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 July 31, 1995
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: 33,593,067 shares as of August 30, 1995
<PAGE>
TOLL BROTHERS, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page No.
PART I. Financial Information
ITEM 1. Financial Statements
<S> <C>
Condensed Consolidated Balance Sheets 1
July 31, 1995 (Unaudited) and October 31, 1994
Condensed Consolidated Statements of Income (Unaudited) 2
For the Nine Months and Three Months Ended
July 31, 1995 and 1994
Condensed Consolidated Statements of Cash Flows 3
(Unaudited)
For the Nine Months Ended July 31, 1995 and 1994
Notes to Condensed Consolidated Financial Statements 4
(Unaudited)
ITEM 2. Management's Discussion and Analysis of 6
Financial Condition and Results of Operations
PART II. Other Information 8
SIGNATURES 9
</TABLE>
<PAGE>
<PAGE>
PART I. ITEM 1. FINANCIAL STATEMENTS
TOLL BROTHERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
<TABLE>
<CAPTION>
July 31, October 31,
1995 1994
(unaudited) (Note 1)
----------- -----------
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 19,860 $ 38,026
Marketable securities -- 3,674
Residential inventories 614,188 506,347
Property, construction and office equipment 11,660 11,537
Receivables, prepaid expenses and other assets 23,569 22,695
Mortgage notes receivable 4,047 4,614
-------- --------
$673,324 $586,893
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Loans payable $ 63,895 $ 17,506
Subordinated notes 224,212 227,969
Customer deposits on sales contracts 30,324 30,071
Accounts payable 30,370 28,914
Accrued expenses 46,217 40,872
Collateralized mortgage obligations payable 4,098 4,686
Income taxes payable 35,586 32,699
------- --------
Total liabilities 434,702 382,717
======== ========
Shareholders' equity:
Preferred stock - -
Common stock 336 334
Additional paid-in capital 37,695 36,198
Retained earnings 200,591 167,644
-------- --------
Total shareholders' equity 238,622 204,176
-------- --------
$673,324 $586,893
======== ========
</TABLE>
See accompanying notes
<PAGE>
<PAGE>
TOLL BROTHERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Nine months Three months
ended July 31 ended July 31
1995 1994 1995 1994
-------------------- -------------------
Revenues:
<S> <C> <C> <C> <C>
Housing sales $445,030 $327,725 $186,604 $119,043
Interest and other 1,703 1,907 324 1,017
-------- -------- -------- --------
446,733 329,632 186,928 120,060
-------- -------- -------- --------
Costs and expenses:
Land and housing
construction 335,561 248,781 140,317 90,548
Selling, general &
administrative 43,393 35,447 16,211 12,672
Interest 15,491 12,001 6,040 3,909
-------- -------- -------- --------
394,445 296,229 162,568 107,129
-------- -------- -------- --------
Income before income taxes 52,288 33,403 24,360 12,931
Income taxes 19,342 12,556 9,118 4,939
-------- -------- -------- --------
Net income $ 32,946 $ 20,847 $ 15,242 $ 7,992
======== ======== ======== ========
Income per share:
Primary $ .98 $ .62 $ .45 $ .24
Fully-diluted $ .94 $ .61 $ .43 $ .23
Weighted average number
of shares
Primary 33,769 33,660 34,074 33,563
Fully-diluted 36,504 35,545 36,605 36,149
</TABLE>
See accompanying notes
<PAGE>
<PAGE>
TOLL BROTHERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Note 5)
(Amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months
ended July 31
--------------------
1995 1994
------- -------
Cash flows from operating activities:
<S> <C> <C>
Net income $32,946 $20,847
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 1,779 1,993
Gain from repurchase of subordinated notes (523) (549)
Net realizable provisions 1,123 4,875
Increase in residential inventories (108,964) (78,240)
Increase in receivables, prepaid expenses
and other assets (1,236) (1,116)
Increase in customer deposits on sales contracts 253 10,322
Increase in accounts payable 1,456 6,854
Increase in accrued expenses and other
liabilities 5,345 8,817
Increase (decrease) in current income
taxes payable 2,865 (3,312)
Increase in deferred income taxes payable 159 996
Net cash used in operating activities (64,797) (28,513)
Cash flows from investing activities:
Proceeds from (purchase of) marketable
securities, net 3,674 (6,554)
Purchase of property, construction and
office equipment, net (1,636) (2,411)
Principal repayments of mortgage notes receivable 576 4,714
Net cash provided by (used in) investing
activities 2,614 (4,251)
Cash flows from financing activities:
Proceeds from loans payable 151,000 13,493
Principal payments of loans payable (104,721) (25,465)
Net proceeds from issuance of subordinated notes -0- 55,541
Repurchase of subordinated notes (3,166) (2,353)
Principal payments of collateralized
mortgage obligations (595) (5,607)
Proceeds from stock options exercised
and employee stock plan purchases 1,499 848
Net cash provided by financing activities 44,017 36,457
Net increase (decrease) in cash and cash equivalents (18,166) 3,693
Cash and cash equivalents, beginning of period 38,026 32,329
Cash and cash equivalents, end of period $19,860 $36,022
Supplemental disclosures of cash flow information
Interest paid, net of capitalized amount $ 3,669 $ 3,177
Income taxes paid $15,999 $14,872
Supplemental disclosures of non-cash financing
activities:
Cost of residential inventories acquired
through seller financing $ -0- $ 5,000
Income tax benefit relating to exercise
of employee stock options $ 318 $ 223
</TABLE>
See accompanying notes
<PAGE>
<PAGE>
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, 1994 balance sheet amounts and disclosures included herein have
been derived from the October 31, 1994 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, 1994
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 July 31, 1995 and October
31, 1994, the results of its operations for the nine months and three
months ended July 31, 1995 and 1994 and its cash flows for the nine months
ended July 31, 1995 and 1994. The results of operations for such interim
period are not necessarily indicative of the results to be expected for the
full year.
2. Residential Inventories
Residential inventories consisted of the following:
<TABLE>
<CAPTION>
July 31, October 31,
1995 1994
----------- -----------
<S> <C> <C>
Land and land development costs $157,437 $158,686
Construction in progress 398,440 277,098
Sample homes 27,944 22,641
Land deposits and costs of future
development 12,439 13,943
Loan assets acquired for future
development 6,127 25,186
Deferred marketing and financing
costs 11,801 8,793
-------- --------
$614,188 $506,347
======== ========
</TABLE>
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 settled. Interest
incurred, capitalized and expensed is summarized as follows:
<TABLE>
<CAPTION>
Nine months Three months
ended July 31 ended July 31
----------------- -----------------
1995 1994 1995 1994
------- ------- ------- -------
Interest capitalized,
<S> <C> <C> <C> <C>
beginning of period $39,835 $38,270 $42,704 $39,335
Interest incurred 18,856 16,107 6,439 5,538
Interest expensed (15,491) (12,001) (6,040) (3,909)
Write off to cost of sales
and other (176) (1,941) (79) (529)
Interest capitalized,
end of period $43,024 $40,435 $43,024 $40,435
</TABLE>
3. Loans Payable
In the third quarter of 1995, the Company increased its revolving credit
facility to $230 million and extended the expiration date to June 2000.
The facility reduces by 50% in June 1998 unless extended pursuant to the
Agreement.
4. Net Income Per Share
Net income per share is based on the weighted average number of shares of
common stock and common stock equivalents outstanding. Common stock
equivalents include dilutive stock options. Fully-diluted earnings per
share assumes conversion of the Company's 4 3/4% Convertible Subordinated
Notes at a conversion price of $21.75 per share.
5. Subsequent Event
In August 1995, the Company acquired certain assets of Geoffrey H. Edmunds
& Associates, Inc., a privately owned, Scottsdale, Arizona, luxury
homebuilder. The Company, through this acquisition, will own or control
approximately 750 lots in the Scottsdale area. The acquisition will take
place in phases with the merger of the organization completed by April 1,
1996.
<PAGE>
<PAGE>
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:
<TABLE>
<CAPTION>
Nine months Three months
ended July 31 ended July 31
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Land and housing construction 75.1 75.5 75.1 75.4
Selling, general and
administrative 9.7 10.8 8.7 10.6
Interest 3.5 3.6 3.2 3.3
----- ----- ----- -----
Total costs and expenses 88.3 89.9 87.0 89.3
----- ----- ----- -----
Income before income taxes 11.7% 10.1% 13.0% 10.7%
===== ===== ===== =====
Number of homes closed 1,270 1,056 516 374
===== ===== ===== =====
</TABLE>
Revenues for the nine months and three months ended July 31, 1995 were higher
than those of the comparable period of the prior year by approximately $117.1
million, or 36%, and $66.9 million, or 56%, respectively. 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
1995, as compared to the beginning of 1994 and to the construction delays
caused by the adverse weather conditions during the early part of 1994. In
addition, the average sales price per home increased in the periods as the
result of a change in product mix, a shift in the location of homes closed to
more expensive communities and increases in selling prices.
As of July 31, 1995 and 1994, the backlog of homes under contract amounted to
$393.3 million (1,058 homes) and $377.3 million (1,080 homes), respectively.
The aggregate sales value of new contracts signed during the nine months and
three months ended July 31, 1995 amounted to $467.8 million (1,303 homes) and
$147.0 million (400 homes), respectively. This compares to $419.5 million
(1,244 homes) and $126.4 million (363 homes) for the same periods of 1994.
The increase in new contracts signed and backlog in 1995 over 1994 is
primarily attributable to the increase in the number of communities in which
the Company is offering homes for sale, a shift in location of the
communities to more expensive areas, an increase in the size of the homes
that our customers purchased and increases in selling prices.
As a percentage of revenues, land and housing construction costs decreased
slightly in the nine months and three months ended July 31, 1995 as compared to
the same periods of 1994. During both periods of 1995, the Company saw lower
overhead costs per home and lower writeoffs of inventory and previously
capitalized costs that the Company no longer considered realizable. These lower
costs were partially offset by higher material and labor costs. The Company
provided writeoffs of approximately $3.3 million and $1.3 million in the nine
month and three month periods of 1995, and $4.9 million and $2.3 million for the
same periods of fiscal 1994.
Selling, general and administrative expenses ("SG&A") as a percentage of
revenues decreased in both periods of 1995 as compared to 1994 although SG&A
spending increased for the 1995 periods over the same periods of 1994. The
decline in the SG&A percentages is principally the result of revenue
increasing at a greater rate than spending. The increased spending was
principally due to the increased number of communities that the Company was
operating in during the 1995 periods.
Interest expense was slightly lower as a percentage of revenues in the nine
month and three month periods of 1995 as compared to 1994. Interest expense is
determined on a specific house by house basis and will vary depending on many
factors including the period of time that the land was owned, the period of time
that the house was 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.
Income taxes for the nine month periods of 1995 and 1994 were provided at
effective rates of 37.0% and 37.6%, respectively. For the three month periods
of 1995 and 1994, income taxes were provided at effective rates of 37.4% and
38.2%, respectively.
CAPITAL RESOURCES AND LIQUIDITY
Funding for the Company's residential development activities has been
principally provided by cash flows from operations, unsecured bank borrowings
and the public debt and equity markets.
The Company has a $230 million unsecured revolving credit facility with fourteen
banks which extends to June 2000. The facility reduces by 50% in June 1998
unless extended pursuant to the agreement. As of July 31, 1995, the Company had
$59 million of loans and approximately $35.3 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 operating cash flow, cash balances and existing sources of
credit.
<PAGE>
<PAGE>
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
(a) Exhibits
Exhibit 11. Statement Regarding Computation of Per Share
Earnings
Exhibit 27. Financial Data Schedule
(b) Reports on Form 8-K
None.
<PAGE>
<PAGE>
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: September 12, 1995 By: /s/ Joel H. Rassman
-------------------- ------------------------
Joel H. Rassman
Senior Vice President,
Treasurer and Chief
Financial Officer
Date: September 12, 1995 By: /s/ Joseph R. Sicree
-------------------- ------------------------
Joseph R. Sicree
Vice President -
Chief Accounting Officer
(Principal Accounting Officer)
<PAGE>
TOLL BROTHERS, INC. & SUBSIDIARIES EXHIBIT 11
STATEMENT: COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Nine Months Nine Months
ended July 31, ended July 31,
-------------- --------------
1995 1994
---- ----
Net income per income
<S> <C> <C>
statement $32,946,000 $20,847,000
Addback: Interest on
convertible debentures,
net of income taxes 1,190,000 721,000
----------- -----------
Net income (Fully diluted) $34,136,000 $21,568,000
=========== ===========
Earnings per share:
Primary $ 0.98 $ 0.62
Fully Diluted $ 0.94 $ 0.61
PRIMARY SHARES:
Weighted average shares
outstanding 33,475,849 33,390,484
Common stock equivalents -
stock options 293,449 269,226
----------- -----------
TOTAL 33,769,298 33,659,710
=========== ===========
FULLY DILUTED SHARES:
Weighted average shares
outstanding 33,475,996 33,390,241
Common stock equivalents -
stock options 575,238 306,208
Shares issuable on conversion of
subordinated debentures 2,452,917 1,848,764
----------- -----------
TOTAL 36,504,151 35,545,213
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
Three Months Three Months
ended July 31, ended July 31,
-------------- --------------
1995 1994
---- ----
Net income per income
<S> <C> <C>
statement $15,242,000 $ 7,992,000
Addback: Interest on
convertible debentures,
net of income taxes 395,000 401,000
----------- -----------
Net income (Fully diluted) $15,637,000 $ 8,393,000
=========== ===========
Earnings per share:
Primary $ 0.45 $ 0.24
Fully Diluted $ 0.43 $ 0.23
PRIMARY SHARES:
Weighted average shares
outstanding 33,531,627 33,419,365
Common stock equivalents -
stock options 542,359 143,142
----------- -----------
TOTAL 34,073,986 33,562,507
=========== ===========
FULLY DILUTED SHARES:
Weighted average shares
outstanding 33,531,627 33,419,365
Common stock equivalents -
stock options 627,824 143,153
Shares issuable on conversion of
subordinated debentures 2,445,931 2,586,207
----------- -----------
TOTAL 36,605,382 36,148,725
=========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> JUL-31-1995
<CASH> 19,860
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 614,188
<CURRENT-ASSETS> 0
<PP&E> 25,207
<DEPRECIATION> 13,547
<TOTAL-ASSETS> 673,324
<CURRENT-LIABILITIES> 0
<BONDS> 224,212
<COMMON> 336
0
0
<OTHER-SE> 238,286
<TOTAL-LIABILITY-AND-EQUITY> 673,324
<SALES> 445,030
<TOTAL-REVENUES> 446,733
<CGS> 335,561
<TOTAL-COSTS> 378,954
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,491
<INCOME-PRETAX> 52,288
<INCOME-TAX> 19,342
<INCOME-CONTINUING> 32,946
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 32,946
<EPS-PRIMARY> .98
<EPS-DILUTED> .94
</TABLE>
