Toll Brothers Reports 4th Qtr and FYE 2012 Results Toll Brothers Reports 4th Qtr and FYE 2012 Results
December 04, 2012 07:00 | Source:Toll Brothers, Inc.
HORSHAM, Pa., Dec. 4, 2012 (GLOBE NEWSWIRE) -- Toll Brothers, Inc. (NYSE:TOL) (#), the nation's leading builder of luxury homes, today announced results for earnings, revenues, contracts, and backlog for its fourth quarter and fiscal year ended October 31, 2012. In its fourth quarter, revenues rose 48% in dollars and 44% in units, contracts rose 75% in dollars and 70% in units, and backlog rose 70% in dollars and 54% in units, compared to FY 2011's fourth quarter. In the fourth quarter, pre-tax income was $60.7 million and net income was $411.4 million.
Fourth Quarter Financial Highlights:
• FY 2012's fourth quarter net income was $411.4 million, or $2.35 per share, compared to $15.0 million, or $0.09 per share in FY 2011's fourth quarter. Included in FY 2012's fourth quarter was a net tax benefit of $350.7 million, which included the reversal of $400.0 million of the Company's deferred tax asset valuation reserves against its deferred tax asset, offset by a tax provision of $49.3 million.
• Net income also included pre-tax inventory write-downs of $1.5 million and $0.7 million of cash recoveries of prior joint venture write-offs, compared to pre-tax inventory write-downs of $18.2 million and a $0.4 million pre-tax loss from early repurchase of debt in FY 2011's fourth quarter.
• Pre-tax income was $60.7 million, compared to $15.3 million in FY 2011's fourth quarter.
• Revenues of $632.8 million and homebuilding deliveries of 1,088 units rose 48% in dollars and 44% in units, compared to FY 2011's fourth quarter.
• Net signed contracts of $684.1 million and 1,098 units rose 75% in dollars and 70% in units, compared to FY 2011's fourth quarter. On a per-community basis, FY 2012's fourth-quarter net signed contracts of 4.86 units per community were the highest for any fourth quarter since FY 2005.
• Backlog of $1.67 billion and 2,569 units rose 70% in dollars and 54% in units, compared to FY 2011's fourth-quarter-end backlog.
• The Company's cancellation rate (current-quarter cancellations divided by current-quarter signed contracts) was 4.6%, compared to 7.9% in FY 2011's fourth quarter.
• The average price of homes delivered was $582,000, compared to $576,000 in FY 2012's third quarter and $565,000 in FY 2011's fourth quarter.
• Gross margin, excluding interest and write-downs, was 24.6%, compared to 24.2% in FY 2011's fourth quarter.
• SG&A as a percentage of revenue improved to 11.8%, compared to 16.0% in FY 2011's fourth quarter due primarily to higher revenues and an insurance reserve reversal of $8.0 million.
• The Company ended FY 2012 with 224 selling communities, compared to 226 at FY 2012's third-quarter end, and 215 at FYE 2011. At FYE 2012 the Company had approximately 40,400 lots owned and optioned, compared to approximately 39,200 at FY 2012's third-quarter end and approximately 37,500 one year ago.
FY 2012 Financial Highlights
• FY 2012 net income was $487.1 million, or $2.86 per share diluted, compared to FY 2011's net income of $39.8 million, or $0.24 per share diluted. Included in FY 2012's full year net income was a net tax benefit of $374.2 million, which included the reversal of $400.0 million of the Company's deferred tax asset valuation reserves against its deferred tax asset, offset by a tax provision of $25.8 million.
• Net income included pre-tax inventory write-downs of $14.7 million and $2.3 million of cash recoveries of prior joint venture write-offs, compared to pre-tax inventory write-downs of $92.7 million and a $3.8 million pre-tax loss from early repurchase of debt in FY 2011. FY 2011 net income also included a net tax benefit of $69.2 million.
• Pre-tax income was $112.9 million, compared to a pre-tax loss of $29.4 million in FY 2011.
• Revenues of $1.88 billion and homebuilding deliveries of 3,286 units rose 28% in dollars and 26% in units, compared to FY 2011.
• Net signed contracts of $2.56 billion and 4,159 units rose 59% in dollars and 49% in units, compared to FY 2011. On a per-community basis, FY 2012's net signed contracts of 18.2 units per community were the highest for any fiscal year since FY 2006.
• Gross margin, excluding interest and write-downs, was 24.0%, compared to 23.3% for FY 2011.
• SG&A as a percentage of revenue improved to 15.3% compared to 17.7% for FY 2011.
Douglas C. Yearley, Jr., Toll Brothers' chief executive officer, stated: "Pent-up demand, rising home prices, low interest rates, and improving consumer confidence motivated buyers to return to the housing market in FY 2012. As household formations accelerated and unsold home inventories dropped to record lows, the industry took further steps toward a sustained housing recovery.
"We enjoyed resurgent activity across all of our product lines and in most of our geographic regions. The momentum that began in our first quarter of FY 2012 built throughout the year. Sequentially, over the four quarters of FY 2012, the value of net signed contracts rose 45%, 51%, 66% and 75% compared to FY 2011's same four quarters. Our net contracts per community ("same store sales"), which increased 33% and 60% respectively versus FY 2011's full year and fourth quarter, were the highest for a fiscal year since FY 2006 and the highest for a fourth quarter since FY 2005. Now, five weeks into FY 2013, our contracts are up 34% versus FY 2012's same period.
"Our large increase in FY 2012 contracts was achieved primarily through an increase in per-community sales. FY 2012's contracts per community of 18.2, while up 33% from FY 2011, were still 36% below our average annual pace from 1987 through 2006 of 28.6; therefore, as the economy strengthens, we believe there is great potential to increase sales paces per community.
"We believe the publicly traded home building companies are growing market share: As the only national home building company focused on the luxury market, we are particularly well positioned. Our financial strength gives us a competitive advantage over the small and mid-sized private builders in our luxury niche whose access to capital and land remains constricted.
"Our financial strength also gives us an advantage in buying land, as sellers know we have the appetite and capital to close transactions quickly. Since the start of our fourth quarter, we have been seeing great deal flow in some excellent locations. Our philosophy has always been to acquire exceptionally located sites – "on the corner of 'Main and Main.'" In contrast to the "just-in-time" model of some "land-light" builders, we often take this land through approvals while we have it under option and then improve it. This helps increase our profit margins and enables us to position the company for the future as we put land under control today that may translate into revenues starting several years later.
"As the economy slowly heals and more customers re-enter the housing market, we look forward to the future. Based on our strong balance sheet, solid land holdings, recognized brand and excellent team of associates, we believe we are well-positioned for the housing market's continuing recovery."
Martin P. Connor, Toll Brothers' chief financial officer, stated: "We ended FY 2012 with approximately $1.2 billion of cash and marketable securities, $814.9 million available under our 12-bank credit facility and a net-debt-to-capital ratio of 23.6%. Our stockholders' equity grew $535 million in FY 2012, due primarily to our operating income and the reversal of most of our valuation allowance.
"Our strong credit ratings enable us to access the capital markets at industry-leading rates. This quarter we raised $287.5 million through a 20-year exchangeable note offering, callable in September 2017, with a 0.50% coupon and a conversion premium set at $49.08 per share - 50% above our then-current stock price of $32.72.
"Subject to the caveats in our Statement on Forward-Looking Information included in this release, we offer the following limited guidance. We ended FY 2012 with a backlog of $1.67 billion and 2,569 units, up 70% in dollars and 54% in units, compared to FYE 2011. With this backlog and the lowest cancellation rate in our industry, we believe we will deliver between 3,600 and 4,400 homes in FY 2013 at an average price of between $595,000 and $630,000 per home. We expect to end FY 2013 with between 225 and 255 selling communities."
Robert I. Toll, executive chairman, stated: "Our optimism for our own and the housing industry's prospects is buoyed by basic demographics. During the last five years, population has continued to increase in the United States; however, household formations, a key driver of housing demand, have not kept pace. A recent study by Harvard University estimated that, based on historic trends, 1.8 to 2.8 million more U.S. households should have been formed since 2007 than actually were created. Recent trends suggest these formations are starting to occur.
"Meanwhile, new home production has been anemic. Many experts estimate that, going forward, the industry has to produce between 1.4 and 1.7 million new homes per year to keep pace with basic demographic-driven demand. From 2008 through 2011, that number dropped to 660,000 on average and is projected by the National Association of Home Builders to be about 757,000 for 2012. Clearly, more new home production will be needed to meet future demand.
"While general economic trends are encouraging, we hope there is recognition among our leaders that policies supportive of a housing recovery will have an exponentially positive impact on job growth and that an increase in home values will translate into stronger family balance sheets, improved consumer confidence and a greater propensity to spend, which will accelerate the economic recovery.
"In a speech on November 15, 2012, Federal Reserve Chairman Ben Bernanke stated the case for housing: 'Strengthening and broadening the housing recovery remain a critical challenge for policymakers, lenders and community leaders. The degree to which that challenge is met will help determine the strength and sustainability of the economic recovery and the extent to which its benefits are broadly felt.'"
"Toll Brothers was named 2012 Builder of the Year by Professional Builder magazine a few weeks ago. As we end 2012 and look forward to 2013, Doug and I especially want to thank our co-workers. Their enthusiasm, diligence, perseverance, excellence and commitment to quality is why Toll Brothers received this honor."
Toll Brothers' financial highlights for the fourth quarter and fiscal year ended October 31, 2012 (unaudited):
• FY 2012's fourth-quarter net income was $411.4 million, or $2.35 per share diluted, compared to FY 2011's fourth-quarter net income of $15.0 million, or $0.09 per share diluted.
• FY 2012's fourth quarter included a net tax benefit of $350.7 million, which included the reversal of $400.0 million of the Company's deferred tax asset valuation reserves against its deferred tax asset, offset by a tax provision of $49.3 million. This compared to a $0.2 million tax provision in FY 2011's fourth quarter.
• FY 2012's fourth-quarter pre-tax income was $60.7 million, compared to FY 2011's fourth-quarter pre-tax income of $15.3 million. FY 2012's fourth-quarter results included pre-tax write-downs of $1.5 million: $1.4 million of the write-downs was attributable to operating communities and $0.3 million to owned land for future communities, offset, in part, by recoveries of previously recognized write-downs of $0.2 million and by $0.7 million of cash recoveries of prior joint venture write-offs. FY 2011's fourth-quarter results included a pre-tax charge of $0.4 million associated with the early retirement of debt and pre-tax write-downs of $18.2 million.
• Excluding inventory write-downs and cash recoveries of prior joint venture write-offs, FY 2012's fourth-quarter pre-tax income was $61.6 million, compared to pre-tax income of $33.9 million in FY 2011's fourth quarter, excluding write-downs and debt retirement charges.
• FY 2012's fourth-quarter gross margin improved to 20.1% from 15.3% in FY 2011's fourth quarter. Excluding write-downs and interest, FY 2012's fourth-quarter gross margin improved to 24.6% from 24.2% in FY 2011's fourth quarter. For FY 2012, gross margin, excluding interest and write-downs, was 24.0%, compared to 23.3% for FY 2011.
• FY 2012's net income was $487.1 million, or $2.86 per share diluted, compared to FY 2011's net income of $39.8 million, or $0.24 per share diluted.
• FY 2012 included a net tax benefit of $374.2 million, which included the reversal of $400.0 million of the Company's deferred tax asset valuation reserves against its deferred tax asset, offset by a tax provision of $25.8 million. This compared to a $69.2 million net tax benefit in FY 2011.
• FY 2012's pre-tax income was $112.9 million, compared to FY 2011's pre-tax loss of $29.4 million. FY 2012's results included pre-tax write-downs of $14.7 million: $13.1 million of the write-downs was attributable to operating communities, $1.2 million to owned land for future communities and $0.5 million to land controlled for future communities, offset, in part, by $2.3 million of cash recoveries of prior joint venture write-offs. FY 2011's results included pre-tax write-downs totaling $92.7 million and pre-tax charges of $3.8 million due to early retirement of debt.
• Excluding write-downs and cash recoveries of prior joint venture write-offs, FY 2012's pre-tax income was $125.4 million, compared to pre-tax income of $67.2 million for FY 2011.
• Interest included in cost of sales was 4.3% of revenues in FY 2012's fourth quarter, compared to 4.7% of revenues in FY 2012's third quarter, and down from 5.0% in FY 2011's fourth quarter.
• FY 2012's fourth-quarter revenues and home building deliveries of $632.8 million and 1,088 units increased 48% in dollars and 44% in units, compared to FY 2011's fourth-quarter results of $427.8 million and 757 units. The average price of homes delivered was $582,000, compared to $576,000 in FY 2012's third quarter and $565,000 in FY 2011's fourth quarter.
• For FY 2012, home building revenues of $1.88 billion and 3,286 units increased 28% in dollars and 26% in units, compared to FY 2011's results of $1.48 billion and 2,611 units.
• In FY 2012's fourth quarter, unconsolidated entities in which the Company had an interest delivered $13.6 million of homes, compared to $34.8 million in the fourth quarter of FY 2011. In FY 2012, unconsolidated entities in which the Company had an interest delivered $89.9 million of homes, compared to $233.4 million in FY 2011. The Company recorded its share of the results from these entities' operations in "(Income/(Loss) from Unconsolidated Entities" on the Company's Statement of Operations.
• The Company signed gross contracts of $715.4 million and 1,151 units in FY 2012's fourth quarter, an increase of 70% and 65%, respectively, compared to $421.4 million and 699 gross contracts signed in FY 2011's fourth quarter. The Company signed gross contracts of $2.67 billion and 4,341 units in FY 2012, an increase of 56% in dollars and 46% in units, compared to the $1.71 billion and 2,965 gross contracts signed in FY 2011.
• FY 2012's fourth-quarter net signed contracts of $684.1 million and 1,098 rose 75% in dollars and 70% in units, compared to FY 2011's fourth-quarter net signed contracts of $390.0 million and 644 units. The Company's FY 2012 net contracts of $2.56 billion and 4,159 units increased by 59% and 49%, respectively, compared to net contracts of $1.60 billion and 2,784 units in FY 2011.
• On a per-community basis, FY 2012's fourth-quarter net signed contracts of 4.86 units per community were 60% greater than FY 2011's fourth-quarter total of 3.04; 65% greater than FY 2010's fourth-quarter total of 2.94 units; 37% greater than FY 2009's fourth-quarter total of 3.56 units; and 161% greater than FY 2008's fourth-quarter total of 1.86; however, they were still below the Company's historical fourth-quarter average, dating back to 1990, of 5.82 units per community. On a per-community basis, FY 2012's net signed contracts of 18.2 units per community were the highest for any fiscal year since FY 2006.
• The average price per unit of net contracts signed in FY 2012's fourth quarter was $623,000, compared to $603,000 in FY 2012's third quarter and $606,000 in FY 2011's fourth quarter.
• FY 2012's fourth-quarter cancellation rate (current-quarter cancellations divided by current-quarter signed contracts) was 4.6%, compared to 7.9% in FY 2011's fourth quarter. As a percentage of beginning-quarter backlog, FY 2012's fourth-quarter cancellation rate was 2.1%, compared to 3.1% in FY 2011's fourth quarter.
• The Company ended FY 2012 with a backlog of approximately $1.67 billion and 2,569 units, which increased 70% in dollars and 54% in units, compared to FY 2011's year-end backlog of $981.1 million and 1,667 units.
• In FY 2012's fourth quarter, SG&A as a percentage of revenue improved to 11.8%, compared to 16.0% in FY 2011's fourth quarter, due primarily to higher revenues and an insurance reserve reversal of $8.0 million. For FY 2012, SG&A as a percentage of revenue improved to 15.3% compared to 17.7% for FY 2011.
• At October 31, 2012, unconsolidated entities in which the Company had an interest had a backlog of $27.2 million, compared to $21.0 million at October 31, 2011. In FY 2012's fourth quarter and twelve-month periods, such unconsolidated entities produced $16.4 million and $96.1 million of contracts, respectively, compared to $29.6 million and $163.1 million, respectively, in the previous year.
• The Company ended FY 2012 with $1.22 billion of cash and marketable securities, compared to $877.4 million at FY 2012's third-quarter end and $1.14 billion at FYE 2011. The Company used $92.0 million on land purchases in FY 2012's fourth quarter. At FYE 2012, the Company also had $814.9 million available under its $885 million 12-bank credit facility, which matures in October 2014.
• The Company's Stockholders' Equity at FYE 2012 was $3.12 billion, compared to $2.59 billion at FYE 2011.
• The Company ended FY 2012 with a net-debt-to-capital ratio(1) of 23.6%, compared to 27.5% at FY 2012's third-quarter end and 15.0% at FYE 2011.
• The Company ended FY 2012 with approximately 40,400 lots owned and optioned, compared to 39,200 one quarter earlier, 37,500 one year earlier, and 91,200 at its peak at FY 2006's second-quarter end. This is exclusive of approximately 800 lots the Company expects to buy from its Baker Ranch joint venture, the operating terms of which were finalized shortly after the quarter ended. At FYE 2012, approximately 31,300 of the 40,400 lots were owned, of which approximately 12,700 lots, including those in backlog, were substantially improved.
• In the fourth quarter of FY 2012, the Company purchased 1,899 lots for approximately $92.0 million, and, for the full fiscal year, purchased 5,877 lots for approximately $456.5 million.
• The Company expects to end FY 2013 with between 225 and 255 selling communities, compared to its peak of 325 communities at FY 2007's second-quarter end. The Company ended FY 2012 with 224 selling communities, compared to 226 at FY 2012's third-quarter end and 215 at FYE 2011.
• Based on FYE 2012's backlog and the pace of activity at its communities, the Company currently estimates it will deliver between 3,600 and 4,400 homes in FY 2013. It believes the average delivered price for FY 2013 will be between $595,000 and $630,000 per home.
• In FY 2012's fourth quarter and fiscal year, the Company's Gibraltar Capital and Asset Management subsidiary reported a pre-tax loss of $0.4 million and pre-tax income of $7.2 million respectively, compared to FY 2011's fourth quarter and fiscal-year pre-tax income of $1.7 million and $6.9 million, respectively.
(1) Net debt-to-capital is calculated as total debt minus mortgage warehouse loans minus cash and marketable securities, divided by total debt minus mortgage warehouse loans minus cash and marketable securities plus stockholders' equity.
https://globenewswire.com/news-release/2012/12/04/509309/10014474/en/Toll-Brothers-Reports-4th-Qtr-and-FYE-2012-Results.html
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