6,248 | 6,177 |
Total equity | 3,703,057 | 3,339,164 |
$ 8,245,066 | $ 6,827,459 |
TOLL BROTHERS, INC. AND SUBSIDIARIES | ||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
(Amounts in thousands, except per share data) | ||||
(Unaudited) |
||||
Six Months Ended April 30, |
Three Months Ended April 30, |
|||
2014 | 2013 | 2014 | 2013 | |
Revenues | $ 1,504,055 | $ 940,605 | $ 860,374 | $ 516,004 |
Cost of revenues | 1,202,030 | 765,950 | 687,998 | 420,013 |
Selling, general and administrative expenses | 202,190 | 157,597 | 104,320 | 79,550 |
1,404,220 | 923,547 | 792,318 | 499,563 | |
Income from operations | 99,835 | 17,058 | 68,056 | 16,441 |
Other: | ||||
Income from unconsolidated entities | 37,242 | 8,076 | 14,327 | 4,993 |
Other income - net | 27,642 | 24,160 | 11,101 | 19,534 |
Income before income taxes | 164,719 | 49,294 | 93,484 | 40,968 |
Income tax provision | 53,917 | 20,188 | 28,262 | 16,294 |
Net income | $ 110,802 | $ 29,106 | $ 65,222 | $ 24,674 |
Income per share: | ||||
Basic | $ 0.63 | $ 0.17 | $ 0.37 | $ 0.15 |
Diluted | $ 0.60 | $ 0.17 | $ 0.35 | $ 0.14 |
Weighted-average number of shares: | ||||
Basic | 177,278 | 169,222 | 178,082 | 169,380 |
Diluted | 185,665 | 177,949 | 186,442 | 178,136 |
TOLL BROTHERS, INC. AND SUBSIDIARIES | ||||
SUPPLEMENTAL DATA | ||||
(Amounts in thousands) | ||||
(unaudited) | ||||
Six Months Ended April 30, |
Three Months Ended April 30, |
|||
2014 | 2013 | 2014 | 2013 | |
Impairment charges recognized: | ||||
Cost of sales - land controlled for future communities | $ 1,006 | $ 698 | $ 324 | $ 689 |
Cost of sales - operating communities | 2,900 | 1,040 | 1,600 | 340 |
$ 3,906 | $ 1,738 | $ 1,924 | $ 1,029 | |
Depreciation and amortization | $ 11,095 | $ 12,593 | $ 5,807 | $ 6,068 |
Interest incurred | $ 82,628 | $ 64,051 | $ 42,684 | $ 32,303 |
Interest expense: | ||||
Charged to cost of sales | $ 54,585 | $ 42,990 | $ 29,145 | $ 23,016 |
Charged to other income - net | 1,039 | 1,221 | 722 | 1,133 |
$ 55,624 | $ 44,211 | $ 29,867 | $ 24,149 | |
Home sites controlled: | ||||
Owned | 37,701 | 33,117 | ||
Optioned | 12,657 | 12,060 | ||
50,358 | 45,177 | |||
Toll Brothers operates in two segments: Traditional Home Building and Urban Infill ("City Living"). Within Traditional Home Building, Toll operates in four 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, California, Colorado, Nevada, and Washington |
Three Months Ended April 30, |
Three Months Ended April 30, |
|||
Units | $ (Millions) | |||
2014 | 2013 | 2014 | 2013 | |
HOME BUILDING REVENUES | ||||
North | 239 | 170 | $ 137.3 | $ 92.2 |
Mid-Atlantic | 273 | 259 | 180.5 | 140.5 |
South | 285 | 224 | 186.1 | 135.6 |
West | 377 | 207 | 321.6 | 128.6 |
Traditional Home Building | 1,174 | 860 | 825.5 | 496.9 |
City Living | 44 | 34 | 34.9 | 19.1 |
Total consolidated | 1,218 | 894 | $ 860.4 | $ 516.0 |
CONTRACTS | ||||
North | 303 | 323 | $ 199.6 | $ 179.3 |
Mid-Atlantic | 367 | 478 | 226.6 | 281.7 |
South | 374 | 377 | 256.3 | 253.0 |
West | 637 | 419 | 519.4 | 339.8 |
Traditional Home Building | 1,681 | 1,597 | 1,201.9 | 1,053.8 |
City Living | 68 | 156 | 73.0 | 134.1 |
Total consolidated | 1,749 | 1,753 | $ 1,274.9 | $ 1,187.9 |
BACKLOG | ||||
North | 984 | 862 | $ 615.5 | $ 485.2 |
Mid-Atlantic | 986 | 879 | 613.9 | 532.9 |
South | 1,042 | 962 | 761.4 | 651.3 |
West | 1,056 | 760 | 897.9 | 627.5 |
Traditional Home Building | 4,068 | 3,463 | 2,888.7 | 2,296.9 |
City Living | 256 | 192 | 318.7 | 234.7 |
Total consolidated | 4,324 | 3,655 | $ 3,207.4 | $ 2,531.6 |
Six Months Ended April 30, |
Six Months Ended April 30, |
|||
Units | $ (Millions) | |||
2014 | 2013 | 2014 | 2013 | |
HOME BUILDING REVENUES | ||||
North | 448 | 321 | $ 264.9 | $ 174.6 |
Mid-Atlantic | 546 | 495 | 349.6 | 270.1 |
South | 510 | 367 | 336.7 | 222.7 |
West | 581 | 407 | 507.8 | 241.2 |
Traditional Home Building | 2,085 | 1,590 | 1,459.0 | 908.6 |
City Living | 61 | 50 | 45.1 | 32.0 |
Total consolidated | 2,146 | 1,640 | $ 1,504.1 | $ 940.6 |
CONTRACTS | ||||
North | 484 | 558 | $ 317.8 | $ 309.8 |
Mid-Atlantic | 630 | 740 | 390.5 | 428.6 |
South | 596 | 580 | 424.6 | 390.5 |
West | 836 | 660 | 707.2 | 517.7 |
Traditional Home Building | 2,546 | 2,538 | 1,840.1 | 1,646.6 |
City Living | 119 | 188 | 136.5 | 155.8 |
Total consolidated | 2,665 | 2,726 | $ 1,976.6 | $ 1,802.4 |
Unconsolidated entities:
Information related to revenues and contracts of entities in which we have an interest for the three-month and six-month periods ended April 30, 2014 and 2013, and for backlog at April 30, 2014 and 2013 is as follows:
2014 | 2013 | 2014 | 2013 | |
Units | Units | $(Mill) | $(Mill) | |
Three months ended April 30, | ||||
Revenues | 13 | 15 | $ 11.6 | $ 11.0 |
Contracts | 76 | 22 | $ 160.0 | $ 16.0 |
Six months ended April 30, | ||||
Revenues | 28 | 25 | $ 23.2 | $ 19.9 |
Contracts | 87 | 32 | $ 167.7 | $ 22.2 |
Backlog at April 30, | 121 | 43 | $ 190.7 | $ 29.5 |