-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MbMszMFex4CBE0YihKuZdrhGQo5vH/PUqRfAr1142qljJW3X7nBqN11U8ts2N4ih RF1yQUxSNG1BkPBh2Yk7kQ== /in/edgar/work/20000607/0000794170-00-000014/0000794170-00-000014.txt : 20000919 0000794170-00-000014.hdr.sgml : 20000919 ACCESSION NUMBER: 0000794170-00-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000430 FILED AS OF DATE: 20000607 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TOLL BROTHERS INC CENTRAL INDEX KEY: 0000794170 STANDARD INDUSTRIAL CLASSIFICATION: [1531 ] IRS NUMBER: 232416878 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-09186 FILM NUMBER: 650687 BUSINESS ADDRESS: STREET 1: 3103 PHILMONT AVE CITY: HUNTINGDON VALLEY STATE: PA ZIP: 19006 BUSINESS PHONE: 2159388000 MAIL ADDRESS: STREET 1: 3103 PHILMONT AVENUE CITY: HUNTINGDON VALLEY STATE: PA ZIP: 19006 10-Q 1 0001.txt SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED April 30, 2000 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO Commission file number 1-9186 TOLL BROTHERS, INC. (Exact name of registrant as specified in its charter) Delaware 23-2416878 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 3103 Philmont Avenue, Huntingdon Valley, Pennsylvania 19006 (Address of principal executive offices) (Zip Code) (215) 938-8000 (Registrant's telephone number, including area code) Not applicable (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: Common Stock, $.01 par value: 36,277,368 shares as of June 1, 2000 TOLL BROTHERS, INC. AND SUBSIDIARIES INDEX Page No. PART I. Financial Information ITEM 1. Financial Statements Condensed Consolidated Balance Sheets (Unaudited) 1 as of April 30, 2000 and October 31, 1999 Condensed Consolidated Statements of Income (Unaudited) 2 For the Six Months and Three Months Ended April 30, 2000 and 1999 Condensed Consolidated Statements of Cash Flows 3 (Unaudited)For the Six Months Ended April 30, 2000 and 1999 Notes to Condensed Consolidated Financial Statements 4 (Unaudited) ITEM 2. Management's Discussion and Analysis of 7 Financial Condition and Results of Operations PART II. Other Information 12 SIGNATURES 13 STATEMENT OF FORWARD-LOOKING INFORMATION Certain information included herein and in other Company statements, reports and S.E.C. filings 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, increases in revenues, increased profitability, interest expense, growth and expansion, and its ability to acquire land. 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 statements, reports and S.E.C. filings. These risks and uncertainties include local, regional and national economic conditions, 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, the availability and cost of labor and materials, and weather conditions.
TOLL BROTHERS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Amounts in thousands) April 30, October 31, 2000 1999 (Unaudited) ASSETS Cash and cash equivalents $ 24,325 $ 96,484 Residential inventories 1,604,473 1,443,282 Property, construction and office equipment, net 21,960 19,633 Receivables, prepaid expenses and other assets 94,516 87,469 Investments in unconsolidated entities 30,785 21,194 $1,776,059 $1,668,062 LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Loans payable $ 244,270 $ 213,317 Subordinated notes 469,458 469,418 Customer deposits on sales contracts 108,080 82,495 Accounts payable 81,211 84,777 Accrued expenses 140,312 141,835 Income taxes payable 66,877 59,886 Total liabilities 1,110,208 1,051,728 Stockholders' equity: Common stock 364 365 Additional paid-in capital 105,252 105,239 Retained earnings 573,008 522,665 Treasury stock (12,773) (11,935) Total stockholders' equity 665,851 616,334 $1,776,059 $1,668,062
See accompanying notes
TOLL BROTHERS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Amounts in thousands, except per share data) (Unaudited) Six months Three months ended April 30 ended April 30 2000 1999 2000 1999 Revenues: Housing sales $708,205 $610,677 $373,985 $339,995 Land sales 20,517 11,492 Equity earnings from unconsolidated joint venture 3,069 3,069 Interest and other 3,246 4,860 1,940 2,676 735,037 615,537 390,486 342,671 Costs and expenses: Housing sales 545,273 477,225 287,479 266,264 Land sales 15,648 8,609 Selling, general & administrative75,130 58,764 39,673 32,175 Interest 19,295 17,258 10,362 9,511 655,346 553,247 346,123 307,950 Income before income taxes and extraordinary loss 79,691 62,290 44,363 34,721 Income taxes 29,348 22,772 16,413 12,641 Income before extraordinary loss 50,343 39,518 27,950 22,080 Extraordinary loss from extinguishment of debt, net of income taxes of $857 in 1999 1,461 Net income $ 50,343 $ 38,057 $27,950 $ 22,080 Earnings per share: Basic Income before extraordinary loss$ 1.38 $ 1.07 $ .77 $ .60 Extraordinary loss from extinguishment of debt .04 Net Income $ 1.38 $ 1.03 $ .77 $ .60 Diluted Income before extraordinary loss$ 1.36 $ 1.05 $ .75 $ .59 Extraordinary loss from extinguishment of debt .04 Net Income $ 1.36 $ 1.01 $ .75 $ .59 Weighted average number of shares Basic 36,434 36,840 36,396 36,717 Diluted 36,973 37,686 37,036 37,339
See accompanying notes
TOLL BROTHERS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands) (Unaudited) Six months ended April 30 2000 1999 Cash flows used in operating activities: Net income $50,343 $38,057 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 3,966 2,942 Equity in the earnings of unconsolidated joint venture (3,069) Extraordinary loss from extinguishment of debt 2,318 Deferred tax provision 2,656 2,838 Changes in operating assets and liabilities net of assets and liabilities acquired: Increase in residential inventories (159,515) (207,556) Increase in receivables, prepaid expenses and other assets (8,267) (16,396) Increase in customer deposits on sales contracts25,585 13,426 (Decrease) increase in accounts payable and accrued expenses (3,696) 10,312 Increase (decrease) in current income taxes payable 4,767 (674) Net cash used in operating activities (87,230) (154,733) Cash flows from investing activities: Purchase of property, construction and office equipment, net (4,759) (3,385) Acquisition of company, net of cash acquired (11,092) Investments in unconsolidated entities (12,635) Distribution from unconsolidated entities 2,699 Net cash used in investing activities (2,060) (27,112) Cash flows from financing activities: Proceeds from loans payable 230,060 167,500 Principal payments of loans payable (210,275) (149,063) Net proceeds from the issuance of senior subordinated notes 267,716 Redemption of subordinated notes (71,359) Proceeds from stock options exercised and employee stock plan purchases 870 2,064 Purchase of treasury stock (3,524) (13,220) Net cash provided by financing activities 17,131 203,638 Net (decrease) increase in cash and cash equivalents (72,159) 21,793 Cash and cash equivalents, beginning of period 96,484 80,143 Cash and cash equivalents, end of period $ 24,325 $101,936
See accompanying notes TOLL BROTHERS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands) (Unaudited) 1. Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission for interim financial information. The October 31, 1999 balance sheet amounts and disclosures included herein have been derived from the October 31, 1999 audited financial statements of the Registrant. Since the accompanying condensed consolidated financial statements do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements, it is suggested that they be read in conjunction with the financial statements and notes thereto included in the Registrant's October 31, 1999 Annual Report on Form 10-K. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, which are of a normal recurring nature, necessary to present fairly the Company's financial position as of April 30, 2000 and April 30, 1999, the results of its operations for the six months and three months then ended and its cash flows for the six months then ended. The results of operations for such interim periods are not necessarily indicative of the results to be expected for the full year.
2. Residential Inventories Residential inventories consisted of the following: April 30, October 31, 2000 1999 Land and land development costs $ 396,722 $506,869 Construction in progress 1,072,114 794,599 Sample homes 53,923 57,995 Land deposits and costs of future development 49,364 55,575 Deferred marketing costs 32,350 28,244 $1,604,473 $1,443,282
Construction in progress includes the cost of homes under construction, land and land development and carrying costs of lots that have been substantially improved. The Company capitalizes certain interest costs to inventories during the development and construction period. Capitalized interest is charged to interest expense when the related inventories are closed. Interest incurred, capitalized and expensed is summarized as follows:
Six months Three months ended April 30 ended April 30 2000 1999 2000 1999 Interest capitalized, beginning of period $64,984 $53,966 70,188 $56,338 Interest incurred 28,631 23,468 14,438 13,342 Interest expensed (19,295) (17,258) (10,362) (9,511) Write off to cost of sales (149) (31) (93) (24) Interest capitalized, end of period $74,171 $60,145 $74,171 $60,145
3. Extinguishment of Debt In January 1999, the Company called for redemption on March 15, 1999 of all of its outstanding 9 1/2% Senior Subordinated Notes due 2003 at 102% of principal amount plus accrued interest. The principal amount outstanding at January 31, 1999 was $69,960,000. The redemption resulted in an extraordinary loss in the first quarter of fiscal 1999 of $1,461,000, net of $857,000 of income taxes. The loss represents the redemption premium and a write-off of unamortized deferred issuance costs.
4. Earnings per share information: (in thousands) Information pertaining to the calculation of earnings per share for the six months and three months ended April 30, 2000 and 1999 is as follows: Six months Three months ended April 30 ended April 30 2000 1999 2000 1999 Basic weighted average shares outstanding 36,434 36,840 36,396 36,717 Stock options 539 846 640 622 Diluted weighted average shares 36,973 37,686 37,036 37,339
5. Stock Repurchase Program In April 1997, the Company's Board of Directors authorized the repurchase of up to 3,000,000 shares of its Common Stock, par value $.01, from time to time, in open market transactions or otherwise, for the purpose of providing shares for its various employee benefit plans. As of April 30, 2000, the Company had repurchased 1,136,000 shares under the program, of which approximately 487,000 shares have been re-issued under its various employee benefit plans.
6. Supplemental Disclosure to Statement of Cash Flows The following are supplemental disclosures to the statements of cash flow for six months ended April 30, 2000 and 1999: 2000 1999 Supplemental disclosures of cash flow information: Interest paid, net of capitalized amount $ 4,575 $ 3,667 Income taxes paid $ 21,925 $19,750 Supplemental disclosures of non-cash activities: Cost of residential inventories acquired through seller financing $ 2,893 $ 7,504 Investment in unconsolidated subsidiary acquired through seller financing $ 8,000 Income tax benefit relating to exercise of employee stock options $ 492 $ 506 Stock bonus awards $ 1,395 $ 2,461 Contributions to employee retirement plan $ 781 490 Acquisition of company: Fair value of assets acquired 56,124 Liabilities assumed 45,032 Cash paid $ 11,092
PART I. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS The following table sets forth, for the periods indicated, certain income statement items related to the Company's operations (dollars in millions): Six months ended April 30 Three months ended April 30 2000 1999 2000 1999 $ % $ % $ % $ % Housing sales Revenues 708.2 610.7 374.0 340.0 Costs 545.3 77.0 477.2 78.1 287.5 76.9 266.3 78.3 Land sales Revenues 20.5 11.5 Costs 15.6 76.3 8.6 74.9 Equity earnings in unconsolidated joint venture 3.1 3.1 Other 3.2 4.9 1.9 2.7 Total Revenues 735.0 615.5 390.5 342.7 Selling, general & administrative expense 75.1 10.2 58.8 9.5 39.7 10.2 32.2 9.4 Interest expense 19.3 2.6 17.3 2.8 10.4 2.7 9.5 2.8 Total costs and expenses 655.3 89.2 553.2 89.9 346.1 88.6 308.0 89.9
Note: Percentages of selling, general and administrative expense, interest expense and total costs and expenses are based on total revenues. HOUSING SALES Housing revenues for the six-month and three-month periods ended April 30, 2000 were higher than those of the comparable periods of 1999 by approximately $98 million or 16%, and $34 million or 10%, respectively. The increase in revenues in the six-month period of 2000 was attributable to an 8% increase in the number of homes delivered and a 7% increase in the average price of the homes delivered. The 10% increase in revenues in the three-month period of 2000 was attributable to an increase in the average price of the homes delivered. The increase in the number of homes delivered in the six month period was due to the greater number of communities from which the Company was delivering homes, the larger backlog of homes at the beginning of fiscal 2000 as compared to the beginning of fiscal 1999, offset in part by a slight decrease in the number of homes delivered per community. The increase in the backlog was the result of the 19% increase in contracts signed in fiscal 1999 as compared to fiscal 1998. The increase in the average price of homes delivered was the result of increased selling prices and a shift in the location of homes delivered to more expensive areas. Over the past ten years, housing revenues have grown at a 23% compound annual rate. The aggregate sales value of signed contracts for the six-month and three-month periods ended April 30, 2000 increased by 26% compared to each of the comparable periods of fiscal 1999. These increases were the result of increases in the number of communities that the Company was offering homes for sale, increases in the average price of homes sold (due primarily to the location, size and an increase in the base selling prices) and increases in the number of homes sold per community. The increases in the number of selling communities was the result of the Company's continued expansion both geographically and by product offering and its continued penetration of existing markets. Over the past ten years, the value of signed contracts has grown at a 25% compound annual rate. As of April 30, 2000, the backlog of homes under contract but not delivered amounted to $1.39 billion (2,957 homes), a 29% increase over the $1.08 billion (2,516 homes) backlog as of April 30, 1999 and a 31% increase over the $1.07 billion (2,381 homes) backlog as of October 31, 1999. Based upon the aforementioned 16% increase in homes delivered for the six months ended April 30, 2000 and the 29% higher backlog of homes under contract but not delivered as of April 30, 2000 as compared to April 30, 1999, the Company expects fiscal 2000 homebuilding revenues to be higher than fiscal 1999 homebuilding revenues. Housing costs as a percentage of housing sales decreased in both periods of fiscal 2000 as compared to the comparable periods of fiscal 1999. The decreases were the result of improved operating efficiencies and selling prices increasing at a greater rate than costs, offset in part by higher overhead costs and higher inventory write-offs. The Company incurred $4.1 million and $2.1 million in write-offs in the six-month and three-month periods of fiscal 2000, respectively, as compared to $2.4 million and $1.5 million in the comparable periods of fiscal 1999. LAND SALES In March 1999, the Company acquired land for homes, apartments, retail, office and industrial space in the master planned community of South Riding, located in Loudoun County, Virginia. The Company will use some of the property for its own homebuilding operations and will also sell home sites and commercial parcels to other builders. The Company recorded its first sale of land from this operation in the third quarter of fiscal 1999. The Company is also developing several other master planned communities which it may sell land to other builders. In the three- month period ended April 30, 2000, the Company realized land sales from South Riding and one other master planned community. Land sales are expected to continue for the next several years but the amounts will vary from quarter to quarter. EQUITY EARNINGS IN UNCONSOLIDATED JOINT VENTURE In fiscal 1998, the Company entered into a joint venture to develop and sell land owned by the other partner. Under the terms of the agreement the Company has the right to purchase up to a specified number of lots with the majority of the lots to be sold to other builders. In the quarter ended April 30, 2000, the joint venture sold its first group of lots to other builders and to the Company. The Company recognized earnings from the sale of lots to other builders but does not recognize earnings from lots that it purchases but reduces its cost basis in the lots. Earnings from this joint venture will vary significantly from quarter to quarter and are expected to continue into fiscal 2001. OTHER INCOME Other income decreased $1.6 million in the six-month and $.7 million in the three- month period ended April 30, 2000 as compared to the same periods of fiscal 1999. The decrease was principally due to a decrease in interest income and increases in expenses related to the Company's expansion of its ancillary businesses. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ("SG&A") SG&A spending increased by $16.4 million or 28%, and $7.5 million or 23% in the six-month and three-month periods ended April 30, 2000 as compared to the same periods of fiscal 1999. This increased spending was primarily due to the increase in housing revenues in fiscal 2000 as compared to 1999, the increase in the number of communities that the Company was selling from, the Company's expansion into new markets, expenses incurred in the opening of divisional offices to manage the growth and spending related to the development of its master planned communities and land sales. INTEREST EXPENSE The Company determines interest expense on a specific lot-by-lot basis for its homebuilding operations and on a parcel-by-parcel basis for its land sales. As a percentage of total revenues, interest expense will vary depending on many factors including the period of time that the land was owned, the length of time that the homes delivered during the period were under construction, and the interest rates and the amount of debt carried by the Company in proportion to the amount of its inventory during those periods. Interest expense as a percentage of revenues was lower in fiscal 2000 than in fiscal 1999. OPERATING INCOME Operating income increased 28% in each of the six-month and three-month periods of fiscal 2000 over the same periods of fiscal 1999. INCOME TAXES Income taxes were provided at an effective rate of 36.8% and 37% for the six-month and three-month periods of fiscal 2000, respectively. For the comparable periods of fiscal 1999, income taxes were provided at 36.6% and 36.4%. EXTRAORDINARY LOSS FROM EXTINGUISHMENT OF DEBT In January 1999, the Company called for redemption on March 15, 1999 of all of its outstanding 9 1/2% Senior Subordinated Notes due 2003 at 102% of principal amount plus accrued interest. The redemption resulted in an extraordinary loss of $1,461,000, net of $857,000 of income taxes. The loss represents the redemption premium and a write-off of unamortized deferred issuance costs. CAPITAL RESOURCES AND LIQUIDITY Funding for the Company's operations has been principally provided by cash flows from operations, unsecured bank borrowings, and from the public debt and equity markets. Cash flow from operations, before inventory additions, has improved as operating results have improved. The Company anticipates that the cash flow from operations, before inventory additions, will continue to improve as a result of an increase in revenues from the delivery of homes from its existing backlog as well as from new sales contracts and land sales. The Company has used the cash flow from operations, bank borrowings and public debt to acquire additional land for new communities, to fund additional expenditures for land development and construction costs needed to meet the requirements of the increased backlog and continuing expansion of the number of communities in which the Company is offering homes for sale, and to reduce debt. The Company expects that inventories will continue to increase and is currently negotiating and searching for additional opportunities to obtain control of land for future communities. The Company has a $465 million unsecured revolving credit facility with sixteen banks which extends through February 2003. As of April 30, 2000, the Company had $100 million of loans and approximately $35.6 million of letters of credit outstanding under the facility. The Company believes that it will be able to fund its activities through a combination of existing cash resources, cash flow from operations and existing sources of credit.
HOUSING DATA Six Months Three Months Ended April 30 Ended April 30 2000 1999 2000 1999 # of homes closed 1,657 1,531 858 857 Sales value of homes closed (in thous.) $708,205 $610,677 $373,985 $339,995 # of homes contracted 2,262 1,964 1,398 1,208 Sales value of homes contracted (in thous.)$1,041,496 $826,583 $649,918 $517,303 Average number of selling communities 146 135 151 143 April 30, April 30, Oct. 31, Oct. 31, 2000 1999 1999 1998 # of homes in backlog 2,957 2,516 2,381 1,892 Sales value of homes in backlog (in thous.) $1,394,181 $1,080,156 $1,067,685 $814,714
* Contract totals for the six-month and three-month periods ended April 30, 2000 include $7,894,000 (30 homes) and $3,135,000 (12 homes), respectively, from an unconsolidated 50% owned joint venture. As of April 30, 2000 and October 31, 1999 backlog includes $14,855,000 (55 homes) and $13,756,000 (54 homes), respectively, from the joint venture. PART II. Other Information ITEM 1. Legal Proceedings None. ITEM 2. Changes in Securities and Use of Proceeds None. ITEM 3. Defaults upon Senior Securities None. ITEM 4. Submission of Matters to a Vote of Security Holders (a) The Company's 2000 Annual Meeting of Shareholders was held on March 23, 2000. (b) Not required. (c) The following proposals were submitted to a vote of shareholders and were approved by the affirmative vote of a majority of the shares of common stock of the Company that were present in person or by proxy, as indicated below. (i) The election of three directors to hold office until the 2003 Annual Meeting of Shareholders. WITHHELD NOMINEES FOR AUTHORITY Robert S. Blank 30,387,711 420,278 Roger S. Hillas 30,780,961 427,028 Paul E. Shapiro 30,383,143 424,846 (ii) The approval of Ernst & Young LLP as the Company's independent auditors for the 2000 fiscal year. FOR AGAINST ABSTAIN 30,740,267 54,667 12,392 ITEM 5. Other Information None. ITEM 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit 27 Financial Data Schedule (b) Reports on Form 8-K None SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TOLL BROTHERS, INC. (Registrant) Date: June 5, 2000 By: /s/ Joel H. Rassman Joel H. Rassman Senior Vice President, Treasurer and Chief Financial Officer Date: June 5, 2000 By: /s/ Joseph R. Sicree Joseph R. Sicree Vice President - Chief Accounting Officer (Principal Accounting Officer) EX-27 2 0002.txt
5 0000794170 TOLL BROTHERS, INC. 6-MOS OCT-31-2000 APR-30-2000 24,325 0 0 0 1,604,473 0 49,976 28,016 1,776,059 0 469,458 364 0 0 665,478 1,776,059 728,722 735,037 560,805 636,051 0 0 19,295 79,691 29,348 50,343 0 0 0 50,343 1.38 1.36
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