Delaware | 001-09186 | 23-2416878 | ||
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||
250 Gibraltar Road, Horsham, PA | 19044 | |||
(Address of Principal Executive Offices) | (Zip Code) |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
99.1* |
TOLL BROTHERS, INC. | ||||||
Dated: | February 26, 2019 | By: | /s/ Michael J. Grubb | |||
Michael J. Grubb Senior Vice President, Chief Accounting Officer |
FOR IMMEDIATE RELEASE | CONTACT: Frederick N. Cooper (215) 938-8312 |
February 26, 2019 | fcooper@tollbrothers.com |
▪ | Net income and earnings per share were $112.1 million and $0.76 per share diluted, compared to net income of $132.1 million and $0.83 per share diluted in FY 2018’s first quarter. This decline in earnings per share was primarily the result of a (0.4)% effective tax rate in FY 2018’s first quarter due to the revaluation of the Company’s net deferred tax liability as a result of the enactment of the Tax Cuts and Jobs Act, compared to a 26.0% effective tax rate in FY 2019’s first quarter. |
▪ | Pre-tax income grew 15% to $151.4 million, compared to $131.6 million in FY 2018’s first quarter. |
▪ | Home sales revenues were $1.32 billion, up 12%; home building deliveries were 1,530, up 8%. |
▪ | Net signed contract value was $1.16 billion, down 31%; contract units were 1,379, down 24%. |
▪ | Backlog value at first quarter end was $5.37 billion, down 4%; units in backlog totaled 5,954, down 5%. |
▪ | Home sales gross margin was 21.0%; Adjusted Home Sales Gross Margin, which excludes interest and inventory write-downs (“Adjusted Home Sales Gross Margin”), was 24.2%. |
▪ | Land sales gross profit was $9.6 million in FY 2019’s first quarter. |
▪ | SG&A, as a percentage of home sales revenues, was 12.3%. |
▪ | Income from operations was 9.1% of total revenues. |
▪ | Other income and Income from unconsolidated entities was $27.0 million. |
▪ | The Company repurchased approximately 785,000 shares of its common stock at an average price of $32.02 per share for an aggregate purchase price of approximately $25.1 million. |
▪ | Deliveries of between 1,650 and 1,850 units with an average price of between $860,000 and $890,000. |
▪ | Adjusted Home Sales Gross Margin of approximately 23.1%. |
▪ | SG&A, as a percentage of second quarter home sales revenues, of approximately 11.3%. |
▪ | Other income, Income from unconsolidated entities, and land sales gross profit of approximately $13 million. |
▪ | Tax rate of approximately 27.5%. |
▪ | FY 2019’s first quarter net income and earnings per share declined 15% and 8%, respectively, to $112.1 million, or $0.76 per share diluted, compared to FY 2018’s first quarter net income of $132.1 million, or $0.83 per share diluted. |
▪ | FY 2018’s first quarter net income was favorably impacted by the Tax Cuts and Jobs Act enacted in December 2017 which resulted in a FY 2018 first quarter $31.2 million tax benefit associated with the revaluation of the Company’s net deferred tax liability. The Company’s effective tax rate in FY 2018’s first quarter was (0.4)% compared to 26.0% in FY 2019’s first quarter. |
▪ | FY 2019’s first quarter pre-tax income was $151.4 million, compared to FY 2018’s first quarter pre-tax income of $131.6 million. FY 2019’s first quarter results included pre-tax inventory impairments totaling $7.6 million. FY 2018’s first quarter results included pre-tax inventory impairments of $3.9 million. |
▪ | FY 2019’s first quarter home sales revenues of $1.32 billion and 1,530 units rose 12% in dollars and 8% in units, compared to FY 2018’s first quarter totals of $1.18 billion and 1,423 units. |
▪ | The Company’s FY 2019 first quarter net signed contracts of 1,379 units and $1.16 billion, decreased by 24% in units and 31% in dollars, compared to FY 2018’s first quarter net contracts of 1,822 units and $1.69 billion. In FY 2019’s first quarter, the Company adjusted its guidelines for deposit levels necessary for a sale agreement to be counted as a contract in certain lower price point communities, resulting in 27 net signed contracts that would not have been counted under the previous guidelines. |
▪ | In FY 2019, first quarter-end backlog of $5.37 billion and 5,954 units decreased 4% in dollars and 5% in units, compared to FY 2018’s first quarter-end backlog of $5.58 billion and 6,250 units. The average price of homes in backlog was $901,000, compared to $892,000 at FY 2018’s first quarter end. |
▪ | FY 2019’s first quarter home sales gross margin was 21.0%, compared to 20.5% in FY 2018’s first quarter. FY 2019’s first quarter Adjusted Home Sales Gross Margin was 24.2%, compared to FY 2018’s first quarter Adjusted Home Sales Gross Margin of 23.7%. |
▪ | FY 2019’s land sales gross profit was $9.6 million, driven primarily by a gain on sale of apartment land to a joint venture. Due to the adoption of Accounting Standards Update No. 2014-09 “Revenue from Contracts with Customers,” land sales gross profit is presented separately. In prior years, land sales gross profit was included in Other income. |
▪ | Interest included in cost of sales was 2.6% of home sales revenues in FY 2019’s first quarter, compared to 2.9% in FY 2018’s first quarter. |
▪ | SG&A, as a percentage of home sales revenues, was 12.3% in FY 2019’s first quarter, compared to 13.4% in FY 2018’s first quarter. |
▪ | Income from operations of $124.4 million represented 9.1% of total revenues in FY 2019’s first quarter, compared to $83.7 million and 7.1% of revenues in FY 2018’s first quarter. |
▪ | Other income and Income from unconsolidated entities in FY 2019’s first quarter totaled $27.0 million, compared to $47.9 million in FY 2018’s first quarter. |
▪ | FY 2019’s first quarter cancellation rate (current quarter cancellations divided by current quarter signed contracts) was 9.6%, compared to 5.3% in FY 2018’s first quarter. As a percentage of beginning quarter backlog, FY 2019’s first quarter cancellation rate was 2.4% compared to 1.7% in FY 2018’s first quarter. |
▪ | The Company ended its FY 2019 first quarter with $801.7 million in cash and cash equivalents, compared to $1.18 billion at FYE 2018, and $508.3 million at FY 2018’s first quarter end. At FY 2019’s first quarter end, the Company also had $1.12 billion available under its $1.295 billion, 20-bank credit facility, which matures in May 2021. |
▪ | During the first quarter of FY 2019, the Company repurchased approximately 785,000 shares at an average price per share of $32.02, for an aggregate purchase price of approximately $25.1 million. |
▪ | On January 25, 2019, the Company paid its quarterly dividend of $0.11 per share to shareholders of record at the close of business on January 11, 2019. |
▪ | Stockholders’ Equity at FY 2019’s first quarter end was $4.82 billion, compared to $4.46 billion at FY 2018’s first quarter end. |
▪ | The Company ended its FY 2019 first quarter with a debt-to-capital ratio of 42.7%, compared to 43.7% at FYE 2018 and 44.2% at FY 2018’s first quarter end. The Company ended FY 2019’s first quarter with a net debt-to-capital ratio of 36.0%, compared to 33.2% at FYE 2018, and 40.1% at FY 2018’s first quarter end.(1) |
▪ | The Company ended FY 2019’s first quarter with approximately 54,000 lots owned and optioned, compared to 53,400 one quarter earlier, and 49,500 one year earlier. Approximately 33,500 of these lots were owned, of which approximately 17,140 lots, including those in backlog, were substantially improved. |
▪ | In the first quarter of FY 2019, the Company spent approximately $262.3 million on land to purchase approximately 2,686 lots. |
▪ | The Company ended FY 2019’s first quarter with 317 selling communities, compared to 315 at FYE 2018 and 295 at FY 2018’s first quarter end. |
▪ | The Company expects FY 2019 second quarter deliveries of between 1,650 and 1,850 units with an average price of between $860,000 and $890,000. |
▪ | The Company expects its second quarter FY 2019 Adjusted Home Sales Gross Margin to be approximately 23.1% of home sales revenues. |
▪ | FY 2019 second quarter SG&A is expected to be approximately 11.3% of second quarter home sales revenues. |
▪ | The Company’s second quarter FY 2019 Other income, Income from unconsolidated entities, and land sales gross profit is expected to total approximately $13 million. |
▪ | The FY 2019 second quarter effective tax rate is expected to be approximately 27.5%. |
(1) | See “Reconciliation of Non-GAAP Measures” below for more information on the calculation of the Company’s net debt-to-capital ratio. |
January 31, 2019 | October 31, 2018 | ||||||
(Unaudited) | |||||||
ASSETS | |||||||
Cash and cash equivalents | $ | 801,734 | $ | 1,182,195 | |||
Inventory | 7,714,643 | 7,598,219 | |||||
Property, construction and office equipment, net | 294,658 | 193,281 | |||||
Receivables, prepaid expenses and other assets | 609,664 | 550,778 | |||||
Mortgage loans held for sale | 88,840 | 170,731 | |||||
Customer deposits held in escrow | 100,034 | 117,573 | |||||
Investments in unconsolidated entities | 409,374 | 431,813 | |||||
Income taxes receivable | 16,907 | ||||||
$ | 10,035,854 | $ | 10,244,590 | ||||
LIABILITIES AND EQUITY | |||||||
Liabilities: | |||||||
Loans payable | $ | 1,000,467 | $ | 686,801 | |||
Senior notes | 2,511,932 | 2,861,375 | |||||
Mortgage company loan facility | 74,135 | 150,000 | |||||
Customer deposits | 406,355 | 410,864 | |||||
Accounts payable | 302,042 | 362,098 | |||||
Accrued expenses | 879,734 | 973,581 | |||||
Income taxes payable | 30,959 | ||||||
Total liabilities | 5,174,665 | 5,475,678 | |||||
Equity: | |||||||
Stockholders’ Equity | |||||||
Common stock | 1,779 | 1,779 | |||||
Additional paid-in capital | 717,405 | 727,053 | |||||
Retained earnings | 5,239,251 | 5,161,551 | |||||
Treasury stock, at cost | (1,139,623 | ) | (1,130,878 | ) | |||
Accumulated other comprehensive income | 750 | 694 | |||||
Total stockholders' equity | 4,819,562 | 4,760,199 | |||||
Noncontrolling interest | 41,627 | 8,713 | |||||
Total equity | 4,861,189 | 4,768,912 | |||||
$ | 10,035,854 | $ | 10,244,590 |
Three Months Ended January 31, | |||||||||||
2019 | 2018 | ||||||||||
$ | % | $ | % | ||||||||
Revenues: | |||||||||||
Home sales | $ | 1,319,308 | $ | 1,175,468 | |||||||
Land sales (1) | 43,873 | ||||||||||
1,363,181 | 1,175,468 | ||||||||||
Cost of revenues: | |||||||||||
Home sales | 1,042,245 | 79.0 | % | 934,480 | 79.5 | % | |||||
Land sales (1) | 34,253 | 78.1 | % | ||||||||
1,076,498 | 934,480 | ||||||||||
Gross margin - home sales | 277,063 | 21.0 | % | 240,988 | 20.5 | % | |||||
Gross margin - land sales (1) | 9,620 | 21.9 | % | ||||||||
Selling, general and administrative expenses | $ | 162,238 | 12.3 | % | $ | 157,267 | 13.4 | % | |||
Income from operations | 124,445 | 9.1 | % | 83,721 | 7.1 | % | |||||
Other: | |||||||||||
Income from unconsolidated entities | 6,140 | 38,880 | |||||||||
Other income - net | 20,861 | 8,997 | |||||||||
Income before income taxes | 151,446 | 131,598 | |||||||||
Income tax provision (benefit) | 39,396 | (509 | ) | ||||||||
Net income | $ | 112,050 | $ | 132,107 | |||||||
Per share: | |||||||||||
Basic earnings | $ | 0.76 | $ | 0.85 | |||||||
Diluted earnings | $ | 0.76 | $ | 0.83 | |||||||
Cash dividend declared | $ | 0.11 | $ | 0.08 | |||||||
Weighted-average number of shares: | |||||||||||
Basic | 146,751 | 155,882 | |||||||||
Diluted | 148,032 | 158,897 | |||||||||
Effective tax rate | 26.0% | (0.4)% |
(1) | On November 1, 2018, we adopted Accounting Standard Update No. 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”). Upon adoption, land sale activity is presented as part of income from operations where previously it was included in "Other income - net." Prior periods are not restated. During the three months ended January 31, 2018, we recognized land sales revenues and land sales cost of revenues of $7.0 million and $6.3 million, respectively. |
Three Months Ended January 31, | |||||||
2019 | 2018 | ||||||
Impairment charges recognized: | |||||||
Cost of home sales - land owned/controlled for future communities | $ | 1,777 | $ | 117 | |||
Cost of home sales - operating communities | 5,785 | 3,736 | |||||
$ | 7,562 | $ | 3,853 | ||||
Depreciation and amortization | $ | 15,669 | $ | 6,171 | |||
Interest incurred | $ | 44,485 | $ | 38,687 | |||
Interest expense: | |||||||
Charged to home sales cost of sales | $ | 34,441 | $ | 33,885 | |||
Charged to land sales cost of sales | 352 | ||||||
Charged to other income - net | 716 | ||||||
$ | 34,793 | $ | 34,601 | ||||
Home sites controlled: | January 31, 2019 | January 31, 2018 | |||||
Owned | 33,491 | 32,127 | |||||
Optioned | 20,522 | 17,420 | |||||
54,013 | 49,547 |
January 31, 2019 | October 31, 2018 | ||||||
Land and land development costs | $ | 2,179,152 | $ | 1,917,354 | |||
Construction in progress | 4,870,299 | 4,917,917 | |||||
Sample homes | 409,548 | 493,037 | |||||
Land deposits and costs of future development | 255,644 | 245,114 | |||||
Other | 24,797 | ||||||
$ | 7,714,643 | $ | 7,598,219 |
North: | Connecticut, Illinois, Massachusetts, Michigan, 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 January 31, | |||||||||||||||||||||
Units | $ (Millions) | Average Price Per Unit $ | |||||||||||||||||||
2019 | 2018 | 2019 | 2018 | 2019 | 2018 | ||||||||||||||||
REVENUES | |||||||||||||||||||||
North | 237 | 209 | $ | 169.5 | $ | 134.3 | $ | 715,200 | $ | 642,500 | |||||||||||
Mid-Atlantic | 305 | 332 | 205.7 | 207.0 | 674,400 | 623,400 | |||||||||||||||
South | 281 | 221 | 208.2 | 171.5 | 740,700 | 776,000 | |||||||||||||||
West | 434 | 412 | 300.4 | 258.0 | 692,200 | 626,300 | |||||||||||||||
California | 209 | 185 | 370.0 | 287.1 | 1,770,400 | 1,551,900 | |||||||||||||||
Traditional Home Building | 1,466 | 1,359 | 1,253.8 | 1,057.9 | 855,200 | 778,400 | |||||||||||||||
City Living | 64 | 64 | 68.6 | 117.6 | 1,071,800 | 1,837,500 | |||||||||||||||
Corporate and other | (3.1 | ) | |||||||||||||||||||
Total home sales | 1,530 | 1,423 | 1,319.3 | 1,175.5 | $ | 862,300 | $ | 826,000 | |||||||||||||
Land sales | 43.9 | ||||||||||||||||||||
Total consolidated | $ | 1,363.2 | $ | 1,175.5 | |||||||||||||||||
CONTRACTS | |||||||||||||||||||||
North | 241 | 271 | $ | 171.5 | $ | 197.5 | $ | 711,600 | $ | 728,700 | |||||||||||
Mid-Atlantic | 347 | 324 | 221.0 | 212.2 | 637,000 | 654,900 | |||||||||||||||
South | 268 | 303 | 195.5 | 239.0 | 729,300 | 788,900 | |||||||||||||||
West | 351 | 489 | 266.8 | 333.9 | 760,200 | 682,900 | |||||||||||||||
California | 149 | 388 | 268.9 | 646.0 | 1,804,700 | 1,664,800 | |||||||||||||||
Traditional Home Building | 1,356 | 1,775 | 1,123.7 | 1,628.6 | 828,700 | 917,500 | |||||||||||||||
City Living | 23 | 47 | 39.7 | 61.8 | 1,724,400 | 1,316,000 | |||||||||||||||
Total consolidated | 1,379 | 1,822 | $ | 1,163.4 | $ | 1,690.4 | $ | 843,600 | $ | 927,800 | |||||||||||
BACKLOG | |||||||||||||||||||||
North | 1,102 | 1,279 | $ | 770.6 | $ | 879.3 | $ | 699,300 | $ | 687,500 | |||||||||||
Mid-Atlantic | 1,184 | 1,135 | 774.4 | 746.8 | 654,000 | 658,000 | |||||||||||||||
South | 1,153 | 1,137 | 891.5 | 883.5 | 773,300 | 777,000 | |||||||||||||||
West | 1,317 | 1,474 | 998.1 | 1,047.8 | 757,900 | 710,900 | |||||||||||||||
California | 1,073 | 1,090 | 1,783.4 | 1,854.0 | 1,662,100 | 1,700,900 | |||||||||||||||
Traditional Home Building | 5,829 | 6,115 | 5,218.0 | 5,411.4 | 895,200 | 884,900 | |||||||||||||||
City Living | 125 | 135 | 148.7 | 165.1 | 1,189,400 | 1,222,600 | |||||||||||||||
Total consolidated | 5,954 | 6,250 | $ | 5,366.7 | $ | 5,576.5 | $ | 901,400 | $ | 892,200 |
Units | $ (Millions) | Average Price Per Unit $ | |||||||||||||||||||
2019 | 2018 | 2019 | 2018 | 2019 | 2018 | ||||||||||||||||
Three months ended January 31, | |||||||||||||||||||||
Revenues | 17 | 28 | $ | 27.3 | $ | 32.6 | $ | 1,604,500 | $ | 1,162,700 | |||||||||||
Contracts | 3 | 74 | $ | 12.1 | $ | 122.1 | $ | 4,019,500 | $ | 1,650,100 | |||||||||||
Backlog at January 31, | 158 | 162 | $ | 306.1 | $ | 257.0 | $ | 1,937,300 | $ | 1,586,400 |
Three Months Ended January 31, | ||||||||
2019 | 2018 | |||||||
Revenues - homes sales | $ | 1,319,308 | $ | 1,175,468 | ||||
Cost of revenues - home sales | 1,042,245 | 934,480 | ||||||
Home sales gross margin | 277,063 | 240,988 | ||||||
Add: | Interest recognized in cost of revenues - home sales | 34,441 | 33,885 | |||||
Inventory write-downs | 7,562 | 3,853 | ||||||
Adjusted homes sales gross margin | $ | 319,066 | $ | 278,726 | ||||
Homes sales gross margin as a percentage of home sale revenues | 21.0 | % | 20.5 | % | ||||
Adjusted Home Sales Gross Margin as a percentage of home sale revenues | 24.2 | % | 23.7 | % | ||||
January 31, 2019 | January 31, 2018 | October 31, 2018 | ||||||||||
Loans payable | $ | 1,000,467 | $ | 631,791 | $ | 686,801 | ||||||
Senior notes | 2,511,932 | 2,859,689 | 2,861,375 | |||||||||
Mortgage company loan facility | 74,135 | 38,344 | 150,000 | |||||||||
Total debt | 3,586,534 | 3,529,824 | 3,698,176 | |||||||||
Total stockholders' equity | 4,819,562 | 4,458,994 | 4,760,199 | |||||||||
Total capital | $ | 8,406,096 | $ | 7,988,818 | $ | 8,458,375 | ||||||
Ratio of debt-to-capital | 42.7 | % | 44.2 | % | 43.7 | % | ||||||
Total debt | $ | 3,586,534 | $ | 3,529,824 | $ | 3,698,176 | ||||||
Less: | Mortgage company loan facility | (74,135 | ) | (38,344 | ) | (150,000 | ) | |||||
Cash and cash equivalents | (801,734 | ) | (508,277 | ) | (1,182,195 | ) | ||||||
Total net debt | 2,710,665 | 2,983,203 | 2,365,981 | |||||||||
Total stockholders' equity | 4,819,562 | 4,458,994 | 4,760,199 | |||||||||
Total net capital | $ | 7,530,227 | $ | 7,442,197 | $ | 7,126,180 | ||||||
Net debt-to-capital ratio | 36.0 | % | 40.1 | % | 33.2 | % |