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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Toll Brothers Inc | NYSE:TOL | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
7.59 | 5.96% | 134.97 | 135.37 | 131.05 | 131.60 | 2,067,073 | 23:58:37 |
FY 2017 Third Quarter Financial Highlights:
Douglas C. Yearley, Jr., Toll Brothers’ chief executive officer, stated: “Thanks to our broad geographic presence, diverse product offerings, unique brand, robust demand from affluent buyers, and our great team, we continue to produce strong results. Our third-quarter net income increased 41%, revenues rose 18% in dollars and deliveries rose 26% in units, contracts grew 25% in dollars and 24% in units, and backlog increased 21% in both dollars and units, compared to third-quarter FY 2016. Our expansion in the western markets since 2011, now encompassing California, Washington, Arizona, Nevada Colorado and Idaho, has helped drive these strong results.
“This was our twelfth consecutive quarter of year-over-year growth in contract dollars and units, highlighted by 20% or higher year-over year unit growth in each of the past four quarters. FY 2017’s third-quarter contracts, in both units and dollars, were the highest third-quarter totals in twelve years. While California and the other western states are leading our growth, backlog, in both dollars and units, was up in all our geographic regions compared to one year ago.
“Our diverse offerings enable us to expand our presence within our many markets. In addition to our core move-up communities, our Active Living communities targeted to 55+ aged buyers represented 21%, in units, of net signed contracts to-date in FY 2017, while millennial households, in which one buyer is 35 years of age or under, represented 23%.
“Our Apartment Living platform continues to grow. We are at 95% occupancy in the roughly 3,000 units in six projects that have reached stabilization, which is a component of a nationwide pipeline of 12,600 units that also includes projects in construction, under development or in approvals.
“The unemployment rate is at a 15-year low, the economy is growing, the stock market is strong, and home prices continue to rise, putting equity in the pockets of those who may want to sell their existing home and move to a new one. New home prices are significantly outpacing existing home prices. Many buyers want new and they want it their way: That’s exactly what we provide. This bodes well for Toll Brothers over the coming years.”
Martin P. Connor, Toll Brothers’ chief financial officer, stated: “We are very pleased with our financial performance this quarter. Earnings per share grew by 42.6% compared to a year ago, and we exceeded our guidance on Adjusted Gross Margin, SG&A, Other income and Income from unconsolidated entities, and our tax rate.
“With more than $946 million of cash on hand as we enter the fourth quarter, we are well positioned to pay off the $687.5 million of debt maturing or to be redeemed in the fourth quarter. The retirement of $400 million of our 8.91% Senior Notes and elimination of approximately 5.9 million shares from our share count associated with the retirement of our convertible debt will positively contribute to our earnings per share in FY 2018 and beyond.
“Subject to our normal caveats regarding forward-looking statements, we offer the following guidance: For full FY 2017, we now project revenues of between $5.6 billion and $6.0 billion compared to $5.17 billion in FY 2016, based on deliveries of between 7,000 and 7,300 units at an average price of between $800,000 and $825,000. We had been prepared to increase the mid-point of our FY 2017 delivery guidance by 100 units, from a mid-point of 7,200 units to 7,300, but our full year delivery projection was negatively impacted by 150 homes which will now be delivered in FY 2018 due to the floor joist recall by a major lumber manufacturer that has affected many builders in the industry.
“Adjusted Gross Margin for full FY 2017 is now expected to be between 24.8% and 25.0% of revenues, while SG&A is projected to be approximately 10.4% of revenues. Other income and Income from unconsolidated entities is now projected to be between $160 million and $180 million as we will have fewer deliveries in our New York City joint venture projects than previously anticipated. We expect our FY 2017 effective tax rate to be approximately 35.0%.
“For FY 2017’s fourth quarter, we project deliveries of between 2,275 and 2,575 units at an average delivered sales price of between $840,000 and $860,000. Adjusted Gross Margin is expected to improve 35 to 50 basis points from FY 2017’s third-quarter results, while SG&A is projected to be about 8.0% of revenues. Other income and Income from unconsolidated entities is projected to be between $10 million and $30 million. We expect our FY 2017’s fourth-quarter effective tax rate to be approximately 38.0%.”
Robert I. Toll, executive chairman, stated: “In early June, we celebrated the 50th anniversary of the founding of our Company. I am so proud of how we have evolved from a local suburban Philadelphia home builder into America’s Luxury Home Builder, a national Fortune 500 company operating across 50 suburban and urban markets in 20 states.
“Our growth has been driven by a relentless focus on quality, value, and service, the establishment of a great brand and reputation in the luxury market, our broad geographic presence, and our diversified platform of for-sale and rental communities serving everyone from baby boomers to millennials.
“We believe our industry has room to run. Single-family housing starts, at 811,000, are still well below the 50-year industry average of 1.02 million units. The home ownership rate is on the rise but also still below historic norms. Interest rates remain low, unemployment is low, and more and more buyers are entering the upscale market. Based on these trends, we believe Toll Brothers is well positioned for future growth.”
The financial highlights for the third quarter and nine months ended July 31, 2017 (unaudited):
(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. (EDT) today, August 22, 2017, 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 500 Company, is the nation's leading builder of luxury homes. The Company began business fifty years ago 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 rental apartment and commercial 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 2017, Toll Brothers was named World’s Most Admired Home Building Company in Fortune magazine’s survey of the World’s Most Admired Companies, the third 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 third quarter ended July 31, 2017 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) | |||||||
July 31, 2017 | October 31, 2016 | ||||||
(Unaudited) | |||||||
ASSETS | |||||||
Cash and cash equivalents | $ | 946,195 | $ | 633,715 | |||
Restricted cash and investments | 781 | 31,291 | |||||
Inventory | 7,633,568 | 7,353,967 | |||||
Property, construction and office equipment, net | 179,476 | 169,576 | |||||
Receivables, prepaid expenses and other assets | 536,524 | 582,758 | |||||
Mortgage loans held for sale | 89,419 | 248,601 | |||||
Customer deposits held in escrow | 93,851 | 53,057 | |||||
Investments in unconsolidated entities | 514,265 | 496,411 | |||||
Deferred tax assets, net of valuation allowances | 134,857 | 167,413 | |||||
$ | 10,128,936 | $ | 9,736,789 | ||||
LIABILITIES AND EQUITY | |||||||
Liabilities: | |||||||
Loans payable | $ | 619,574 | $ | 871,079 | |||
Senior notes | 3,148,905 | 2,694,372 | |||||
Mortgage company loan facility | 57,921 | 210,000 | |||||
Customer deposits | 414,145 | 309,099 | |||||
Accounts payable | 276,766 | 281,955 | |||||
Accrued expenses | 956,121 | 1,072,300 | |||||
Income taxes payable | 116,883 | 62,782 | |||||
Total liabilities | 5,590,315 | 5,501,587 | |||||
Equity: | |||||||
Stockholders’ Equity | |||||||
Common stock | 1,779 | 1,779 | |||||
Additional paid-in capital | 713,624 | 728,464 | |||||
Retained earnings | 4,294,808 | 3,977,297 | |||||
Treasury stock, at cost | (474,665 | ) | (474,912 | ) | |||
Accumulated other comprehensive loss | (2,832 | ) | (3,336 | ) | |||
Total stockholders' equity | 4,532,714 | 4,229,292 | |||||
Noncontrolling interest | 5,907 | 5,910 | |||||
Total equity | 4,538,621 | 4,235,202 | |||||
$ | 10,128,936 | $ | 9,736,789 |
TOLL BROTHERS, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||||||||||||||
(Amounts in thousands, except per share data and percentages) | |||||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||
Nine Months Ended July 31, | Three Months Ended July 31, | ||||||||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||||||||||||||
$ | % | $ | % | $ | % | $ | % | ||||||||||||||||||||
Revenues | $ | 3,787,151 | $ | 3,314,057 | $ | 1,502,909 | $ | 1,269,934 | |||||||||||||||||||
Cost of revenues | 2,986,471 | 78.9 | % | 2,574,298 | 77.7 | % | 1,176,028 | 78.3 | % | 991,416 | 78.1 | % | |||||||||||||||
Gross margin | 800,680 | 21.1 | % | 739,759 | 22.3 | % | 326,881 | 21.7 | % | 278,518 | 21.9 | % | |||||||||||||||
Selling, general and administrative expenses | 440,183 | 11.6 | % | 385,120 | 11.6 | % | 155,212 | 10.3 | % | 134,984 | 10.6 | % | |||||||||||||||
Income from operations | 360,497 | 9.5 | % | 354,639 | 10.7 | % | 171,669 | 11.4 | % | 143,534 | 11.3 | % | |||||||||||||||
Other: | |||||||||||||||||||||||||||
Income from unconsolidated entities | 112,274 | 22,754 | 19,925 | 4,998 | |||||||||||||||||||||||
Other income - net | 39,793 | 43,474 | 11,980 | 15,121 | |||||||||||||||||||||||
Income before income taxes | 512,564 | 420,867 | 203,574 | 163,653 | |||||||||||||||||||||||
Income tax provision | 168,947 | 153,150 | 55,011 | 58,170 | |||||||||||||||||||||||
Net income | $ | 343,617 | $ | 267,717 | $ | 148,563 | $ | 105,483 | |||||||||||||||||||
Per share: | |||||||||||||||||||||||||||
Basic earnings | $ | 2.11 | $ | 1.58 | $ | 0.91 | $ | 0.64 | |||||||||||||||||||
Diluted earnings | $ | 2.01 | $ | 1.52 | $ | 0.87 | $ | 0.61 | |||||||||||||||||||
Cash dividend declared | $ | 0.16 | $ | 0.08 | |||||||||||||||||||||||
Weighted-average number of shares: | |||||||||||||||||||||||||||
Basic | 163,186 | 169,692 | 163,478 | 165,919 | |||||||||||||||||||||||
Diluted | 171,127 | 177,403 | 171,562 | 173,405 | |||||||||||||||||||||||
Effective tax rate | 33.0 | % | 36.4 | % | 27.0 | % | 35.5 | % |
TOLL BROTHERS, INC. AND SUBSIDIARIES | |||||||||||||||
SUPPLEMENTAL DATA | |||||||||||||||
(Amounts in thousands) | |||||||||||||||
(unaudited) | |||||||||||||||
Nine Months Ended July 31, | Three Months Ended July 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Impairment charges recognized: | |||||||||||||||
Cost of sales - land owned/controlled for future communities | $ | 3,019 | $ | 3,403 | $ | 1,037 | $ | 2,469 | |||||||
Cost of sales - operating communities | 8,295 | 7,950 | 1,360 | 1,250 | |||||||||||
$ | 11,314 | $ | 11,353 | $ | 2,397 | $ | 3,719 | ||||||||
Depreciation and amortization | $ | 18,437 | $ | 16,838 | $ | 6,314 | $ | 5,809 | |||||||
Interest incurred | $ | 130,887 | $ | 122,079 | $ | 45,577 | $ | 41,667 | |||||||
Interest expense: | |||||||||||||||
Charged to cost of sales | $ | 114,365 | $ | 107,176 | $ | 45,879 | $ | 39,431 | |||||||
Charged to other income - net | 2,097 | 606 | 102 | 297 | |||||||||||
$ | 116,462 | $ | 107,782 | $ | 45,981 | $ | 39,728 | ||||||||
Home sites controlled: | |||||||||||||||
Owned | 32,392 | 35,594 | |||||||||||||
Optioned | 15,448 | 13,103 | |||||||||||||
47,840 | 48,697 |
Inventory at July 31, 2017 and October 31, 2016 consisted of the following (amounts in thousands):
July 31, 2017 | October 31, 2016 | ||||||
Land and land development costs | $ | 2,343,706 | $ | 2,497,603 | |||
Construction in progress | 4,577,199 | 4,225,456 | |||||
Sample homes | 523,872 | 460,948 | |||||
Land deposits and costs of future development | 163,332 | 144,417 | |||||
Other | 25,459 | 25,543 | |||||
$ | 7,633,568 | $ | 7,353,967 |
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, Idaho, Nevada, and Washington |
California: | California |
Three Months Ended July 31, | |||||||||||||||||||||
Units | $ (Millions) | Average Price Per Unit $ | |||||||||||||||||||
2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||
HOME BUILDING REVENUES | |||||||||||||||||||||
North | 326 | 313 | $ | 225.8 | $ | 205.2 | $ | 692,700 | $ | 655,600 | |||||||||||
Mid-Atlantic | 469 | 350 | 281.9 | 220.6 | 601,100 | 630,300 | |||||||||||||||
South | 344 | 294 | 253.9 | 232.1 | 738,100 | 789,500 | |||||||||||||||
West | 464 | 309 | 307.4 | 223.1 | 662,500 | 721,900 | |||||||||||||||
California | 218 | 227 | 335.2 | 336.4 | 1,537,700 | 1,482,100 | |||||||||||||||
Traditional Home Building | 1,821 | 1,493 | 1,404.2 | 1,217.4 | 771,200 | 815,400 | |||||||||||||||
City Living | 78 | 14 | 98.7 | 52.5 | 1,264,500 | 3,750,500 | |||||||||||||||
Total consolidated | 1,899 | 1,507 | $ | 1,502.9 | $ | 1,269.9 | $ | 791,400 | $ | 842,700 | |||||||||||
CONTRACTS | |||||||||||||||||||||
North | 368 | 342 | $ | 239.9 | $ | 242.6 | $ | 651,800 | $ | 709,300 | |||||||||||
Mid-Atlantic | 473 | 396 | 300.8 | 242.5 | 636,000 | 612,300 | |||||||||||||||
South | 330 | 335 | 251.9 | 245.5 | 763,400 | 732,900 | |||||||||||||||
West | 537 | 387 | 335.3 | 276.7 | 624,400 | 715,100 | |||||||||||||||
California | 408 | 251 | 642.7 | 367.6 | 1,575,300 | 1,464,600 | |||||||||||||||
Traditional Home Building | 2,116 | 1,711 | 1,770.6 | 1,374.9 | 836,800 | 803,600 | |||||||||||||||
City Living | 47 | 37 | 40.4 | 77.4 | 858,500 | 2,091,700 | |||||||||||||||
Total consolidated | 2,163 | 1,748 | $ | 1,811.0 | $ | 1,452.3 | $ | 837,300 | $ | 830,800 | |||||||||||
BACKLOG | |||||||||||||||||||||
North | 1,217 | 1,075 | $ | 807.7 | $ | 773.1 | $ | 663,700 | $ | 719,200 | |||||||||||
Mid-Atlantic | 1,269 | 1,080 | 801.9 | 680.1 | 631,900 | 629,700 | |||||||||||||||
South | 1,154 | 1,005 | 895.2 | 776.2 | 775,700 | 772,400 | |||||||||||||||
West | 1,500 | 1,151 | 1,003.8 | 842.4 | 669,200 | 731,900 | |||||||||||||||
California | 934 | 695 | 1,511.4 | 1,045.1 | 1,618,200 | 1,503,800 | |||||||||||||||
Traditional Home Building | 6,074 | 5,006 | 5,020.0 | 4,116.9 | 826,500 | 822,400 | |||||||||||||||
City Living | 208 | 175 | 289.0 | 257.6 | 1,389,400 | 1,471,700 | |||||||||||||||
Total consolidated | 6,282 | 5,181 | $ | 5,309.0 | $ | 4,374.5 | $ | 845,100 | $ | 844,300 |
Nine Months Ended July 31, | |||||||||||||||||||||
Units | $ (Millions) | Average Price Per Unit $ | |||||||||||||||||||
2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||
HOME BUILDING REVENUES | |||||||||||||||||||||
North | 812 | 728 | $ | 560.8 | $ | 491.7 | $ | 690,600 | $ | 675,400 | |||||||||||
Mid-Atlantic | 1,133 | 929 | 692.5 | 577.0 | 611,200 | 621,100 | |||||||||||||||
South | 808 | 731 | 591.2 | 571.4 | 731,700 | 781,700 | |||||||||||||||
West | 1,240 | 799 | 821.3 | 548.7 | 662,300 | 686,700 | |||||||||||||||
California | 621 | 602 | 928.3 | 881.8 | 1,494,800 | 1,464,800 | |||||||||||||||
Traditional Home Building | 4,614 | 3,789 | 3,594.1 | 3,070.6 | 779,000 | 810,400 | |||||||||||||||
City Living | 113 | 85 | 193.1 | 243.5 | 1,708,800 | 2,864,700 | |||||||||||||||
Total consolidated | 4,727 | 3,874 | $ | 3,787.2 | $ | 3,314.1 | $ | 801,200 | $ | 855,500 | |||||||||||
CONTRACTS | |||||||||||||||||||||
North | 1,052 | 913 | $ | 675.8 | $ | 645.6 | $ | 642,400 | $ | 707,100 | |||||||||||
Mid-Atlantic | 1,416 | 1,198 | 884.3 | 738.2 | 624,500 | 616,200 | |||||||||||||||
South | 1,002 | 912 | 750.0 | 678.4 | 748,500 | 743,900 | |||||||||||||||
West | 1,592 | 1,134 | 1,019.7 | 817.6 | 640,500 | 721,000 | |||||||||||||||
California | 1,022 | 688 | 1,572.0 | 1,029.1 | 1,538,200 | 1,495,800 | |||||||||||||||
Traditional Home Building | 6,084 | 4,845 | 4,901.8 | 3,908.9 | 805,700 | 806,800 | |||||||||||||||
City Living | 112 | 146 | 171.5 | 275.7 | 1,531,300 | 1,888,400 | |||||||||||||||
Total consolidated | 6,196 | 4,991 | $ | 5,073.3 | $ | 4,184.6 | $ | 818,800 | $ | 838,400 |
Unconsolidated entities:
Information related to revenues and contracts of entities in which we have an interest for the three-month and nine-month periods ended July 31, 2017 and 2016, and for backlog at July 31, 2017 and 2016 is as follows:
Units | $ (Millions) | Average Price Per Unit $ | |||||||||||||||||||
2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||
Three months ended July 31, | |||||||||||||||||||||
Revenues | 33 | 21 | $ | 81.0 | $ | 17.9 | $ | 2,455,300 | $ | 851,300 | |||||||||||
Contracts | 38 | 27 | $ | 58.1 | $ | 36.6 | $ | 1,528,900 | $ | 1,357,100 | |||||||||||
Nine months ended July 31, | |||||||||||||||||||||
Revenues | 176 | 61 | $ | 451.6 | $ | 55.4 | $ | 2,566,100 | $ | 907,900 | |||||||||||
Contracts | 107 | 95 | $ | 138.0 | $ | 141.9 | $ | 1,290,000 | $ | 1,493,400 | |||||||||||
Backlog at July 31, | 115 | 220 | $ | 157.9 | $ | 553.1 | $ | 1,372,800 | $ | 2,513,900 |
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 Gross Margin and the Company’s net debt-to-capital ratio.
These two 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 we 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 Gross MarginThe 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 (a non-GAAP financial measure). Adjusted Gross Margin is calculated as (i) gross margin plus interest recognized in cost of sales plus inventory write-downs divided by (ii) revenues.
Adjusted Gross Margin Reconciliation | ||||||||
(Amounts in thousands, except percentages) | ||||||||
Three Months Ended July 31, | ||||||||
2017 | 2016 | |||||||
Revenues | $ | 1,502,909 | $ | 1,269,934 | ||||
Cost of revenues | 1,176,028 | 991,416 | ||||||
Gross margin | 326,881 | 278,518 | ||||||
Add: | Interest recognized in cost of sales | 45,879 | 39,431 | |||||
Inventory write-downs | 2,397 | 3,719 | ||||||
Adjusted gross margin | $ | 375,157 | $ | 321,668 | ||||
Gross margin as a percentage of revenues | 21.7 | % | 21.9 | % | ||||
Adjusted Gross Margin | 25.0 | % | 25.3 | % |
The Company’s management believes Adjusted Gross Margin is a useful financial measure to investors because it allows them to evaluate the performance of our homebuilding operations without the often varying effects of capitalized interest costs and inventory impairments. 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 fourth quarter and full year fiscal 2017 gross margin or a GAAP reconciliation for forward-looking Adjusted Gross Margin 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 fourth quarter or the full fiscal year. The variability of these charges may have a potentially unpredictable, and potentially significant, impact on our fourth quarter and full year fiscal 2017 gross margin.
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 divided by (ii) total debt minus mortgage warehouse loans minus cash and cash equivalents plus stockholders’ equity.
Net Debt-to-Capital Ratio Reconciliation | ||||||||||||
(Amounts in thousands, except percentages) | ||||||||||||
July 31, 2017 | April 30, 2017 | July 31, 2016 | ||||||||||
Loans payable | $ | 619,574 | $ | 637,931 | $ | 1,058,656 | ||||||
Senior notes | 3,148,905 | 2,993,882 | 2,693,221 | |||||||||
Mortgage company loan facility | 57,921 | 61,129 | 125,000 | |||||||||
Total debt | 3,826,400 | 3,692,942 | 3,876,877 | |||||||||
Total stockholders' equity | 4,532,714 | 4,448,088 | 4,174,151 | |||||||||
Total capital | $ | 8,359,114 | $ | 8,141,030 | $ | 8,051,028 | ||||||
Ratio of debt-to-capital | 45.8 | % | 45.4 | % | 48.2 | % | ||||||
Total debt | $ | 3,826,400 | $ | 3,692,942 | $ | 3,876,877 | ||||||
Less: | Mortgage company loan facility | (57,921 | ) | (61,129 | ) | (125,000 | ) | |||||
Cash and cash equivalents | (946,195 | ) | (691,266 | ) | (351,854 | ) | ||||||
Total net debt | 2,822,284 | 2,940,547 | 3,400,023 | |||||||||
Total stockholders' equity | 4,532,714 | 4,448,088 | 4,174,151 | |||||||||
Total net capital | $ | 7,354,998 | $ | 7,388,635 | $ | 7,574,174 | ||||||
Net debt-to-capital ratio | 38.4 | % | 39.8 | % | 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@tollbrothers.com
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