e10vq
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-Q
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(Mark One)
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended
April 30, 2008
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or
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the transition period
from to
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Commission file number 1-9186
TOLL BROTHERS, INC.
(Exact name of registrant as
specified in its charter)
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Delaware
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23-2416878
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(State or other jurisdiction
of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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250 Gibraltar Road, Horsham, Pennsylvania
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19044
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(Address of principal executive
offices)
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(Zip Code)
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(215) 938-8000
(Registrants 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 þ No o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in Rule
12b-2 of the
Exchange Act. (Check one):
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Large accelerated
filer þ
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Accelerated
filer o
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Non-accelerated
filer o
(Do not check if a smaller reporting company)
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Smaller reporting
company o
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Indicate by check mark whether the Registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act) Yes o No þ
Indicate the number of shares outstanding of each of the
issuers classes of common stock, as of the latest
practicable date:
At June 2, 2008, there were approximately
158,721,000 shares of Common Stock, $.01 par value,
outstanding.
TOLL
BROTHERS, INC. AND SUBSIDIARIES
TABLE OF
CONTENTS
STATEMENT
ON FORWARD-LOOKING INFORMATION
Certain information included in this report or in other
materials we have filed or will file with the Securities and
Exchange Commission (the SEC) (as well as
information included in oral statements or other written
statements made or to be made by us) contains or may contain
forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended. You
can identify these statements by the fact that they do not
relate strictly to historical or current facts. They contain
words such as anticipate, estimate,
expect, project, intend,
plan, believe, may,
can, could, might,
should and other words or phrases of similar meaning
in connection with any discussion of future operating or
financial performance. Such statements may include information
relating to anticipated operating results (including changes in
revenues, profitability and operating margins), financial
resources, interest expense, inventory write-downs, changes in
accounting treatment, effects of homebuyer cancellations, growth
and expansion, anticipated income or loss to be realized from
our investments in unconsolidated entities, the ability to
acquire land, the ability to gain approvals and to open new
communities, the ability to sell homes and properties, the
ability to deliver homes from backlog, the ability to secure
materials and subcontractors, the ability to produce the
liquidity and capital necessary to expand and take advantage of
opportunities in the future, industry trends, and stock market
valuations. From time to time, forward-looking statements also
are included in our
Form 10-K
and other periodic reports on
Forms 10-Q
and 8-K, in
press releases, in presentations, on our web site and in other
materials released to the public.
Any or all of the forward-looking statements included in this
report and in any other reports or public statements made by us
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.
These risks and uncertainties include local, regional and
national economic conditions, the demand for homes, domestic and
international political events, uncertainties created by
terrorist attacks, the effects of governmental regulation, the
competitive environment in which the Company operates,
fluctuations in interest rates, changes in home prices and sales
activity in the markets where the Company builds homes, the
availability and cost of land for future growth, adverse market
conditions that could result in substantial inventory
write-downs, the availability of capital, uncertainties and
fluctuations in capital and securities markets, changes in tax
laws and their interpretation, legal proceedings, the
availability of adequate insurance at reasonable cost, the
ability of customers to obtain adequate and affordable financing
for the purchase of homes, the ability of home buyers to sell
their existing homes, the ability of the participants in our
various joint ventures to honor their commitments, the
availability and cost of labor and building and construction
materials, the cost of oil, gas and other raw materials,
construction delays and weather conditions.
The factors mentioned in this report 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. If one or more of the assumptions
underlying our forward-looking statements proves incorrect, then
our actual results, performance or achievements could differ
materially from those expressed in, or implied by the
forward-looking statements contained in this report. Therefore,
we caution you not to place undue reliance on our
forward-looking statements. This statement is provided as
permitted by the Private Securities Litigation Reform Act of
1995.
Additional information concerning potential factors that we
believe could cause our actual results to differ materially from
expected and historical results is included in Item 1A
Risk Factors of our Annual Report on
Form 10-K
for the fiscal year ended October 31, 2007 and this
Form 10-Q
for the period ended April 30, 2008.
When this report uses the words we, us,
our, and the Company, they refer to Toll
Brothers, Inc. and its subsidiaries, unless the context
otherwise requires. Reference herein to fiscal 2008,
fiscal 2007, fiscal 2006, and
fiscal 2005, refer to our fiscal year ending
October 31, 2008, and our fiscal years ended
October 31, 2007, October 31, 2006 and
October 31, 2005, respectively.
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. However, any further
disclosures made on related subjects in our subsequent reports
on
Forms 10-K,
10-Q and
8-K should
be consulted. On June 3, 2008, we issued a press release
and held a conference call to review the results of operations
for the six-month and three-month periods ended April 30,
2008 and to discuss the current state of our business. The
information contained in this report is the same information
given in the press release and on the conference call on
June 3, 2008, and we are not reconfirming or updating that
information in this
Form 10-Q.
1
PART I.
FINANCIAL INFORMATION
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ITEM 1.
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FINANCIAL
STATEMENTS
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TOLL
BROTHERS, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEETS
(Amounts
in thousands)
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April 30,
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October 31,
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2008
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2007
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(Unaudited)
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ASSETS
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Cash and cash equivalents
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$
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1,236,028
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$
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900,337
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Inventory
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4,835,869
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5,572,655
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Property, construction and office equipment, net
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93,046
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84,265
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Receivables, prepaid expenses and other assets
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123,185
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135,910
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Contracts receivable
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5,288
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46,525
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Mortgage loans receivable
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67,498
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93,189
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Customer deposits held in escrow
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26,854
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34,367
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Investments in and advances to unconsolidated entities
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196,566
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183,171
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Deferred tax assets, net
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373,967
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169,897
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$
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6,958,301
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$
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7,220,316
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LIABILITIES AND STOCKHOLDERS EQUITY
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Liabilities:
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Loans payable
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$
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718,803
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$
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696,814
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Senior notes
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1,142,876
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1,142,306
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Senior subordinated notes
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350,000
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350,000
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Mortgage company warehouse loan
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56,732
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76,730
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Customer deposits
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201,533
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260,155
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Accounts payable
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150,638
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236,877
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Accrued expenses
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769,494
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724,229
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Income taxes payable
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233,771
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197,960
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Total liabilities
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3,623,847
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3,685,071
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Minority interest
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8,014
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8,011
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Stockholders equity:
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Preferred stock, none issued
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Common stock, 158,729 and 157,028 shares issued at
April 30, 2008 and October 31, 2007, respectively
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1,587
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1,570
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Additional paid-in capital
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264,716
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227,561
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Retained earnings
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3,061,771
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3,298,925
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Treasury stock, at cost 4 and 20 shares at
April 30, 2008 and October 31, 2007, respectively
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(102
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)
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(425
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)
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Accumulated other comprehensive loss
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(1,532
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)
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(397
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)
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Total stockholders equity
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3,326,440
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3,527,234
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$
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6,958,301
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$
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7,220,316
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See accompanying notes
2
TOLL
BROTHERS, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts
in thousands, except per share data)
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Six months ended April 30,
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Three months ended April 30,
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2008
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2007
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2008
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2007
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(Unaudited)
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Revenues:
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Completed contract
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$
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1,626,837
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$
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2,178,395
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$
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800,303
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$
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1,124,259
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Percentage of completion
|
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33,489
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81,522
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17,694
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48,437
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Land sales
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1,316
|
|
|
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5,371
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|
793
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|
|
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1,981
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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1,661,642
|
|
|
|
2,265,288
|
|
|
|
818,790
|
|
|
|
1,174,677
|
|
|
|
|
|
|
|
|
|
|
|
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|
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Cost of revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Completed contract
|
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1,638,909
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|
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1,788,169
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|
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804,713
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|
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941,766
|
|
Percentage of completion
|
|
|
27,482
|
|
|
|
63,260
|
|
|
|
14,594
|
|
|
|
37,363
|
|
Land sales
|
|
|
1,094
|
|
|
|
2,764
|
|
|
|
660
|
|
|
|
1,727
|
|
Interest
|
|
|
44,124
|
|
|
|
49,137
|
|
|
|
23,157
|
|
|
|
26,494
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,711,609
|
|
|
|
1,903,330
|
|
|
|
843,124
|
|
|
|
1,007,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
|
230,023
|
|
|
|
264,577
|
|
|
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108,705
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|
|
130,367
|
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Goodwill impairment
|
|
|
|
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8,973
|
|
|
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|
|
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|
|
|
|
|
|
|
|
|
|
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(Loss) income from operations
|
|
|
(279,990
|
)
|
|
|
88,408
|
|
|
|
(133,039
|
)
|
|
|
36,960
|
|
Other:
|
|
|
|
|
|
|
|
|
|
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|
|
|
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(Loss) earnings from unconsolidated entities
|
|
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(105,643
|
)
|
|
|
11,527
|
|
|
|
(81,557
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)
|
|
|
4,735
|
|
Interest and other income
|
|
|
79,667
|
|
|
|
46,758
|
|
|
|
60,585
|
|
|
|
17,798
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
(Loss) income before income taxes
|
|
|
(305,966
|
)
|
|
|
146,693
|
|
|
|
(154,011
|
)
|
|
|
59,493
|
|
Income taxes (benefit) provision
|
|
|
(116,272
|
)
|
|
|
55,687
|
|
|
|
(60,274
|
)
|
|
|
22,803
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(189,694
|
)
|
|
$
|
91,006
|
|
|
$
|
(93,737
|
)
|
|
$
|
36,690
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|
|
|
|
|
|
|
|
|
|
|
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|
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(Loss) earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Basic
|
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$
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(1.20
|
)
|
|
$
|
0.59
|
|
|
$
|
(0.59
|
)
|
|
$
|
0.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Diluted
|
|
$
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(1.20
|
)
|
|
$
|
0.55
|
|
|
$
|
(0.59
|
)
|
|
$
|
0.22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
158,217
|
|
|
|
154,464
|
|
|
|
158,621
|
|
|
|
154,716
|
|
Diluted
|
|
|
158,217
|
|
|
|
164,171
|
|
|
|
158,621
|
|
|
|
164,294
|
|
See accompanying notes
3
TOLL
BROTHERS, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts
in thousands)
|
|
|
|
|
|
|
|
|
|
|
Six months ended April 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(Unaudited)
|
|
|
Cash flow from operating activities:
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(189,694
|
)
|
|
$
|
91,006
|
|
Adjustments to reconcile net (loss) income to net cash provided
by (used in) operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
14,082
|
|
|
|
15,772
|
|
Amortization of initial benefit obligation
|
|
|
|
|
|
|
885
|
|
Stock-based compensation
|
|
|
16,347
|
|
|
|
18,290
|
|
Excess tax benefits from stock-based compensation
|
|
|
(8,378
|
)
|
|
|
(170
|
)
|
Loss (earnings) from unconsolidated entities
|
|
|
105,643
|
|
|
|
(11,527
|
)
|
Distributions of earnings from unconsolidated entities
|
|
|
12,987
|
|
|
|
10,176
|
|
Deferred tax provision
|
|
|
(204,070
|
)
|
|
|
(72,105
|
)
|
Provision for inventory write-offs
|
|
|
420,739
|
|
|
|
216,612
|
|
Goodwill impairment charge
|
|
|
|
|
|
|
8,973
|
|
Gain on sale of ancillary business
|
|
|
|
|
|
|
(9,565
|
)
|
Changes in operating assets and liabilities
|
|
|
|
|
|
|
|
|
Decrease (increase) in inventory
|
|
|
314,617
|
|
|
|
(238,411
|
)
|
Origination of mortgage loans
|
|
|
(500,549
|
)
|
|
|
(648,663
|
)
|
Sale of mortgage loans
|
|
|
526,240
|
|
|
|
633,284
|
|
Decrease in contracts receivable
|
|
|
41,237
|
|
|
|
95,444
|
|
Decrease in receivables, prepaid expenses and other assets
|
|
|
24,424
|
|
|
|
13,929
|
|
Decrease in customer deposits
|
|
|
(51,109
|
)
|
|
|
(34,499
|
)
|
Decrease in accounts payable and accrued expenses
|
|
|
(138,969
|
)
|
|
|
(97,479
|
)
|
Increase (decrease) in current income taxes payable
|
|
|
464
|
|
|
|
(75,136
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
384,011
|
|
|
|
(83,184
|
)
|
|
|
|
|
|
|
|
|
|
Cash flow from investing activities:
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(4,008
|
)
|
|
|
(11,872
|
)
|
Proceeds from sale of ancillary business
|
|
|
|
|
|
|
15,755
|
|
Purchases of marketable securities
|
|
|
(1,468,437
|
)
|
|
|
(2,117,690
|
)
|
Sale of marketable securities
|
|
|
1,454,557
|
|
|
|
2,117,690
|
|
Investments in and advances to unconsolidated entities
|
|
|
(37,322
|
)
|
|
|
(13,872
|
)
|
Distributions of capital from unconsolidated entities
|
|
|
2,623
|
|
|
|
16,965
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by investing activities
|
|
|
(52,587
|
)
|
|
|
6,976
|
|
|
|
|
|
|
|
|
|
|
Cash flow from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds from loans payable
|
|
|
557,545
|
|
|
|
694,084
|
|
Principal payments of loans payable
|
|
|
(572,574
|
)
|
|
|
(702,517
|
)
|
Proceeds from stock-based benefit plans
|
|
|
12,089
|
|
|
|
4,099
|
|
Proceeds from restricted stock award
|
|
|
|
|
|
|
1,800
|
|
Excess tax benefits from stock-based compensation
|
|
|
8,378
|
|
|
|
170
|
|
Purchase of treasury stock
|
|
|
(1,174
|
)
|
|
|
(886
|
)
|
Change in minority interest
|
|
|
3
|
|
|
|
60
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
4,267
|
|
|
|
(3,190
|
)
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
335,691
|
|
|
|
(79,398
|
)
|
Cash and cash equivalents, beginning of period
|
|
|
900,337
|
|
|
|
632,524
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
1,236,028
|
|
|
$
|
553,126
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes
4
TOLL
BROTHERS, INC. AND SUBSIDIARIES
(Unaudited)
|
|
1.
|
Significant
Accounting Policies
|
Basis
of Presentation
The accompanying unaudited condensed consolidated financial
statements include the accounts of Toll Brothers, Inc. (the
Company), a Delaware corporation, and its
majority-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated. Investments in
50% or less owned partnerships and affiliates are accounted for
using the equity method unless it is determined that the Company
has effective control of the entity, in which case the entity
would be consolidated.
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with the rules and
regulations of the Securities and Exchange Commission
(SEC) for interim financial information. The
October 31, 2007 balance sheet amounts and disclosures
included herein have been derived from our October 31, 2007
audited financial statements. Since the accompanying condensed
consolidated financial statements do not include all the
information and footnotes required by U.S. generally
accepted accounting principles for complete financial
statements, the Company suggests that they be read in
conjunction with the consolidated financial statements and notes
thereto included in its Annual Report on
Form 10-K
for the fiscal year ended October 31, 2007. 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
Companys financial position as of April 30, 2008, the
results of its operations for the six months and three months
ended April 30, 2008 and 2007 and its cash flows for the
six months ended April 30, 2008 and 2007. The results of
operations for such interim periods are not necessarily
indicative of the results to be expected for the full year.
Income
Taxes
On November 1, 2007, the Company adopted the provisions of
the Financial Accounting Standards Board (the FASB)
Interpretation No. 48, Accounting for Uncertainty in
Income Taxes (FIN 48). FIN 48
clarifies the accounting for uncertainty in income taxes
recognized in accordance with Statement of Financial Accounting
Standards (SFAS) No. 109, Accounting for
Income Taxes, and prescribes a recognition threshold and
measurement attributes for the financial statement recognition
and measurement of a tax position taken or expected to be taken
in a tax return. FIN 48 also provides guidance on
de-recognition, classification, interest and penalties,
accounting in interim periods, disclosure and transition.
FIN 48 requires a company to recognize the financial
statement effect of a tax position when it is
more-likely-than-not (defined as a likelihood of more than
50 percent), based on the technical merits of the position,
that the position will be sustained upon examination. A tax
position that meets the more-likely-than-not recognition
threshold is measured to determine the amount of benefit to be
recognized in the financial statements based upon the largest
amount of benefit that is greater than 50 percent likely of
being realized upon ultimate settlement with a taxing authority
that has full knowledge of all relevant information. If a tax
position does not meet the more-likely-than-not recognition
threshold, the benefit of that tax position is not recognized in
the financial statements. See Note 6, Income
Taxes, for information concerning the adoption of
FIN 48.
Recent
Accounting Pronouncements
In September 2006, the FASB issued SFAS No. 158,
Employers Accounting for Defined Benefit Pension and
Other Postretirement Plans, an Amendment of FASB Statements
No. 87, 88, 106, and 132(R)
(SFAS 158). SFAS 158 requires the Company
to (a) recognize in its statement of financial position the
overfunded or underfunded status of a defined benefit
postretirement plan, measured as the difference between the fair
value of plan assets and the benefit obligation,
(b) recognize as a component of other comprehensive income,
net of tax, the actuarial gains and losses and the prior service
costs and credits that arise during the period, (c) measure
defined benefit plan assets and defined benefit plan obligations
as of the date of the Companys statement of financial
position, and (d) disclose additional information about
certain effects on net periodic benefit costs in the upcoming
5
TOLL
BROTHERS, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
fiscal year that arise from the delayed recognition of the
actuarial gains and losses and the prior service costs and
credits. The Company adopted SFAS 158 effective
October 31, 2007 related to its recognition of accumulated
other comprehensive income, net of tax. The Companys
adoption of SFAS 158 did not have a material effect on its
financial statements.
In September 2006, the FASB issued SFAS No. 157,
Fair Value Measurements (SFAS 157).
SFAS 157 provides guidance for using fair value to measure
assets and liabilities. SFAS 157 also responds to
investors requests for expanded information about the
extent to which a company measures assets and liabilities at
fair value, the information used to measure fair value, and the
effect of fair value measurements on earnings. SFAS 157
will be effective for the Companys fiscal year beginning
November 1, 2008. The Company is currently reviewing the
effect SFAS 157 will have on its financial statements;
however, it is not expected that it will have a material impact
on the Companys consolidated financial position, results
of operations or cash flows.
In February 2007, the FASB issued SFAS No. 159,
The Fair Value Option for Financial Assets and Financial
Liabilities, Including an Amendment of FASB Statement
No. 115 (SFAS 159). SFAS 159
permits entities to choose to measure certain financial assets
and liabilities at fair value. Unrealized gains and losses on
items for which the fair value option has been elected will be
reported in earnings. SFAS No. 159 will be effective
for the Companys fiscal year beginning November 1,
2008. The Company is currently reviewing the effect
SFAS 159 will have on its financial statements; however, it
is not expected that it will have a material impact on the
Companys consolidated financial position, results of
operations or cash flows.
In December 2007, the FASB issued SFAS No. 160,
Noncontrolling Interests in Consolidated Financial
Statements, an Amendment to ARB No. 51
(SFAS 160). Under the provisions of
SFAS 160, a noncontrolling interest in a subsidiary, or
minority interest, must be classified as equity and the amount
of consolidated net income specifically attributable to the
minority interest must be clearly identified in the consolidated
statement of operations. SFAS 160 also requires consistency
in the manner of reporting changes in the parents
ownership interest and requires fair value measurement of any
noncontrolling interest retained in a deconsolidation.
SFAS 160 will be effective for the Companys fiscal
year beginning November 1, 2009. The Company is currently
evaluating the impact of the adoption of SFAS 160; however,
it is not expected that it will have a material impact on the
Companys consolidated financial position, results of
operations or cash flows.
Reclassification
The presentation of certain prior period amounts have been
reclassified to conform to the fiscal 2008 presentation.
Inventory at April 30, 2008 and October 31, 2007
consisted of the following (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
April 30,
|
|
|
October 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
Land and land development costs
|
|
$
|
1,425,711
|
|
|
$
|
1,749,652
|
|
Construction in progress completed contract
|
|
|
2,742,657
|
|
|
|
3,109,243
|
|
Construction in progress percentage of completion
|
|
|
55,828
|
|
|
|
62,677
|
|
Sample homes and sales offices
|
|
|
371,601
|
|
|
|
357,322
|
|
Land deposits and costs of future development
|
|
|
221,223
|
|
|
|
274,799
|
|
Other
|
|
|
18,849
|
|
|
|
18,962
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,835,869
|
|
|
$
|
5,572,655
|
|
|
|
|
|
|
|
|
|
|
6
TOLL
BROTHERS, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Construction in progress includes the cost of homes under
construction, land and land development costs and the carrying
cost of home sites that have been substantially improved.
The Company capitalizes certain interest costs to inventory
during the development and construction period. Capitalized
interest is charged to cost of revenues when the related
inventory is delivered for homes accounted for under the
completed contract method or when the related inventory is
charged to cost of revenues under percentage of completion
accounting. Interest incurred, capitalized and expensed for the
six months and three months ended April 30, 2008 and 2007,
was as follows (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended April 30,
|
|
|
Three Months Ended April 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
Interest capitalized, beginning of period
|
|
$
|
215,571
|
|
|
$
|
181,465
|
|
|
$
|
227,709
|
|
|
$
|
192,933
|
|
Interest incurred
|
|
|
63,681
|
|
|
|
68,272
|
|
|
|
30,576
|
|
|
|
34,121
|
|
Interest expensed to cost of revenues
|
|
|
(44,124
|
)
|
|
|
(49,137
|
)
|
|
|
(23,157
|
)
|
|
|
(26,494
|
)
|
Write-off against other income
|
|
|
(34
|
)
|
|
|
(40
|
)
|
|
|
(34
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest capitalized, end of period
|
|
$
|
235,094
|
|
|
$
|
200,560
|
|
|
$
|
235,094
|
|
|
$
|
200,560
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventory impairment charges are recognized against all
inventory costs of a community, such as land, land improvements,
cost of home construction and capitalized interest. The amounts
included in the above table reflect the gross amount of
capitalized interest before allocation of any impairment charges
recognized.
Interest included in cost of revenues for the six months and
three months ended April 30, 2008 and 2007, was as follows
(amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended April 30,
|
|
|
Three Months Ended April 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
Completed contract
|
|
$
|
43,243
|
|
|
$
|
46,029
|
|
|
$
|
22,542
|
|
|
$
|
24,292
|
|
Percentage of completion
|
|
|
841
|
|
|
|
2,999
|
|
|
|
577
|
|
|
|
2,094
|
|
Land
|
|
|
40
|
|
|
|
109
|
|
|
|
38
|
|
|
|
108
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
44,124
|
|
|
$
|
49,137
|
|
|
$
|
23,157
|
|
|
$
|
26,494
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company recognized inventory impairment charges and the
expensing of costs that it believed not to be recoverable in the
six months and three months ended April 30, 2008 and 2007,
as follows (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
Three Months Ended
|
|
|
|
April 30,
|
|
|
April 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
Operating communities and owned land
|
|
$
|
341,025
|
|
|
$
|
199,112
|
|
|
$
|
195,850
|
|
|
$
|
116,150
|
|
Land controlled for future communities
|
|
|
79,714
|
|
|
|
17,500
|
|
|
|
7,229
|
|
|
|
3,561
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
420,739
|
|
|
$
|
216,612
|
|
|
$
|
203,079
|
|
|
$
|
119,711
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7
TOLL
BROTHERS, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
At the end of each fiscal quarter, the Company reviews the
profitability of each of its operating communities. For those
communities operating below certain profitability thresholds,
the Company determines the estimated fair value of these
communities and whether the estimated fair value exceeded their
carrying value. The table below provides, as of the date
indicated, the number of operating communities in which the
Company recognized impairment charges, the fair value of those
communities, net of impairment charges, and the amount of
impairment charges recognized ($ amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
Fair Value of
|
|
|
|
|
|
|
|
|
Fair Value of
|
|
|
|
|
|
|
|
|
|
Communities,
|
|
|
|
|
|
|
|
|
Communities,
|
|
|
|
|
|
|
|
|
|
Net of
|
|
|
|
|
|
|
|
|
Net of
|
|
|
|
|
|
|
Number of
|
|
|
Impairment
|
|
|
Impairment
|
|
|
Number of
|
|
|
Impairment
|
|
|
Impairment
|
|
|
|
Communities
|
|
|
Charges
|
|
|
Charges
|
|
|
Communities
|
|
|
Charges
|
|
|
Charges
|
|
|
Three Months Ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 31,
|
|
|
38
|
|
|
$
|
339,303
|
|
|
$
|
145,175
|
|
|
|
18
|
|
|
$
|
211,800
|
|
|
$
|
82,962
|
|
April 30,
|
|
|
46
|
|
|
$
|
406,031
|
|
|
|
195,850
|
|
|
|
24
|
|
|
$
|
228,900
|
|
|
|
116,150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
341,025
|
|
|
|
|
|
|
|
|
|
|
$
|
199,112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At April 30, 2008, the Company evaluated its land purchase
contracts to determine if any of the selling entities were
variable interest entities (VIEs) and, if they were,
whether the Company was the primary beneficiary of any of them.
Under these purchase contracts, the Company does not possess
legal title to the land and its risk is generally limited to
deposits paid to the sellers; the creditors of the sellers
generally have no recourse against the Company. At
April 30, 2008, the Company had determined that it was the
primary beneficiary of one VIE related to a land purchase
contract and had recorded $15.3 million of inventory and
$12.0 million of accrued expenses.
|
|
3.
|
Investments
in and Advances to Unconsolidated Entities
|
The Company has investments in and advances to a number of joint
ventures with unrelated parties to develop land. Some of these
joint ventures develop land for the sole use of the venture
participants, including the Company, and others develop land for
sale to the venture participants and to unrelated builders. The
Company recognizes its share of earnings from the sale of home
sites to other builders. The Company does not recognize earnings
from home sites it purchases from the joint ventures, but
instead reduces its cost basis in those home sites by its share
of the earnings on the home sites. At April 30, 2008, the
Company had approximately $92.3 million invested in or
advanced to these joint ventures. At April 30, 2008,
several of these joint ventures had loan commitments in an
aggregate of $1.09 billion, and had approximately
$1.06 billion borrowed against the commitments. In
connection with two of these joint ventures, the Company
executed completion guarantees and conditional repayment
guaranties. The obligations under the guarantees are several,
and not joint, and are limited to the Companys pro-rata
share of the loan obligations of the respective joint venture.
At April 30, 2008, the Companys outstanding
guarantees, net of amounts that the Company has accrued that it
believes it may be required to fund, amounted to
$50.3 million. With respect to another venture, the parties
to this venture are in the process of determining whether or not
to move forward with this project based upon, among other
things, market conditions. If the project proceeds as originally
planned, the Companys estimated contribution would be
approximately $145.5 million, less any outside financing
the joint venture is able to obtain. The Company has recognized
cumulative impairment charges of $172.0 million
($85.0 million in the three-month period ended
April 30, 2008, $27.8 million in the three-month
period ended January 31, 2008 and $59.2 million in the
three-month period ended October 31, 2007) against
three of its joint venture investments because it did not
believe that its investments were recoverable.
At April 30, 2008, the Company had $50.2 million of
investments in three joint ventures with unrelated parties to
develop luxury condominium projects, including for-sale
residential units and commercial space. At April 30, 2008,
these joint ventures had an aggregate of $302.9 million of
loan commitments, and had approximately $216.6 million
borrowed against the commitments. At April 30, 2008, the
Company had guaranteed $18.6 million of the loans and other
liabilities of these joint ventures. One of these joint ventures
is developing a condominium
8
TOLL
BROTHERS, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
project in two phases. The first phase has been substantially
completed and commenced delivery in May 2008 of units that had
been previously sold. At April 30, 2008, the Company was
committed to make an additional contribution of up to
$12.3 million, if required by this joint venture. Further,
the Company has the right to withdraw from phase 1 of the
project upon the payment of a termination fee to our partner of
$16.0 million, and from phase 2 of the project upon the
payment of a termination fee to our partner of
$30.0 million. At April 30, 2008, the Company was a
partner in a second joint venture which has a project that is
currently in the planning stages; any contribution by the
Company will be based upon both partners agreement to proceed
with the project. If the project were to go forward, and if the
Company were to fund its entire commitment to this second joint
venture, the Companys estimated contribution would be
approximately $112.5 million.
The Company has a 50% interest in a joint venture with an
unrelated party to convert a
525-unit
apartment complex, The Hudson Tea Buildings, located in Hoboken,
New Jersey, into luxury condominium units. At April 30,
2008, the Company had investments in and advances to this joint
venture of $43.4 million.
In fiscal 2005, the Company, together with the Pennsylvania
State Employees Retirement System (PASERS), formed
Toll Brothers Realty Trust II (Trust II)
to be in a position to take advantage of commercial real estate
opportunities. Trust II is owned 50% by the Company and 50%
by PASERS. At April 30, 2008, the Company had an investment
of $10.4 million in Trust II. In addition, the Company
and PASERS each entered into subscription agreements that expire
in September 2009, whereby each agreed to invest additional
capital in an amount not to exceed $11.1 million if
required by Trust II. Prior to the formation of
Trust II, the Company used Toll Brothers Realty Trust (the
Trust) to invest in commercial real estate
opportunities.
The Company formed the Trust in 1998 to take advantage of
commercial real estate opportunities. The Trust is effectively
owned one-third by the Company; one-third by Robert I. Toll,
Bruce E. Toll (and trusts established for the benefit of members
of his family), Zvi Barzilay (and trusts established for the
benefit of members of his family), Joel H. Rassman, and other
members of the Companys current and former senior
management; and one-third by PASERS. During fiscal 2007, the
Company received distributions from the Trust that resulted in
reducing the carrying value of its investment in the Trust to
zero. The Company provides development, finance and management
services to the Trust and recognized fees under the terms of
various agreements in the amounts of $1.1 million and
$0.5 million in the six-month and three-month periods ended
April 30, 2008, respectively, and $1.0 million and
$0.5 million in the six-month and three-month periods ended
April 30, 2007, respectively. The Company believes that the
transactions between itself and the Trust were on terms no less
favorable than it would have agreed to with unrelated parties.
The Companys investments in these entities are accounted
for using the equity method.
In the three-month period ended January 31, 2007, due to
the continued decline of the Detroit housing market, the Company
re-evaluated the carrying value of goodwill that resulted from a
1999 acquisition in accordance with SFAS No. 142,
Goodwill and Other Intangible Assets. The Company
estimated the fair value of its assets in this market, including
goodwill. Fair value was determined based on the discounted
future cash flow expected to be generated in this market. Based
upon this evaluation and the Companys expectation that
this market would not recover for a number of years, the Company
determined that the related goodwill was impaired. The Company
recognized a $9.0 million impairment charge in the first
quarter of fiscal 2007. After recognizing this charge, the
Company did not have any goodwill remaining from this
acquisition.
9
TOLL
BROTHERS, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Accrued expenses at April 30, 2008 and October 31,
2007 consisted of the following (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
April 30,
|
|
|
October 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
Land, land development and construction
|
|
$
|
198,370
|
|
|
$
|
247,322
|
|
Compensation and employee benefits
|
|
|
96,804
|
|
|
|
100,893
|
|
Insurance and litigation
|
|
|
152,854
|
|
|
|
144,349
|
|
Commitments to unconsolidated entities
|
|
|
125,633
|
|
|
|
27,792
|
|
Warranty
|
|
|
60,816
|
|
|
|
59,249
|
|
Interest
|
|
|
45,619
|
|
|
|
47,136
|
|
Other
|
|
|
89,398
|
|
|
|
97,488
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
769,494
|
|
|
$
|
724,229
|
|
|
|
|
|
|
|
|
|
|
The Company accrues for expected warranty costs at the time each
home is closed and title and possession are transferred to the
home buyer. Costs are accrued based upon historical experience.
Changes in the warranty accrual for the six-month and
three-month periods ended April 30, 2008 and 2007 were as
follows (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended April 30,
|
|
|
Three Months Ended April 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
Balance, beginning of period
|
|
$
|
59,249
|
|
|
$
|
57,414
|
|
|
$
|
60,350
|
|
|
$
|
57,835
|
|
Additions
|
|
|
13,030
|
|
|
|
14,884
|
|
|
|
6,683
|
|
|
|
7,350
|
|
Charges incurred
|
|
|
(11,463
|
)
|
|
|
(13,582
|
)
|
|
|
(6,217
|
)
|
|
|
(6,469
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of period
|
|
$
|
60,816
|
|
|
$
|
58,716
|
|
|
$
|
60,816
|
|
|
$
|
58,716
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of November 1, 2007, the Company recorded a
$47.5 million charge ($79.1 million before recognition
of tax benefit) to retained earnings to recognize the net
cumulative effect of the adoption of FIN 48. As of
November 1, 2007, after adoption of FIN 48, the
cumulative net unrecognized tax benefits were
$218.6 million ($364.3 million before recognition of
tax benefit). Interest and penalties are recognized as a
component of the provision for income taxes which is consistent
with the Companys historical accounting policy.
During the six-month period ended April 30, 2008, the
Company utilized $33.0 million of net unrecognized tax
benefits ($55.0 million before recognition of tax benefit)
for the partial settlement of its Internal Revenue Service
(IRS) tax audits for fiscal years 2003 through 2005,
State of California tax audits for fiscal years 2002 and 2003,
and certain other amended filings; the Company expects to
utilize an additional $15.0 million of net unrecognized tax
benefits ($25.0 million before recognition of tax benefit)
to complete these settlements in subsequent quarters. In the
three-month period ended April 30, 2008, the Company did
not recognize any net unrecognized tax benefit. The state impact
of any amended federal returns remains subject to examination by
various states for a period of up to one year after formal
notification of such amendments to the states. The Company and
its subsidiaries have various state and other income tax returns
in the process of examination or administrative appeal. The
Company does not anticipate any material adjustments to its
financial statements resulting from tax examinations currently
in progress.
During the next twelve months, it is reasonably possible that
the amount of unrecognized tax benefits will decrease primarily
from expiration of tax statutes, but the Company does not
believe these reversals will have a material impact on the
Companys financial statements. The Companys net
unrecognized tax benefits at April 30,
10
TOLL
BROTHERS, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
2008, amounted to $197.8 million ($329.6 million
before recognition of tax benefit) and are included in
Income taxes payable on the Companys condensed
consolidated balance sheet at April 30, 2008. If these tax
benefits reverse in the future, they would have an impact on the
Companys effective tax rate.
During the six months ended April 30, 2008 and 2007, the
Company recognized in its tax provision, before reduction for
applicable taxes, interest and penalties of approximately
$7.0 million and $2.5 million, respectively. During
the three months ended April 30, 2008 and 2007, the Company
recognized in its tax provision, before reduction for applicable
taxes, interest and penalties of approximately $3.5 million
and $1.5 million, respectively. At April 30, 2008 and
October 31, 2007, the Company had accrued interest and
penalties, before reduction of applicable taxes, of
$147.1 million and $54.8 million, respectively; these
amounts were included in Income taxes payable on the
accompanying condensed consolidated balance sheet. The increase
in the six-month period ended April 30, 2008 relates
primarily to the adoption of FIN 48.
The components of other comprehensive loss in the six-month and
three-month periods ended April 30, 2008 were as follows
(amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
Three Months Ended
|
|
|
|
April 30, 2008
|
|
|
April 30, 2008
|
|
|
Net loss
|
|
|
|
|
|
$
|
(189,694
|
)
|
|
|
|
|
|
$
|
(93,737
|
)
|
Changes in pension liability, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in benefits
|
|
|
(3,056
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in actuarial assumptions
|
|
|
1,701
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of prior service cost and unrecognized gains
|
|
|
220
|
|
|
|
|
|
|
|
110
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,135
|
)
|
|
|
|
|
|
|
110
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(190,829
|
)
|
|
|
|
|
|
$
|
(93,627
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in accumulated other comprehensive loss in the six-month
and three-month periods ended April 30, 2008 were as
follows (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
Three Months Ended
|
|
|
|
April 30, 2008
|
|
|
April 30, 2008
|
|
|
Balance, beginning of period
|
|
|
|
|
|
$
|
(397
|
)
|
|
|
|
|
|
$
|
(1,642
|
)
|
Changes in pension liability, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in benefits
|
|
|
(3,056
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in actuarial assumptions
|
|
|
1,701
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of prior service cost and
unrecognized gains
|
|
|
220
|
|
|
|
|
|
|
|
110
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,135
|
)
|
|
|
|
|
|
|
110
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of period
|
|
|
|
|
|
$
|
(1,532
|
)
|
|
|
|
|
|
$
|
(1,532
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8.
|
Employee
Retirement Plans
|
In December 2007, the Company amended its Supplemental Executive
Retirement Plan to provide for increased benefits to certain
participants if such participants continue to work beyond
retirement age. Based on this amendment and a concomitant change
in the assumption related to the participants retirement
dates, the Companys unrecognized prior service cost
increased by $5.1 million and its unrecognized actuarial
gains
11
TOLL
BROTHERS, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
increased by $2.8 million. The additional unrecognized
prior service cost and unrecognized actuarial gains will be
amortized over the extended period that the Company has
estimated that the participants will continue to work.
For the six-month and three-month periods ended April 30,
2008 and 2007, the Company recognized costs and made payments
related to its supplemental retirement plans as follows (amounts
in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended April 30,
|
|
|
Three Months Ended April 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
Service cost
|
|
$
|
106
|
|
|
$
|
165
|
|
|
$
|
53
|
|
|
$
|
83
|
|
Interest cost
|
|
|
612
|
|
|
|
507
|
|
|
|
306
|
|
|
|
253
|
|
Amortization of initial benefit obligation
|
|
|
684
|
|
|
|
885
|
|
|
|
342
|
|
|
|
442
|
|
Amortization of unrecognized gains
|
|
|
(320
|
)
|
|
|
|
|
|
|
(160
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost
|
|
$
|
1,082
|
|
|
$
|
1,557
|
|
|
$
|
541
|
|
|
$
|
778
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit payments
|
|
$
|
63
|
|
|
$
|
125
|
|
|
$
|
34
|
|
|
$
|
34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9.
|
Stock-Based
Benefit Plans
|
The fair value of each option award is estimated on the date of
grant using a lattice-based option valuation model that uses
assumptions noted in the following table. The lattice-based
option valuation model incorporates ranges of assumptions for
inputs; those ranges are disclosed in the table below. Expected
volatilities were based on implied volatilities from traded
options on the Companys stock, historical volatility of
the Companys stock and other factors. The expected lives
of options granted were derived from the historical exercise
patterns and anticipated future patterns and represents the
period of time that options granted are expected to be
outstanding; the range given below results from certain groups
of employees exhibiting different behavior. The risk-free rate
for periods within the contractual life of the option is based
on the U.S. Treasury yield curve in effect at the time of
grant.
The weighted-average assumptions and the fair value used for
stock option grants for fiscal 2008 and 2007 were as follows:
|
|
|
|
|
|
|
2008
|
|
2007
|
|
Expected volatility
|
|
46.67% - 48.63%
|
|
36.32% - 38.22%
|
Weighted-average volatility
|
|
47.61%
|
|
37.16%
|
Risk-free interest rate
|
|
3.32% - 3.85%
|
|
4.57% - 4.61%
|
Expected life (years)
|
|
4.29 - 8.32
|
|
3.69 - 8.12
|
Dividends
|
|
none
|
|
none
|
Weighted-average grant date fair value
per share of options granted
|
|
$9.50
|
|
$11.17
|
In the six-month and three-month periods ended April 30,
2008, the Company recognized $16.0 million and
$3.8 million of stock compensation expense, respectively,
and $6.4 million and $1.5 million of income tax
benefit, respectively, related to stock option grants. In the
six-month and three-month periods ended April 30, 2007, the
Company recognized $18.1 million and $5.3 million of
stock compensation expense, respectively, and $6.8 million
and $2.0 million of income tax benefit, respectively,
related to stock option grants.
The Company expects to recognize approximately
$21.8 million of stock compensation expense and
$8.7 million of income tax benefit for fiscal 2008 related
to stock option grants. The Company recognized approximately
$27.0 million of stock compensation expense and
$10.1 million of income tax benefit for the full fiscal
2007 year related to stock option grants.
12
TOLL
BROTHERS, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
10.
|
Earnings
per Share Information
|
Information pertaining to the calculation of earnings per share
for the six-month and three-month periods ended April 30,
2008 and 2007 is as follows (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended April 30,
|
|
|
Three Months Ended April 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
Basic weighted average shares
|
|
|
158,217
|
|
|
|
154,464
|
|
|
|
158,621
|
|
|
|
154,716
|
|
Common stock equivalents
|
|
|
|
|
|
|
9,707
|
|
|
|
|
|
|
|
9,578
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average shares
|
|
|
158,217
|
|
|
|
164,171
|
|
|
|
158,621
|
|
|
|
164,294
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the six months and three months ended April 30, 2008,
there were no incremental shares attributed to outstanding
options to purchase common stock because the Company had a net
loss in each of the periods, and any incremental shares would
not be dilutive.
At April 30, 2008, the exercise price of approximately
5.3 million outstanding options was higher than the average
closing price of the Companys common stock on the New York
Stock Exchange (the NYSE) for the three-month period
ended April 30, 2008. At April 30, 2007, the exercise
price of approximately 5.6 million outstanding options was
higher than the average closing price of the Companys
common stock on the NYSE for the three-month period ended
April 30, 2007.
|
|
11.
|
Stock
Repurchase Program
|
In March 2003, the Companys Board of Directors authorized
the repurchase of up to 20 million shares of its common
stock, par value $.01, from time to time, in open market
transactions or otherwise, for the purpose of providing shares
for its various employee benefit plans. At April 30, 2008,
the Company was authorized to repurchase approximately
12.0 million shares.
|
|
12.
|
Commitments
and Contingencies
|
At April 30, 2008, the aggregate purchase price of land
parcels under option and purchase agreements, excluding parcels
that the Company does not expect to acquire, was approximately
$1.80 billion (including $1.04 billion of land to be
acquired from joint ventures in which the Company has
investments). Of the $1.80 billion of land purchase
commitments, the Company had paid or deposited
$96.7 million. Of the $1.04 billion of land to be
acquired from joint ventures, $139.1 million of the
Companys investments in the joint ventures will be
credited against the purchase price of the land. The
Companys option agreements to acquire the home sites do
not require the Company to buy the home sites, although the
Company may, in some cases, forfeit any deposit balance
outstanding if and when it terminates an option agreement. Of
the $96.7 million the Company had paid or deposited on
these option agreements, $75.9 million was non-refundable
at April 30, 2008. Any deposit in the form of a standby
letter of credit is recorded as a liability at the time the
standby letter of credit is issued. At April 30, 2008,
accrued expenses included $29.7 million, representing the
Companys outstanding standby letters of credit issued in
connection with options to purchase home sites.
At April 30, 2008, the Company had $196.6 million of
investments in and advances to a number of unconsolidated
entities. In addition to its investments and advances, the
Company had various funding commitments and had made certain
loan guarantees of these entities indebtedness. See
Note 3, Investments in and Advances to Unconsolidated
Entities for more information regarding these entities.
At April 30, 2008, a joint venture in which the Company has
an 86.6% ownership interest and which is included in the
Companys consolidated financial statements was in default
under a $78.2 million non-recourse purchase money mortgage
secured by a parcel of land acquired by the joint venture. The
mortgage holders only recourse is to foreclose on the
parcel of land owned by the joint venture. The net carrying
value of the land owned by the joint venture that is included as
an asset in the Companys consolidated balance sheet is
offset by liabilities equal
13
TOLL
BROTHERS, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
to the sum of the principal amount of the non-recourse purchase
money mortgage and the carrying value of the minority interest.
This default does not have an effect on any of the
Companys loan covenants.
At April 30, 2008, the Company had outstanding surety bonds
amounting to $578.7 million, related primarily to its
obligations to various governmental entities to construct
improvements in the Companys various communities. The
Company estimates that $226.7 million of work remains on
these improvements. The Company has an additional
$116.3 million of surety bonds outstanding that guarantee
other obligations of the Company. The Company does not believe
it is likely that any outstanding bonds will be drawn upon.
At April 30, 2008, the Company had agreements of sale
outstanding to deliver 3,035 homes with an aggregate sales value
of $2.08 billion, of which the Company has recognized
$4.9 million of revenues with regard to a portion of such
homes using the percentage of completion accounting method.
At April 30, 2008, the Companys mortgage subsidiary
was committed to fund $968.6 million of mortgage loans.
$157.7 million of these commitments, as well as
$67.5 million of mortgage loans receivable, have
locked in interest rates. The mortgage subsidiary
has commitments from recognized outside mortgage financing
institutions to acquire $224.9 million of these
locked-in loans and receivables. Our home buyers
have not locked-in the interest rate on the
remaining $811.2 million.
In January 2006, the Company received a request for information
pursuant to Section 308 of the Clean Water Act from Region
3 of the U.S. Environmental Protection Agency (the
EPA) requesting information about storm water
discharge practices in connection with its homebuilding projects
in the states that comprise EPA Region 3. The
U.S. Department of Justice (DOJ) has now
assumed responsibility for the oversight of this matter. To the
extent the DOJs review were to lead it to assert
violations of state
and/or
federal regulatory requirements and request injunctive relief
and/or civil
penalties, the Company would defend and attempt to resolve any
such asserted violations. At this time, the Company cannot
predict the outcome of the DOJs review.
In October 2006, the Illinois Attorney General and State
Attorney of Lake County, IL brought suit against the Company,
alleging violations in Lake County, IL of certain storm water
discharge regulations. The Company is in the process of
resolving the alleged violations. At this time, the Company
cannot predict the outcome of this litigation, but the Company
does not believe it will have a material effect on the
Companys business or financial position.
On April 17, 2007, a securities class action suit was filed
against Toll Brothers, Inc. and Robert I. Toll and Bruce E. Toll
in the U.S. District Court for the Eastern District of
Pennsylvania. The original plaintiff, Desmond Lowrey, has been
replaced by two new lead plaintiffs The City of
Hialeah Employees Retirement System and the Laborers
Pension Trust Funds for Northern California. On
August 14, 2007, an amended complaint was filed on behalf
of the purported class of purchasers of the Companys
common stock between December 9, 2004 and November 8,
2005 and the following individual defendants, who are directors
and/or
officers of Toll Brothers, Inc., were added to the suit: Zvi
Barzilay, Joel H. Rassman, Robert S. Blank, Richard J. Braemer,
Carl B. Marbach, Paul E. Shapiro and Joseph R. Sicree. The
amended complaint filed on behalf of the purported class alleges
that the defendants violated federal securities laws by issuing
various materially false and misleading statements that had the
effect of artificially inflating the market price of the
Companys stock. They further allege that the individual
defendants sold shares for a substantial gain. The purported
class is seeking compensatory damages, counsel fees, and expert
costs. The Company has responded to the amended complaint by
filing a motion to dismiss, challenging the sufficiency of the
pleadings. There has not yet been any ruling on the
Companys motion. The Company believes that this lawsuit is
without merit and intends to continue to vigorously defend
against it.
A second securities class action suit was filed on
September 7, 2007 in federal court in the Central District
of California. In the complaint, the plaintiff, on behalf of the
purported class of stockholders, alleged that the Chief
Financial Officer of the Company violated federal securities
laws by issuing various materially false and misleading
statements and sought compensatory damages, counsel fees and
expert costs. The alleged class period was December 8, 2005
to August 22, 2007. The original plaintiff, Kathy
Mankofsky, was replaced by a new lead
14
TOLL
BROTHERS, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
plaintiff the Massachusetts Bricklayers &
Masons Trust Funds. On March 21, 2008, the plaintiff
voluntarily dismissed this action without prejudice.
The Company is involved in various other claims and litigation
arising in the ordinary course of business. The Company believes
that the disposition of these matters will not have a material
effect on the business or on the financial condition of the
Company.
Revenue and (loss) income before income taxes for each of the
Companys geographic segments for the six months and three
months ended April 30, 2008 and 2007 were as follows
(amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended April 30,
|
|
|
Three Months Ended April 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
|
|
$
|
466,378
|
|
|
$
|
458,532
|
|
|
$
|
239,601
|
|
|
$
|
247,385
|
|
Mid-Atlantic
|
|
|
453,892
|
|
|
|
664,493
|
|
|
|
203,541
|
|
|
|
333,175
|
|
South
|
|
|
294,933
|
|
|
|
534,715
|
|
|
|
155,618
|
|
|
|
286,947
|
|
West
|
|
|
446,439
|
|
|
|
607,548
|
|
|
|
220,030
|
|
|
|
307,170
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,661,642
|
|
|
$
|
2,265,288
|
|
|
$
|
818,790
|
|
|
$
|
1,174,677
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
|
|
$
|
30,280
|
|
|
$
|
(7,673
|
)
|
|
$
|
25,487
|
|
|
$
|
(7,059
|
)
|
Mid-Atlantic
|
|
|
(12,245
|
)
|
|
|
120,683
|
|
|
|
(27,410
|
)
|
|
|
68,223
|
|
South
|
|
|
(166,957
|
)
|
|
|
25,943
|
|
|
|
(55,281
|
)
|
|
|
21,493
|
|
West
|
|
|
(101,586
|
)
|
|
|
62,419
|
|
|
|
(71,187
|
)
|
|
|
5,536
|
|
Corporate and other(1)
|
|
|
(55,458
|
)
|
|
|
(54,679
|
)
|
|
|
(25,620
|
)
|
|
|
(28,700
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(305,966
|
)
|
|
$
|
146,693
|
|
|
$
|
(154,011
|
)
|
|
$
|
59,493
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Corporate and other is comprised principally of
general corporate expenses such as the Offices of the Chief
Executive Officer and President, and the corporate finance,
accounting, audit, tax, human resources, risk management,
marketing and legal groups, offset in part by interest income
and income from the Companys ancillary businesses. |
15
TOLL
BROTHERS, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Inventory write-downs and the expensing of costs that the
Company believed not to be recoverable and write-downs of
investments in unconsolidated entities that the Company does not
believe it will be able to recover for the six-month and
three-month periods ended April 30, 2008 and 2007 were as
follows (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended April 30,
|
|
|
Three Months Ended April 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
Land controlled for future communities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
|
|
$
|
19,285
|
|
|
$
|
3,561
|
|
|
$
|
75
|
|
|
$
|
2,628
|
|
Mid-Atlantic
|
|
|
9,727
|
|
|
|
1,530
|
|
|
|
3,618
|
|
|
|
178
|
|
South
|
|
|
41,885
|
|
|
|
2,298
|
|
|
|
1,448
|
|
|
|
(85
|
)
|
West
|
|
|
8,817
|
|
|
|
10,111
|
|
|
|
2,088
|
|
|
|
840
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
79,714
|
|
|
|
17,500
|
|
|
|
7,229
|
|
|
|
3,561
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating communities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
|
|
|
44,500
|
|
|
|
79,100
|
|
|
|
25,900
|
|
|
|
46,900
|
|
Mid-Atlantic
|
|
|
69,650
|
|
|
|
22,100
|
|
|
|
53,000
|
|
|
|
600
|
|
South
|
|
|
138,875
|
|
|
|
44,550
|
|
|
|
63,150
|
|
|
|
16,450
|
|
West
|
|
|
88,000
|
|
|
|
53,362
|
|
|
|
53,800
|
|
|
|
52,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
341,025
|
|
|
|
199,112
|
|
|
|
195,850
|
|
|
|
116,150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in unconsolidated entities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
West
|
|
|
112,817
|
|
|
|
|
|
|
|
85,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
533,556
|
|
|
$
|
216,612
|
|
|
$
|
288,079
|
|
|
$
|
119,711
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets for each of the Companys geographic segments
at April 30, 2008 and October 31, 2007 (amounts in
thousands) were as follows:
|
|
|
|
|
|
|
|
|
|
|
April 30,
|
|
|
October 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
North
|
|
$
|
1,519,437
|
|
|
$
|
1,589,119
|
|
Mid-Atlantic
|
|
|
1,351,590
|
|
|
|
1,523,447
|
|
South
|
|
|
903,929
|
|
|
|
1,180,325
|
|
West
|
|
|
1,351,916
|
|
|
|
1,616,395
|
|
Corporate and other(2)
|
|
|
1,831,429
|
|
|
|
1,311,030
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
6,958,301
|
|
|
$
|
7,220,316
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) |
|
Corporate and other is comprised principally of cash
and cash equivalents and the assets of the Companys
manufacturing facilities and mortgage subsidiary. |
16
TOLL
BROTHERS, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
14.
|
Supplemental
Disclosure to Statements of Cash Flows
|
The following are supplemental disclosures to the statements of
cash flows for the six months ended April 30, 2008 and 2007
(amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
Cash flow information:
|
|
|
|
|
|
|
|
|
Interest paid, net of amount capitalized
|
|
$
|
6,704
|
|
|
$
|
8,740
|
|
Income taxes paid
|
|
$
|
87,332
|
|
|
$
|
202,929
|
|
Non-cash activity:
|
|
|
|
|
|
|
|
|
Adoption of FIN 48
|
|
$
|
47,460
|
|
|
|
|
|
Reclassification of inventory to property, construction and
office equipment
|
|
$
|
16,103
|
|
|
|
|
|
Reduction of investment in unconsolidated entities due to
reduction of letters of credit
|
|
$
|
5,804
|
|
|
$
|
5,047
|
|
Reclassification of accrued liabilities to loans payable
|
|
$
|
2,163
|
|
|
|
|
|
Cost of inventory acquired through seller financing
|
|
$
|
4,013
|
|
|
$
|
26,567
|
|
Land returned to seller subject to loan financing
|
|
$
|
7,750
|
|
|
$
|
8,693
|
|
Income tax benefits related to exercise of employee stock options
|
|
$
|
2,980
|
|
|
$
|
6,251
|
|
Stock bonus awards
|
|
$
|
26
|
|
|
$
|
7,042
|
|
Contributions to employee retirement plan
|
|
|
|
|
|
$
|
2,764
|
|
Disposition of ancillary businesses:
|
|
|
|
|
|
|
|
|
Fair value of assets sold
|
|
|
|
|
|
$
|
5,790
|
|
Liabilities incurred in disposition
|
|
|
|
|
|
$
|
400
|
|
Cash received
|
|
|
|
|
|
$
|
15,755
|
|
|
|
15.
|
Supplemental
Guarantor Information
|
Toll Brothers Finance Corp., a 100% owned, indirect subsidiary
(the Subsidiary Issuer) of the Company, is the
issuer of four series of senior notes aggregating
$1.15 billion. The obligations of the Subsidiary Issuer to
pay principal, premiums, if any, and interest are guaranteed
jointly and severally on a senior basis by the Company and
substantially all of its 100% owned home building subsidiaries
(the Guarantor Subsidiaries). The guarantees are
full and unconditional. The Companys non-home building
subsidiaries and certain home building subsidiaries (the
Non-Guarantor Subsidiaries) do not guarantee the
debt. Separate financial statements and other disclosures
concerning the Guarantor Subsidiaries are not presented because
management has determined that such disclosures would not be
material to investors. The Subsidiary Issuer has not had and
does not have any operations other than the issuance of the four
series of senior notes and the lending of the proceeds from the
senior notes to other subsidiaries of the Company. Supplemental
consolidating financial information of the Company, the
Subsidiary
17
TOLL
BROTHERS, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Issuer, the Guarantor Subsidiaries, the Non-Guarantor
Subsidiaries and the eliminations to arrive at the
Companys financial information on a consolidated basis are
as follows:
Condensed
Consolidating Balance Sheet at April 30, 2008 ($ in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Toll
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Brothers,
|
|
|
Subsidiary
|
|
|
Guarantor
|
|
|
Guarantor
|
|
|
|
|
|
|
|
|
|
Inc.
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
1,108,885
|
|
|
|
127,143
|
|
|
|
|
|
|
|
1,236,028
|
|
Inventory
|
|
|
|
|
|
|
|
|
|
|
4,346,446
|
|
|
|
489,423
|
|
|
|
|
|
|
|
4,835,869
|
|
Property, construction and office equipment, net
|
|
|
|
|
|
|
|
|
|
|
90,370
|
|
|
|
2,676
|
|
|
|
|
|
|
|
93,046
|
|
Receivables, prepaid expenses and other assets
|
|
|
|
|
|
|
3,896
|
|
|
|
95,283
|
|
|
|
26,683
|
|
|
|
(2,677
|
)
|
|
|
123,185
|
|
Contracts receivable
|
|
|
|
|
|
|
|
|
|
|
3,295
|
|
|
|
1,993
|
|
|
|
|
|
|
|
5,288
|
|
Mortgage loans receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
67,498
|
|
|
|
|
|
|
|
67,498
|
|
Customer deposits held in escrow
|
|
|
|
|
|
|
|
|
|
|
25,770
|
|
|
|
1,084
|
|
|
|
|
|
|
|
26,854
|
|
Investments in and advances to unconsolidated entities
|
|
|
|
|
|
|
|
|
|
|
150,623
|
|
|
|
45,943
|
|
|
|
|
|
|
|
196,566
|
|
Investments in and advances to consolidated entities
|
|
|
3,188,244
|
|
|
|
1,159,554
|
|
|
|
(1,020,776
|
)
|
|
|
(129,107
|
)
|
|
|
(3,197,915
|
)
|
|
|
|
|
Deferred tax assets, net
|
|
|
373,967
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
373,967
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,562,211
|
|
|
|
1,163,450
|
|
|
|
4,799,896
|
|
|
|
633,336
|
|
|
|
(3,200,592
|
)
|
|
|
6,958,301
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans payable
|
|
|
|
|
|
|
|
|
|
|
448,895
|
|
|
|
269,908
|
|
|
|
|
|
|
|
718,803
|
|
Senior notes
|
|
|
|
|
|
|
1,142,876
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,142,876
|
|
Senior subordinated notes
|
|
|
|
|
|
|
|
|
|
|
350,000
|
|
|
|
|
|
|
|
|
|
|
|
350,000
|
|
Mortgage company warehouse loan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56,732
|
|
|
|
|
|
|
|
56,732
|
|
Customer deposits
|
|
|
|
|
|
|
|
|
|
|
169,151
|
|
|
|
32,382
|
|
|
|
|
|
|
|
201,533
|
|
Accounts payable
|
|
|
|
|
|
|
|
|
|
|
143,482
|
|
|
|
7,156
|
|
|
|
|
|
|
|
150,638
|
|
Accrued expenses
|
|
|
|
|
|
|
20,574
|
|
|
|
501,722
|
|
|
|
250,116
|
|
|
|
(2,918
|
)
|
|
|
769,494
|
|
Income taxes payable
|
|
|
235,771
|
|
|
|
|
|
|
|
|
|
|
|
(2,000
|
)
|
|
|
|
|
|
|
233,771
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
235,771
|
|
|
|
1,163,450
|
|
|
|
1,613,250
|
|
|
|
614,294
|
|
|
|
(2,918
|
)
|
|
|
3,623,847
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,014
|
|
|
|
|
|
|
|
8,014
|
|
Stockholders equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
1,587
|
|
|
|
|
|
|
|
|
|
|
|
2,003
|
|
|
|
(2,003
|
)
|
|
|
1,587
|
|
Additional paid-in capital
|
|
|
264,716
|
|
|
|
|
|
|
|
4,420
|
|
|
|
2,734
|
|
|
|
(7,154
|
)
|
|
|
264,716
|
|
Retained earnings
|
|
|
3,061,771
|
|
|
|
|
|
|
|
3,183,758
|
|
|
|
6,291
|
|
|
|
(3,190,049
|
)
|
|
|
3,061,771
|
|
Treasury stock, at cost
|
|
|
(102
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(102
|
)
|
Accumulated other comprehensive loss
|
|
|
(1,532
|
)
|
|
|
|
|
|
|
(1,532
|
)
|
|
|
|
|
|
|
1,532
|
|
|
|
(1,532
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
3,326,440
|
|
|
|
|
|
|
|
3,186,646
|
|
|
|
11,028
|
|
|
|
(3,197,674
|
)
|
|
|
3,326,440
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,562,211
|
|
|
|
1,163,450
|
|
|
|
4,799,896
|
|
|
|
633,336
|
|
|
|
(3,200,592
|
)
|
|
|
6,958,301
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
TOLL
BROTHERS, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Condensed
Consolidating Balance Sheet at October 31, 2007 ($ in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Toll
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Brothers,
|
|
|
Subsidiary
|
|
|
Guarantor
|
|
|
Guarantor
|
|
|
|
|
|
|
|
|
|
Inc.
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
ASSETS
|
Cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
783,891
|
|
|
|
116,446
|
|
|
|
|
|
|
|
900,337
|
|
Inventory
|
|
|
|
|
|
|
|
|
|
|
5,183,247
|
|
|
|
389,408
|
|
|
|
|
|
|
|
5,572,655
|
|
Property, construction and office equipment, net
|
|
|
|
|
|
|
|
|
|
|
81,832
|
|
|
|
2,433
|
|
|
|
|
|
|
|
84,265
|
|
Receivables, prepaid expenses and other assets
|
|
|
|
|
|
|
4,241
|
|
|
|
105,316
|
|
|
|
32,465
|
|
|
|
(6,112
|
)
|
|
|
135,910
|
|
Contracts receivable
|
|
|
|
|
|
|
|
|
|
|
45,472
|
|
|
|
1,053
|
|
|
|
|
|
|
|
46,525
|
|
Mortgage loans receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
93,189
|
|
|
|
|
|
|
|
93,189
|
|
Customer deposits held in escrow
|
|
|
|
|
|
|
|
|
|
|
33,689
|
|
|
|
678
|
|
|
|
|
|
|
|
34,367
|
|
Investments in and advances to unconsolidated entities
|
|
|
|
|
|
|
|
|
|
|
183,171
|
|
|
|
|
|
|
|
|
|
|
|
183,171
|
|
Deferred tax assets, net
|
|
|
169,897
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
169,897
|
|
Investments in and advances to consolidated entities
|
|
|
3,557,297
|
|
|
|
1,159,384
|
|
|
|
(1,175,807
|
)
|
|
|
(94,835
|
)
|
|
|
(3,446,039
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,727,194
|
|
|
|
1,163,625
|
|
|
|
5,240,811
|
|
|
|
540,837
|
|
|
|
(3,452,151
|
)
|
|
|
7,220,316
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans payable
|
|
|
|
|
|
|
|
|
|
|
481,262
|
|
|
|
215,552
|
|
|
|
|
|
|
|
696,814
|
|
Senior notes
|
|
|
|
|
|
|
1,142,306
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,142,306
|
|
Senior subordinated notes
|
|
|
|
|
|
|
|
|
|
|
350,000
|
|
|
|
|
|
|
|
|
|
|
|
350,000
|
|
Mortgage company warehouse loan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
76,730
|
|
|
|
|
|
|
|
76,730
|
|
Customer deposits
|
|
|
|
|
|
|
|
|
|
|
230,982
|
|
|
|
29,173
|
|
|
|
|
|
|
|
260,155
|
|
Accounts payable
|
|
|
|
|
|
|
|
|
|
|
229,448
|
|
|
|
7,429
|
|
|
|
|
|
|
|
236,877
|
|
Accrued expenses
|
|
|
|
|
|
|
21,319
|
|
|
|
563,016
|
|
|
|
146,156
|
|
|
|
(6,262
|
)
|
|
|
724,229
|
|
Income taxes payable
|
|
|
199,960
|
|
|
|
|
|
|
|
|
|
|
|
(2,000
|
)
|
|
|
|
|
|
|
197,960
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
199,960
|
|
|
|
1,163,625
|
|
|
|
1,854,708
|
|
|
|
473,040
|
|
|
|
(6,262
|
)
|
|
|
3,685,071
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,011
|
|
|
|
|
|
|
|
8,011
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
1,570
|
|
|
|
|
|
|
|
|
|
|
|
2,003
|
|
|
|
(2,003
|
)
|
|
|
1,570
|
|
Additional paid-in capital
|
|
|
227,561
|
|
|
|
|
|
|
|
4,420
|
|
|
|
2,734
|
|
|
|
(7,154
|
)
|
|
|
227,561
|
|
Retained earnings
|
|
|
3,298,925
|
|
|
|
|
|
|
|
3,382,080
|
|
|
|
55,049
|
|
|
|
(3,437,129
|
)
|
|
|
3,298,925
|
|
Treasury stock, at cost
|
|
|
(425
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(425
|
)
|
Accumulated other comprehensive loss
|
|
|
(397
|
)
|
|
|
|
|
|
|
(397
|
)
|
|
|
|
|
|
|
397
|
|
|
|
(397
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
3,527,234
|
|
|
|
|
|
|
|
3,386,103
|
|
|
|
59,786
|
|
|
|
(3,445,889
|
)
|
|
|
3,527,234
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,727,194
|
|
|
|
1,163,625
|
|
|
|
5,240,811
|
|
|
|
540,837
|
|
|
|
(3,452,151
|
)
|
|
|
7,220,316
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
TOLL
BROTHERS, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Condensed
Consolidating Statement of Operations for the six months ended
April 30, 2008 ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Toll
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Brothers,
|
|
|
Subsidiary
|
|
|
Guarantor
|
|
|
Guarantor
|
|
|
|
|
|
|
|
|
|
Inc.
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Completed contract
|
|
|
|
|
|
|
|
|
|
|
1,626,837
|
|
|
|
|
|
|
|
|
|
|
|
1,626,837
|
|
Percentage of completion
|
|
|
|
|
|
|
|
|
|
|
30,039
|
|
|
|
3,450
|
|
|
|
|
|
|
|
33,489
|
|
Land sales
|
|
|
|
|
|
|
|
|
|
|
1,316
|
|
|
|
|
|
|
|
|
|
|
|
1,316
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,658,192
|
|
|
|
3,450
|
|
|
|
|
|
|
|
1,661,642
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs of revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Completed contract
|
|
|
|
|
|
|
|
|
|
|
1,638,265
|
|
|
|
1,007
|
|
|
|
(363
|
)
|
|
|
1,638,909
|
|
Percentage of completion
|
|
|
|
|
|
|
|
|
|
|
24,658
|
|
|
|
2,824
|
|
|
|
|
|
|
|
27,482
|
|
Land sales
|
|
|
|
|
|
|
|
|
|
|
1,094
|
|
|
|
|
|
|
|
|
|
|
|
1,094
|
|
Interest
|
|
|
|
|
|
|
32,725
|
|
|
|
44,027
|
|
|
|
97
|
|
|
|
(32,725
|
)
|
|
|
44,124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,725
|
|
|
|
1,708,044
|
|
|
|
3,928
|
|
|
|
(33,088
|
)
|
|
|
1,711,609
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
|
1
|
|
|
|
349
|
|
|
|
230,271
|
|
|
|
14,515
|
|
|
|
(15,113
|
)
|
|
|
230,023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(1
|
)
|
|
|
(33,074
|
)
|
|
|
(280,123
|
)
|
|
|
(14,993
|
)
|
|
|
48,201
|
|
|
|
(279,990
|
)
|
Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from unconsolidated entities
|
|
|
|
|
|
|
|
|
|
|
(20,649
|
)
|
|
|
(84,994
|
)
|
|
|
|
|
|
|
(105,643
|
)
|
Interest and other income (loss)
|
|
|
|
|
|
|
33,074
|
|
|
|
(5,193
|
)
|
|
|
17,365
|
|
|
|
34,421
|
|
|
|
79,667
|
|
Loss from subsidiaries
|
|
|
(305,965
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
305,965
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(305,966
|
)
|
|
|
|
|
|
|
(305,965
|
)
|
|
|
(82,622
|
)
|
|
|
388,587
|
|
|
|
(305,966
|
)
|
Income tax benefit
|
|
|
(116,272
|
)
|
|
|
|
|
|
|
(124,542
|
)
|
|
|
(32,304
|
)
|
|
|
156,846
|
|
|
|
(116,272
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(189,694
|
)
|
|
|
|
|
|
|
(181,423
|
)
|
|
|
(50,318
|
)
|
|
|
231,741
|
|
|
|
(189,694
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
TOLL
BROTHERS, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Condensed
Consolidating Statement of Operations for the three months ended
April 30, 2008 ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Toll
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Brothers,
|
|
|
Subsidiary
|
|
|
Guarantor
|
|
|
Guarantor
|
|
|
|
|
|
|
|
|
|
Inc.
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Completed contract
|
|
|
|
|
|
|
|
|
|
|
800,303
|
|
|
|
|
|
|
|
|
|
|
|
800,303
|
|
Percentage of completion
|
|
|
|
|
|
|
|
|
|
|
17,694
|
|
|
|
|
|
|
|
|
|
|
|
17,694
|
|
Land sales
|
|
|
|
|
|
|
|
|
|
|
793
|
|
|
|
|
|
|
|
|
|
|
|
793
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
818,790
|
|
|
|
|
|
|
|
|
|
|
|
818,790
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs of revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Completed contract
|
|
|
|
|
|
|
|
|
|
|
804,378
|
|
|
|
471
|
|
|
|
(136
|
)
|
|
|
804,713
|
|
Percentage of completion
|
|
|
|
|
|
|
|
|
|
|
14,594
|
|
|
|
|
|
|
|
|
|
|
|
14,594
|
|
Land sales
|
|
|
|
|
|
|
|
|
|
|
660
|
|
|
|
|
|
|
|
|
|
|
|
660
|
|
Interest
|
|
|
|
|
|
|
15,990
|
|
|
|
23,157
|
|
|
|
|
|
|
|
(15,990
|
)
|
|
|
23,157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,990
|
|
|
|
842,789
|
|
|
|
471
|
|
|
|
(16,126
|
)
|
|
|
843,124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
|
|
|
|
|
173
|
|
|
|
108,607
|
|
|
|
7,162
|
|
|
|
(7,237
|
)
|
|
|
108,705
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
|
|
|
|
(16,163
|
)
|
|
|
(132,606
|
)
|
|
|
(7,633
|
)
|
|
|
23,363
|
|
|
|
(133,039
|
)
|
Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) earnings from unconsolidated entities
|
|
|
|
|
|
|
|
|
|
|
3,437
|
|
|
|
(84,994
|
)
|
|
|
|
|
|
|
(81,557
|
)
|
Interest and other income (loss)
|
|
|
|
|
|
|
16,163
|
|
|
|
(24,842
|
)
|
|
|
8,198
|
|
|
|
61,066
|
|
|
|
60,585
|
|
Loss from subsidiaries
|
|
|
(154,011
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
154,011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(154,011
|
)
|
|
|
|
|
|
|
(154,011
|
)
|
|
|
(84,429
|
)
|
|
|
238,440
|
|
|
|
(154,011
|
)
|
Income tax benefit
|
|
|
(60,274
|
)
|
|
|
|
|
|
|
(59,925
|
)
|
|
|
(33,027
|
)
|
|
|
92,952
|
|
|
|
(60,274
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(93,737
|
)
|
|
|
|
|
|
|
(94,086
|
)
|
|
|
(51,402
|
)
|
|
|
145,488
|
|
|
|
(93,737
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
TOLL
BROTHERS, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Condensed
Consolidating Statement of Operations for the six months ended
April 30, 2007 ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Toll
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Brothers,
|
|
|
Subsidiary
|
|
|
Guarantor
|
|
|
Guarantor
|
|
|
|
|
|
|
|
|
|
Inc.
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Completed contract
|
|
|
|
|
|
|
|
|
|
|
2,178,395
|
|
|
|
|
|
|
|
|
|
|
|
2,178,395
|
|
Percentage of completion
|
|
|
|
|
|
|
|
|
|
|
43,950
|
|
|
|
37,572
|
|
|
|
|
|
|
|
81,522
|
|
Land sales
|
|
|
|
|
|
|
|
|
|
|
5,371
|
|
|
|
|
|
|
|
|
|
|
|
5,371
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,227,716
|
|
|
|
37,572
|
|
|
|
|
|
|
|
2,265,288
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs of revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Completed contract
|
|
|
|
|
|
|
|
|
|
|
1,785,690
|
|
|
|
4,462
|
|
|
|
(1,983
|
)
|
|
|
1,788,169
|
|
Percentage of completion
|
|
|
|
|
|
|
|
|
|
|
35,522
|
|
|
|
27,738
|
|
|
|
|
|
|
|
63,260
|
|
Land sales
|
|
|
|
|
|
|
|
|
|
|
2,764
|
|
|
|
|
|
|
|
|
|
|
|
2,764
|
|
Interest
|
|
|
|
|
|
|
33,470
|
|
|
|
41,612
|
|
|
|
7,525
|
|
|
|
(33,470
|
)
|
|
|
49,137
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,470
|
|
|
|
1,865,588
|
|
|
|
39,725
|
|
|
|
(35,453
|
)
|
|
|
1,903,330
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
|
8
|
|
|
|
353
|
|
|
|
264,851
|
|
|
|
16,952
|
|
|
|
(17,587
|
)
|
|
|
264,577
|
|
Goodwill impairment
|
|
|
|
|
|
|
|
|
|
|
8,973
|
|
|
|
|
|
|
|
|
|
|
|
8,973
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
(8
|
)
|
|
|
(33,823
|
)
|
|
|
88,304
|
|
|
|
(19,105
|
)
|
|
|
53,040
|
|
|
|
88,408
|
|
Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from unconsolidated entities
|
|
|
|
|
|
|
|
|
|
|
11,520
|
|
|
|
7
|
|
|
|
|
|
|
|
11,527
|
|
Interest and other income
|
|
|
|
|
|
|
33,823
|
|
|
|
46,877
|
|
|
|
32,550
|
|
|
|
(66,492
|
)
|
|
|
46,758
|
|
Earnings from subsidiaries
|
|
|
146,701
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(146,701
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
146,693
|
|
|
|
|
|
|
|
146,701
|
|
|
|
13,452
|
|
|
|
(160,153
|
)
|
|
|
146,693
|
|
Income taxes
|
|
|
55,687
|
|
|
|
|
|
|
|
54,086
|
|
|
|
5,259
|
|
|
|
(59,345
|
)
|
|
|
55,687
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
91,006
|
|
|
|
|
|
|
|
92,615
|
|
|
|
8,193
|
|
|
|
(100,808
|
)
|
|
|
91,006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22
TOLL
BROTHERS, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Condensed
Consolidating Statement of Operations for the three months ended
April 30, 2007 ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Toll
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Brothers,
|
|
|
Subsidiary
|
|
|
Guarantor
|
|
|
Guarantor
|
|
|
|
|
|
|
|
|
|
Inc.
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Completed contract
|
|
|
|
|
|
|
|
|
|
|
1,124,259
|
|
|
|
|
|
|
|
|
|
|
|
1,124,259
|
|
Percentage of completion
|
|
|
|
|
|
|
|
|
|
|
29,054
|
|
|
|
19,383
|
|
|
|
|
|
|
|
48,437
|
|
Land sales
|
|
|
|
|
|
|
|
|
|
|
1,981
|
|
|
|
|
|
|
|
|
|
|
|
1,981
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,155,294
|
|
|
|
19,383
|
|
|
|
|
|
|
|
1,174,677
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs of revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Completed contract
|
|
|
|
|
|
|
|
|
|
|
939,513
|
|
|
|
2,896
|
|
|
|
(643
|
)
|
|
|
941,766
|
|
Percentage of completion
|
|
|
|
|
|
|
|
|
|
|
23,049
|
|
|
|
14,314
|
|
|
|
|
|
|
|
37,363
|
|
Land sales
|
|
|
|
|
|
|
|
|
|
|
1,727
|
|
|
|
|
|
|
|
|
|
|
|
1,727
|
|
Interest
|
|
|
|
|
|
|
16,735
|
|
|
|
22,623
|
|
|
|
3,871
|
|
|
|
(16,735
|
)
|
|
|
26,494
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,735
|
|
|
|
986,912
|
|
|
|
21,081
|
|
|
|
(17,378
|
)
|
|
|
1,007,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
|
1
|
|
|
|
173
|
|
|
|
130,426
|
|
|
|
8,549
|
|
|
|
(8,782
|
)
|
|
|
130,367
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
(1
|
)
|
|
|
(16,908
|
)
|
|
|
37,956
|
|
|
|
(10,247
|
)
|
|
|
26,160
|
|
|
|
36,960
|
|
Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from unconsolidated entities
|
|
|
|
|
|
|
|
|
|
|
4,728
|
|
|
|
7
|
|
|
|
|
|
|
|
4,735
|
|
Interest and other income
|
|
|
|
|
|
|
16,908
|
|
|
|
16,810
|
|
|
|
11,433
|
|
|
|
(27,353
|
)
|
|
|
17,798
|
|
Earnings from subsidiaries
|
|
|
59,494
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(59,494
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
59,493
|
|
|
|
|
|
|
|
59,494
|
|
|
|
1,193
|
|
|
|
(60,687
|
)
|
|
|
59,493
|
|
Income taxes
|
|
|
22,803
|
|
|
|
|
|
|
|
22,035
|
|
|
|
466
|
|
|
|
(22,501
|
)
|
|
|
22,803
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
36,690
|
|
|
|
|
|
|
|
37,459
|
|
|
|
727
|
|
|
|
(38,186
|
)
|
|
|
36,690
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23
TOLL
BROTHERS, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Condensed
Consolidating Statement of Cash Flows for the six months ended
April 30, 2008 ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Toll
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Brothers,
|
|
|
Subsidiary
|
|
|
Guarantor
|
|
|
Guarantor
|
|
|
|
|
|
|
|
|
|
Inc.
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Cash flow from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(189,694
|
)
|
|
|
|
|
|
|
(181,423
|
)
|
|
|
(50,318
|
)
|
|
|
231,741
|
|
|
|
(189,694
|
)
|
Adjustments to reconcile net loss to net cash provided by (used
in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
|
|
|
570
|
|
|
|
13,324
|
|
|
|
188
|
|
|
|
|
|
|
|
14,082
|
|
Stock-based compensation
|
|
|
16,347
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,347
|
|
Excess tax benefits from stock-based compensation
|
|
|
(8,378
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,378
|
)
|
Loss from unconsolidated entities
|
|
|
|
|
|
|
|
|
|
|
20,649
|
|
|
|
84,994
|
|
|
|
|
|
|
|
105,643
|
|
Distributions of earnings from unconsolidated entities
|
|
|
|
|
|
|
|
|
|
|
12,987
|
|
|
|
|
|
|
|
|
|
|
|
12,987
|
|
Deferred tax provision
|
|
|
(204,070
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(204,070
|
)
|
Provision for inventory write-offs
|
|
|
|
|
|
|
|
|
|
|
420,739
|
|
|
|
|
|
|
|
|
|
|
|
420,739
|
|
Changes in operating assets and liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease (increase) in inventory
|
|
|
|
|
|
|
|
|
|
|
353,278
|
|
|
|
(38,661
|
)
|
|
|
|
|
|
|
314,617
|
|
Origination of mortgage loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(500,549
|
)
|
|
|
|
|
|
|
(500,549
|
)
|
Sale of mortgage loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
526,240
|
|
|
|
|
|
|
|
526,240
|
|
Decrease (increase) in contracts receivable
|
|
|
|
|
|
|
|
|
|
|
42,177
|
|
|
|
(940
|
)
|
|
|
|
|
|
|
41,237
|
|
Decrease (increase) in receivables, prepaid expenses and other
assets
|
|
|
369,053
|
|
|
|
175
|
|
|
|
(124,738
|
)
|
|
|
16,907
|
|
|
|
(236,973
|
)
|
|
|
24,424
|
|
(Decrease) increase in customer deposits
|
|
|
|
|
|
|
|
|
|
|
(53,030
|
)
|
|
|
1,921
|
|
|
|
|
|
|
|
(51,109
|
)
|
Decrease in accounts payable and accrued expenses
|
|
|
(3,015
|
)
|
|
|
(745
|
)
|
|
|
(96,239
|
)
|
|
|
(44,202
|
)
|
|
|
5,232
|
|
|
|
(138,969
|
)
|
Increase in current income taxes payable
|
|
|
464
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
464
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
(19,293
|
)
|
|
|
|
|
|
|
407,724
|
|
|
|
(4,420
|
)
|
|
|
|
|
|
|
384,011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
|
|
|
|
|
|
|
|
(3,577
|
)
|
|
|
(431
|
)
|
|
|
|
|
|
|
(4,008
|
)
|
Purchase of marketable securities
|
|
|
|
|
|
|
|
|
|
|
(1,239,712
|
)
|
|
|
(228,725
|
)
|
|
|
|
|
|
|
(1,468,437
|
)
|
Sale of marketable securities
|
|
|
|
|
|
|
|
|
|
|
1,226,332
|
|
|
|
228,225
|
|
|
|
|
|
|
|
1,454,557
|
|
Investments in and advances to unconsolidated entities
|
|
|
|
|
|
|
|
|
|
|
(37,322
|
)
|
|
|
|
|
|
|
|
|
|
|
(37,322
|
)
|
Distributions of capital from unconsolidated entities
|
|
|
|
|
|
|
|
|
|
|
2,623
|
|
|
|
|
|
|
|
|
|
|
|
2,623
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
|
|
|
|
|
|
|
|
(51,656
|
)
|
|
|
(931
|
)
|
|
|
|
|
|
|
(52,587
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from loans payable
|
|
|
|
|
|
|
|
|
|
|
743
|
|
|
|
556,802
|
|
|
|
|
|
|
|
557,545
|
|
Principal payments of loans payable
|
|
|
|
|
|
|
|
|
|
|
(31,817
|
)
|
|
|
(540,757
|
)
|
|
|
|
|
|
|
(572,574
|
)
|
Proceeds from stock-based benefit plans
|
|
|
12,089
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,089
|
|
Excess tax benefits from stock-based compensation
|
|
|
8,378
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,378
|
|
Purchase of treasury stock
|
|
|
(1,174
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,174
|
)
|
Change in minority interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
19,293
|
|
|
|
|
|
|
|
(31,074
|
)
|
|
|
16,048
|
|
|
|
|
|
|
|
4,267
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
324,994
|
|
|
|
10,697
|
|
|
|
|
|
|
|
335,691
|
|
Cash and cash equivalents, beginning of period
|
|
|
|
|
|
|
|
|
|
|
783,891
|
|
|
|
116,446
|
|
|
|
|
|
|
|
900,337
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
|
|
|
|
|
|
|
|
|
1,108,885
|
|
|
|
127,143
|
|
|
|
|
|
|
|
1,236,028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24
TOLL
BROTHERS, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Condensed
Consolidating Statement of Cash Flows for the six months ended
April 30, 2007 ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Toll
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Brothers,
|
|
|
Subsidiary
|
|
|
Guarantor
|
|
|
Guarantor
|
|
|
|
|
|
|
|
|
|
Inc.
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Cash flow from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
91,006
|
|
|
|
|
|
|
|
92,615
|
|
|
|
8,179
|
|
|
|
(100,794
|
)
|
|
|
91,006
|
|
Adjustments to reconcile net income to net cash used in
(provided by) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
|
|
|
570
|
|
|
|
14,968
|
|
|
|
234
|
|
|
|
|
|
|
|
15,772
|
|
Amortization of initial benefit obligation
|
|
|
|
|
|
|
|
|
|
|
885
|
|
|
|
|
|
|
|
|
|
|
|
885
|
|
Stock-based compensation
|
|
|
18,290
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,290
|
|
Excess tax benefits from stock-based compensation
|
|
|
(170
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(170
|
)
|
Earnings in unconsolidated entities
|
|
|
|
|
|
|
|
|
|
|
(5,066
|
)
|
|
|
(6,461
|
)
|
|
|
|
|
|
|
(11,527
|
)
|
Distributions of earnings from unconsolidated entities
|
|
|
|
|
|
|
|
|
|
|
10,183
|
|
|
|
(7
|
)
|
|
|
|
|
|
|
10,176
|
|
Deferred tax provision
|
|
|
(72,105
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(72,105
|
)
|
Provision for inventory write-offs
|
|
|
|
|
|
|
|
|
|
|
216,612
|
|
|
|
|
|
|
|
|
|
|
|
216,612
|
|
Goodwill impairment charge
|
|
|
|
|
|
|
|
|
|
|
8,973
|
|
|
|
|
|
|
|
|
|
|
|
8,973
|
|
Gain on sale of ancillary business
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9,565
|
)
|
|
|
|
|
|
|
(9,565
|
)
|
Changes in operating assets and liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease in inventory
|
|
|
|
|
|
|
|
|
|
|
(221,257
|
)
|
|
|
(17,154
|
)
|
|
|
|
|
|
|
(238,411
|
)
|
Origination of mortgage loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(648,663
|
)
|
|
|
|
|
|
|
(648,663
|
)
|
Sale of mortgage loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
633,284
|
|
|
|
|
|
|
|
633,284
|
|
Decrease in contracts receivable
|
|
|
|
|
|
|
|
|
|
|
44,150
|
|
|
|
51,294
|
|
|
|
|
|
|
|
95,444
|
|
Decrease (increase) in receivables, prepaid expenses and other
assets
|
|
|
23,105
|
|
|
|
(570
|
)
|
|
|
(107,450
|
)
|
|
|
(1,950
|
)
|
|
|
100,794
|
|
|
|
13,929
|
|
Decrease in customer deposits
|
|
|
|
|
|
|
|
|
|
|
(29,697
|
)
|
|
|
(4,802
|
)
|
|
|
|
|
|
|
(34,499
|
)
|
(Decrease) increase in accounts payable and accrued expenses
|
|
|
9,774
|
|
|
|
|
|
|
|
(123,952
|
)
|
|
|
16,699
|
|
|
|
|
|
|
|
(97,479
|
)
|
Decrease in current income taxes payable
|
|
|
(75,083
|
)
|
|
|
|
|
|
|
|
|
|
|
(53
|
)
|
|
|
|
|
|
|
(75,136
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by operating activities
|
|
|
(5,183
|
)
|
|
|
|
|
|
|
(99,036
|
)
|
|
|
21,035
|
|
|
|
|
|
|
|
(83,184
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
|
|
|
|
|
|
|
|
(11,119
|
)
|
|
|
(753
|
)
|
|
|
|
|
|
|
(11,872
|
)
|
Proceeds from sale of business
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,755
|
|
|
|
|
|
|
|
15,755
|
|
Purchase of marketable securities
|
|
|
|
|
|
|
|
|
|
|
(2,018,015
|
)
|
|
|
(99,675
|
)
|
|
|
|
|
|
|
(2,117,690
|
)
|
Sale of marketable securities
|
|
|
|
|
|
|
|
|
|
|
2,018,015
|
|
|
|
99,675
|
|
|
|
|
|
|
|
2,117,690
|
|
Investments in and advances to unconsolidated entities
|
|
|
|
|
|
|
|
|
|
|
(13,872
|
)
|
|
|
|
|
|
|
|
|
|
|
(13,872
|
)
|
Distributions of capital from unconsolidated entities
|
|
|
|
|
|
|
|
|
|
|
16,965
|
|
|
|
|
|
|
|
|
|
|
|
16,965
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) in investing activities
|
|
|
|
|
|
|
|
|
|
|
(8,026
|
)
|
|
|
15,002
|
|
|
|
|
|
|
|
6,976
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from loans payable
|
|
|
|
|
|
|
|
|
|
|
34,365
|
|
|
|
659,719
|
|
|
|
|
|
|
|
694,084
|
|
Principal payments of loans payable
|
|
|
|
|
|
|
|
|
|
|
(30,064
|
)
|
|
|
(672,453
|
)
|
|
|
|
|
|
|
(702,517
|
)
|
Proceeds from stock-based benefit plans
|
|
|
4,099
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,099
|
|
Proceeds from restricted stock award
|
|
|
1,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,800
|
|
Excess tax benefits from stock-based compensation
|
|
|
170
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
170
|
|
Purchase of treasury stock
|
|
|
(886
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(886
|
)
|
Change in minority interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60
|
|
|
|
|
|
|
|
60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities
|
|
|
5,183
|
|
|
|
|
|
|
|
4,301
|
|
|
|
(12,674
|
)
|
|
|
|
|
|
|
(3,190
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
(102,761
|
)
|
|
|
23,363
|
|
|
|
|
|
|
|
(79,398
|
)
|
Cash and cash equivalents, beginning of period
|
|
|
|
|
|
|
|
|
|
|
582,465
|
|
|
|
50,059
|
|
|
|
|
|
|
|
632,524
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
|
|
|
|
|
|
|
|
|
479,704
|
|
|
|
73,422
|
|
|
|
|
|
|
|
553,126
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
|
|
ITEM 2.
|
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
OVERVIEW
In the six-month and three-month periods ended April 30,
2008, we recognized $1.66 billion and $818.8 million
of revenues, respectively, and recorded a net loss of
$189.7 million and $93.7 million, respectively. In the
six-month and three-month periods ended April 30, 2007, we
recognized $2.27 billion and $1.17 billion of
revenues, respectively, and recorded net income of
$91.0 million and $36.7 million, respectively. The
losses in the fiscal 2008 periods as compared to the comparable
periods of fiscal 2007 were due primarily to the significantly
higher inventory and joint venture impairment charges recognized
and the higher sales incentives given on the homes delivered in
the fiscal 2008 periods as compared to the fiscal 2007 periods.
In the six-month period ended April 30, 2008, we recognized
inventory and joint venture impairment charges and write-offs of
$533.6 million, as compared to $225.6 million of
inventory and goodwill impairment charges and write-offs in the
comparable period of fiscal 2007. In the three-month period
ended April 30, 2008, we recognized inventory and joint
venture impairment charges and write-offs of
$288.1 million, as compared to $119.7 million of
inventory impairment charges and write-offs in the comparable
period of fiscal 2007.
Our backlog at April 30, 2008 of $2.08 billion
decreased 50%, as compared to our backlog at April 30, 2007
of $4.15 billion. Backlog consists of homes under contract
but not yet delivered to our home buyers for our communities
accounted for using the completed contract method of accounting.
Backlog for communities for which we use the percentage of
completion accounting method consists of units under contract
but not yet delivered to our home buyers, less the amount of
revenues we have recognized related to those units.
The slowdown that we have experienced since the fourth quarter
of fiscal 2005 has continued into the third quarter of fiscal
2008. The result is that the value of net new contracts signed
has declined by 55% and 58% in the six-month and three-month
periods ended April 30, 2008, respectively, as compared to
the comparable periods of fiscal 2007. The value of net new
contracts signed has declined by 76% and 77% in the six-month
and three-month periods ended April 30, 2008, respectively,
as compared to the comparable periods of fiscal 2005. When we
report contracts signed, the number and value of contracts
signed is reported net of any cancellations occurring during the
reporting period, whether signed in that reporting period or in
a prior period. Only outstanding agreements of sale that have
been signed by both the home buyer and us as of the end of the
period on which we are reporting are included in backlog.
We attribute the slowdown primarily to a decline in consumer
confidence, an overall softening of demand for new homes, the
inability of some of our home buyers to sell their current home,
an increase in available competing inventory and their related
increase in incentives and the direct and indirect impact of the
turmoil in the mortgage loan market. We believe the reduction in
demand is due to concerns on the part of prospective home buyers
about the direction of home prices, due in part to the constant
media attention regarding the potential for mortgage
foreclosures and recession, and concerns by prospective home
buyers about being able to sell their existing homes. We believe
the concern about the direction of home prices is due to an
oversupply of homes available for sale, and many other builders
advertising price reductions and increased sales incentives.
Despite this slowdown, we believe our industry demographics
remain strong due to the continuing regulation-induced
constraints on lot supplies and the growing number of affluent
households. We continue to seek a balance between our short-term
goal of selling homes in a tough market and our long-term goal
of maximizing the value of our communities. We believe that many
of our communities are in locations that are difficult to
replace and in markets where approvals are increasingly
difficult to achieve. We believe that many of these communities
have substantial embedded value that will be realizable in the
future and that this value should not necessarily be sacrificed
in the current soft market.
We are concerned about the dislocation in the secondary mortgage
market. We maintain relationships with a widely diversified
group of mortgage providers, most of which are among the largest
and, we believe, most reliable in our industry. With few
exceptions, the mortgage providers that provide our customers
with mortgages continue to issue new commitments. Our buyers
generally have been able to obtain adequate financing.
Nevertheless, tightening credit standards have shrunk the pool
of potential home buyers. Mortgage market liquidity issues and
higher borrowing rates may impede some of our home buyers from
closing, while others may find it more
26
difficult to sell their existing homes as their buyers face the
problem of obtaining a mortgage. However, we believe that our
buyers generally should be able to continue to secure mortgages,
due to their typically lower loan-to-value ratios and attractive
credit profiles, as compared to the average American home buyer.
Although we cannot predict the short- and long-term liquidity of
the credit markets, we continue to caution that, with the
uncertainties in these markets, the pace of home sales could
slow further until these markets settle down.
In the current challenging environment, we believe our access to
reliable capital and our strong balance sheet give us an
important competitive advantage. Based on our experience during
prior downturns in the housing market, we have learned that
unexpected opportunities may arise in difficult times for those
builders that are well-prepared. We believe that our solid
financial base, our broad geographic presence, our diversified
product lines and our national brand name all position us well
for such opportunities now and in the future. At April 30,
2008, we had $1.24 billion of cash and cash equivalents and
approximately $1.27 billion available under our bank
revolving credit facility which extends to 2011. We believe we
have the resources available to fund attractive opportunities,
should they arise.
Notwithstanding the current market conditions, we believe
geographic and product diversification, access to lower-cost
capital, and strong demographics have in the past and will in
the future, as market conditions improve, benefit those builders
that can control land and persevere through the increasingly
difficult regulatory approval process. We believe that these
factors favor the large publicly traded home building companies
with the capital and expertise to control home sites and gain
market share. We believe that as builders reduce the number of
home sites being taken through the approval process and this
process continues to become more difficult, and as the political
pressure from no-growth proponents continues to increase, our
expertise in taking land through the approval process and our
already approved land positions will allow us to grow in the
years to come, as market conditions improve.
Because of the length of time that it takes to obtain the
necessary approvals on a property, complete the land
improvements on it, and deliver a home after a home buyer signs
an agreement of sale, we are subject to many risks. We attempt
to reduce certain risks by controlling land for future
development through options whenever we can, thus allowing us to
obtain the necessary governmental approvals before acquiring
title to the land; generally commencing construction of a
detached home only after executing an agreement of sale and
receiving a substantial down payment from the buyer; and using
subcontractors to perform home construction and land development
work on a fixed-price basis. In response to current market
conditions, we have been reevaluating and renegotiating many of
our optioned land positions. As a result, we have reduced our
land position from a high of approximately 91,200 home sites at
April 30, 2006, to approximately 51,800 home sites at
April 30, 2008.
In the ordinary course of doing business, we must make estimates
and judgments that affect decisions on how we operate and on the
reported amounts of assets, liabilities, revenues and expenses.
These estimates include, but are not limited to, those related
to the recognition of income and expenses; impairment of assets;
estimates of future improvement and amenity costs;
capitalization of costs to inventory; provisions for litigation,
insurance and warranty costs; and income taxes. We base our
estimates on historical experience and on various other
assumptions that are believed to be reasonable under the
circumstances. On an ongoing basis, we evaluate and adjust our
estimates based on the information currently available. Actual
results may differ from these estimates and assumptions or
conditions.
At April 30, 2008, we were selling from 300 communities,
compared to 315 communities at October 31, 2007 and 325
communities at April 30, 2007. We expect to be selling from
approximately 290 communities at October 31, 2008.
CRITICAL
ACCOUNTING POLICIES
We believe the following critical accounting policies reflect
the more significant judgments and estimates used in the
preparation of our consolidated financial statements.
Inventory
Inventory is stated at the lower of cost or fair value in
accordance with Statement of Financial Accounting Standards
(SFAS) No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets
(SFAS 144). In addition to direct land
acquisition, land development and home construction costs, costs
include interest, real estate
27
taxes and direct overhead related to development and
construction, which are capitalized to inventories during the
period beginning with the commencement of development and ending
with the completion of construction. Once a parcel of land has
been approved for development, it generally takes four to five
years to fully develop, sell and deliver all the homes in one of
our typical communities. Longer or shorter time periods are
possible depending on the number of home sites in a community
and the sales and delivery pace of the homes in a community. Our
master planned communities, consisting of several smaller
communities, may take up to ten years or more to complete.
Because of the downturn in our business, the aforementioned
estimated community lives will likely be significantly longer.
Because our inventory is considered a long-lived asset under
U.S. generally accepted accounting principles, we are
required, under SFAS 144, to regularly review the carrying
value of each of our communities and write down the value of
those communities for which we believe the values are not
recoverable.
Current Communities: When the profitability of
a current community deteriorates, the sales pace declines
significantly or some other factor indicates a possible
impairment in the recoverability of the asset, the asset is
reviewed for impairment by comparing the estimated future
undiscounted cash flow for the community to its carrying value.
If the estimated future undiscounted cash flow is less than the
communitys carrying value, the carrying value is written
down to its estimated fair value. Fair value is primarily
determined by discounting the estimated future cash flow of each
community. The impairment is charged to cost of revenues in the
period in which the impairment is determined. In estimating the
cash flow of a community, we use various estimates such as:
(a) the expected sales pace in a community based upon
general economic conditions that will have a short-term or
long-term impact on the market in which the community is located
and on competition within the market, including the number of
home sites available and pricing and incentives being offered in
other communities owned by us or by other builders; (b) the
expected sales prices and sales incentives to be offered in a
community; (c) costs expended to date and expected to be
incurred in the future, including, but not limited to, land and
land development costs, home construction costs, interest costs
and overhead costs; (d) alternative product offerings that
may be offered in a community that will have an impact on sales
pace, sales price, building cost or the number of homes that can
be built on a particular site; and (e) alternative uses for
the property such as the possibility of a sale of the entire
community to another builder or the sale of individual home
sites.
Future Communities: We evaluate all land held
for future communities or future sections of current
communities, whether owned or under contract, to determine
whether or not we expect to proceed with the development of the
land as originally contemplated. This evaluation encompasses the
same types of estimates used for current communities described
above, as well as an evaluation of the regulatory environment in
which the land is located and the estimated probability of
obtaining the necessary approvals, the estimated time and cost
it will take to obtain the approvals and the possible
concessions that will be required to be given in order to obtain
them. Concessions may include cash payments to fund improvements
to public places such as parks and streets, dedication of a
portion of the property for use by the public or as open space
or a reduction in the density or size of the homes to be built.
Based upon this review, we decide (a) as to land under
contract to be purchased, whether the contract will likely be
terminated or renegotiated, and (b) as to land we own,
whether the land will likely be developed as contemplated or in
an alternative manner, or should be sold. We then further
determine whether costs that have been capitalized to the
community are recoverable or should be written off. The
write-off is charged to cost of revenues in the period in which
the need for the write-off is determined.
The estimates used in the determination of the estimated cash
flows and fair value of both current and future communities are
based on factors known to us at the time such estimates are made
and our expectations of future operations and economic
conditions. Should the estimates or expectations used in
determining estimated fair value deteriorate in the future, we
may be required to recognize additional write-downs/write-offs
related to current and future communities.
Variable Interest Entities: We have a
significant number of land purchase contracts, sometimes
referred to herein as land purchase contracts,
purchase agreements, options or
option agreements, and several investments in
unconsolidated entities which we evaluate in accordance with the
Financial Accounting Standards Board (FASB)
Interpretation No. 46 Consolidation of Variable
Interest Entities, an interpretation of ARB No. 51,
as amended by FIN 46R (FIN 46). Pursuant
to FIN 46, an enterprise that absorbs a majority of the
expected losses or receives a majority of the expected residual
returns of a variable interest entity (VIE) is
considered to be the primary beneficiary and must consolidate
the VIE. A VIE is an entity with insufficient equity
28
investment or in which the equity investors lack some of the
characteristics of a controlling financial interest. For land
purchase contracts with sellers meeting the definition of a VIE,
we perform a review to determine which party is the primary
beneficiary of the VIE. This review requires substantial
judgment and estimation. These judgments and estimates involve
assigning probabilities to various estimated cash flow
possibilities relative to the entitys expected profits and
losses and the cash flows associated with changes in the fair
value of the land under contract. At April 30, 2008, we had
determined that we were the primary beneficiary of one VIE
related to a land purchase contract and had recorded
$15.3 million of inventory and $12.0 million of
accrued expenses.
Revenue
and Cost Recognition
Home Sales-Completed Contract Method: The
construction time of our homes is generally less than one year,
although some may take more than one year to complete. Revenues
and cost of revenues from these home sales are recorded at the
time each home is delivered and title and possession are
transferred to the buyer. Closing normally occurs shortly after
construction is substantially completed. In addition, we have
several high-rise/mid-rise projects which do not qualify for
percentage of completion accounting in accordance
SFAS No. 66, Accounting for Sales of Real
Estate (SFAS 66), which are included in
this category of revenues and costs.
Land, land development and related costs, both incurred and
estimated to be incurred in the future, are amortized to the
cost of homes closed based upon the total number of homes to be
constructed in each community. Any changes resulting from a
change in the estimated number of homes to be constructed or in
the estimated costs subsequent to the commencement of delivery
of homes are allocated to the remaining undelivered homes in the
community. Home construction and related costs are charged to
the cost of homes closed under the specific identification
method. The estimated land, common area development and related
costs of master planned communities, including the cost of golf
courses, net of their estimated residual value, are allocated to
individual communities within a master planned community on a
relative sales value basis. Any changes resulting from a change
in the estimated number of homes to be constructed or in the
estimated costs are allocated to the remaining home sites in
each of the communities of the master planned community.
Forfeited customer deposits are recognized in other income in
the period in which we determine that the customer will not
complete the purchase of the home and when we determine that we
have the right to keep the deposit.
Home Sales-Percentage of Completion Method: We
have three high-rise projects for which we use the percentage of
completion accounting method to recognize revenues and costs.
Under the provisions of SFAS 66, revenues and costs for
these projects are recognized using the percentage of completion
method of accounting when construction is beyond the preliminary
stage, the buyer is committed to the extent of being unable to
require a refund except for non-delivery of the unit, sufficient
units in the project have been sold to ensure that the property
will not be converted to rental property, the sales proceeds are
collectible and the aggregate sales proceeds and the total cost
of the project can be reasonably estimated. Revenues and costs
of individual projects are recognized on the individual
projects aggregate value of units for which the home
buyers have signed binding agreements of sale, less an allowance
for cancellations, and are based on the percentage of total
estimated construction costs that have been incurred. Total
estimated revenues and construction costs are reviewed
periodically, and any change is applied to current and future
periods.
Forfeited customer deposits are recognized as a reduction in the
amount of revenues reversed in the period in which we determine
that the customer will not complete the purchase of the home and
when we determine that we have the right to keep the deposit.
Land Sales: Land sales revenues and cost of
revenues are recorded at the time that title and possession of
the property have been transferred to the buyer. We recognize
the pro rata share of land sales revenues and cost of land sales
revenues to entities in which we have a 50% or less interest
based upon the ownership percentage attributable to the
non-Company investors. Any profit not recognized in a
transaction reduces our investment in the entity or is recorded
as an accrued liability on our consolidated balance sheet.
29
OFF-BALANCE
SHEET ARRANGEMENTS
We have investments in and advances to various joint ventures
and to Toll Brothers Realty Trust Group (Trust)
and Toll Brothers Realty Trust Group II
(Trust II). At April 30, 2008, we had
investments in and advances to these entities of
$196.6 million, and were committed to invest or advance
additional funds to these entities if needed and had guaranteed
to several of these entities indebtedness
and/or loan
commitments. See Note 3 of the Notes to Condensed
Consolidated Financial Statements-Investments in and
Advances to Unconsolidated Entities for more information
regarding these entities. Our investments in these entities are
accounted for using the equity method.
RESULTS
OF OPERATIONS
The following table sets forth, for the six-month and
three-month periods ended April 30, 2008 and 2007, a
comparison of certain statement of operations items ($ in
millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended April 30,
|
|
|
Three Months Ended April 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
$
|
|
|
%
|
|
|
$
|
|
|
%
|
|
|
$
|
|
|
%
|
|
|
$
|
|
|
%
|
|
|
Completed contract
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
1,626.8
|
|
|
|
|
|
|
|
2,178.4
|
|
|
|
|
|
|
|
800.3
|
|
|
|
|
|
|
|
1,124.3
|
|
|
|
|
|
Costs
|
|
|
1,638.9
|
|
|
|
100.7
|
|
|
|
1,788.2
|
|
|
|
82.1
|
|
|
|
804.7
|
|
|
|
100.6
|
|
|
|
941.8
|
|
|
|
83.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12.1
|
)
|
|
|
|
|
|
|
390.2
|
|
|
|
|
|
|
|
(4.4
|
)
|
|
|
|
|
|
|
182.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of completion
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
33.5
|
|
|
|
|
|
|
|
81.5
|
|
|
|
|
|
|
|
17.7
|
|
|
|
|
|
|
|
48.4
|
|
|
|
|
|
Costs
|
|
|
27.5
|
|
|
|
82.1
|
|
|
|
63.3
|
|
|
|
77.6
|
|
|
|
14.6
|
|
|
|
82.5
|
|
|
|
37.4
|
|
|
|
77.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6.0
|
|
|
|
|
|
|
|
18.3
|
|
|
|
|
|
|
|
3.1
|
|
|
|
|
|
|
|
11.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
1.3
|
|
|
|
|
|
|
|
5.4
|
|
|
|
|
|
|
|
0.8
|
|
|
|
|
|
|
|
2.0
|
|
|
|
|
|
Costs
|
|
|
1.1
|
|
|
|
83.1
|
|
|
|
2.8
|
|
|
|
51.5
|
|
|
|
0.7
|
|
|
|
83.2
|
|
|
|
1.7
|
|
|
|
87.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.2
|
|
|
|
|
|
|
|
2.6
|
|
|
|
|
|
|
|
0.1
|
|
|
|
|
|
|
|
0.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest*
|
|
|
44.1
|
|
|
|
2.7
|
|
|
|
49.1
|
|
|
|
2.2
|
|
|
|
23.2
|
|
|
|
2.8
|
|
|
|
26.5
|
|
|
|
2.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
1,661.6
|
|
|
|
|
|
|
|
2,265.3
|
|
|
|
|
|
|
|
818.8
|
|
|
|
|
|
|
|
1,174.7
|
|
|
|
|
|
Costs
|
|
|
1,711.6
|
|
|
|
103.0
|
|
|
|
1,903.3
|
|
|
|
84.0
|
|
|
|
843.1
|
|
|
|
103.0
|
|
|
|
1,007.4
|
|
|
|
85.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(50.0
|
)
|
|
|
|
|
|
|
362.0
|
|
|
|
|
|
|
|
(24.3
|
)
|
|
|
|
|
|
|
167.3
|
|
|
|
|
|
Selling, general and administrative*
|
|
|
230.0
|
|
|
|
13.8
|
|
|
|
264.6
|
|
|
|
11.7
|
|
|
|
108.7
|
|
|
|
13.3
|
|
|
|
130.4
|
|
|
|
11.1
|
|
Goodwill impairment
|
|
|
|
|
|
|
|
|
|
|
9.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from operations
|
|
|
(280.0
|
)
|
|
|
|
|
|
|
88.4
|
|
|
|
|
|
|
|
(133.0
|
)
|
|
|
|
|
|
|
37.0
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) earnings from unconsolidated entities
|
|
|
(105.6
|
)
|
|
|
|
|
|
|
11.5
|
|
|
|
|
|
|
|
(81.6
|
)
|
|
|
|
|
|
|
4.7
|
|
|
|
|
|
Interest and other income
|
|
|
79.7
|
|
|
|
|
|
|
|
46.8
|
|
|
|
|
|
|
|
60.6
|
|
|
|
|
|
|
|
17.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before income taxes
|
|
|
(306.0
|
)
|
|
|
|
|
|
|
146.7
|
|
|
|
|
|
|
|
(154.0
|
)
|
|
|
|
|
|
|
59.5
|
|
|
|
|
|
Income tax (benefit) provision
|
|
|
(116.3
|
)
|
|
|
|
|
|
|
55.7
|
|
|
|
|
|
|
|
(60.3
|
)
|
|
|
|
|
|
|
22.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
|
(189.7
|
)
|
|
|
|
|
|
|
91.0
|
|
|
|
|
|
|
|
(93.7
|
)
|
|
|
|
|
|
|
36.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Percentages are based on total revenues. |
Note: Amounts may not add due to rounding.
30
REVENUES
AND COSTS COMPLETED CONTRACT
Revenues for the six months ended April 30, 2008 were lower
than those for the comparable period of fiscal 2007 by
$551.6 million, or 25%. The decrease was primarily
attributable to a decrease in the number of homes delivered,
which was primarily due to the lower backlog of homes at
October 31, 2007 as compared to October 31, 2006. This
lower backlog of homes was primarily the result of a 28%
decrease in the number of net new contracts signed in fiscal
2007 over fiscal 2006. Although the average price of the homes
delivered in the six-month period of fiscal 2008 period was
comparable to the average price of the homes delivered in the
comparable fiscal 2007 period, the average sales incentives
increased on homes closed in the six-month period of fiscal
2008, as compared to the comparable fiscal 2007 period, which
was offset by the settlement of units in several of our high
rise projects in the fiscal 2008 period that did not have
settlements in the comparable fiscal 2007 period and a shift in
product mix to higher priced product. Sales incentives given on
homes delivered in the six-month period of fiscal 2008 averaged
$68,000 per home, as compared to $29,000 in the comparable
period of fiscal 2007.
Revenues for the three months ended April 30, 2008 were
lower than those for the comparable period of fiscal 2007 by
approximately $324.0 million, or 29%. The decrease was
attributable to a 28% decrease in the number of homes delivered
and a 1% decrease in the average price of the homes delivered.
The decrease in the number of homes delivered in the three-month
period ended April 30, 2008 was primarily due to the lower
backlog of homes at October 31, 2007, as compared to
October 31, 2006, which was primarily the result of a 28%
decrease in the number of net new contracts signed in fiscal
2007 over fiscal 2006, and the increased number of cancellations
of contracts by home buyers in fiscal 2007 as compared to fiscal
2006. The decrease in the average price of the homes delivered
was due to the higher sales incentives given on the homes
delivered in the fiscal 2008 period, offset, in part, by the
settlement of units in several of our high rise projects in the
fiscal 2008 period that did not have settlements in the fiscal
2007 periods and a shift in product mix to higher priced
product. Sales incentives given on homes delivered in the
three-month period of fiscal 2008 averaged $76,000 per home, as
compared to $32,000 in the comparable period of fiscal 2007.
The value of net new sales contracts signed was $868.3 million
(1,570 homes) and $483.7 million (917 homes) in the
six-month and three-month periods of fiscal 2008, respectively,
as compared to $1.89 billion (2,636 homes) and
$1.16 billion (1,633 homes) in the comparable periods of
fiscal 2007.
The value of net new contracts signed in the six-month and
three-month periods of fiscal 2008, as compared to the
comparable periods of fiscal 2007, decreased 54% and 58%,
respectively. The decrease in the six-month period was the
result of a 40% decrease in the number of net new contracts
signed and a 23% decrease in the average value of each contract
signed. The decrease in the three-month period was the result of
a 44% decrease in the number of net new contracts signed and a
26% decrease in the average value of each contract signed.
We believe the decrease in the number of new contracts signed
was attributable to a decline in consumer confidence, an overall
softening of demand for new homes and concerns on the part of
prospective home buyers about the direction of home prices and
their ability to sell their existing homes. We attribute the
concern about the direction of home prices to an oversupply of
homes available for sale and to many other builders advertising
price reductions and increased sales incentives.
In addition, speculators and investors are no longer
contributing to demand. We try to avoid selling homes to
speculators, and we generally do not build detached homes
without having a signed agreement of sale. Nonetheless, we have
been impacted by an overall increase in the supply of homes
available for sale in many markets as speculators attempt to
sell the homes they previously purchased or cancel contracts for
homes under construction, and as builders, who, as part of their
business strategy, were building homes in anticipation of
capturing additional sales in a demand-driven market attempt to
reduce their inventories by lowering prices and adding
incentives. In addition, based on the high cancellation rates
reported by us and by other builders, non-speculative buyer
cancellations are also adding to the supply of homes in the
marketplace.
The decrease in the average value of the net new contracts
signed in the six-month and three-month periods of fiscal 2008,
as compared to the comparable periods of fiscal 2007, was due
primarily to the higher average value of the contracts cancelled
during the fiscal 2008 periods compared to the fiscal 2007
periods, higher sales incentives given to homebuyers in the
fiscal 2008 periods, as compared to the comparable periods of
fiscal 2007, and a shift in
31
the number of contracts signed to less expensive areas
and/or
products in the fiscal 2008 periods, as compared to the
comparable periods of fiscal 2007. At April 30, 2008, we
were offering sales incentives on homes of approximately 8.9% of
the sales price, as compared to 5.1% at April 30, 2007.
At April 30, 2008, our backlog of homes under contract was
$2.07 billion (3,017 homes), 49% lower than the
$4.04 billion (5,532 homes) backlog at April 30, 2007.
The decrease in backlog at April 30, 2008 compared to the
backlog at April 30, 2007 was primarily attributable to a
lower backlog at October 31, 2007, as compared to the
backlog at October 31, 2006, and the decrease in the value
and number of net new contracts signed in the six months of
fiscal 2008, as compared to the comparable six months of fiscal
2007, offset in part by lower deliveries in the fiscal 2008
period, as compared to the fiscal 2007 period.
Home costs, including inventory impairment charges and
write-offs but before interest, as a percentage of home sales
revenue were 100.7% and 100.6% in the six-month and three-month
periods ended April 30, 2008, respectively, as compared to
82.1% and 83.8% in the comparable periods of fiscal 2007. In the
six-month periods ended April 30, 2008 and 2007, we
recognized inventory impairment charges and write-offs of
$420.7 million and $216.6 million, respectively. In
the three-month periods ended April 30, 2008 and 2007, we
recognized inventory impairment charges and write-offs of
$203.1 million and $119.7 million, respectively.
Excluding inventory impairment charges and write-offs, cost of
revenues was 74.9% and 75.2% of revenues in the six-month and
three-month periods of fiscal 2008, respectively, as compared to
72.1% and 73.1% in the comparable periods of fiscal 2007. The
increase in the cost of revenues before inventory write-offs and
impairment charges percentage was due primarily to higher sales
incentives on the homes delivered and higher overhead costs per
home due to the decreased construction activity.
As we stated in the guidance we provided on June 3, 2008
(which is not being reconfirmed or updated in this
Form 10-Q),
we believe home deliveries for the full 2008 fiscal year will be
between 4,200 and 4,800 homes, and the average delivered price
will be between $630,000 and $650,000. We believe that due to
higher sales incentives and slower deliveries per community, our
costs as a percentage of revenues, before impairment charges and
write-offs and interest, will be higher in fiscal 2008, as
compared to fiscal 2007.
REVENUES
AND COSTS PERCENTAGE OF COMPLETION
In the six-month periods ended April 30, 2008 and 2007, we
recognized $33.5 million and $81.5 million of
revenues, respectively, and $27.5 million and
$63.3 million of costs, respectively, on projects accounted
for using the percentage of completion method. In the
three-month periods ended April 30, 2008 and 2007, we
recognized $17.7 million and $48.4 million of
revenues, respectively, and $14.6 million and
$37.4 million of costs, respectively, on projects accounted
for using the percentage of completion method. At April 30,
2008, our backlog of homes in communities that we account for
using the percentage of completion method of accounting was
$11.4 million (net of $4.9 million of revenue
recognized) compared to $102.1 million at April 30,
2007 (net of $74.1 million of revenue recognized). The
decline in the backlog at April 30, 2008 was primarily the
result of the delivery of units, the continued recognition of
revenue and a high number of contract cancellations, offset, in
part, by new contracts signed. We expect that this decline will
continue as we recognize revenues, and sell out of existing
projects without replacing them with new projects that qualify
under the accounting rules for the application of the percentage
of completion accounting method.
REVENUES
AND COSTS LAND SALES
We are developing several communities in which we expect to sell
a portion of the land to other builders or unrelated entities.
The amount and profitability of land sales will vary from year
to year depending upon the sale and delivery of the specific
land parcels. In the six-month periods ended April 30, 2008
and 2007, we recognized $1.3 million and $5.4 million
of land sales revenues, respectively, and $1.1 million and
$2.8 million of costs, respectively. In the three-month
periods ended April 30, 2008 and 2007, we recognized
$0.8 million and $2.0 million of land sales revenues,
respectively, and $0.7 million and $1.7 million of
costs, respectively.
32
INTEREST
EXPENSE
In our traditional homebuilding operations, we determine
interest expense on a specific
lot-by-lot
basis, and for land sales, on a
parcel-by-parcel
basis. As a percentage of total revenues, interest expense
varies depending on many factors, including the period of time
that we owned the land, the length of time that the homes
delivered during the period were under construction, and the
interest rates and the amount of debt carried by us in
proportion to the amount of our inventory during those periods.
For projects using the percentage of completion method of
revenue recognition, interest expense is determined based on the
total estimated interest for the project and the percentage of
total estimated construction costs that have been incurred to
date. Any change in the estimated interest expense for the
project is applied to current and future periods.
Interest expense as a percentage of revenues was 2.7% of total
revenues in the six-month period ended April 30, 2008, as
compared to 2.2% in the comparable period of fiscal 2007.
Interest expense as a percentage of revenues was 2.8% of total
revenues in the three-month period ended April 30, 2008, as
compared to 2.3% in the comparable period of fiscal 2007. The
increase in interest expense as a percentage of revenues for
both periods is due to the added length of time that the homes
delivered in 2008 remained in inventory and accumulated
additional capitalized interest. In addition, as our inventory
has been reduced, there is less available inventory to allocate
the interest incurred.
The guidance we provided on June 3, 2008 stated that,
for the full 2008 fiscal year, we believe that interest expense
as a percentage of revenues will be slightly higher as a
percentage of revenues than the percentage in the second quarter
of fiscal 2008.
SELLING,
GENERAL AND ADMINISTRATIVE EXPENSES
(SG&A)
SG&A spending decreased by $34.6 million, or 13.1%, in
the six-month period ended April 30, 2008 as compared to
the comparable period of fiscal 2007. As a percentage of
revenues, SG&A was 13.8% in the fiscal 2008 period, as
compared to 11.7% in the comparable period of fiscal 2007. The
reduction in spending was due to reduced compensation costs and
reduced costs for advertising, promotions and marketing.
SG&A spending decreased by $21.7 million, or 16.6%, in
the three-month period ended April 30, 2008, as compared to
the comparable period of fiscal 2007. As a percentage of
revenues, SG&A was 13.3% in the fiscal 2008 period, as
compared to 11.1% in the comparable period of fiscal 2007. The
reduction in spending was due to reduced compensation costs and
reduced costs for advertising, promotions and marketing.
The guidance we provided on June 3, 2008 stated that,
for the full 2008 fiscal year, we believe SG&A spending in
absolute dollars will be lower for the full fiscal
2008 year as compared to fiscal 2007, but is expected to be
higher as a percentage of revenues in fiscal 2008, as compared
to fiscal 2007.
GOODWILL
IMPAIRMENT
During the three-month period ended January 31, 2007, due
to the continued decline of the Detroit housing market, we
re-evaluated the carrying value of goodwill associated with a
1999 acquisition. We estimated the fair value of our assets in
this market, including goodwill. Fair value was determined based
on the discounted future cash flow expected to be generated in
this market. Based upon this evaluation and our expectation that
this market would not recover for a number of years, we
determined that the related goodwill had been impaired. We
recognized a $9.0 million impairment charge in the
three-month period ended January 31, 2007. After
recognizing this charge, we do not have any goodwill remaining
from this acquisition.
(LOSS)
EARNINGS FROM UNCONSOLIDATED ENTITIES
We are a participant in several joint ventures and in the Trust
and Trust II. We recognize our proportionate share of the
earnings and losses from these entities. Many of our joint
ventures are land development projects or high-rise/mid-rise
construction projects and do not generate revenues and earnings
for a number of years during the development of the property.
Once development is complete, the joint ventures generally, over
a relatively short
33
period of time, are expected to generate revenues and earnings
until all the assets of the entities are sold. Because there is
not a steady flow of revenues and earnings from these entities,
the earnings recognized from these entities will vary
significantly from quarter to quarter and year to year.
In the six months ended April 30, 2008, we recognized
$105.6 million of losses from unconsolidated entities as
compared to $11.5 million of income in the comparable
period of fiscal 2007. The loss in the six-month period ended
April 30, 2008 was attributable to $112.8 million of
impairment charges recognized on three of our investments in
unconsolidated entities.
In the three months ended April 30, 2008, we recognized
$81.6 million of losses from unconsolidated entities as
compared to $4.7 million of income in the comparable period
of fiscal 2007. The loss in the three-month period ended
April 30, 2008 was attributable to $85.0 million of
impairment charges recognized on two of our investments in
unconsolidated entities.
INTEREST
AND OTHER INCOME
For the six months ended April 30, 2008 and 2007, interest
and other income was $79.7 million and $46.8 million,
respectively. The increase in other income in the fiscal 2008
period, as compared to the comparable period of fiscal 2007, was
primarily due to the recognition of a gain of $40.2 million
related to the receipt of proceeds from a condemnation judgment
in the Companys favor, higher interest income and retained
customer deposits, offset, in part, by a $9.6 million gain
from the sale of our cable TV and broadband internet business in
the fiscal 2007 period.
For the three months ended April 30, 2008 and 2007,
interest and other income was $60.6 million and
$17.8 million, respectively. The increase in other income
in the fiscal 2008 period, as compared to the comparable period
of fiscal 2007, was primarily due to the recognition of a gain
of $40.2 million related to the receipt of proceeds from a
condemnation judgment in the Companys favor, higher
interest income and retained customer deposits.
The guidance we provided on June 3, 2008 stated that,
due to the lower investment rates currently available, interest
income in the second half of fiscal 2008 should be lower than
interest income in the first half of fiscal 2008.
(LOSS)
INCOME BEFORE INCOME TAXES
For the six-month period ended April 30, 2008, we reported
a loss before tax benefits of $306.0 million, as compared
to $146.7 million of income before taxes for the six-month
period ended April 30, 2007. For the three-month period
ended April 30, 2008, we reported a loss before tax
benefits of $154.0 million, as compared to
$59.5 million of income before taxes for the three-month
period ended April 30, 2007.
INCOME
TAXES
An income tax benefit was provided in the six-month and
three-month periods ended April 30, 2008 at an effective
rate of 38.0% and 39.1%, respectively. For the six-month and
three-month periods ended April 30, 2007, an income tax
provision was provided at an effective rate of 38.0% and 38.3%,
respectively.
CAPITAL
RESOURCES AND LIQUIDITY
Funding for our business has been provided principally by cash
flow from operating activities, unsecured bank borrowings and
the public debt and equity markets. We have used our cash flow
from operating activities, bank borrowings and the proceeds of
public debt and equity offerings to acquire additional land for
new communities, fund additional expenditures for land
development, fund construction costs needed to meet the
requirements of our backlog and the increasing number of
communities in which we were offering homes for sale, invest in
unconsolidated entities, repurchase our stock, and repay debt.
In the six-month period ended April 30, 2008, we generated
$335.7 million of cash, principally from operating
activities. In the fiscal 2008 period, cash flow from operating
activities was generated primarily from net income before
inventory and investment impairment losses, reductions in
inventory, and a decrease in contracts receivable
34
related to percentage of completion accounting, offset, in part,
by a decrease in accounts payable and accrued expenses
(excluding accruals of estimated liabilities to various joint
ventures), a decrease in customer deposits and an increase in
deferred tax assets. The decreased inventory, contracts
receivable, accounts payable and customer deposits were due
primarily to the decline in our business as previously discussed.
In the six-month period ended April 30, 2007, we used
$79.4 million of cash, including $83.2 million used in
operating activities and $3.2 million in financing
activities, offset, in part by $7.0 million provided by
investing activities. In the fiscal 2007 period, net cash used
in operating activities was primarily attributable to inventory
additions, a reduction in accounts payable and accrued expenses,
and a reduction in customer deposits, offset, in part, by net
income before write-offs. The increase in inventory in the
fiscal 2007 period was the result of our continued spending on
land improvements and construction in progress, and the decrease
in accounts payable, accrued expenses and customer deposits was
due primarily to the decline in our business as previously
discussed. For the full 2007 fiscal year, cash flow from
operations was $330.5 million and our net increase in cash
was $267.8 million.
At April 30, 2008, the aggregate purchase price of land
parcels under option and purchase agreements was approximately
$1.80 billion (including $1.04 billion of land to be
acquired from joint ventures in which we have invested). Of the
$1.80 billion of land purchase commitments, we had paid or
deposited $96.7 million. Of the $1.04 billion of land
to be acquired from joint ventures, $139.1 million of our
investments in the joint ventures will be credited against the
purchase price of the land. The purchases of these land parcels
are scheduled over the next several years.
In general, cash flow from operating activities assumes that, as
each home is delivered, we will purchase a home site to replace
it. Because we own several years supply of home sites, we
do not need to buy home sites immediately to replace the ones
delivered. In addition, we generally do not begin construction
of our single-family detached homes until we have a signed
contract with the home buyer, although in fiscal 2006 and 2007,
due to an extremely high cancellation rate of customer contracts
and the increase in the number of attached-home communities from
which we were operating, the number of speculative homes in our
inventory increased significantly. In the six-month period ended
April 30, 2008, the value of net new contracts signed
decreased approximately 20% versus the six-month period ended
October 31, 2007. In fiscal 2007, the value of net new
contracts signed decreased 33% versus fiscal 2006. In fiscal
2006, the value of net new contracts signed with home buyers
decreased by 38% from fiscal 2005. Should our business remain at
its current level or decline significantly from present levels,
we believe that our inventory levels would continue to decrease,
as we complete and deliver the homes under construction but do
not commence construction of as many new homes, complete the
improvements on the land we already own and sell and deliver the
speculative homes that are currently in inventory, resulting in
an increase in our cash flow from operations. In addition, we
might continue to delay or curtail our acquisition of additional
land, as we have since the second half of fiscal 2006, which
would further reduce our inventory levels and cash needs. At
April 30, 2008, we owned or controlled through options
approximately 51,800 home sites, as compared to approximately
59,300 at October 31, 2007, and approximately 91,200 at
April 30, 2006, the high point of our home sites owned and
controlled.
During the past several years, we have had a significant amount
of cash invested in either short-term cash equivalents or
short-term interest-bearing marketable securities. In addition,
we have made a number of investments in unconsolidated entities
related to the acquisition and development of land for future
home sites or in entities that are constructing or converting
apartment buildings into luxury condominiums. Our investment
activities related to marketable securities and investments in
and distributions of investments from unconsolidated entities
are contained in the Condensed Consolidated Statements of
Cash Flows under Cash flow from investing
activities.
We have a $1.89 billion credit facility consisting of a
$1.56 billion unsecured revolving credit facility and a
$331.7 million term loan facility (collectively, the
Credit Facility) with 35 banks, which extends to
March 2011. At April 30, 2008, interest was payable on
borrowings under the revolving credit facility at 0.475%
(subject to adjustment based upon our corporate debt rating and
leverage ratios) above the Eurodollar rate or at other specified
variable rates as selected by us from time to time. At
April 30, 2008, we had no outstanding borrowings against
the revolving credit facility but had letters of credit of
approximately $290.7 million outstanding under it. Under
the term loan facility, interest is payable at 0.50% (subject to
adjustment based upon our corporate debt rating and
35
leverage ratios) above the Eurodollar rate or at other specified
variable rates as selected by us from time to time. At
April 30, 2008, interest was payable on the term loan at
3.31%. Under the terms of the Credit Facility, we are not
permitted to allow our maximum leverage ratio (as defined in the
agreement) to exceed 2.00 to 1.00 and was required to maintain a
minimum tangible net worth (as defined in the agreement) of
approximately $2.30 billion at April 30, 2008. At
April 30, 2008, our leverage ratio was approximately 0.31
to 1.00, and our tangible net worth was approximately
$3.18 billion.
We believe that we will be able to continue to fund our
operations and meet our contractual obligations through a
combination of existing cash resources and our existing sources
of credit.
INFLATION
The long-term impact of inflation on us is manifested in
increased costs for land, land development, construction and
overhead, as well as in increased sales prices of our homes. We
generally contract for land significantly before development and
sales efforts begin. Accordingly, to the extent land acquisition
costs are fixed, increases or decreases in the sales prices of
homes will affect our profits. Because the sales price of each
of our homes is fixed at the time a buyer enters into a contract
to acquire a home, and because we generally contract to sell our
homes before we begin construction, any inflation of costs in
excess of those anticipated may result in lower gross margins.
We generally attempt to minimize that effect by entering into
fixed-price contracts with our subcontractors and material
suppliers for specified periods of time, which generally do not
exceed one year.
In general, housing demand is adversely affected by increases in
interest rates and housing costs. Interest rates, the length of
time that land remains in inventory and the proportion of
inventory that is financed affect our interest costs. If we are
unable to raise sales prices enough to compensate for higher
costs, or if mortgage interest rates increase significantly,
affecting prospective buyers ability to adequately finance
home purchases, our revenues, gross margins and net income would
be adversely affected. Increases in sales prices, whether the
result of inflation or demand, may affect the ability of
prospective buyers to afford new homes.
GEOGRAPHIC
SEGMENTS
We operate in four geographic segments around the United States:
the North, consisting of Connecticut, Illinois, Massachusetts,
Michigan, Minnesota, New Jersey, New York, and Rhode Island; the
Mid-Atlantic, consisting of Delaware, Maryland, Pennsylvania,
Virginia and West Virginia; the South, consisting of Florida,
Georgia, North Carolina, South Carolina, and Texas; and the
West, consisting of Arizona, California, Colorado and Nevada. We
acquired and opened our first communities for sale in Georgia in
fiscal 2007.
36
The following table summarizes by geographic segment total
revenues and (loss) income before income taxes for each of the
six-month and three-month periods ended April 30, 2008 and
2007 (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
Three Months Ended
|
|
|
|
April 30,
|
|
|
April 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
|
|
$
|
466.4
|
|
|
$
|
458.5
|
|
|
$
|
239.6
|
|
|
$
|
247.4
|
|
Mid-Atlantic
|
|
|
453.9
|
|
|
|
664.5
|
|
|
|
203.6
|
|
|
|
333.2
|
|
South
|
|
|
294.9
|
|
|
|
534.7
|
|
|
|
155.6
|
|
|
|
286.9
|
|
West
|
|
|
446.4
|
|
|
|
607.6
|
|
|
|
220.0
|
|
|
|
307.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,661.6
|
|
|
$
|
2,265.3
|
|
|
$
|
818.8
|
|
|
$
|
1,174.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
|
|
$
|
30.3
|
|
|
$
|
(7.7
|
)
|
|
$
|
25.5
|
|
|
$
|
(7.0
|
)
|
Mid-Atlantic
|
|
|
(12.2
|
)
|
|
|
120.7
|
|
|
|
(27.4
|
)
|
|
|
68.2
|
|
South
|
|
|
(167.0
|
)
|
|
|
25.9
|
|
|
|
(55.3
|
)
|
|
|
21.5
|
|
West
|
|
|
(101.6
|
)
|
|
|
62.4
|
|
|
|
(71.2
|
)
|
|
|
5.5
|
|
Other
|
|
|
(55.5
|
)
|
|
|
(54.6
|
)
|
|
|
(25.6
|
)
|
|
|
(28.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(306.0
|
)
|
|
$
|
146.7
|
|
|
$
|
(154.0
|
)
|
|
$
|
59.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
Revenues in the six months ended April 30, 2008 were higher
than those for the six months ended April 30, 2007 by
$7.9 million, or 2%. The increase in revenues was
attributable to a 9% increase in the average price of homes
delivered, partially offset by a decrease of $22.5 million in
percentage of completion revenues and a 2% decrease in the
number of homes delivered. The increase in the average price of
homes delivered in the six months ended April 30, 2008, as
compared to the comparable period of the prior year, was
primarily due to closings during the first six months of fiscal
2008 in several high-rise completed contract communities in the
New York and New Jersey urban markets, which had higher average
prices than our typical product; we did not have any closings of
this type of product in the fiscal 2007 period. Excluding these
deliveries, the average price of homes delivered in the first
six months of fiscal 2008 decreased 4%, as compared to the
comparable period of fiscal 2007, primarily due to higher sales
incentives and a shift in the number of settlements to less
expensive products and/or locations. The decrease in the number
of homes delivered in the six-month period ended April 30,
2008, as compared to the same period of fiscal 2007, was
primarily due to lower backlog at October 31, 2007, as
compared to October 31, 2006, which was the result of an
11% decrease in the number of new contracts signed in fiscal
2007 over fiscal 2006.
For the three months ended April 30, 2008, revenues were
lower than those of the comparable period in fiscal 2007 by
$7.8 million, or 3%. The decrease in revenues was the
result of a decrease in percentage of completion revenues of
$25.4 million, offset, in part, by a 7% increase in the
average price of homes delivered. The increase in the average
price of homes delivered in the quarter ended April 30,
2008 as compared to the quarter ended April 30, 2007, was
primarily due to closings in the fiscal 2008 period in several
high-rise completed contract communities in the New York and New
Jersey urban markets as discussed above. Excluding these
deliveries, the average price of homes delivered in the three
months ended April 30, 2008 decreased 4%, as compared to
the three months ended April 30, 2007, primarily due to
higher sales incentives and a shift in the number of settlements
to less expensive products and/or locations.
The value of net new contracts signed in the six-month and
three-month periods ended April 30, 2008 was
$200.5 million and $76.0 million, respectively, a 69%
and 79% decline, respectively, from the net new contracts signed
in the six-month and three-month periods ended April, 30, 2007.
The decline in the six-month period of fiscal 2008 as compared
to the comparable period of fiscal 2007 was due to a 62%
decrease in the number of net new contracts signed and a 21%
decrease in the average value of each contract. The decline in
the three-month period of
37
fiscal 2008 as compared to the comparable period of fiscal 2007
was the result of a 69% decrease in the number of net new
contracts signed and a 33% decrease in the average value of each
contract. The decreases in the net new contracts signed in the
fiscal 2008 periods were primarily due to the continued slowdown
in the housing market. The decline in the average sales price
was primarily the result of: fewer net new contracts signed in
the New York and New Jersey urban markets, which had higher
average prices than our typical product, as several communities
in these areas sold out in fiscal 2007; higher sales incentives
given in the six months and three months ended April 30,
2008, as compared to the same periods in 2007; and a shift in
the number of contracts signed to less expensive product in the
fiscal 2008 periods, as compared to the fiscal 2007 periods. The
number of contract cancellations for the six months and three
months ended April 30, 2008, were 156 and 112,
respectively, as compared to 97 and 57 in the six months and
three months ended April 30, 2007, respectively.
We reported $30.3 million and $25.5 million,
respectively, of income before income taxes in the six-month and
three-month periods ended April 30, 2008, as compared to a
loss before income taxes of $7.7 million and
$7.0 million, respectively, in the six-month and
three-month periods ended April 30, 2007. The increase in
income for the six months ended April 30, 2008, as compared
to the same period in fiscal 2007, was due to the recognition of
a $9.0 million charge for goodwill impairment in the first
quarter of 2007 and lower costs of revenues in 2008, as compared
to 2007, offset, in part, by a $4.6 million decrease in
income realized from unconsolidated entities in the six months
ended April 30, 2008, as compared to the comparable period
in fiscal 2007. In the three-month period ended April 30,
2008, the increase in income, as compared to the three-month
period ended April 30, 2007, was the result of lower cost
of revenues in 2008, as compared to 2007. The lower costs of
revenues in the six-month and three-month periods ended
April 30, 2008, as compared to the comparable periods of
fiscal 2007, was primarily the result of the lower inventory
impairment charges recognized. In the six months ended
April 30, 2008, we recorded $63.8 million of inventory
impairments, as compared to $82.7 million in the fiscal
2007 period. In the three-month periods ended April 30,
2008 and 2007, we recognized inventory impairment charges of
$26.0 million and $49.5 million, respectively.
Mid-Atlantic
Revenues for the six-month and three-month periods ended
April 30, 2008 were lower than those for the comparable
periods of 2007 by $210.6 million and $129.6 million,
or 32% and 39%, respectively. The decrease in revenues for the
six-month period was attributable to a 30% decrease in the
number of homes delivered (primarily in Virginia and
Pennsylvania), and a 2% decrease in the average sales price of
the homes delivered. The decrease in revenues for the
three-month period ended April 30, 2008 was due to 37% and
3% decreases in the number of homes and average price of homes
delivered, respectively. The decreases in the number of homes
delivered were primarily due to a lower backlog at
October 31, 2007, as compared to October 31, 2006. The
decrease in the backlog of homes was primarily the result of a
23% decrease in the number of net new contracts signed in fiscal
2007 over fiscal 2006 due to weak demand. The decreases in the
average price of the homes delivered in the fiscal 2008 periods,
as compared to the fiscal 2007 periods, were primarily related
to higher sales incentives given in fiscal 2008, as compared to
fiscal 2007.
The value of net new contracts signed in the six months ended
April 30, 2008 of $325.1 million decreased 41% from
the net new contracts signed of $553.2 million in the
comparable period of fiscal 2007. The decline was due to a 34%
decrease in the number of contracts signed and an 11% decrease
in the average value of each contract. The value of net new
contracts signed during the three-month period ended
April 30, 2008 was $194.6 million, a decrease of 44%
from the $346.0 million of net new contracts signed in the
comparable period of fiscal 2007. This decrease was due to a 35%
decrease in the number of net new contracts signed and a 13%
decrease in the average value of each contract. The declines in
the number of net new contracts signed were due primarily to
continued weak demand, partially offset by lower cancellations.
The number of contract cancellations decreased from 147 and 59
in the six-month and three-month periods ended April 30,
2007 to 94 and 51 in the comparable periods of fiscal 2008. The
decrease in the average value of each contract was primarily
attributable to higher sales incentives in the fiscal 2008
periods, as compared to the fiscal 2007 periods, and a shift in
the number of contracts signed to less expensive products in
Maryland and Virginia in the fiscal 2008 periods, as compared to
the fiscal 2007 periods.
38
We reported a loss before income taxes for the six months and
three months ended April 30, 2008 of $12.2 million and
$27.4 million, respectively, as compared to income before
taxes of $120.7 million and $68.2 million for the same
periods in 2007, respectively. These declines were primarily due
to higher cost of revenues as a percentage of revenues in the
fiscal 2008 periods, as compared to the comparable periods of
fiscal 2007, offset, in part, by lower selling, general and
administrative expenses. For the six-month and three-month
periods ended April 30, 2008, cost of revenues before
interest as a percentage of revenues was 92.3% and 102.8%,
respectively, as compared to 73.7% and 71.2%, respectively, in
the comparable periods of fiscal 2007. The increases in the
fiscal 2008 percentages were primarily the result of the
higher inventory impairment charges recognized as a percentage
of revenues and increased sales incentives given to home buyers
on the homes delivered. We recognized inventory impairment
charges of $79.4 million and $56.6 million in the six
months and three months ended April 30, 2008, respectively,
as compared to $23.6 million and $0.8 million in the
comparable periods of fiscal 2007. As a percentage of
revenues, higher sales incentives increased cost of revenues
approximately 3.8% and 4.5%, respectively, in the
six-month and
three-month
periods ended April 30, 2008, as compared to the comparable
periods of fiscal 2007.
South
Revenues for the six months ended April 30, 2008 were lower
than those for the six months ended April 30, 2007 by
$239.8 million, or 45%. The decrease in revenues was
attributable to a 34% decrease in the number of homes delivered,
a 12% decrease in the average selling price of the homes
delivered, and a reduction in percentage of completion revenues
of $25.5 million. Revenues for the three months ended
April 30, 2008 were lower than those for the comparable
period of 2007 by approximately $131.3 million, or 46%. The
decrease in the revenues was attributable to a 38% decrease in
the number of homes delivered, a 14% decrease in the average
selling price of homes delivered and a $5.4 million
reduction in percentage of completion revenues. The decreases in
the number of homes delivered were primarily attributable to our
Florida operations, where we had a lower number of homes in
backlog at October 31, 2007, as compared to
October 31, 2006. The decreases in the average price of the
homes delivered in the fiscal 2008 periods, as compared to the
fiscal 2007 periods, were due to higher sales incentives and a
shift in the number of settlements to less expensive areas,
primarily in Florida.
The value of net new contracts signed in the six-month and
three-month periods ended April 30, 2008 was
$204.3 million and $114.9 million, respectively, a 29%
and 31% decline, respectively, from the net new contracts signed
in the six-month and three-month periods ended April, 30, 2007.
The decline in the six-month period of fiscal 2008, as compared
to the comparable period of fiscal 2007, was due to a 17%
decrease in the number of net new contracts signed and a 14%
decrease in the average value of each contract. The decline in
the three-month period of fiscal 2008, as compared to the
comparable period of fiscal 2007, was due to a 17% decrease in
the number of net new contracts signed and a 16% decrease in the
average value of each contract. The decreases in the number of
net new contracts signed were attributable to overall continued
weak market conditions in North Carolina, South Carolina and
Texas. In Florida, the number of net new contracts signed in the
six months and three months ended April 30, 2008 increased
50% and 32%, respectively, as compared to comparable periods in
fiscal 2007. The increases in net new contracts signed in
Florida were due primarily to the decrease in the number of
cancellations from 190 and 80 in the six-month and three-month
periods ended April 30, 2007, respectively, to 64 and 27 in
the comparable periods of fiscal 2008, respectively. The number
of cancellations in this geographic segment for the six months
and three months ended April 30, 2007 was 240 and 110,
respectively, and 129 and 66 for the six months and three months
ended April 30, 2008, respectively. The decrease in the
average value of each contract signed in this geographic segment
was primarily due to lower average sales prices in Florida,
which were the result of higher sales incentives and a shift in
the number of contracts signed to less expensive areas and
products in the fiscal 2008 periods, as compared to the fiscal
2007 periods. In addition, the average value of each contract
signed in Florida for the six months ended April 30, 2008
was negatively impacted by cancellations at
high-rise
projects in the first quarter of 2008, which carried a higher
average value per cancelled contract. The decreases in
Floridas average value of each contract signed were
offset, in part, by an increase in the average value of
contracts signed in North Carolina, which was primarily due to a
shift in the number of contracts signed to areas with higher
priced homes in the fiscal 2008 periods, as compared to the
comparable periods of fiscal 2007.
39
We reported a loss before income taxes of $167.0 million
and $55.3 million, respectively, in the six-month and
three-month periods ended April 30, 2008, as compared to
income before income taxes of $25.9 million and
$21.5 million, respectively, in the six-month and
three-month periods ended April 30, 2007. These decreases
were primarily due to higher cost of revenues as a percentage of
revenues in the fiscal 2008 periods, as compared to the fiscal
2007 periods, partially offset by lower selling, general and
administrative expenses in the fiscal 2008 periods, as compared
to the fiscal 2007 periods. Cost of revenues before interest as
a percentage of revenues was 142.6% in the six months ended
April 30, 2008, as compared to 85.2% in the comparable
period of fiscal 2007. For the three months ended April 30,
2008 and 2007, cost of revenues before interest as a percentage
of revenues was 122.4% and 82.8%, respectively. The increases in
the fiscal 2008 percentages were primarily due to the
higher inventory impairment charges recognized as well as
increased sales incentives given to home buyers on the homes
delivered during the fiscal 2008 periods, as compared to the
comparable periods of fiscal 2007. In the six months ended
April 30, 2008, we recorded $180.8 million of
inventory impairments, as compared to $46.8 million in the
fiscal 2007 period. In the three-month periods ended
April 30, 2008 and 2007, we recognized inventory impairment
charges of $64.6 million and $16.4 million,
respectively. As a percentage of revenues, higher sales
incentives increased cost of revenues approximately 5.7% and
5.5%, respectively, in the six-month and three-month periods
ended April 30, 2008, as compared to the fiscal 2007
periods.
West
Revenues for the six-month and three-month periods ended
April 30, 2008 were lower than those for the comparable
periods of 2007 by $161.2 million and $87.2 million,
or 27% and 28%, respectively. The decrease in revenues for the
six-month period was attributable to a 29% decrease in the
number of homes delivered, partially offset by a 3% increase in
the average selling price of homes delivered. The decrease in
revenues for the three months ended April 30, 2008 was due
to a 29% decrease in the number of homes delivered. The decrease
in the number of homes delivered was primarily attributable to
the lower number of homes in backlog at October 31, 2007,
as compared to October 31, 2006, partially offset by a
decrease in the number of contract cancellations in the fiscal
2008 periods, as compared to the fiscal 2007 periods. The
increase in the average price of homes delivered in the six
months ended April 30, 2008, as compared to the same period
in fiscal 2007, was primarily due to a change in product mix in
Arizona to communities with higher average selling prices,
offset, in part, by a decrease in the average price of homes
delivered in Nevada, due primarily to higher sales incentives.
The value of net new contracts signed in the six-month period
ended April 30, 2008 of $141.6 million decreased 66%
from the net new contracts signed of $420.6 million in the
six-month period ended April 30, 2007. The decline was due
primarily to a 42% decrease in both the number of contracts
signed and the average value of each contract. The value of net
new contracts signed during the three-month period ended
April 30, 2008 was $111.0 million, a decrease of 62%
from the $291.3 million of net new contracts signed in the
comparable period of fiscal 2007. This decrease was due to a 40%
decrease in the number of net new contracts signed and a 37%
decrease in the average value of each contract. The decrease in
the number of net new contracts signed was primarily due to
continued depressed market conditions. In the six months and
three months ended April 30, 2008, we had 186 and 79
contract cancellations, respectively, as compared to 336 and 158
in the comparable periods of 2007, respectively. The decreases
in the average value of each contract signed were attributable
to the increases in sales incentives given in the fiscal 2008
periods, as compared to the fiscal 2007 periods and, in Arizona,
in the 2008 fiscal periods, the higher average value of the
contracts cancelled, which resulted in a significantly lower
average value of net new contracts signed.
We reported $101.6 million and $71.2 million of losses
before income taxes in the six-month and three-month periods
ended April 30, 2008, respectively, as compared to income
before income taxes of $62.4 million and $5.5 million,
respectively, in the six-month and three-month periods ended
April 30, 2007. These decreases were attributable to lower
revenues and higher cost of revenues in the fiscal 2008 periods,
as compared to the fiscal 2007 periods, and impairment charges
of $112.8 million and $85.0 million in the six months
and three months ended April 30, 2008, respectively,
related to unconsolidated entities in which we have investments.
For the six-month and three-month periods ended April 30,
2008, cost of revenues before interest as a percentage of
revenues was 96.1% and 102.0%, respectively, as compared to
80.4% and 88.5%, respectively, in the comparable periods of
fiscal 2007. The increases in the fiscal 2008 percentages
were primarily the result of the higher inventory impairment
charges
40
recognized and increased sales incentives given to home buyers
on the homes delivered. We recognized inventory impairment
charges of $96.8 million and $55.9 million in the six
months and three months ended April 30, 2008 and 2007,
respectively, as compared to $63.5 million and
$53.0 million in the comparable periods of fiscal 2007. As
a percentage of revenues, higher sales incentives increased cost
of revenues approximately 3.9% and 8.7%, respectively, in the
six months and three months ended April 30, 2008, as
compared to the comparable periods of fiscal 2007. This
geographic segment also benefited from the recognition of
$40.2 million of income, in the six-month and three-month
periods of fiscal 2008, related to the receipt of proceeds from
a favorable condemnation judgment on property we owned.
Other
Other loss before income taxes for the six months ended
April 30, 2008 was $55.5 million, an increase of
$0.8 million from the $54.6 million loss before income
taxes reported for the six months ended April 30, 2007.
This increase was primarily the result of a $9.6 million
gain realized from the sale of our cable TV and broadband
internet business in fiscal 2007 and lower management fee income
in the fiscal 2008 period as compared to the fiscal 2007 period,
partially offset by higher interest income and lower corporate
general and administrative expenses in the fiscal 2008 period,
as compared to the fiscal 2007 period.
For the three months ended April 30, 2008 and 2007, other
loss before income taxes was $25.6 million and
$28.7 million, respectively. This decrease was primarily
due to higher interest income in the three-month period ended
April 30, 2008, as compared to same period in fiscal 2007.
41
HOUSING
DATA
Revenues
Three months ended April 30:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
Units
|
|
|
Units
|
|
|
(In millions)
|
|
|
(In millions)
|
|
|
Completed contract(a):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
|
|
|
329
|
|
|
|
325
|
|
|
$
|
232.4
|
|
|
$
|
215.2
|
|
Mid-Atlantic
|
|
|
335
|
|
|
|
534
|
|
|
|
203.5
|
|
|
|
333.2
|
|
South
|
|
|
291
|
|
|
|
467
|
|
|
|
144.4
|
|
|
|
268.7
|
|
West
|
|
|
257
|
|
|
|
360
|
|
|
|
220.0
|
|
|
|
307.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,212
|
|
|
|
1,686
|
|
|
|
800.3
|
|
|
|
1,124.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of completion(b):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
|
|
|
|
|
|
|
|
|
|
|
6.9
|
|
|
|
32.2
|
|
South
|
|
|
|
|
|
|
|
|
|
|
10.8
|
|
|
|
16.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
17.7
|
|
|
|
48.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
|
|
|
329
|
|
|
|
325
|
|
|
|
239.3
|
|
|
|
247.4
|
|
Mid-Atlantic
|
|
|
335
|
|
|
|
534
|
|
|
|
203.5
|
|
|
|
333.2
|
|
South
|
|
|
291
|
|
|
|
467
|
|
|
|
155.2
|
|
|
|
284.9
|
|
West
|
|
|
257
|
|
|
|
360
|
|
|
|
220.0
|
|
|
|
307.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated
|
|
|
1,212
|
|
|
|
1,686
|
|
|
$
|
818.0
|
|
|
$
|
1,172.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Includes communities that have extended construction cycles. See
tables below entitled Extended Delivery Communities
for information related to these communities. |
|
(b) |
|
See tables below entitled Percentage of Completion
Deliveries for information related to deliveries related
to communities accounted for using the percentage of completion
accounting method. |
Contracts
Three months ended April 30:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
Units
|
|
|
Units
|
|
|
(In millions)
|
|
|
(In millions)
|
|
|
Completed contract(c):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
|
|
|
151
|
|
|
|
503
|
|
|
$
|
71.0
|
|
|
$
|
355.9
|
|
Mid-Atlantic
|
|
|
347
|
|
|
|
536
|
|
|
|
194.6
|
|
|
|
346.0
|
|
South
|
|
|
233
|
|
|
|
285
|
|
|
|
107.1
|
|
|
|
164.6
|
|
West
|
|
|
186
|
|
|
|
309
|
|
|
|
111.0
|
|
|
|
291.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
917
|
|
|
|
1,633
|
|
|
|
483.7
|
|
|
|
1,157.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of completion:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
|
|
|
9
|
|
|
|
13
|
|
|
|
5.0
|
|
|
|
10.1
|
|
South
|
|
|
3
|
|
|
|
1
|
|
|
|
7.8
|
|
|
|
1.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
12
|
|
|
|
14
|
|
|
|
12.8
|
|
|
|
11.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
|
|
|
160
|
|
|
|
516
|
|
|
|
76.0
|
|
|
|
366.0
|
|
Mid-Atlantic
|
|
|
347
|
|
|
|
536
|
|
|
|
194.6
|
|
|
|
346.0
|
|
South
|
|
|
236
|
|
|
|
286
|
|
|
|
114.9
|
|
|
|
165.8
|
|
West
|
|
|
186
|
|
|
|
309
|
|
|
|
111.0
|
|
|
|
291.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated
|
|
|
929
|
|
|
|
1,647
|
|
|
$
|
496.5
|
|
|
$
|
1,169.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(c) |
|
Includes communities that have extended construction cycles. See
tables below entitled Extended Delivery Communities
for information related to these communities. |
42
Backlog
at April 30:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
Units
|
|
|
Units
|
|
|
(In millions)
|
|
|
(In millions)
|
|
|
Completed contract(d):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
|
|
|
1,158
|
|
|
|
1,671
|
|
|
$
|
805.3
|
|
|
$
|
1,262.2
|
|
Mid-Atlantic
|
|
|
810
|
|
|
|
1,424
|
|
|
|
547.9
|
|
|
|
955.6
|
|
South
|
|
|
634
|
|
|
|
1,218
|
|
|
|
349.8
|
|
|
|
677.5
|
|
West
|
|
|
415
|
|
|
|
1,219
|
|
|
|
362.7
|
|
|
|
1,149.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
3,017
|
|
|
|
5,532
|
|
|
|
2,065.7
|
|
|
|
4,044.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of completion:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
|
|
|
17
|
|
|
|
193
|
|
|
|
13.5
|
|
|
|
124.5
|
|
South
|
|
|
1
|
|
|
|
21
|
|
|
|
2.8
|
|
|
|
51.7
|
|
Less revenue recognized on units remaining in backlog
|
|
|
|
|
|
|
|
|
|
|
(4.9
|
)
|
|
|
(74.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
18
|
|
|
|
214
|
|
|
|
11.4
|
|
|
|
102.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
|
|
|
1,175
|
|
|
|
1,864
|
|
|
|
818.8
|
|
|
|
1,386.7
|
|
Mid-Atlantic
|
|
|
810
|
|
|
|
1,424
|
|
|
|
547.9
|
|
|
|
955.6
|
|
South
|
|
|
635
|
|
|
|
1,239
|
|
|
|
352.6
|
|
|
|
729.2
|
|
West
|
|
|
415
|
|
|
|
1,219
|
|
|
|
362.7
|
|
|
|
1,149.4
|
|
Less revenue recognized on units remaining in backlog
|
|
|
|
|
|
|
|
|
|
|
(4.9
|
)
|
|
|
(74.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated
|
|
|
3,035
|
|
|
|
5,746
|
|
|
$
|
2,077.1
|
|
|
$
|
4,146.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(d) |
|
Includes communities that have extended construction cycles. See
tables below entitled Extended Delivery Communities
for information related to these communities. |
Revenues
Six months ended April 30:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
Units
|
|
|
Units
|
|
|
(In millions)
|
|
|
(In millions)
|
|
|
Completed contract(e):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
|
|
|
602
|
|
|
|
612
|
|
|
$
|
436.8
|
|
|
$
|
406.8
|
|
Mid-Atlantic
|
|
|
734
|
|
|
|
1,046
|
|
|
|
453.9
|
|
|
|
662.3
|
|
South
|
|
|
573
|
|
|
|
870
|
|
|
|
289.7
|
|
|
|
501.8
|
|
West
|
|
|
511
|
|
|
|
717
|
|
|
|
446.4
|
|
|
|
607.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2,420
|
|
|
|
3,245
|
|
|
|
1,626.8
|
|
|
|
2,178.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of completion(f):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
|
|
|
|
|
|
|
|
|
|
|
29.2
|
|
|
|
51.7
|
|
South
|
|
|
|
|
|
|
|
|
|
|
4.3
|
|
|
|
29.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
33.5
|
|
|
|
81.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
|
|
|
602
|
|
|
|
612
|
|
|
|
466.0
|
|
|
|
458.5
|
|
Mid-Atlantic
|
|
|
734
|
|
|
|
1,046
|
|
|
|
453.9
|
|
|
|
662.3
|
|
South
|
|
|
573
|
|
|
|
870
|
|
|
|
294.0
|
|
|
|
531.6
|
|
West
|
|
|
511
|
|
|
|
717
|
|
|
|
446.4
|
|
|
|
607.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated
|
|
|
2,420
|
|
|
|
3,245
|
|
|
$
|
1,660.3
|
|
|
$
|
2,259.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(e) |
|
Includes communities that have extended construction cycles. See
tables below entitled Extended Delivery Communities
for information related to these communities. |
43
|
|
|
(f) |
|
See tables below entitled Percentage of Completion
Deliveries for information related to deliveries related
to communities accounted for using the percentage of completion
accounting method. |
Contracts
Six months ended April 30:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
Units
|
|
|
Units
|
|
|
(In millions)
|
|
|
(In millions)
|
|
|
Completed contract(g):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
|
|
|
329
|
|
|
|
843
|
|
|
$
|
191.1
|
|
|
$
|
632.2
|
|
Mid-Atlantic
|
|
|
571
|
|
|
|
865
|
|
|
|
325.1
|
|
|
|
553.2
|
|
South
|
|
|
418
|
|
|
|
497
|
|
|
|
210.5
|
|
|
|
283.0
|
|
West
|
|
|
252
|
|
|
|
431
|
|
|
|
141.6
|
|
|
|
420.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,570
|
|
|
|
2,636
|
|
|
|
868.3
|
|
|
|
1,889.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of completion:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
|
|
|
9
|
|
|
|
37
|
|
|
|
9.4
|
|
|
|
25.3
|
|
South
|
|
|
(3
|
)
|
|
|
1
|
|
|
|
(6.2
|
)
|
|
|
3.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|