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Toll Brothers Reports FY 2021 3rd Quarter Results

FORT WASHINGTON, Pa., Aug. 24, 2021 (GLOBE NEWSWIRE) -- Toll Brothers, Inc. (NYSE:TOL) (TollBrothers.com), the nation’s leading builder of luxury homes, today announced results for its third quarter ended July 31, 2021.

FY 2021’s Third Quarter Financial Highlights (Compared to FY 2020's Third Quarter):

  • Net income and earnings per share were $234.9 million and $1.87 per share diluted, compared to net income of $114.8 million and $0.90 per share diluted in FY 2020’s third quarter.
  • Pre-tax income was $303.4 million, compared to $151.9 million in FY 2020’s third quarter.
  • Home sales revenues were $2.23 billion, up 37% compared to FY 2020’s third quarter; delivered homes were 2,597, up 28%.
  • Net signed contract value was $2.98 billion, up 35% compared to FY 2020’s third quarter; contracted homes were 3,154, up 11%. Net signed contracts, in both dollars and units, were third quarter records.
  • Backlog value was $9.44 billion at third quarter end, up 55% compared to FY 2020’s third quarter; homes in backlog were 10,661, up 47%. Quarter-end backlog, in both dollars and units, were all-time records.
  • Home sales gross margin was 22.7%, compared to FY 2020’s third quarter home sales gross margin of 21.0%.
  • Adjusted home sales gross margin, which excludes interest and inventory write-downs, was 25.6%, compared to FY 2020’s third quarter adjusted home sales gross margin of 23.9%.
  • SG&A, as a percentage of home sales revenues, was 10.5%, compared to 11.9% in FY 2020’s third quarter.
  • Income from operations was $276.7 million.
  • Other income, income from unconsolidated entities, and gross margin from land sales and other was $29.1 million.

Douglas C. Yearley, Jr., chairman and chief executive officer, stated: “We are very pleased with our third quarter performance. Home sales revenues were up 37%,and pre-tax income and earnings per share more than doubled compared to one year ago. We are benefiting from our strategy of broadening our product lines, price points and geographies as we continue to grow our business, drive price, expand margins and improve our capital efficiency.

“Demand continues to be very strong. Net signed contracts were up 35% in dollars to approximately $3 billion compared to the prior year period. The housing market is being driven by many strong fundamentals, including low mortgage rates, favorable millennial-driven demographics, a decade of pent-up demand, low new home supply, and a tight resale market. We expect strong and sustainable demand for our homes in the years to come.

“Our deep land position provides a solid foundation for growth, with 340 communities projected by FYE 2021 and an additional 10% community count growth in fiscal 2022. Our record backlog, our focus on capital and operating efficiency, and the continued strength of the housing market give us confidence that our full FY 2022 margins will significantly exceed the strong margins we project for our FY 2021 fourth quarter and that our return on beginning equity will exceed 20% in FY 2022 and beyond.”

Fourth Quarter and FY 2021 Financial Guidance:
 Fourth Quarter Full Fiscal Year 2021
Deliveries3,450 units 10,100 units
Average Delivered Price per Home$840,000 $830,000
Adjusted Home Sales Gross Margin25.6 % 24.9 %
SG&A, as a Percentage of Home Sales Revenues9.8 % 11.3 %
Quarter-End Community Count340 340
Other Income, Income from Unconsolidated   
Entities, and Gross Margin from Land Sales
and Other
$40 million $140 million
Tax Rate26.0 % 24.6 %


Financial Highlights for the three months ended July 31, 2021 and 2020 (unaudited):
 2021 2020
Net Income$234.9 million, or $1.87 per share diluted $114.8 million, or $0.90 per share diluted
Pre-Tax Income$303.4 million $151.9 million
Pre-Tax Inventory Impairments$13.2 million $6.7 million
Home Sales Revenues$2.23 billion and 2,597 units $1.63 billion and 2,022 units
Net Signed Contracts$2.98 billion and 3,154 units $2.21 billion and 2,833 units
Net Signed Contracts per Community10.2 units 8.5 units
Quarter-End Backlog$9.44 billion and 10,661 units $6.09 billion and 7,239 units
Average Price per Home in Backlog$885,200 $840,600
Home Sales Gross Margin22.7 % 21.0 %
Adjusted Home Sales Gross Margin25.6 % 23.9 %
Interest Included in Home Sales Cost of   
Revenues, as a percentage of Home
Sales Revenues
2.2 % 2.5 %
SG&A, as a percentage of Home   
Sales Revenues10.5 % 11.9 %
Income from Operations$276.7 million, or 12.3% of total revenues $149.6 million, or 9.1% of total revenues
Other Income, Income from Unconsolidated   
Entities, and Gross Margin from Land
Sales and Other
$29.1 million $3.6 million
Quarterly Cancellations as a Percentage   
of Signed Contracts in Quarter3.1 % 8.0 %
Quarterly Cancellations as a Percentage   
of Beginning-Quarter Backlog1.0 % 3.8 %


Financial Highlights for the nine months ended July 31, 2021 and 2020 (unaudited):
 2021 2020
Net Income$459.3 million, or $3.63 per share diluted $247.3 million, or $1.87 per share diluted
Pre-Tax Income*$600.6 million $319.9 million
Pre-Tax Inventory Impairments$16.0 million $21.9 million
Home Sales Revenues$5.48 billion and 6,645 units $4.44 billion and 5,556 units
Net Signed Contracts$8.54 billion and 9,515 units $5.26 billion and 6,525 units
Income from Operations$580.2 million, or 10.1% of total revenues $289.7 million, or 6.4% of total revenues
Other Income, Income from    
Unconsolidated Entities, and
Land Sales Gross Profit
$100.7 million $39.9 million

*Pre-tax income in the nine months ended July 31, 2021 includes charges of $35.2 million for the early retirement of debt.   

Additional Information:

  • The Company ended its FY 2021 third quarter with approximately $946 million in cash and cash equivalents, compared to $1.37 billion at FYE 2020 and $715 million at FY 2021’s second quarter end. At FY 2021 third quarter end, the Company also had $1.79 billion available under its $1.905 billion bank revolving credit facility, substantially all of which is scheduled to mature in November 2025.
  • On July 23, 2021, the Company paid its quarterly dividend of $0.17 per share to shareholders of record at the close of business on July 9, 2021.
  • Stockholders' Equity at FY 2021 third quarter end was $5.03 billion, compared to $4.88 billion at FYE 2020.
  • FY 2021's third quarter-end book value per share was $41.34 per share, compared to $38.53 at FYE 2020.
  • The Company ended its FY 2021 third quarter with a debt-to-capital ratio of 41.6%, compared to 42.2% at FY 2021’s second quarter end and 44.8% at FYE 2020. The Company ended FY 2021’s third quarter with a net debt-to-capital ratio(1) of 33.1%, compared to 35.6% at FY 2021’s second quarter end, and 33.3% at FYE 2020.
  • The Company ended FY 2021’s third quarter with approximately 79,500 lots owned and optioned, compared to 74,500 one quarter earlier, and 61,400 one year earlier. Approximately 47% or 37,500, of these lots were owned, of which approximately 17,800 lots, including those in backlog, were substantially improved.
  • In the third quarter of FY 2021, the Company spent approximately $200.9 million on land to purchase approximately 2,138 lots.
  • The Company ended FY 2021’s third quarter with 314 selling communities, compared to 320 at FY 2021’s second quarter end and 323 at FY 2020’s third quarter end.
  • The Company repurchased approximately 1.7 million shares of its common stock during the quarter at an average price of $57.66 per share for an aggregate purchase price of approximately $95.4 million. In the nine months ended July 31, 2021, the Company repurchased approximately 5.7 million shares of its common stock at an average price of $48.37 per share for an aggregate purchase price of approximately $275.1 million.
  • On August, 24, 2021, the Company announced a strategic partnership with Equity Residential to selectively acquire and develop sites for new rental apartment communities in metro Boston, MA; Atlanta, GA; Austin, TX; Denver, CO; Orange County/San Diego, CA; Seattle, WA, and Dallas-Fort Worth, TX.

(1)   See “Reconciliation of Non-GAAP Measures” below for more information on the calculation of the Company’s net debt-to-capital ratio.

Toll Brothers will be broadcasting live via the Investor Relations section of its website, investors.TollBrothers.com, a conference call hosted by Chairman & CEO Douglas C. Yearley, Jr. at 8:30 a.m. (EST) Wednesday, August 25, 2021, to discuss these results and its outlook for the fourth quarter and FY 2021. To access the call, enter the Toll Brothers website, click on the Investor Relations page, and select “Events & Presentations.” Participants are encouraged to log on at least fifteen minutes prior to the start of the presentation to register and download any necessary software.

The call can be heard live with an online replay which will follow.

ABOUT TOLL BROTHERS

Toll Brothers, Inc., A FORTUNE 500 Company, is the nation's leading builder of luxury homes. The Company was founded over fifty years ago in 1967 and became a public company in 1986. Its common stock is listed on the New York Stock Exchange under the symbol “TOL.” The Company serves first-time, move-up, empty-nester, active-adult, and second-home buyers, as well as urban and suburban renters. Toll Brothers builds in 24 states: Arizona, California, Colorado, Connecticut, Delaware, Florida, Georgia, Idaho, Illinois, Maryland, Massachusetts, Michigan, Nevada, New Jersey, New York, North Carolina, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Utah, Virginia, and Washington, as well as in the District of Columbia. The Company operates its own architectural, engineering, mortgage, title, land development, golf course development, smart home technology, and landscape subsidiaries. The Company also operates its own lumber distribution, house component assembly, and manufacturing operations.

2021 marks the 10th year Toll Brothers has been named to FORTUNE magazine’s World’s Most Admired Companies® list. Toll Brothers has been honored as Builder of the Year by Builder magazine and is the first two-time recipient of Builder of the Year by Professional Builder magazine. For more information visit TollBrothers.com.

Toll Brothers discloses information about its business and financial performance and other matters, and provides links to its securities filings, notices of investor events, and earnings and other news releases, on the Investor Relations section of its website (investors.TollBrothers.com).

FORWARD-LOOKING STATEMENTS

Information presented herein for the third quarter ended July 31, 2021 is subject to finalization of the Company's regulatory filings, related financial and accounting reporting procedures and external auditor procedures.

This release contains or may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. One can identify these statements by the fact that they do not relate to matters of a strictly historical or factual nature and generally discuss or relate to future events. These statements contain words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “may,” “can,” “could,” “might,” “should,” “likely,” “will,” and other words or phrases of similar meaning. Such statements may include, but are not limited to, information and statements regarding: the impact of Covid-19 on the U.S. economy and on our business; expectations regarding inflation and interest rates; the markets in which we operate or may operate; our strategic priorities; our land acquisition, land development and capital allocation priorities; market conditions; demand for our homes; anticipated operating results and guidance; home deliveries; financial resources and condition; changes in revenues; changes in profitability; changes in margins; changes in accounting treatment; cost of revenues, including expected labor and material costs; selling, general, and administrative expenses; interest expense; inventory write-downs; home warranty and construction defect claims; unrecognized tax benefits; anticipated tax refunds; sales paces and prices; effects of home buyer cancellations; growth and expansion; joint ventures in which we are involved; anticipated results from our investments in unconsolidated entities; our ability to acquire or dispose of land and pursue real estate opportunities; our ability to gain approvals and open new communities; our ability to market, construct and sell homes and properties; our ability to deliver homes from backlog; our ability to secure materials and subcontractors; our ability to produce the liquidity and capital necessary to conduct normal business operations or to expand and take advantage of opportunities; and the outcome of legal proceedings, investigations, and claims.

Any or all of the forward-looking statements included in this release are not guarantees of future performance and may turn out to be inaccurate. This can occur as a result of incorrect assumptions or as a consequence of known or unknown risks and uncertainties. The major risks and uncertainties – and assumptions that are made – that affect our business and may cause actual results to differ from these forward-looking statements include, but are not limited to:

  • the ongoing effects of the Covid-19 pandemic, which remain highly uncertain, cannot be predicted and will depend upon future developments, including the duration of the pandemic, the impact of mitigation strategies taken by applicable government authorities, the continued availability and effectiveness of vaccines, adequate testing and therapeutic treatments and the prevalence of widespread immunity to Covid-19;
  • the effect of general economic conditions, including employment rates, housing starts, interest rate levels, availability of financing for home mortgages and strength of the U.S. dollar;
  • market demand for our products, which is related to the strength of the various U.S. business segments and U.S. and international economic conditions;
  • the availability of desirable and reasonably priced land and our ability to control, purchase, hold and develop such land;
  • access to adequate capital on acceptable terms;
  • geographic concentration of our operations;
  • levels of competition;
  • the price and availability of lumber, other raw materials, home components and labor;
  • the effect of U.S. trade policies, including the imposition of tariffs and duties on home building products and retaliatory measures taken by other countries;
  • the effects of weather and the risk of loss from earthquakes, volcanoes, fires, floods, droughts, windstorms, hurricanes, pest infestations and other natural disasters, and the risk of delays, reduced consumer demand, and shortages and price increases in labor or materials associated with such natural disasters;
  • the risk of loss from acts of war, terrorism or outbreaks of contagious diseases, such as Covid-19;
  • federal and state tax policies;
  • transportation costs;
  • the effect of land use, environment and other governmental laws and regulations;
  • legal proceedings or disputes and the adequacy of reserves;
  • risks relating to any unforeseen changes to or effects on liabilities, future capital expenditures, revenues, expenses, earnings, indebtedness, financial condition, losses and future prospects;
  • changes in accounting principles;
  • risks related to unauthorized access to our computer systems, theft of our and our homebuyers’ confidential information or other forms of cyber-attack; and
  • other factors described in “Risk Factors” included in our Annual Report on Form 10-K for the year ended October 31, 2020 and in subsequent filings we make with the Securities and Exchange Commission (“SEC”).

Many of the factors mentioned above or in other reports or public statements made by us will be important in determining our future performance. Consequently, actual results may differ materially from those that might be anticipated from our forward-looking statements.

Forward-looking statements speak only as of the date they are made. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise.

For a further discussion of factors that we believe could cause actual results to differ materially from expected and historical results, see the information under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our most recent Annual Report on Form 10-K filed with the SEC and in subsequent reports filed with the SEC. This discussion is provided as permitted by the Private Securities Litigation Reform Act of 1995, and all of our forward-looking statements are expressly qualified in their entirety by the cautionary statements contained or referenced in this section.

 
 
TOLL BROTHERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
    
 July 31,
2021
 October 31,
2020
 (Unaudited)  
ASSETS   
Cash and cash equivalents$946,097  $1,370,944 
Inventory8,293,280  7,658,906 
Property, construction and office equipment, net304,013  316,125 
Receivables, prepaid expenses and other assets865,133  956,294 
Mortgage loans held for sale183,268  231,797 
Customer deposits held in escrow86,928  77,291 
Investments in unconsolidated entities550,432  430,701 
Income taxes receivable34,908  23,675 
 $11,264,059  $11,065,733 
    
LIABILITIES AND EQUITY   
Liabilities:   
Loans payable$1,036,632  $1,147,955 
Senior notes2,403,576  2,661,718 
Mortgage company loan facility148,655  148,611 
Customer deposits632,483  459,406 
Accounts payable552,998  411,397 
Accrued expenses1,199,204  1,110,196 
Income taxes payable206,608  198,974 
Total liabilities6,180,156  6,138,257 
        
Equity:       
Stockholders’ Equity       
Common stock1,529  1,529 
Additional paid-in capital712,259  717,272 
Retained earnings5,566,562  5,164,086 
Treasury stock, at cost(1,241,582) (1,000,454)
Accumulated other comprehensive loss(3,855) (7,198)
Total stockholders' equity5,034,913  4,875,235 
Noncontrolling interest48,990  52,241 
Total equity5,083,903  4,927,476 
 $11,264,059  $11,065,733 
        


TOLL BROTHERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data and percentages)
(Unaudited)
    
 Three Months Ended
July 31,
 Nine Months Ended
July 31,
 2021 2020 2021 2020
 $% $ % $ % $ %
Revenues:              
Home sales$2,234,365   $1,627,812    $5,481,329    $4,441,383   
Land sales and other21,116   23,677    267,652    90,609   
 2,255,481   1,651,489    5,748,981    4,531,992   
               
Cost of revenues:              
Home sales1,726,124  77.3%  1,286,108  79.0% 4,282,410  78.1% 3,540,208  79.7%
Land sales and other18,709  88.6%  22,259  94.0% 222,534  83.1% 80,959  89.3%
 1,744,833   1,308,367    4,504,944    3,621,167   
               
Gross margin - home sales508,241  22.7%  341,704  21.0% 1,198,919  21.9% 901,175  20.3%
Gross margin - land sales and other2,407  11.4%  1,418  6.0% 45,118  16.9% 9,650  10.7%
               
Selling, general and administrative expenses233,915  10.5%  $193,477  11.9% 663,824  12.1% 621,136  14.0%
Income from operations276,733   149,645    580,213    289,689   
               
Other:              
Income (loss) from unconsolidated entities16,636   (2,566    28,313    5,304   
Other income - net10,026   4,786    27,311    24,917   
Expenses related to early retirement of debt       (35,211       
Income before income taxes303,395   151,865    600,626    319,910   
Income tax provision68,463   37,104    141,329    72,603   
Net income$234,932   $114,761    $459,297    $247,307   
Per share:              
Basic earnings$1.90   $0.91    $3.68    $1.89   
Diluted earnings$1.87   $0.90    $3.63    $1.87   
Cash dividend declared$0.17   $0.11    $0.45    $0.33   
Weighted-average number of shares:              
Basic123,826   126,722    124,727    131,024   
Diluted125,610   127,399    126,390    132,032   
               
Effective tax rate22.6%   24.4%    23.5%    22.7%   
                   


TOLL BROTHERS, INC. AND SUBSIDIARIES
SUPPLEMENTAL DATA
(Amounts in thousands)
(unaudited)
 
 Three Months Ended
July 31,
 Nine Months Ended
July 31,
 2021 2020 2021 2020
Inventory impairment charges recognized:       
Cost of home sales - land owned/controlled for future communities$13,150  $6,690  $14,897  $21,634 
Cost of home sales - operating communities    1,100  300 
 $13,150  $6,690  $15,997  $21,934 
        
Depreciation and amortization$20,757  $16,415  $53,938  $46,700 
Interest incurred$37,398  $41,794  $117,112  $131,547 
Interest expense:       
Charged to home sales cost of sales$49,995  $40,467  $127,412  $111,278 
Charged to land sales and other cost of sales1,065  2,820  3,482  4,124 
Charged to other income - net      2,440 
 $51,060  $43,287  $130,894  $117,842 
        
Home sites controlled:    July 31,
2021
 July 31,
2020
Owned    37,493  35,289 
Optioned    42,024  26,151 
     79,517  61,440 

Inventory at July 31, 2021 and October 31, 2020 consisted of the following (amounts in thousands):

 July 31,
2021
 October 31,
2020
Land and land development costs$2,126,699   $2,094,775  
Construction in progress5,423,110   4,848,647  
Sample homes325,512   398,053  
Land deposits and costs of future development417,959   317,431  
 $8,293,280   $7,658,906  

Toll Brothers operates in two segments: Traditional Home Building and Urban Infill ("City Living"). Within Traditional Home Building, the Company operates in the following five geographic segments, with current operations in the states listed below:

  • North: Connecticut, Delaware, Illinois, Massachusetts, Michigan, Pennsylvania, New Jersey and New York
  • Mid-Atlantic: Georgia, Maryland, North Carolina, Tennessee and Virginia
  • South: Florida, South Carolina and Texas
  • Mountain: Arizona, Colorado, Idaho, Nevada and Utah
  • Pacific: California, Oregon and Washington
  
 Three Months Ended
July 31,
 Units $ (Millions) Average Price Per Unit $
 2021 2020 2021 2020 2021 2020
REVENUES           
North552  412  $402.9  $290.4  $729,900  $704,900 
Mid-Atlantic361  305  276.9  201.3  $766,900  $659,900 
South435  410  291.7  276.3  $670,600  $674,000 
Mountain755  612  553.2  425.4  $732,700  $695,100 
Pacific386  263  524.0  406.4  $1,357,500  $1,545,300 
Traditional Home Building2,489  2,002  2,048.7  1,599.8  $823,100  $799,100 
City Living108  20  184.1  26.4  $1,704,600  $1,318,300 
Corporate and other    1.6  1.6     
Total home sales2,597  2,022  2,234.4  1,627.8  $860,400  $805,000 
Land sales and other    21.1  23.7     
Total consolidated    $2,255.5  $1,651.5     
            
CONTRACTS           
North539  620  $450.5  $428.0  $835,700  $690,400 
Mid-Atlantic361  478  314.7  334.5  $871,900  $699,800 
South736  538  585.6  344.1  $795,600  $639,500 
Mountain956  801  846.5  561.8  $885,500  $701,400 
Pacific517  393  713.4  536.7  $1,380,000  $1,365,600 
Traditional Home Building3,109  2,830  2,910.7  2,205.1  $936,200  $779,200 
City Living45  3  69.0  8.8  $1,533,300  $2,936,000 
Total consolidated3,154  2,833  $2,979.7  $2,213.9  $944,700  $781,500 
            
BACKLOG           
North1,880  1,885  $1,525.5  $1,325.5  $811,400  $703,200 
Mid-Atlantic1,218  954  1,077.7  707.5  $884,800  $741,600 
South2,408  1,302  1,786.2  930.7  $741,800  $714,800 
Mountain3,539  1,888  2,826.8  1,408.8  $798,800  $746,200 
Pacific1,563  1,129  2,138.9  1,581.6  $1,368,500  $1,400,900 
Traditional Home Building10,608  7,158  9,355.1  5,954.1  $881,900  $831,800 
City Living53  81  82.4  131.1  $1,554,100  $1,617,900 
Total consolidated10,661  7,239  $9,437.5  $6,085.2  $885,200  $840,600 


 Nine Months Ended
July 31,
 Units $ (Millions) Average Price Per Unit $
 2021 2020 2021 2020 2021 2020
REVENUES           
North1,565  1,254  $1,106.2  $840.5  $706,800  $670,300 
Mid-Atlantic892  848  659.1  556.6  $738,900  $656,400 
South1,184  1,032  788.8  690.8  $666,200  $669,400 
Mountain1,885  1,518  1,363.0  1,026.0  $723,100  $675,900 
Pacific959  819  1,313.7  1,225.1  $1,369,900  $1,495,800 
Traditional Home Building6,485  5,471  5,230.8  4,339.0  $806,600  $793,100 
City Living160  85  249.9  103.0  $1,561,900  $1,211,800 
Corporate and other    0.6  (0.6)    
Total home sales6,645  5,556  5,481.3  4,441.4  $824,900  $799,400 
Land sales    267.7  90.6     
Total consolidated    $5,749.0  $4,532.0     
            
CONTRACTS           
North1,539  1,397  $1,261.6  $985.0  $819,800  $705,100 
Mid-Atlantic1,120  1,014  966.1  723.9  $862,600  $713,900 
South2,104  1,286  1,536.2  861.8  $730,100  $670,100 
Mountain3,150  1,800  2,518.3  1,281.3  $799,500  $711,800 
Pacific1,478  974  2,065.1  1,320.5  $1,397,200  $1,355,700 
Traditional Home Building9,391  6,471  8,347.3  5,172.5  $888,900  $799,300 
City Living124  54  193.3  83.9  $1,558,900  $1,553,700 
Total consolidated9,515  6,525  $8,540.6  $5,256.4  $897,600  $805,600 
                      

Unconsolidated entities:

Information related to revenues and contracts of entities in which we have an interest for the three-month and nine-month periods ended July 31, 2021 and 2020, and for backlog at July 31, 2021 and 2020 is as follows:

 Units $ (Millions) Average Price Per Unit $
 2021 2020 2021 2020 2021 2020
Three months ended July 31,           
Revenues10  9  $27.6  $35.6  $2,755,000  $3,957,900 
Contracts6  2  $18.0  $7.0  $2,997,800  $3,510,600 
            
Nine months ended July 31,           
Revenues26  41  $71.2  $127.0  $2,738,300  $3,098,200 
Contracts25  17  $71.8  $57.5  $2,871,900  $3,381,900 
            
Backlog at July 31,3  2  $10.6  $6.8  $3,528,800  $3,390,600 
                      

RECONCILIATION OF NON-GAAP MEASURES

This press release contains, and Company management’s discussion of the results presented in this press release may include, information about the Company’s adjusted homes sales gross margin and the Company’s net debt-to-capital ratio.

These two measures are non-GAAP financial measures which are not calculated in accordance with generally accepted accounting principles (“GAAP”). These non-GAAP financial measures should not be considered a substitute for, or superior to, the comparable GAAP financial measures, and may be different from non-GAAP measures used by other companies in the home building business.

The Company’s management considers these non-GAAP financial measures as we make operating and strategic decisions and evaluate our performance, including against other home builders that may use similar non-GAAP financial measures. The Company’s management believes these non-GAAP financial measures are useful to investors in understanding our operations and leverage and may be helpful in comparing the Company to other home builders to the extent they provide similar information.

Adjusted Home Sales Gross Margin
The following table reconciles the Company’s homes sales gross margin as a percentage of homes sale revenues (calculated in accordance with GAAP) to the Company’s adjusted homes sales gross margin (a non-GAAP financial measure). Adjusted homes sales gross margin is calculated as (i) homes sales gross margin plus interest recognized in homes sales cost of revenues plus inventory write-downs recognized in home sales cost of revenues divided by (ii) homes sale revenues.

 
Adjusted Home Sales Gross Margin Reconciliation
(Amounts in thousands, except percentages)
     
  Three Months Ended
July 31,
 Nine Months Ended
July 31,
  2021 2020 2021 2020
Revenues - homes sales$2,234,365  $1,627,812  $5,481,329  $4,441,383 
Cost of revenues - home sales1,726,124  1,286,108  4,282,410  3,540,208 
Home sales gross margin508,241  341,704  1,198,919  901,175 
Add:Interest recognized in cost of revenues - home sales49,995  40,467  127,412  111,278 
 Inventory write-downs13,150  6,690  15,997  21,934 
Adjusted homes sales gross margin$571,386  $388,861  $1,342,328  $1,034,387 
         
Homes sales gross margin as a percentage of home sale revenues22.7% 21.0% 21.9% 20.3%
         
Adjusted home sales gross margin as a percentage of home sale revenues25.6% 23.9% 24.5% 23.3%
            

The Company’s management believes adjusted home sales gross margin is a useful financial measure to investors because it allows them to evaluate the performance of our home building operations without the often varying effects of capitalized interest costs and inventory impairments. The use of adjusted home sales gross margin also assists the Company’s management in assessing the profitability of our home building operations and making strategic decisions regarding community location and product mix.

Forward-looking Adjusted Homes Sales Gross Margin
The Company has not provided projected fourth quarter and full FY 2021 homes sales gross margin or a GAAP reconciliation for forward-looking adjusted homes sales gross margin because such measure cannot be provided without unreasonable efforts on a forward-looking basis, since inventory write-downs are based on future activity and observation and therefore cannot be projected for the fourth quarter and full FY 2021. The variability of these charges may have a potentially unpredictable, and potentially significant, impact on our fourth quarter and full FY 2021 homes sales gross margin.

Net Debt-to-Capital Ratio
The following table reconciles the Company’s ratio of debt to capital (calculated in accordance with GAAP) to the Company’s net debt-to-capital ratio (a non-GAAP financial measure). The net debt-to-capital ratio is calculated as (i) total debt minus mortgage warehouse loans minus cash and cash equivalents divided by (ii) total debt minus mortgage warehouse loans minus cash and cash equivalents plus stockholders’ equity.

 
Net Debt-to-Capital Ratio Reconciliation
(Amounts in thousands, except percentages)
  
  July 31, 2021 April 30, 2021 October 31, 2020
Loans payable$1,036,632  $1,033,165  $1,147,955 
Senior notes2,403,576  2,403,163  2,661,718 
Mortgage company loan facility148,655  146,932  148,611 
Total debt3,588,863  3,583,260  3,958,284 
Total stockholders' equity5,034,913  4,913,070  4,875,235 
Total capital$8,623,776  $8,496,330  $8,833,519 
Ratio of debt-to-capital41.6% 42.2% 44.8%
       
Total debt$3,588,863  $3,583,260  $3,958,284 
Less:Mortgage company loan facility(148,655) (146,932) (148,611)
 Cash and cash equivalents(946,097) (714,968) (1,370,944)
Total net debt2,494,111  2,721,360  2,438,729 
Total stockholders' equity5,034,913  4,913,070  4,875,235 
Total net capital$7,529,024  $7,634,430  $7,313,964 
Net debt-to-capital ratio33.1% 35.6% 33.3%
         

The Company’s management uses the net debt-to-capital ratio as an indicator of its overall leverage and believes it is a useful financial measure to investors in understanding the leverage employed in the Company’s operations.

CONTACT: Frederick N. Cooper (215) 938-8312
fcooper@tollbrothers.com

A photo accompanying this announcement is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/d841822c-9b95-4cb8-8763-24cc9776710c


The Mayne, Sereno Canyon, Scottsdale, AZ

Toll Brothers, America's Luxury Home Builder