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Toll Brothers Reports FY 2013 3rd Qtr and 9 Month Results

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HORSHAM, Pa., Aug. 21, 2013 (GLOBE NEWSWIRE) -- 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 third quarter ended July 31, 2013.



2013 Third Quarter Highlights:

  • In FY 2013's third quarter, net income was $46.6 million, or $0.26 per share, compared to $61.6 million, or $0.36 per share in FY 2012's third quarter.
  • Net income included a tax expense of $21.7 million, compared to a tax benefit of $18.7 million in FY 2012's third quarter.
  • Pre-tax income was $68.3 million, compared to $43.0 million in FY 2012's third quarter.
  • Total revenues of $689.2 million and homebuilding deliveries of 1,059 units rose 24% in dollars and 10% in units, compared to FY 2012's third quarter.
  • Net signed contracts of $992.6 million and 1,405 units rose 47% in dollars and 26% in units, compared to FY 2012's third quarter.
  • FY 2013's third-quarter cancellation rate was 4.6%, matching the 4.6% in FY 2012's third quarter.
  • Backlog of $2.84 billion and 4,001 units rose 75% in dollars and 56% in units, compared to FY 2012's third-quarter-end backlog.
  • The average price of homes delivered was $651,000, compared to $577,000 in FY 2013's second quarter and $576,000 in FY 2012's third quarter. Excluding 16 deliveries at the Touraine, a luxury Upper East Side Manhattan high-rise building, the average price of homes delivered in FY 2013's third quarter was $612,000.
  • Gross margin, excluding interest and write-downs, was 25.1%, compared to 24.4% in FY 2012's third quarter.
  • SG&A as a percentage of revenue improved to 12.9%, compared to 13.5% in FY 2012's third quarter.
  • The Company ended FY 2013's third quarter with $1.02 billion of cash and marketable securities and $815.4 million available under its then-existing $885 million bank credit facility. On August 1, 2013, the Company replaced that facility with a new $1.035 billion, 15-bank, five-year credit facility. The Company's net-debt-to-capital ratio(1) at FY 2013's third quarter-end was 31.9%.

Douglas C. Yearley, chief executive officer, stated: "Sales volumes and pricing power both increased this quarter from one year ago, a pattern consistent with recent quarters. We believe the recovery is real and we are in the early stages of the rebound. Our average sales contracts per community are about where they were in 1997-1998, several years into the previous cyclical recovery. From there, over the next seven years, through August 2005, a period when mortgage rates averaged between 5.8% and 8.1%, sales contracts per community continued to increase, eventually peaking at twice that pace.

"We remain focused on growing our company. This quarter our land position grew to 47,200 lots from 45,200 last quarter and 39,200 one year ago. We expect our community count – 225 at third quarter-end – to remain stable through the end of FY 2013 and to grow by 10% to 15% by FYE 2014."

Martin Connor, chief financial officer, stated: "Our gross margin and operating margin continued to improve with the increase in pricing power and volume. We expect this to continue in FY 2013's fourth quarter and in FY 2014 as we deliver our backlog. Other income benefited from a $2.7 million gain on sale of non-strategic land and a strong quarter from Gibraltar Capital and Asset Management, our distressed loan and acquisition investment subsidiary, which contributed $4.6 million in pre-tax earnings and $12.4 million of cash flow.

"Subject to the caveats in our Statement on Forward-Looking Information included in this release, we offer the following limited guidance:

"We currently estimate that we will deliver between 1,225 and 1,425 homes in FY 2013's fourth quarter at an average price of between $675,000 and $695,000 per home. This would produce total home sale revenue for FY 2013 of between $2.46 billion and $2.62 billion and total deliveries of between 3,925 and 4,125 homes. This compares to $1.88 billion and 3,286 homes in FY 2012.

"We intend to give preliminary guidance for FY 2014 when we announce fourth quarter results in December 2013."

Robert I. Toll, executive chairman, stated: "The University of Michigan consumer sentiment survey, though down slightly from last month's six-year high, is up significantly from one year ago, as is the Conference Board's similar survey. Inventory levels are still tight in almost all of our markets and housing remains very affordable. Unemployment trends are slowly improving and demand, based on household formations, is compelling, especially given the still very-low volume of industry home production.

"We closed on a new $1.035 billion five-year bank credit facility on August 1, 2013 with 15 U.S. and international banks. That, combined with our $1.02 billion of cash and marketable securities at third quarter-end, will help position us to continue to grow the Company in the coming years."

Financial results for the third-quarter and nine-months ended July 31, 2013 (unaudited):

  • FY 2013's third-quarter net income was $46.6 million, or $0.26 per share, compared to FY 2012's third-quarter net income of $61.6 million, or $0.36 per share.
  • FY 2013's third-quarter pre-tax income was $68.3 million, compared to FY 2012's third-quarter pre-tax income of $43.0 million. FY 2013's third-quarter net income included pre-tax inventory write-downs of $0.2 million and a tax expense of $21.7 million. FY 2012's third-quarter included pre-tax write-downs of $3.1 million and a tax benefit of $18.7 million.
  • FY 2013's nine-month net income was $75.7 million, or $0.43 per share, compared to FY 2012's nine-month net income of $75.7 million, or $0.45 per share. FY 2013's nine-month net income included pre-tax inventory write-downs of $2.0 million: $1.1 million of the inventory write-downs was attributable to operating communities and $0.8 million to land controlled for future communities, and a tax expense of $41.8 million. FY 2012's first nine months included pre-tax write-downs of $13.2 million, a $1.6 million recovery of previously incurred charges related to a joint venture and a tax benefit of $23.5 million.
  • FY 2013's nine-month pre-tax income was $117.5 million, compared to FY 2012's nine-month pre-tax income of $52.2 million. Excluding write-downs and recoveries, FY 2013's nine-month pre-tax income was $119.5 million, compared to $63.8 million for FY 2012's nine-month period.
  • FY 2013's third-quarter total revenues of $689.2 million and 1,059 units increased 24% in dollars and 10% in units from FY 2012's third-quarter total revenues of $554.3 million and 963 units.
  • FY 2013's third-quarter gross margin, excluding interest and write-downs, improved to 25.1% from 24.4% in FY 2012's third quarter.
  • Interest included in cost of sales decreased to 4.2% of revenues in FY 2013's third quarter from 4.7% of revenues in FY 2012's third quarter.
  • FY 2013's nine-month total revenues of $1.63 billion and 2,699 units increased 30% in dollars and 23% in units, compared to FY 2012's nine-month period totals of $1.25 billion and 2,198 units.
  • In FY 2013's third quarter, the Company's net signed contracts totaled $992.6 million and 1,405 units, an increase of 47% in dollars and 26% in units compared to FY 2012's third-quarter net signed contracts of $674.4 million and 1,119 units. The average price per unit of net contracts signed in FY 2013's third quarter was $706,000, compared to $678,000 in FY 2013's second quarter and $603,000 in FY 2012's third quarter.
  • The Company's FY 2013 nine-month net signed contracts of $2.80 billion and 4,131 units increased 49% in dollars and 35% units, compared to net signed contracts of $1.87 billion and 3,061 units in FY 2012's nine-month period.
  • On a per-community basis, FY 2013's third-quarter net signed contracts of 6.24 units per community were 28% greater than FY 2012's third-quarter total of 4.87; 78% greater than FY 2011's third-quarter total of 3.51 units; 69% greater than FY 2010's third-quarter total of 3.69 units; and 75% greater than FY 2009's third-quarter total of 3.56 units. FY 2013's third quarter total was the highest third quarter since FY 2005.
  • In FY 2013, third-quarter-end backlog of $2.84 billion and 4,001 units increased 75% in dollars and 56% in units, compared to FY 2012's third-quarter-end backlog of $1.62 billion and 2,559 units.
  • The average price of units in FY 2013's third-quarter-end backlog was $709,000, compared to $693,000 at FY 2013's second-quarter end and $632,000 at FY 2012's third-quarter end.
  • In FY 2013's third quarter, SG&A as a percentage of revenue improved to 12.9%, compared to 13.5% in FY 2012's third quarter.
  • FY 2013's third-quarter cancellation rate (current-quarter cancellations divided by current-quarter signed contracts) was 4.6%, matching the 4.6% in FY 2012's third quarter. As a percentage of beginning-quarter backlog, FY 2013's third-quarter cancellation rate was 1.9%, compared to 2.2% in FY 2012's third quarter.
  • In FY 2013's third quarter, unconsolidated entities in which the Company had an interest delivered $8.8 million of homes, compared to $28.9 million in the third quarter of FY 2012. In FY 2013's first nine months, unconsolidated entities in which the Company had an interest delivered $28.7 million of homes, compared to $76.3 million in the nine-month period of FY 2012. 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 2013's third quarter, unconsolidated entities in which the Company had an interest signed contracts for $17.7 million of homes, compared to $20.1 million in the third quarter of FY 2012. In FY 2013's first nine months, unconsolidated entities in which the Company had an interest signed contracts for $39.9 million of homes, compared to $79.7 million in the nine-month period of FY 2012.
  • At July 31, 2013, unconsolidated entities in which the Company had an interest had a backlog of $38.4 million, compared to $24.4 million at July 31, 2012.
  • In FY 2013's third quarter and first nine months, the Company's Gibraltar Capital and Asset Management subsidiary reported pre-tax income of $4.6 million and $8.8 million respectively, compared to FY 2012's third quarter and first nine month results of $0.6 million and $7.5 million.
  • The Company ended its FY 2013 third quarter with $1.02 billion in cash and marketable securities, compared to $936.0 million at 2013's second-quarter end and $877.4 million at FY 2012's third-quarter end. At FY 2013's third-quarter end, it had $815.4 million available under its then-existing $885 million bank credit facility. On August 1, 2013, the Company replaced that facility with a new $1.035 billion, 15-bank, five-year credit facility.
  • The Company repurchased approximately 490,000 shares of stock in FY 2013's third quarter for a total price of approximately $15.1 million at an average price of $30.87 per share.
  • The Company's Stockholders' Equity at FY 2013's third-quarter end was $3.22 billion, compared to $3.17 billion at FY 2013's second-quarter end.
  • The Company ended FY 2013's third quarter with a net-debt-to-capital ratio(1) of 31.9%, compared to 31.9% at FY 2013's second-quarter end and 27.5% at FY 2012's third-quarter end.
  • The Company ended FY 2013's third quarter with approximately 47,200 lots owned and optioned, compared to approximately 45,200 one quarter earlier, approximately 39,200 one year earlier, and approximately 91,200 at its peak at FY 2006's second-quarter end. At 2013's third-quarter end, approximately 33,400 of these lots were owned, of which approximately 12,400 lots, including those in backlog, were substantially improved.
  • The Company ended FY 2013's third quarter with 225 selling communities, compared to 225 at FY 2013's second-quarter end and 226 at FY 2012's third-quarter end. The Company expects its community count to remain stable through the end of FY 2013 and to grow by 10% to 15% by FYE 2014.
  • Based on FY 2012's third-quarter-end backlog and the pace of activity at its communities, the Company currently estimates that it will deliver between 1,225 and 1,425 homes in its fourth quarter at an average delivered price of between $675,000 and $695,000 per home. This would produce total home sale revenues for FY 2013 of between $2.46 billion and $2.62 billion and total home deliveries for FY 2013 of between 3,925 and 4,125. This compares to $1.88 billion and 3,286 homes in FY 2012.

(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, August 21, 2013, to discuss these results and its outlook for the remainder of FY 2013. 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.

Toll Brothers builds an array of luxury residential communities, principally on land it develops and improves: single-family detached and attached home communities, master planned resort-style golf communities, and urban low-, mid- and high-rise communities. 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 acquires and develops commercial properties through Toll Commercial and its affiliate, Toll Brothers Realty Trust, and purchases distressed loan and real estate asset portfolios through its wholly owned subsidiary, Gibraltar Capital and Asset Management.

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 for 2012 and is the only 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.

Information presented herein for the third quarter ended July 31, 2013 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; and market and industry trends.

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; and weather conditions. For a more detailed discussion of these factors, see the information under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our most recent annual report on Form 10-K and our subsequent quarterly reports on Form 10-Q filed with the Securities and Exchange Commission.

Any or all of the forward-looking statements included in this release are not guarantees of future performance and may turn out to be inaccurate. Forward-looking statements speak only as of the date they are made. The Company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

TOLL BROTHERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
July 31,
2013
October 31,
2012
(Unaudited)
ASSETS
Cash and cash equivalents $ 899,341 $ 778,824
Marketable securities 122,527 439,068
Restricted cash 33,416 47,276
Inventory 4,515,992 3,761,187
Property, construction and office equipment, net 126,360 109,971
Receivables, prepaid expenses and other assets 175,976 144,558
Mortgage loans held for sale 72,163 86,386
Customer deposits held in escrow 48,878 29,579
Investments in and advances to unconsolidated entities 356,837 330,617
Investment in distressed loans 42,500 37,169
Investment in foreclosed real estate 72,912 58,353
Deferred tax assets, net of valuation allowances 320,584 358,056
$ 6,787,486 $ 6,181,044
LIABILITIES AND EQUITY
Liabilities:
Loans payable $ 97,679 $ 99,817
Senior notes 2,425,806 2,080,463
Mortgage company warehouse loan 65,654 72,664
Customer deposits 231,493 142,977
Accounts payable 153,163 99,911
Accrued expenses 518,447 476,350
Income taxes payable 78,973 80,991
Total liabilities 3,571,215 3,053,173
Equity:
Stockholders' Equity
Common stock 1,693 1,687
Additional paid-in capital 430,191 404,418
Retained earnings 2,797,098 2,721,397
Treasury stock, at cost (14,218) (983)
Accumulated other comprehensive loss (4,687) (4,819)
Total stockholders' equity 3,210,077 3,121,700
Noncontrolling interest 6,194 6,171
Total equity 3,216,271 3,127,871
$ 6,787,486 $ 6,181,044
TOLL BROTHERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amount in thousands, except per share data)
(unaudited)
Nine Months Ended
July 31,
Three Months Ended
July 31,
2013 2012 2013 2012
Revenues $ 1,629,765 $1,249,955 $ 689,160 $ 554,319
Cost of revenues 1,311,039 1,026,357 545,089 447,928
Selling, general and administrative expenses 246,467 212,785 88,870 74,892
1,557,506 1,239,142 633,959 522,820
Income from operations 72,259 10,813 55,201 31,499
Other:
Income from unconsolidated entities 8,844 19,348 768 5,672
Other income-net 36,444 22,032 12,284 5,781
Income before income taxes 117,547 52,193 68,253 42,952
Income tax provision (benefit)
41,846

(23,536)

21,658

(18,691)
Net income $ 75,701 $ 75,729 $ 46,595 $ 61,643
Income per share:
Basic $ 0.45 $ 0.45 $ 0.28 $ 0.37
Diluted $ 0.43 $ 0.45 $ 0.26 $ 0.36
Weighted-average number of shares:
Basic 169,237 166,990 169,268 167,664
Diluted 177,966 168,613 178,001 170,229
TOLL BROTHERS, INC. AND SUBSIDIARIES
SUPPLEMENTAL DATA
(Amount in thousands)
(unaudited)
Nine Months Ended
July 31,
Three Months Ended
July 31,
2013 2012 2013 2012
Impairment charges (recoveries)recognized:
Cost of sales $ 1,977 $ 13,249 $ 239 $ 3,120
Income from unconsolidated entities (1,617)
$ 1,977 $ 11,632 $ 239 $ 3,120
Depreciation and amortization $ 19,137 $ 16,523 $ 6,370 $ 5,825
Interest incurred $ 100,066 $ 93,027 $ 36,015 $ 32,560
Interest expense:
Charged to cost of sales $ 71,905 $ 59,823 $ 28,915 $ 25,834
Charged to other income-net 2,045 1,664 824 82
Capitalized interest on investments in unconsolidated entities 4,510 2,260 1,638 1,123
$ 78,460 $ 63,747 $ 31,377 $ 27,039
Home sites controlled:
Owned 33,367 31,523
Optioned 13,814 7,685
47,181 39,208
Toll Brothers 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 July 31, Three Months Ended July 31,
Units $ (Millions)
HOME BUILDING REVENUES 2013 2012 2013 2012
North 241 280 $ 182.8 $ 177.0
Mid-Atlantic 305 290 166.3 155.6
South 296 166 195.6 97.1
West 217 227 144.5 124.6
Total consolidated 1,059 963 $ 689.2 $ 554.3
CONTRACTS
North 335 227 $ 237.9 $ 148.1
Mid-Atlantic 413 337 257.2 179.8
South 366 264 252.8 160.1
West 291 291 244.7 186.4
Total consolidated 1,405 1,119 $ 992.6 $ 674.4
BACKLOG
North 1,089 690 $ 743.4 $ 459.9
Mid-Atlantic 1,045 721 653.4 419.5
South 1,033 672 710.5 425.2
West 834 476 727.7 314.0
Total consolidated 4,001 2,559 $ 2,835.0 $ 1,618.6
Nine Months Ended July 31, Nine Months Ended July 31,
Units $ (Millions)
HOME BUILDING REVENUES 2013 2012 2013 2012
North 589 617 $ 379.7 $ 363.8
Mid-Atlantic 823 659 446.0 360.0
South 663 444 418.3 255.9
West 624 478 385.8 270.3
Total consolidated 2,699 2,198 $ 1,629.8 $ 1,250.0
CONTRACTS
North 1,023 754 $ 673.9 $ 516.4
Mid-Atlantic 1,210 893 713.3 490.5
South 947 674 645.4 417.9
West 951 740 762.4 449.0
Total consolidated 4,131 3,061 $ 2,795.0 $ 1,873.8

Unconsolidated entities:

Information related to revenues and contracts of entities in which we have an interest for the three-month and nine-months periods ended July 31, 2013 and 2012 is as follows:

2013
Units
2012
Units
2013
$(Mill)
2012
$(Mill)
Three months ended July 31,
Revenues 11 29 $ 8.8 $ 28.9
Contracts 22 22 $ 17.7 $ 20.1
Nine months ended July 31,
Revenues 36 82 $ 28.7 $ 76.3
Contracts 54 89 $ 39.9 $ 79.7
Backlog at July 31, 54 33 $ 38.4 $ 24.4

CONTACT: Frederick N. Cooper (215) 938-8312 fcooper@tollbrothersinc.com Joseph R. Sicree (215) 938-8045 jsicree@tollbrothersinc.com

Source:Toll Brothers, Inc.