-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, A9VMrd68jaKy9mjGw50EXj40kjpBue8WPX4NI3kBhWINhmcpQQ3lZz4kchmRevXA 7DUJmnLq5yA15sb1wkQv6Q== 0000950159-94-000010.txt : 19940315 0000950159-94-000010.hdr.sgml : 19940315 ACCESSION NUMBER: 0000950159-94-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940131 FILED AS OF DATE: 19940314 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: 34 SEC FILE NUMBER: 001-09186 FILM NUMBER: 94515801 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 FORM 10-Q, 1/31/94, TOLL BROTHERS, INC. 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 January 31, 1994 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: 33,408,568 shares as of February 28, 1994 TOLL BROTHERS, INC. AND SUBSIDIARIES INDEX
Page No. PART I. Financial Information ITEM 1. Financial Statements Condensed Consolidated Balance Sheets 1 January 31, 1994 (Unaudited) and October 31, 1993 Condensed Consolidated Statements of Income (Unaudited) 2 Three Months Ended January 31, 1994 and 1993 Condensed Consolidated Statements of Cash Flows 3 (Unaudited) Three Months Ended January 31, 1994 and 1993 Notes to Condensed Consolidated Financial Statements 4 (Unaudited) ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 6 PART II. Other Information 9 SIGNATURES 10
1 PART I. ITEM 1. FINANCIAL STATEMENTS TOLL BROTHERS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Amounts in thousands)
January 31, October 31, 1994 1993 -------- -------- (unaudited) (Note 1) ASSETS Cash and cash equivalents $ 55,436 $ 32,329 Marketable securities, at cost which approximates market - 1,983 Residential inventories (Note 2) 428,720 402,515 Property, construction and office equipment, at cost, net of accumulated depreciation of $11,281 at January 31, 1994 and $10,910 at October 31, 1993 10,910 10,296 Receivables, prepaid expenses and other assets 21,466 18,973 Mortgage notes receivable 7,707 9,902 -------- -------- $524,239 $475,998 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Loans payable $ 14,067 $ 24,779 Subordinated notes and debentures (Note 3) 231,957 174,442 Customer deposits on sales contracts 21,531 22,449 Accounts payable 11,718 16,971 Accrued expenses and other liabilities 36,421 30,221 Collateralized mortgage obligations 8,967 10,810 Income taxes payable: Current 10,107 15,471 Deferred 12,932 13,849 -------- -------- 23,039 29,320 -------- -------- Total liabilities 347,700 308,992 -------- -------- Shareholders' equity (Note 3): Preferred stock - - Common stock 334 333 Additional paid-in capital 36,233 35,206 Retained earnings 139,972 131,467 -------- -------- Total shareholders' equity 176,539 167,006 -------- -------- $524,239 $475,998 ======== ========
See accompanying notes 1 2 TOLL BROTHERS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Amounts in thousands except per share data) (Unaudited)
Three months ended January 31 ------------------ 1994 1993 ---- ---- (Note 1) Revenues: Housing sales $117,704 $75,461 Interest and other 424 333 -------- -------- 118,128 75,794 -------- -------- Costs and expenses: Land and housing construction 89,758 54,459 Selling, general and administrative 10,377 9,428 Interest 4,497 3,763 -------- -------- 104,632 67,650 -------- -------- Income before income taxes and 13,496 8,144 change in accounting Income taxes 4,991 3,253 -------- -------- Income before change in accounting 8,505 4,891 Cumulative effect of change in accounting for income taxes - 1,307 -------- -------- Net income $ 8,505 $ 6,198 ======== ======== Income per share: Income before change in accounting $ .25 $ .15 Cumulative change in accounting - .04 -------- -------- Net income $ .25 $ .19 ======== ======== Weighted average number of shares 33,740 33,433 ======== ========
See accompanying notes 2 3 TOLL BROTHERS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Notes 1 and 4) (Amounts in thousands) (Unaudited)
Three months ended January 31 ------------------ 1994 1993 ---- ---- Cash flows from operating activities: Net income $ 8,505 $ 6,198 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 669 656 Net realizable provisions 2,575 - Increase in residential inventories (30,130) (29,938) Decrease (increase) in receivables, prepaid expenses and other assets 575 (123) (Decrease) increase in customer deposits on sales contracts (918) 711 Decrease in accounts payable (5,253) (1,149) Increase in accrued expenses and other liabilities 6,200 4,084 Decrease in current income taxes payable (5,364) (1,148) Decrease in deferred income taxes payable (639) (987) -------- -------- Net cash used in operating activities (23,780) (21,696) -------- -------- Cash flows from investing activities: Sale of marketable securities 1,983 8,444 Purchase of property, construction and office equipment, net (1,025) (343) Principal repayments of mortgage notes receivable 2,199 4,822 -------- -------- Net cash provided by investing activities 3,157 12,923 -------- -------- Cash flows from financing activities: Proceeds from loans payable 13,678 8,379 Principal payments of loans payable (24,422) (9,177) Net proceeds from issuance of senior subordinated notes 55,575 - Principal payments of collateralized mortgage obligations (1,851) (4,726) Proceeds from stock options exercised and employee stock plan purchases 750 610 -------- -------- Net cash provided by (used in) financing activities 43,730 (4,914) -------- -------- Net increase (decrease) in cash and cash equivalents 23,107 (13,687) Cash and cash equivalents, beginning of period 32,329 33,407 -------- -------- Cash and cash equivalents, end of period $55,436 $19,720 ======== ========
See accompanying notes 3 4 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, 1993 balance sheet amounts and disclosures included herein have been derived from the October 31, 1993 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, 1993 Annual Report to Shareholders. 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 January 31, 1994, and the results of its operations and cash flows for the three months then ended. The results of operations for such interim period are not necessarily indicative of the results to be expected for the full year. During the fourth quarter of 1993, the Company adopted Statement of Financial Accounting Standard No. 109, "Accounting for Income Taxes", effective November 1, 1992. This Statement requires a liability approach for measuring deferred taxes based on temporary differences between the financial statement and tax bases of assets and liabilities existing at each balance sheet date using enacted tax rates for years in which taxes are expected to be paid or recovered. In accordance with FASB 109, the cumulative effect of this change in accounting for income taxes of $1.3 million of income has been included in the consolidated statement of income for the quarter ended January 31, 1993. The net results of the Company's collateralized mortgage financing operations have been included in interest and other revenues. Certain amounts for the three months ended January 31, 1993 have been restated to reflect this treatment. 4 5 2. Residential Inventories Residential inventories consisted of the following:
January 31, October 31, 1994 1993 ---------- ---------- Land and land development costs $135,695 $122,258 Construction in progress 243,190 220,680 Sample homes 17,374 15,297 Land deposits and costs of future development 11,798 15,773 Loan assets acquired for future development 13,352 21,873 Deferred marketing and financing costs 7,311 6,634 -------- -------- $428,720 $402,515 ======== ========
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:
Three months ended January 31 ------------------ 1994 1993 ---- ---- Interest capitalized, beginning of period $38,270 $34,470 Interest incurred 5,076 4,317 Interest expensed (4,497) (3,764) Write off to cost of sales (1,412) - -------- -------- Interest capitalized, end of period $37,437 $35,023 ======== ========
3. Public Offering of Convertible Senior Subordinated Notes In January 1994, the Company completed a public offering of $57.5 million principal amount of 4 3/4% convertible senior subordinated notes due January 15, 2004. The notes were issued at par by one of the Company's subsidiaries and are guaranteed by the Company. The net proceeds from the sale of the notes, approximately $55.8 million, was or will be used to repay bank debt, acquire residential property and for general corporate purposes. Pending such applications, the net proceeds are expected to be invested in high-grade, short-term, marketable, interest-bearing securities. The notes are convertible into shares of common stock of the Company at the option of the noteholder at any time prior to maturity, unless previously redeemed, at a conversion price of $21.75 per share. 5 6 4. Supplemental Disclosures to Statements of Cash Flows The following are supplemental disclosures to the statements of cash flows:
Three months ended January 31 ------------------ 1994 1993 ---- ---- Supplemental disclosures of cash flow information: Interest paid, net of amount capitalized $ 315 $ 677 ======== ======== Income taxes paid $10,994 $4,078 ======== ======== Supplemental disclosures of non-cash financing activities: Income tax benefit relating to exercise of employee stock options $ 278 $ 415 ======== ========
PART I. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Homebuilding The following table sets forth, for the periods indicated, certain income statement items related to the Company's operations as percentages of total revenues and certain other data:
Three months ended January 31 ---------------- 1994 1993 ---- ---- Revenues 100.0% 100.0% ----- ----- Costs and expenses: Land and housing construction 76.0 71.9 Selling, general and administrative 8.8 12.4 Interest 3.8 5.0 ------ ------ Total costs and expenses 88.6 89.2 ------ ------ Income before taxes and change in in accounting 11.4% 10.7% ====== ====== Number of homes closed 386 250 ====== ======
6 7 Homebuilding revenues for the three months ended January 31, 1994 were higher than those of the comparable period of the prior year by approximately $42.3 million, or 56%. The higher revenues were primarily attributable to the increased number of homes closed, which was due to the significantly larger contract backlog at the beginning of fiscal 1994, as compared to a year earlier. In addition, the average sales price per home increased as a result of a change in product mix and due to a shift in the location of homes closed to more expensive communities. The aggregate sales value of new contracts signed during the three months ended January 31, 1994 was $99.3 million (299 homes). This compared to $88.2 million (290 homes) in the three months ended January 31, 1993. Land and housing construction costs as a percentage of revenues increased in the first quarter of 1994 as compared to the first quarter of 1993 due principally to a writeoff in fiscal 1994 of $2.6 million related to previously capitalized costs in one community which the Company no longer considered realizable, an increase in material costs (primarily lumber) and increased costs due to adverse weather conditions. Selling, general and administrative expenses were lower as a percentage of revenues in the first quarter of 1994 as compared to 1993 due to the increase in revenues year-to-year being greater than the increase in the costs incurred. The increase in costs was due primarily to an increase in selling expenses which were attributable to the increased number of homes closed during the 1994 quarter over the 1993 quarter and the increased number of communities in which the Company was offering homes for sale. Interest expense for the first quarter of fiscal 1994 was lower as a percentage of revenues and on a per home basis than in fiscal 1993. On average, the land and land development costs associated with the homes closed in the fiscal 1994 quarter remained in inventory for a shorter period of time than those closed in the prior year. In addition, the amount of interest incurred in recent years has declined as a percentage of inventory due to lower interest rates and the decline in the amount of debt in proportion to the amount of inventory. Accordingly, less capitalized interest was accumulated on the homes closed in 1994 than on those closed in 1993. Collateralized Mortgage Financing The Company has not chosen to participate in any collateralized mortgage financings since fiscal 1987. Accordingly, revenues and expenses have declined in each successive year since then as a result of, and to the extent of, prepayments and normal amortization of the mortgage notes receivable. The results of collateralized mortgage financing operations have been and are expected to continue to be insignificant to consolidated results of operations. The net results of the collateralized mortgage financings are included in interest and other revenue. Income Taxes Income taxes for fiscal 1994 and 1993 were provided at effective rates of 37% and 39.9% respectively. The effective rate for the first quarter of fiscal 1994 was lower than the anticipated effective rate of 39% due principally to the recognition in the quarter of a benefit from the application of FASB 109 related to a change in the Company's projected tax rate on its deferred tax assets and liabilities. Effective November 1, 1992, the Company adopted Statement of Financial Accounting 7 8 Standard No. 109, "Accounting for Income Taxes". This Statement requires a liability approach for measuring deferred taxes based on temporary differences between the financial statement and tax bases of assets and liabilities existing at each balance sheet date using enacted tax rates for years in which taxes are expected to be recovered or paid. The cumulative effect of this change in accounting for income taxes of $1.3 million of income has been included in the consolidated statement of income for 1993. CAPITAL RESOURCES AND LIQUIDITY Funding for the Company's residential development activities is principally provided by cash flows from homebuilding operations, unsecured bank borrowings, and from the public debt and equity markets. The Company has a $150 million unsecured revolving credit facility with nine banks which extends through October 1996. As of January 31, 1994, the Company had $10.0 million of loans and approximately $47.6 million of letters of credit outstanding under the facility. In January 1994, the Company completed a public offering of $57.5 million principal amount of 4 3/4% convertible senior subordinated notes due January 15, 2004. The notes were issued by one of the Company's subsidiaries and are guaranteed by the Company. The net proceeds from the sale of the notes, approximately $55.8 million, was or will be used to repay bank debt and for general corporate purposes and working capital needs. Pending such applications, the net proceeds are expected to be invested in high-grade, short-term, marketable, interest-bearing securities. The Company has not participated in collateralized mortgage financing activities since 1987 and the effect on consolidated capital resources and liquidity is insignificant. The Company believes that it will be able to fund its activities through a combination of operating cash flow, cash balances and existing sources of credit. 8 9 PART II. Other Information ITEM 1. Legal Proceedings None. ITEM 2. Changes in Securities None. ITEM 3. Defaults upon Senior Securities None. ITEM 4. Submission of Matters to a Vote of Security Holders None. ITEM 5. Other Information None. ITEM 6. Exhibits and Reports on Form 8-K Exhibits None. ITEM 7. Reports on Form 8-K Form 8-K dated December 17, 1993 related to the adoption by the Board of Directors, subject to shareholder approval of the Toll Brothers, Inc. Key Executives and Non-Employee Directors Stock Option Plan (1993) and the Toll Brothers, Inc. Cash Bonus Plan. 9 10 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: March 11, 1994 By: /s/ Joel H. Rassman -------------- ---------------------- Joel H. Rassman Senior Vice President, Treasurer and Chief Financial Officer Date: March 11, 1994 By: /s/ Joseph R. Sicree -------------- ----------------------- Joseph R. Sicree Vice President - Chief Accounting Officer (Principal Accounting Officer) 10 -----END PRIVACY-ENHANCED MESSAGE-----