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
July 31, 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 September 2, 2008, there were approximately
158,881,000 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 July 31, 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. The terms 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 September 4, 2008, we issued a press
release and held a conference call to review the results of
operations for the nine-month and three-month periods ended
July 31, 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 September 4, 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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|
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July 31,
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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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1,502,360
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$
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900,337
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Inventory
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4,546,737
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5,572,655
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Property, construction and office equipment, net
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86,841
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84,265
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Receivables, prepaid expenses and other assets
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119,294
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135,910
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Contracts receivable
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4,672
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46,525
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Mortgage loans receivable
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49,717
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93,189
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Customer deposits held in escrow
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21,417
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34,367
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Investments in and advances to unconsolidated entities
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141,843
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183,171
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Deferred tax assets, net
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363,150
|
|
|
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169,897
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|
|
|
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$
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6,836,031
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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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731,629
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$
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696,814
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Senior notes
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1,143,160
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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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39,106
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76,730
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Customer deposits
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171,175
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260,155
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Accounts payable
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142,055
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236,877
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Accrued expenses
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752,705
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724,229
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Income taxes payable
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196,470
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197,960
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|
|
|
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Total liabilities
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3,526,300
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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, 158,798 and 157,028 shares issued at
July 31, 2008 and October 31, 2007, respectively
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1,588
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1,570
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Additional paid-in capital
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269,138
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227,561
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Retained earnings
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3,032,476
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3,298,925
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Treasury stock, at cost 3 and 20 shares at
July 31, 2008 and October 31, 2007, respectively
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(62
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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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(1,423
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)
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(397
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)
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Total stockholders equity
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3,301,717
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3,527,234
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$
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6,836,031
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|
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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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Nine Months Ended July 31,
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Three Months Ended July 31,
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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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2,417,915
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$
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3,356,895
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$
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791,078
|
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$
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1,178,500
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Percentage of completion
|
|
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39,122
|
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|
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110,890
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5,633
|
|
|
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29,368
|
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Land sales
|
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2,275
|
|
|
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9,854
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|
|
959
|
|
|
|
4,483
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,459,312
|
|
|
|
3,477,639
|
|
|
|
797,670
|
|
|
|
1,212,351
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Cost of revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Completed contract(1)
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2,350,072
|
|
|
|
2,811,399
|
|
|
|
711,163
|
|
|
|
1,023,230
|
|
Percentage of completion
|
|
|
32,163
|
|
|
|
87,540
|
|
|
|
4,681
|
|
|
|
24,280
|
|
Land sales
|
|
|
1,910
|
|
|
|
6,441
|
|
|
|
816
|
|
|
|
3,677
|
|
Interest
|
|
|
67,294
|
|
|
|
76,258
|
|
|
|
23,170
|
|
|
|
27,121
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,451,439
|
|
|
|
2,981,638
|
|
|
|
739,830
|
|
|
|
1,078,308
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
|
333,127
|
|
|
|
396,263
|
|
|
|
103,104
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|
|
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131,686
|
|
Goodwill impairment
|
|
|
|
|
|
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8,973
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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(Loss) income from operations
|
|
|
(325,254
|
)
|
|
|
90,765
|
|
|
|
(45,264
|
)
|
|
|
2,357
|
|
Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) earnings from unconsolidated entities(2)
|
|
|
(135,756
|
)
|
|
|
15,375
|
|
|
|
(30,113
|
)
|
|
|
3,848
|
|
Interest and other
|
|
|
100,249
|
|
|
|
85,599
|
|
|
|
20,582
|
|
|
|
38,841
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before income taxes
|
|
|
(360,761
|
)
|
|
|
191,739
|
|
|
|
(54,795
|
)
|
|
|
45,046
|
|
Income tax (benefit) provision
|
|
|
(141,772
|
)
|
|
|
74,247
|
|
|
|
(25,500
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)
|
|
|
18,560
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(218,989
|
)
|
|
$
|
117,492
|
|
|
$
|
(29,295
|
)
|
|
$
|
26,486
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
(Loss) earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Basic
|
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$
|
(1.38
|
)
|
|
$
|
0.76
|
|
|
$
|
(0.18
|
)
|
|
$
|
0.17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Diluted
|
|
$
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(1.38
|
)
|
|
$
|
0.72
|
|
|
$
|
(0.18
|
)
|
|
$
|
0.16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
158,398
|
|
|
|
154,828
|
|
|
|
158,761
|
|
|
|
155,556
|
|
Diluted
|
|
|
158,398
|
|
|
|
164,239
|
|
|
|
158,761
|
|
|
|
164,375
|
|
|
|
|
(1) |
|
Includes inventory impairment charges and write-offs of
$526.7 million and $363.9 million in the nine-month
periods ended July 31, 2008 and 2007, respectively, and
$106.0 million and $147.3 million in the three-month
periods ended July 31, 2008 and 2007, respectively. |
|
(2) |
|
Includes write-downs of the Companys investments in
unconsolidated entities and its pro-rata share of impairment
charges recognized by unconsolidated entities in which it has
investments of $146.3 million and $33.4 million in the
nine-month and three-month periods ended July 31, 2008,
respectively. No impairment charges were recognized in the
fiscal 2007 periods. |
See accompanying notes
3
TOLL
BROTHERS, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts
in thousands)
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended July 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(Unaudited)
|
|
|
Cash flow from operating activities:
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(218,989
|
)
|
|
$
|
117,492
|
|
Adjustments to reconcile net (loss) income to net cash provided
by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
21,062
|
|
|
|
22,833
|
|
Amortization of initial benefit obligation
|
|
|
|
|
|
|
1,088
|
|
Stock-based compensation
|
|
|
19,884
|
|
|
|
22,956
|
|
Excess tax benefits from stock-based compensation
|
|
|
(8,543
|
)
|
|
|
(14,736
|
)
|
Loss (earnings) from unconsolidated entities
|
|
|
135,756
|
|
|
|
(15,375
|
)
|
Distributions of earnings from unconsolidated entities
|
|
|
41,669
|
|
|
|
16,501
|
|
Deferred tax benefit
|
|
|
(193,253
|
)
|
|
|
(137,350
|
)
|
Inventory write-offs
|
|
|
526,729
|
|
|
|
363,904
|
|
Goodwill impairment charge
|
|
|
|
|
|
|
8,973
|
|
Gain on sale of ancillary business
|
|
|
|
|
|
|
(24,643
|
)
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Decrease (increase) in inventory
|
|
|
499,515
|
|
|
|
(183,710
|
)
|
Origination of mortgage loans
|
|
|
(720,917
|
)
|
|
|
(1,064,537
|
)
|
Sale of mortgage loans
|
|
|
764,389
|
|
|
|
1,054,717
|
|
Decrease in contracts receivable
|
|
|
41,853
|
|
|
|
122,038
|
|
Decrease in receivables, prepaid expenses and other assets
|
|
|
23,040
|
|
|
|
26,285
|
|
Decrease in customer deposits
|
|
|
(76,030
|
)
|
|
|
(53,237
|
)
|
Decrease in accounts payable and accrued expenses
|
|
|
(158,665
|
)
|
|
|
(82,151
|
)
|
Decrease in current income taxes payable
|
|
|
(36,638
|
)
|
|
|
(79,548
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
660,862
|
|
|
|
101,500
|
|
|
|
|
|
|
|
|
|
|
Cash flow from investing activities:
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(3,554
|
)
|
|
|
(13,717
|
)
|
Proceeds from sale of ancillary businesses
|
|
|
|
|
|
|
32,299
|
|
Purchases of marketable securities
|
|
|
(1,468,440
|
)
|
|
|
(3,840,620
|
)
|
Sale of marketable securities
|
|
|
1,458,887
|
|
|
|
3,840,620
|
|
Investments in and advances to unconsolidated entities
|
|
|
(46,900
|
)
|
|
|
(21,194
|
)
|
Distributions of investments in unconsolidated entities
|
|
|
2,623
|
|
|
|
35,953
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by investing activities
|
|
|
(57,384
|
)
|
|
|
33,341
|
|
|
|
|
|
|
|
|
|
|
Cash flow from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds from loans payable
|
|
|
801,558
|
|
|
|
1,133,892
|
|
Principal payments of loans payable
|
|
|
(823,127
|
)
|
|
|
(1,162,973
|
)
|
Proceeds from stock-based benefit plans
|
|
|
13,044
|
|
|
|
17,994
|
|
Proceeds from restricted stock award
|
|
|
|
|
|
|
1,800
|
|
Excess tax benefits from stock-based compensation
|
|
|
8,543
|
|
|
|
14,736
|
|
Purchase of treasury stock
|
|
|
(1,476
|
)
|
|
|
(1,395
|
)
|
Change in minority interest
|
|
|
3
|
|
|
|
302
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities
|
|
|
(1,455
|
)
|
|
|
4,356
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
602,023
|
|
|
|
139,197
|
|
Cash and cash equivalents, beginning of period
|
|
|
900,337
|
|
|
|
632,524
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
1,502,360
|
|
|
$
|
771,721
|
|
|
|
|
|
|
|
|
|
|
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 July 31, 2008, the
results of its operations for the nine months and three months
ended July 31, 2008 and 2007 and its cash flows for the
nine months ended July 31, 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). 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
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.
5
TOLL
BROTHERS, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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 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 July 31, 2008 and October 31, 2007
consisted of the following (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
July 31,
|
|
|
October 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
Land and land development costs
|
|
$
|
1,372,651
|
|
|
$
|
1,749,652
|
|
Construction in progress completed contract
|
|
|
2,497,784
|
|
|
|
3,109,243
|
|
Construction in progress percentage of completion
|
|
|
51,887
|
|
|
|
62,677
|
|
Sample homes and sales offices
|
|
|
386,767
|
|
|
|
357,322
|
|
Land deposits and costs of future development
|
|
|
219,453
|
|
|
|
274,799
|
|
Other
|
|
|
18,195
|
|
|
|
18,962
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,546,737
|
|
|
$
|
5,572,655
|
|
|
|
|
|
|
|
|
|
|
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 accounting method or when the related
inventory is charged to cost of revenues under the percentage of
completion accounting method.
6
TOLL
BROTHERS, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Interest incurred, capitalized and expensed for the nine months
and three months ended July 31, 2008 and 2007, was as
follows (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended July 31,
|
|
|
Three Months Ended July 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
Interest capitalized, beginning of period
|
|
$
|
215,571
|
|
|
$
|
181,465
|
|
|
$
|
235,094
|
|
|
$
|
200,560
|
|
Interest incurred
|
|
|
93,205
|
|
|
|
102,702
|
|
|
|
29,524
|
|
|
|
34,430
|
|
Interest expensed to cost of revenues
|
|
|
(67,294
|
)
|
|
|
(76,258
|
)
|
|
|
(23,170
|
)
|
|
|
(27,121
|
)
|
Write-off to other
|
|
|
(46
|
)
|
|
|
(40
|
)
|
|
|
(12
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest capitalized, end of period
|
|
$
|
241,436
|
|
|
$
|
207,869
|
|
|
$
|
241,436
|
|
|
$
|
207,869
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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; impairment charges recognized are not
generally allocated to specific components of inventory.
Interest expense by source of revenue included in cost of
revenues for the nine months and three months ended
July 31, 2008 and 2007, was as follows (amounts in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended July 31,
|
|
|
Three Months Ended July 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
Completed contract
|
|
$
|
66,096
|
|
|
$
|
71,719
|
|
|
$
|
22,852
|
|
|
$
|
25,690
|
|
Percentage of completion
|
|
|
1,070
|
|
|
|
4,256
|
|
|
|
230
|
|
|
|
1,257
|
|
Land sales
|
|
|
128
|
|
|
|
283
|
|
|
|
88
|
|
|
|
174
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
67,294
|
|
|
$
|
76,258
|
|
|
$
|
23,170
|
|
|
$
|
27,121
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company recognized inventory impairment charges and the
expensing of costs that it believed not to be recoverable in the
nine months and three months ended July 31, 2008 and 2007,
as follows (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended July 31,
|
|
|
Three Months Ended July 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
Operating communities and owned land
|
|
$
|
437,355
|
|
|
$
|
338,739
|
|
|
$
|
96,330
|
|
|
$
|
139,628
|
|
Land options and predevelopment costs
|
|
|
89,374
|
|
|
|
25,165
|
|
|
|
9,660
|
|
|
|
7,664
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
526,729
|
|
|
$
|
363,904
|
|
|
$
|
105,990
|
|
|
$
|
147,292
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, it
estimates the expected future cash flow for each of those
communities. For those communities whose estimated cash flow is
not sufficient to recover its carrying value, the Company
estimates the fair value of these communities and recognizes an
impairment charge for the difference between the estimated fair
value of each community and its carrying value. The table below
provides, as of the date indicated, the number of operating
communities in which the Company recognized impairment
7
TOLL
BROTHERS, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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
|
|
|
$
|
82,961
|
|
April 30,
|
|
|
46
|
|
|
$
|
406,031
|
|
|
|
195,850
|
|
|
|
24
|
|
|
$
|
228,900
|
|
|
|
116,150
|
|
July 31,
|
|
|
23
|
|
|
$
|
228,909
|
|
|
|
96,330
|
|
|
|
28
|
|
|
$
|
344,100
|
|
|
|
139,628
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
437,355
|
|
|
|
|
|
|
|
|
|
|
$
|
338,739
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At July 31, 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 July 31,
2008, the Company determined that it was the primary beneficiary
of two VIEs related to land purchase contracts and had recorded
$20.9 million of inventory and $17.3 million of
accrued liabilities.
|
|
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 (land
joint ventures). Some of these land joint ventures develop
land for the sole use of the venture participants, including the
Company, and others develop land for sale to the joint venture
participants and to unrelated builders. The Company recognizes
its share of earnings from the sale of home sites to other
builders. With regard to home sites the Company purchases from
the land joint ventures, it reduces its cost basis in those home
sites by its share of the earnings on the home sites. At
July 31, 2008, the Company had approximately
$66.1 million, net of impairment charges, invested in or
advanced to these land joint ventures. At July 31, 2008,
the land joint ventures had aggregate loan commitments of
$1.09 billion, and had approximately $1.06 billion
borrowed against these commitments. In connection with certain
of these land joint ventures, the Company executed completion
guarantees and conditional repayment guarantees. 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 land joint venture. At July 31, 2008, the
maximum amount of these guarantees (net of amounts that the
Company has accrued) is approximately $50.3 million, if any
liability is determined to be due thereunder. With respect to
another land joint venture, the partners are in the process of
determining whether or not to move forward with the project
based upon, among other things, market conditions. If the
project proceeds as originally planned, the Companys
estimated contribution would be approximately
$145.3 million, less any outside financing the land joint
venture is able to obtain. The Company has recognized cumulative
impairment charges against certain land joint venture
investments because it did not believe that such investments
were fully recoverable. From August 1, 2007 through
July 31, 2008, the Company recognized $200.4 million
of impairment charges related to its land joint ventures
($28.4 million in the three-month period ended
July 31, 2008, $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). At
July 31, 2008, two of these joint ventures were in default
under their respective loan agreements; the Company does not
believe that these joint venture defaults will have a material
impact on the Companys financial condition.
In addition, at July 31, 2008, the Company had
$47.6 million of investments in three joint ventures with
unrelated parties to develop luxury condominium projects,
including for-sale residential units and commercial
8
TOLL
BROTHERS, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
space. At July 31, 2008, these joint ventures had an
aggregate of $302.9 million of loan commitments, and had
approximately $202.4 million borrowed against the
commitments. At July 31, 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 project in two phases. Construction of the first
phase has been substantially completed and deliveries commenced
in May 2008 of units that had been previously sold. At
July 31, 2008, the Company was committed to make an
additional contribution of up to $11.0 million, if required
by this joint venture. Further, the Company has the right to
withdraw from phase two of the project upon the payment of a
termination fee to its partner of $30.0 million. A second
joint venture has a project that is currently in the planning
stages; any contribution by the Company to this second joint
venture will be based upon the partners mutual agreement
to proceed with the project. If the project were to go forward,
and if the joint venture was unable to obtain outside financing
and the Company was to fund its entire commitment to this second
joint venture, the Companys estimated contribution would
be approximately $112.5 million. In the three-month period
ended July 31, 2008, the Company recognized its pro-rata
share of an impairment charge recognized by one of the joint
ventures in which it has an investment: the Companys
pro-rata share of the impairment charge was $5.0 million
and is included in (Loss) Earnings from Unconsolidated
Entities.
The Company also has a 50% interest in a joint venture with an
unrelated party to convert a
525-unit
apartment complex located in Hoboken, New Jersey, into luxury
condominium units. At July 31, 2008, the Company had
investments in and advances to this joint venture of
$16.7 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 July 31, 2008, the Company had an investment
of $11.4 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 provided development, finance and management services to
the Trust and recognized fees under the terms of various
agreements in the amounts of $1.6 million and
$0.5 million in the nine-month and three-month periods
ended July 31, 2008, respectively, and $1.5 million
and $0.6 million in the nine-month and three-month periods
ended July 31, 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 an unrelated
party.
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 July 31, 2008 and October 31, 2007
consisted of the following (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
July 31,
|
|
|
October 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
Land, land development and construction
|
|
$
|
198,631
|
|
|
$
|
247,322
|
|
Compensation and employee benefits
|
|
|
96,772
|
|
|
|
100,893
|
|
Insurance and litigation
|
|
|
155,921
|
|
|
|
144,349
|
|
Commitments to unconsolidated entities
|
|
|
120,123
|
|
|
|
27,792
|
|
Warranty
|
|
|
62,141
|
|
|
|
59,249
|
|
Interest
|
|
|
44,823
|
|
|
|
47,136
|
|
Other
|
|
|
74,294
|
|
|
|
97,488
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
752,705
|
|
|
$
|
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 nine-month and
three-month periods ended July 31, 2008 and 2007 were as
follows (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended July 31,
|
|
|
Three Months Ended July 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
Balance, beginning of period
|
|
$
|
59,249
|
|
|
$
|
57,414
|
|
|
$
|
60,816
|
|
|
$
|
58,716
|
|
Additions
|
|
|
20,223
|
|
|
|
22,392
|
|
|
|
7,193
|
|
|
|
7,509
|
|
Charges incurred
|
|
|
(17,331
|
)
|
|
|
(20,321
|
)
|
|
|
(5,868
|
)
|
|
|
(6,740
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of period
|
|
$
|
62,141
|
|
|
$
|
59,485
|
|
|
$
|
62,141
|
|
|
$
|
59,485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On November 1, 2007, the Company adopted the provisions of
FIN 48. FIN 48 clarifies the accounting for
uncertainty in income taxes recognized in accordance with
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 substantiated 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. The
inability of the Company to determine that a tax position meets
the more-likely-than-not recognition threshold does not mean
that the Internal Revenue Service (IRS) or any other
taxing authority will disagree with the position that the
Company has taken.
If a tax position does not meet the more-likely-than-not
recognition threshold despite the Companys belief that its
filing position is supportable, the benefit of that tax position
is not recognized in the financial statements and the Company is
required to accrue potential interest and penalties until the
uncertainty is resolved. Potential interest and penalties are
recognized as a component of the provision for income taxes
which is consistent with the Companys historical
accounting policy. Differences between amounts taken in a tax
return and amounts recognized in the financial statements are
considered unrecognized tax benefits. The Company believes that
it has a reasonable basis for each of its filing positions and
intends to defend those positions if challenged by the IRS or
another taxing jurisdiction. If the IRS or other taxing
authorities do not disagree with the Companys position and
after the statute
10
TOLL
BROTHERS, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
of limitations expires, the Company will recognize the
unrecognized tax benefit in the period that the uncertainty of
the tax position is eliminated.
As of November 1, 2007, the Company recorded a
$47.5 million charge 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
Companys cumulative net unrecognized tax benefits were
$218.6 million.
During the nine-month period ended July 31, 2008, the
Company entered into a settlement with the IRS for fiscal years
2003 through 2005, and settled certain state tax audits for
fiscal years 2002 and 2003. In connection with these settlements
and certain amended filings that came out of these audits, the
Company agreed to pay $33.0 million. The Company estimates
that it will pay an additional $12.0 million as a result of
these audits in subsequent quarters. 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 nine-month period ended July 31,
2008, the Company reduced its net unrecognized tax benefits by
$9.1 million largely related to expiring tax statutes
offset by new reserves.
During the next twelve months, it is possible that the amount of
unrecognized tax benefits will decrease primarily from the
completion of tax audits where certain of the filing positions
will ultimately be accepted by the IRS
and/or other
tax jurisdictions
and/or
expiration of tax statutes. The Company does not believe these
reversals will have a material impact on the Companys
financial statements. The Companys net unrecognized tax
benefits at July 31, 2008, amounted $187.6 million and
are included in Income taxes payable on the
accompanying condensed consolidated balance sheet at
July 31, 2008. If these tax benefits reverse in the future,
they would have an impact on the Companys effective tax
rate.
During the nine months ended July 31, 2008 and 2007, the
Company recognized in its tax provision, before reduction for
applicable taxes, potential interest and penalties of
approximately $10.5 million and $18.5 million,
respectively. During the three months ended July 31, 2008
and 2007, the Company recognized in its tax provision, before
reduction for applicable taxes, potential interest and penalties
of approximately $3.5 million and $15.8 million,
respectively. At July 31, 2008 and October 31, 2007,
the Company had accrued potential interest and penalties, before
reduction of applicable taxes, of $150.5 million and
$54.8 million, respectively; these amounts were included in
Income taxes payable on the accompanying condensed
consolidated balance sheets. The increase in the nine-month
period ended July 31, 2008 relates primarily to the
adoption of FIN 48.
The components of other comprehensive loss in the nine-month and
three-month periods ended July 31, 2008 were as follows
(amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended July 31, 2008
|
|
|
Three Months Ended July 31, 2008
|
|
|
Net loss per statement of operations
|
|
|
|
|
|
$
|
(218,989
|
)
|
|
|
|
|
|
$
|
(29,295
|
)
|
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
|
|
|
329
|
|
|
|
|
|
|
|
109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,026
|
)
|
|
|
|
|
|
|
109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss
|
|
|
|
|
|
$
|
(220,015
|
)
|
|
|
|
|
|
$
|
(29,186
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11
TOLL
BROTHERS, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
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 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 nine-month and three-month periods ended July 31,
2008 and 2007, the Company recognized costs and made payments
related to its supplemental retirement plans as follows (amounts
in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
|
Three Months
|
|
|
|
Ended July 31,
|
|
|
Ended July 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
Service cost
|
|
$
|
157
|
|
|
$
|
247
|
|
|
$
|
52
|
|
|
$
|
83
|
|
Interest cost
|
|
|
918
|
|
|
|
760
|
|
|
|
306
|
|
|
|
253
|
|
Amortization of initial benefit obligation
|
|
|
1,027
|
|
|
|
1,088
|
|
|
|
343
|
|
|
|
203
|
|
Amortization of unrecognized gains
|
|
|
(480
|
)
|
|
|
|
|
|
|
(160
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,622
|
|
|
$
|
2,095
|
|
|
$
|
541
|
|
|
$
|
539
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefits paid
|
|
$
|
92
|
|
|
$
|
154
|
|
|
$
|
29
|
|
|
$
|
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 the
Companys annual 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
|
|
$9.50
|
|
$11.17
|
In the quarter ended July 31, 2008, pursuant to
stockholder-approved amendments to the Companys Stock
Incentive Plan (1998) and the Companys Stock
Incentive Plan for Employees (2007), the Company offered certain
eligible employees the ability to exchange certain
out-of-the-money stock options (old options) in
exchange for replacement options with the same terms and
conditions as the old options, except for the number of shares
subject to the replacement options and the per-share exercise
price. The Company accepted for exchange old options to purchase
approximately 2.5 million shares with a weighted-average
exercise price per share of $33.18 and issued
12
TOLL
BROTHERS, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
replacement options to purchase approximately 1.6 million
shares with a weighted-average exercise price per share of
$18.92. The assumptions and fair value used for the valuation of
the replacement option grants and old option grants were as
follows:
|
|
|
|
|
|
|
Replacement options
|
|
Old options
|
|
Expected volatility
|
|
51.01% - 51.92%
|
|
51.08% - 51.71%
|
Weighted-average volatility
|
|
51.44%
|
|
51.36%
|
Risk-free interest rate
|
|
3.38% - 3.70%
|
|
3.28% - 3.58%
|
Expected life (years)
|
|
4.84 - 6.96
|
|
4.36 - 6.10
|
Dividends
|
|
none
|
|
none
|
Weighted-average exchange date fair value
per share of options
|
|
$9.94
|
|
$6.25
|
The difference between the aggregate fair value of the old
options and the replacement options was immaterial.
In the nine-month and three-month periods ended July 31,
2008, the Company recognized $19.4 million and
$3.4 million of stock compensation expense, respectively,
and $7.7 million and $1.3 million of income tax
benefit, respectively, related to stock option grants. In the
nine-month and three-month periods ended July 31, 2007, the
Company recognized $22.6 million and $4.5 million of
stock compensation expense, respectively, and $8.4 million
and $2.0 million of income tax benefit, respectively,
related to stock option grants.
The Company expects to recognize approximately
$22.4 million of stock compensation expense and
$8.9 million of income tax benefit for the full fiscal
2008 year 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.
|
|
10.
|
(Loss)
Earnings Per Share Information
|
Information pertaining to the calculation of (loss) earnings per
share for the nine-month and three-month periods ended
July 31, 2008 and 2007 is as follows (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended July 31,
|
|
|
Three Months Ended July 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
Basic weighted average shares
|
|
|
158,398
|
|
|
|
154,828
|
|
|
|
158,761
|
|
|
|
155,556
|
|
Common stock equivalents
|
|
|
|
|
|
|
9,411
|
|
|
|
|
|
|
|
8,819
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average shares
|
|
|
158,398
|
|
|
|
164,239
|
|
|
|
158,761
|
|
|
|
164,375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months and three months ended July 31, 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 July 31, 2008, the exercise price per share of
approximately 5.4 million of the Companys outstanding
stock 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 July 31,
2008. At July 31, 2007, the exercise price per share of
approximately 5.6 million of the Companys outstanding
stock options was higher than the average closing price of the
Companys common stock on the NYSE for the three-month
period ended July 31, 2007.
|
|
11.
|
Stock
Purchase Program
|
In March 2003, the Companys Board of Directors authorized
the purchase 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 July 31, 2008,
the Company had approximately 12.0 million shares remaining
on its purchase authorization.
13
TOLL
BROTHERS, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
12.
|
Commitments
and Contingencies
|
At July 31, 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
$1.62 billion (including $1.04 billion of land to be
acquired from joint ventures in which the Company has
investments). Of the $1.62 billion of land purchase
commitments, the Company had paid or deposited
$77.5 million. Of the $1.04 billion of land to be
acquired from joint ventures, $139.4 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 $77.5 million the Company had paid or deposited on
these option agreements, $68.6 million was non-refundable
at July 31, 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 July 31, 2008,
accrued expenses included $29.1 million, representing the
Companys outstanding standby letters of credit issued in
connection with options to purchase home sites.
At July 31, 2008, the Company had $141.8 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 July 31, 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 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 July 31, 2008, the Company had outstanding surety bonds
amounting to $528.1 million, related primarily to its
obligations to various governmental entities to construct
improvements in the Companys various communities. The
Company estimates that $199.1 million of work remains on
these improvements. The Company has an additional
$106.0 million of surety bonds outstanding that guarantee
other obligations of the Company, including $59.9 million
of escrow bonds securing customer deposits. The Company does not
believe it is likely that any outstanding bonds will be drawn
upon.
At July 31, 2008, the Company had agreements of sale
outstanding to deliver 2,592 homes with an aggregate sales value
of $1.75 billion, of which the Company has recognized
$4.3 million of revenues with regard to a portion of such
homes accounted for using the percentage of completion
accounting method.
At July 31, 2008, the Companys mortgage subsidiary
was committed to fund $677.6 million of mortgage loans.
$122.6 million of these commitments, as well as
$49.7 million of mortgage loans receivable, have
locked in interest rates. The mortgage subsidiary
has commitments from recognized outside mortgage financing
institutions to acquire approximately $172.0 million of
these locked-in loans and receivables. Our home
buyers have not locked-in the interest rate on
approximately $555.0 million of mortgage commitments from
our mortgage subsidiary.
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) concerning 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.
14
TOLL
BROTHERS, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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. In August 2008, the Company signed a
consent order with the Illinois Attorney General and the State
Attorney of Lake County, IL. Under the order, the Company will:
pay $80,000 to the Illinois Environmental Protection Agency; pay
$30,000 to the State Attorney of Lake County; and make a
contribution of $100,000 to the Lake County Health Department
and Community Health Center Lakes Management Unit for use toward
an environmental restoration project. The Company also agreed to
implement certain management, record-keeping and reporting
practices related to storm water discharges at the subject site.
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 responded to the amended complaint by filing
a motion to dismiss, challenging the sufficiency of the
pleadings. On August 29, 2008, the court denied the
Companys motion to dismiss. Nonetheless, the Company
believes that this lawsuit is without merit and intends to
continue to vigorously defend against it.
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 nine months and three
months ended July 31, 2008 and 2007 were as follows
(amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended July 31,
|
|
|
Three Months Ended July 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
|
|
$
|
693,789
|
|
|
$
|
755,295
|
|
|
$
|
227,411
|
|
|
$
|
296,763
|
|
Mid-Atlantic
|
|
|
668,254
|
|
|
|
1,015,097
|
|
|
|
214,364
|
|
|
|
350,601
|
|
South
|
|
|
439,896
|
|
|
|
778,037
|
|
|
|
144,962
|
|
|
|
243,323
|
|
West
|
|
|
657,373
|
|
|
|
929,210
|
|
|
|
210,933
|
|
|
|
321,664
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,459,312
|
|
|
$
|
3,477,639
|
|
|
$
|
797,670
|
|
|
$
|
1,212,351
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
|
|
$
|
54,284
|
|
|
$
|
19,052
|
|
|
$
|
24,017
|
|
|
$
|
26,769
|
|
Mid-Atlantic
|
|
|
(28,324
|
)
|
|
|
182,405
|
|
|
|
(16,039
|
)
|
|
|
61,639
|
|
South
|
|
|
(161,834
|
)
|
|
|
(4,382
|
)
|
|
|
5,118
|
|
|
|
(30,314
|
)
|
West
|
|
|
(149,550
|
)
|
|
|
60,485
|
|
|
|
(48,011
|
)
|
|
|
(1,906
|
)
|
Corporate and other(1)
|
|
|
(75,337
|
)
|
|
|
(65,821
|
)
|
|
|
(19,880
|
)
|
|
|
(11,142
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(360,761
|
)
|
|
$
|
191,739
|
|
|
$
|
(54,795
|
)
|
|
$
|
45,046
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
TOLL
BROTHERS, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
(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. |
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 (including the Companys
pro-rata share of impairment charges recognized by the
unconsolidated entities in which the Company has an investment)
for the nine-month and three-month periods ended July 31,
2008 and 2007 were as follows (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
Three Months Ended
|
|
|
|
July 31,
|
|
|
July 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
Operating communities and owned land:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
|
|
$
|
51,880
|
|
|
$
|
88,975
|
|
|
$
|
7,380
|
|
|
$
|
9,875
|
|
Mid-Atlantic
|
|
|
113,050
|
|
|
|
32,850
|
|
|
|
43,400
|
|
|
|
10,750
|
|
South
|
|
|
144,625
|
|
|
|
105,450
|
|
|
|
5,750
|
|
|
|
60,900
|
|
West
|
|
|
127,800
|
|
|
|
111,464
|
|
|
|
39,800
|
|
|
|
58,103
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
437,355
|
|
|
|
338,739
|
|
|
|
96,330
|
|
|
|
139,628
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land options and predevelopment costs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
|
|
|
21,568
|
|
|
|
4,010
|
|
|
|
2,283
|
|
|
|
449
|
|
Mid-Atlantic
|
|
|
10,139
|
|
|
|
1,949
|
|
|
|
411
|
|
|
|
420
|
|
South
|
|
|
41,902
|
|
|
|
4,354
|
|
|
|
18
|
|
|
|
2,055
|
|
West
|
|
|
15,765
|
|
|
|
14,852
|
|
|
|
6,948
|
|
|
|
4,740
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
89,374
|
|
|
|
25,165
|
|
|
|
9,660
|
|
|
|
7,664
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total inventory impairment charges and write-offs
|
|
$
|
526,729
|
|
|
$
|
363,904
|
|
|
$
|
105,990
|
|
|
$
|
147,292
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in unconsolidated entities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
|
|
$
|
5,000
|
|
|
|
|
|
|
$
|
5,000
|
|
|
|
|
|
West
|
|
|
141,251
|
|
|
|
|
|
|
|
28,434
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
146,251
|
|
|
|
|
|
|
$
|
33,434
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets for each of the Companys geographic segments
at July 31, 2008 and October 31, 2007 (amounts
in thousands) were as follows:
|
|
|
|
|
|
|
|
|
|
|
July 31,
|
|
|
October 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
North
|
|
$
|
1,357,804
|
|
|
$
|
1,589,119
|
|
Mid-Atlantic
|
|
|
1,272,980
|
|
|
|
1,523,447
|
|
South
|
|
|
875,600
|
|
|
|
1,180,325
|
|
West
|
|
|
1,220,133
|
|
|
|
1,616,395
|
|
Corporate and other(2)
|
|
|
2,109,514
|
|
|
|
1,311,030
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
6,836,031
|
|
|
$
|
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 nine months ended July 31, 2008 and 2007
(amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
Cash flow information:
|
|
|
|
|
|
|
|
|
Interest paid, net of amount capitalized
|
|
$
|
8,978
|
|
|
$
|
12,486
|
|
Income taxes paid
|
|
$
|
88,117
|
|
|
$
|
291,146
|
|
Non-cash activity:
|
|
|
|
|
|
|
|
|
Adoption of FIN 48
|
|
$
|
47,460
|
|
|
|
|
|
Reclassification of inventory to property, construction and
office equipment
|
|
$
|
16,103
|
|
|
|
|
|
Cost of inventory acquired through seller financing
|
|
$
|
7,344
|
|
|
$
|
42,163
|
|
Land returned to seller subject to loan payable
|
|
$
|
7,750
|
|
|
$
|
8,693
|
|
Reduction of investment in unconsolidated entities due to
reduction of letter of credit
|
|
$
|
8,661
|
|
|
$
|
7,806
|
|
Reclassification of investment in unconsolidated entities to
accrued liabilities
|
|
$
|
2,109
|
|
|
|
|
|
Reclassification of accrued liabilities to loan payable
|
|
$
|
2,163
|
|
|
|
|
|
Income tax benefit related to exercise of employee stock options
|
|
$
|
11,630
|
|
|
$
|
4,926
|
|
Stock bonus awards
|
|
$
|
26
|
|
|
$
|
8,041
|
|
Contribution to employee retirement plan
|
|
|
|
|
|
$
|
2,764
|
|
Disposition of ancillary businesses:
|
|
|
|
|
|
|
|
|
Fair value of assets sold
|
|
|
|
|
|
$
|
8,453
|
|
Liabilities incurred in disposition
|
|
|
|
|
|
$
|
954
|
|
Liabilities assumed by buyer
|
|
|
|
|
|
$
|
1,751
|
|
Cash received
|
|
|
|
|
|
$
|
32,299
|
|
|
|
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
$1.15 billion. The obligations of the Subsidiary Issuer to
pay principal, premiums, if any, and interest are guaranteed
jointly and severally on a senior basis by the Company and
substantially all of its 100% owned home building subsidiaries
(the Guarantor Subsidiaries). The guarantees are
full and unconditional. The Companys non-home building
subsidiaries and certain home building subsidiaries (the
Non-Guarantor Subsidiaries) do not guarantee the
debt. Separate financial statements and other disclosures
concerning the Guarantor Subsidiaries are not presented because
management has determined that such disclosures would not be
material to investors. The Subsidiary Issuer has not had and
does not have any operations other than the issuance of the four
series of senior notes and the lending of the proceeds from the
senior notes to other subsidiaries of the Company.
17
TOLL
BROTHERS, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Supplemental consolidating financial information of the Company,
the Subsidiary Issuer, the Guarantor Subsidiaries, the
Non-Guarantor Subsidiaries and the eliminations to arrive at the
Companys financial information on a consolidated basis are
as follows:
Condensed
Consolidating Balance Sheet at July 31, 2008 ($ in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Toll
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Brothers,
|
|
|
Subsidiary
|
|
|
Guarantor
|
|
|
Guarantor
|
|
|
|
|
|
|
|
|
|
Inc.
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
1,367,219
|
|
|
|
135,141
|
|
|
|
|
|
|
|
1,502,360
|
|
Inventory
|
|
|
|
|
|
|
|
|
|
|
4,038,780
|
|
|
|
507,957
|
|
|
|
|
|
|
|
4,546,737
|
|
Property, construction and office equipment, net
|
|
|
|
|
|
|
|
|
|
|
84,556
|
|
|
|
2,285
|
|
|
|
|
|
|
|
86,841
|
|
Receivables, prepaid expenses and other assets
|
|
|
|
|
|
|
3,722
|
|
|
|
88,772
|
|
|
|
29,473
|
|
|
|
(2,673
|
)
|
|
|
119,294
|
|
Contracts receivable
|
|
|
|
|
|
|
|
|
|
|
2,679
|
|
|
|
1,993
|
|
|
|
|
|
|
|
4,672
|
|
Mortgage loans receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49,717
|
|
|
|
|
|
|
|
49,717
|
|
Customer deposits held in escrow
|
|
|
|
|
|
|
|
|
|
|
21,670
|
|
|
|
(253
|
)
|
|
|
|
|
|
|
21,417
|
|
Investments in and advances to unconsolidated entities
|
|
|
|
|
|
|
|
|
|
|
95,900
|
|
|
|
45,943
|
|
|
|
|
|
|
|
141,843
|
|
Deferred tax assets net
|
|
|
363,150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
363,150
|
|
Investments in and advances to consolidated entities
|
|
|
3,137,037
|
|
|
|
1,158,425
|
|
|
|
(972,380
|
)
|
|
|
(136,944
|
)
|
|
|
(3,186,138
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,500,187
|
|
|
|
1,162,147
|
|
|
|
4,727,196
|
|
|
|
635,312
|
|
|
|
(3,188,811
|
)
|
|
|
6,836,031
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans payable
|
|
|
|
|
|
|
|
|
|
|
442,635
|
|
|
|
288,994
|
|
|
|
|
|
|
|
731,629
|
|
Senior notes
|
|
|
|
|
|
|
1,143,160
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,143,160
|
|
Senior subordinated notes
|
|
|
|
|
|
|
|
|
|
|
350,000
|
|
|
|
|
|
|
|
|
|
|
|
350,000
|
|
Mortgage company warehouse loan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39,106
|
|
|
|
|
|
|
|
39,106
|
|
Customer deposits
|
|
|
|
|
|
|
|
|
|
|
139,106
|
|
|
|
32,069
|
|
|
|
|
|
|
|
171,175
|
|
Accounts payable
|
|
|
|
|
|
|
|
|
|
|
136,986
|
|
|
|
5,069
|
|
|
|
|
|
|
|
142,055
|
|
Accrued expenses
|
|
|
|
|
|
|
18,987
|
|
|
|
484,885
|
|
|
|
251,681
|
|
|
|
(2,848
|
)
|
|
|
752,705
|
|
Income taxes payable
|
|
|
198,470
|
|
|
|
|
|
|
|
|
|
|
|
(2,000
|
)
|
|
|
|
|
|
|
196,470
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
198,470
|
|
|
|
1,162,147
|
|
|
|
1,553,612
|
|
|
|
614,919
|
|
|
|
(2,848
|
)
|
|
|
3,526,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,014
|
|
|
|
|
|
|
|
8,014
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
1,588
|
|
|
|
|
|
|
|
|
|
|
|
2,003
|
|
|
|
(2,003
|
)
|
|
|
1,588
|
|
Additional paid-in capital
|
|
|
269,138
|
|
|
|
|
|
|
|
4,420
|
|
|
|
2,734
|
|
|
|
(7,154
|
)
|
|
|
269,138
|
|
Retained earnings
|
|
|
3,032,476
|
|
|
|
|
|
|
|
3,170,587
|
|
|
|
7,642
|
|
|
|
(3,178,229
|
)
|
|
|
3,032,476
|
|
Treasury stock, at cost
|
|
|
(62
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(62
|
)
|
Accumulated other comprehensive income
|
|
|
(1,423
|
)
|
|
|
|
|
|
|
(1,423
|
)
|
|
|
|
|
|
|
1,423
|
|
|
|
(1,423
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
3,301,717
|
|
|
|
|
|
|
|
3,173,584
|
|
|
|
12,379
|
|
|
|
(3,185,963
|
)
|
|
|
3,301,717
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,500,187
|
|
|
|
1,162,147
|
|
|
|
4,727,196
|
|
|
|
635,312
|
|
|
|
(3,188,811
|
)
|
|
|
6,836,031
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 nine months ended
July 31, 2008 ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Toll
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Brothers,
|
|
|
Subsidiary
|
|
|
Guarantor
|
|
|
Guarantor
|
|
|
|
|
|
|
|
|
|
Inc.
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Completed contract
|
|
|
|
|
|
|
|
|
|
|
2,417,915
|
|
|
|
|
|
|
|
|
|
|
|
2,417,915
|
|
Percentage of completion
|
|
|
|
|
|
|
|
|
|
|
34,755
|
|
|
|
4,367
|
|
|
|
|
|
|
|
39,122
|
|
Land sales
|
|
|
|
|
|
|
|
|
|
|
2,275
|
|
|
|
|
|
|
|
|
|
|
|
2,275
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,454,945
|
|
|
|
4,367
|
|
|
|
|
|
|
|
2,459,312
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs of revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Completed contract
|
|
|
|
|
|
|
|
|
|
|
2,347,981
|
|
|
|
1,833
|
|
|
|
258
|
|
|
|
2,350,072
|
|
Percentage of completion
|
|
|
|
|
|
|
|
|
|
|
28,663
|
|
|
|
3,500
|
|
|
|
|
|
|
|
32,163
|
|
Land sales
|
|
|
|
|
|
|
|
|
|
|
1,910
|
|
|
|
|
|
|
|
|
|
|
|
1,910
|
|
Interest
|
|
|
|
|
|
|
49,460
|
|
|
|
67,120
|
|
|
|
174
|
|
|
|
(49,460
|
)
|
|
|
67,294
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49,460
|
|
|
|
2,445,674
|
|
|
|
5,507
|
|
|
|
(49,202
|
)
|
|
|
2,451,439
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
|
1
|
|
|
|
525
|
|
|
|
333,908
|
|
|
|
21,922
|
|
|
|
(23,229
|
)
|
|
|
333,127
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(1
|
)
|
|
|
(49,985
|
)
|
|
|
(324,637
|
)
|
|
|
(23,062
|
)
|
|
|
72,431
|
|
|
|
(325,254
|
)
|
Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from unconsolidated entities
|
|
|
|
|
|
|
|
|
|
|
(50,762
|
)
|
|
|
(84,994
|
)
|
|
|
|
|
|
|
(135,756
|
)
|
Interest and other
|
|
|
|
|
|
|
49,985
|
|
|
|
13,044
|
|
|
|
25,602
|
|
|
|
11,618
|
|
|
|
100,249
|
|
Loss from subsidiaries
|
|
|
(360,760
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
360,760
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(360,761
|
)
|
|
|
|
|
|
|
(362,355
|
)
|
|
|
(82,454
|
)
|
|
|
444,809
|
|
|
|
(360,761
|
)
|
Income tax benefit
|
|
|
(141,772
|
)
|
|
|
|
|
|
|
(167,883
|
)
|
|
|
(33,487
|
)
|
|
|
201,370
|
|
|
|
(141,772
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(218,989
|
)
|
|
|
|
|
|
|
(194,472
|
)
|
|
|
(48,967
|
)
|
|
|
243,439
|
|
|
|
(218,989
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
TOLL
BROTHERS, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Condensed
Consolidating Statement of Operations for the three months ended
July 31, 2008 ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Toll
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Brothers,
|
|
|
Subsidiary
|
|
|
Guarantor
|
|
|
Guarantor
|
|
|
|
|
|
|
|
|
|
Inc.
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Completed contract
|
|
|
|
|
|
|
|
|
|
|
791,078
|
|
|
|
|
|
|
|
|
|
|
|
791,078
|
|
Percentage of completion
|
|
|
|
|
|
|
|
|
|
|
4,716
|
|
|
|
917
|
|
|
|
|
|
|
|
5,633
|
|
Land sales
|
|
|
|
|
|
|
|
|
|
|
959
|
|
|
|
|
|
|
|
|
|
|
|
959
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
796,753
|
|
|
|
917
|
|
|
|
|
|
|
|
797,670
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs of revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Completed contract
|
|
|
|
|
|
|
|
|
|
|
709,716
|
|
|
|
826
|
|
|
|
621
|
|
|
|
711,163
|
|
Percentage of completion
|
|
|
|
|
|
|
|
|
|
|
4,005
|
|
|
|
676
|
|
|
|
|
|
|
|
4,681
|
|
Land sales
|
|
|
|
|
|
|
|
|
|
|
816
|
|
|
|
|
|
|
|
|
|
|
|
816
|
|
Interest
|
|
|
|
|
|
|
16,735
|
|
|
|
23,093
|
|
|
|
77
|
|
|
|
(16,735
|
)
|
|
|
23,170
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,735
|
|
|
|
737,630
|
|
|
|
1,579
|
|
|
|
(16,114
|
)
|
|
|
739,830
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
|
|
|
|
|
176
|
|
|
|
103,637
|
|
|
|
7,407
|
|
|
|
(8,116
|
)
|
|
|
103,104
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
|
|
|
|
(16,911
|
)
|
|
|
(44,514
|
)
|
|
|
(8,069
|
)
|
|
|
24,230
|
|
|
|
(45,264
|
)
|
Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from unconsolidated entities
|
|
|
|
|
|
|
|
|
|
|
(30,113
|
)
|
|
|
|
|
|
|
|
|
|
|
(30,113
|
)
|
Interest and other
|
|
|
|
|
|
|
16,911
|
|
|
|
18,237
|
|
|
|
8,237
|
|
|
|
(22,803
|
)
|
|
|
20,582
|
|
Loss from subsidiaries
|
|
|
(54,795
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
54,795
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before income taxes
|
|
|
(54,795
|
)
|
|
|
|
|
|
|
(56,390
|
)
|
|
|
168
|
|
|
|
56,222
|
|
|
|
(54,795
|
)
|
Income tax benefit
|
|
|
(25,500
|
)
|
|
|
|
|
|
|
(43,341
|
)
|
|
|
(1,183
|
)
|
|
|
44,524
|
|
|
|
(25,500
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
|
(29,295
|
)
|
|
|
|
|
|
|
(13,049
|
)
|
|
|
1,351
|
|
|
|
11,698
|
|
|
|
(29,295
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
TOLL
BROTHERS, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Condensed
Consolidating Statement of Operations for the nine months ended
July 31, 2007 ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Toll
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Brothers,
|
|
|
Subsidiary
|
|
|
Guarantor
|
|
|
Guarantor
|
|
|
|
|
|
|
|
|
|
Inc.
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Completed contract
|
|
|
|
|
|
|
|
|
|
|
3,356,895
|
|
|
|
|
|
|
|
|
|
|
|
3,356,895
|
|
Percentage of completion
|
|
|
|
|
|
|
|
|
|
|
61,473
|
|
|
|
49,417
|
|
|
|
|
|
|
|
110,890
|
|
Land sales
|
|
|
|
|
|
|
|
|
|
|
9,854
|
|
|
|
|
|
|
|
|
|
|
|
9,854
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,428,222
|
|
|
|
49,417
|
|
|
|
|
|
|
|
3,477,639
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs of revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Completed contract
|
|
|
|
|
|
|
|
|
|
|
2,767,236
|
|
|
|
44,770
|
|
|
|
(607
|
)
|
|
|
2,811,399
|
|
Percentage of completion
|
|
|
|
|
|
|
|
|
|
|
49,529
|
|
|
|
38,011
|
|
|
|
|
|
|
|
87,540
|
|
Land sales
|
|
|
|
|
|
|
|
|
|
|
6,441
|
|
|
|
|
|
|
|
|
|
|
|
6,441
|
|
Interest
|
|
|
|
|
|
|
50,204
|
|
|
|
65,687
|
|
|
|
10,571
|
|
|
|
(50,204
|
)
|
|
|
76,258
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,204
|
|
|
|
2,888,893
|
|
|
|
93,352
|
|
|
|
(50,811
|
)
|
|
|
2,981,638
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
|
30
|
|
|
|
533
|
|
|
|
396,606
|
|
|
|
26,270
|
|
|
|
(27,176
|
)
|
|
|
396,263
|
|
Goodwill impairment
|
|
|
|
|
|
|
|
|
|
|
8,973
|
|
|
|
|
|
|
|
|
|
|
|
8,973
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
(30
|
)
|
|
|
(50,737
|
)
|
|
|
133,750
|
|
|
|
(70,205
|
)
|
|
|
77,987
|
|
|
|
90,765
|
|
Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from unconsolidated entities
|
|
|
|
|
|
|
|
|
|
|
15,388
|
|
|
|
(13
|
)
|
|
|
|
|
|
|
15,375
|
|
Interest and other
|
|
|
|
|
|
|
50,737
|
|
|
|
42,631
|
|
|
|
60,169
|
|
|
|
(67,938
|
)
|
|
|
85,599
|
|
Earnings from subsidiaries
|
|
|
191,769
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(191,769
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
191,739
|
|
|
|
|
|
|
|
191,769
|
|
|
|
(10,049
|
)
|
|
|
(181,720
|
)
|
|
|
191,739
|
|
Income taxes
|
|
|
74,247
|
|
|
|
|
|
|
|
66,606
|
|
|
|
(3,929
|
)
|
|
|
(62,677
|
)
|
|
|
74,247
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
117,492
|
|
|
|
|
|
|
|
125,163
|
|
|
|
(6,120
|
)
|
|
|
(119,043
|
)
|
|
|
117,492
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22
TOLL
BROTHERS, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Condensed
Consolidating Statement of Operations for the three months ended
July 31, 2007 ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Toll
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Brothers,
|
|
|
Subsidiary
|
|
|
Guarantor
|
|
|
Guarantor
|
|
|
|
|
|
|
|
|
|
Inc.
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Completed contract
|
|
|
|
|
|
|
|
|
|
|
1,178,500
|
|
|
|
|
|
|
|
|
|
|
|
1,178,500
|
|
Percentage of completion
|
|
|
|
|
|
|
|
|
|
|
17,523
|
|
|
|
11,845
|
|
|
|
|
|
|
|
29,368
|
|
Land sales
|
|
|
|
|
|
|
|
|
|
|
4,483
|
|
|
|
|
|
|
|
|
|
|
|
4,483
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,200,506
|
|
|
|
11,845
|
|
|
|
|
|
|
|
1,212,351
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs of revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Completed contract
|
|
|
|
|
|
|
|
|
|
|
981,546
|
|
|
|
40,308
|
|
|
|
1,376
|
|
|
|
1,023,230
|
|
Percentage of completion
|
|
|
|
|
|
|
|
|
|
|
14,007
|
|
|
|
10,273
|
|
|
|
|
|
|
|
24,280
|
|
Land sales
|
|
|
|
|
|
|
|
|
|
|
3,677
|
|
|
|
|
|
|
|
|
|
|
|
3,677
|
|
Interest
|
|
|
|
|
|
|
16,734
|
|
|
|
24,075
|
|
|
|
3,046
|
|
|
|
(16,734
|
)
|
|
|
27,121
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,734
|
|
|
|
1,023,305
|
|
|
|
53,627
|
|
|
|
(15,358
|
)
|
|
|
1,078,308
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
|
22
|
|
|
|
180
|
|
|
|
131,755
|
|
|
|
9,318
|
|
|
|
(9,589
|
)
|
|
|
131,686
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
(22
|
)
|
|
|
(16,914
|
)
|
|
|
45,446
|
|
|
|
(51,100
|
)
|
|
|
24,947
|
|
|
|
2,357
|
|
Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from unconsolidated entities
|
|
|
|
|
|
|
|
|
|
|
3,868
|
|
|
|
(20
|
)
|
|
|
|
|
|
|
3,848
|
|
Interest and other
|
|
|
|
|
|
|
16,914
|
|
|
|
(4,246
|
)
|
|
|
27,619
|
|
|
|
(1,446
|
)
|
|
|
38,841
|
|
Earnings from subsidiaries
|
|
|
45,068
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(45,068
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
45,046
|
|
|
|
|
|
|
|
45,068
|
|
|
|
(23,501
|
)
|
|
|
(21,567
|
)
|
|
|
45,046
|
|
Income taxes
|
|
|
18,560
|
|
|
|
|
|
|
|
12,520
|
|
|
|
(9,188
|
)
|
|
|
(3,332
|
)
|
|
|
18,560
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
26,486
|
|
|
|
|
|
|
|
32,548
|
|
|
|
(14,313
|
)
|
|
|
(18,235
|
)
|
|
|
26,486
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23
TOLL
BROTHERS, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Condensed
Consolidating Statement of Cash Flows for the nine months ended
July 31, 2008 ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Toll
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Brothers,
|
|
|
Subsidiary
|
|
|
Guarantor
|
|
|
Guarantor
|
|
|
|
|
|
|
|
|
|
Inc.
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Cash flow from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(218,989
|
)
|
|
|
|
|
|
|
(194,472
|
)
|
|
|
(48,967
|
)
|
|
|
243,439
|
|
|
|
(218,989
|
)
|
Adjustments to reconcile net loss to net cash provided by (used
in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
|
|
|
854
|
|
|
|
19,628
|
|
|
|
580
|
|
|
|
|
|
|
|
21,062
|
|
Stock-based compensation
|
|
|
19,884
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,884
|
|
Excess tax benefit from stock-based compensation
|
|
|
(8,543
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,543
|
)
|
Loss from unconsolidated entities
|
|
|
|
|
|
|
|
|
|
|
49,643
|
|
|
|
86,113
|
|
|
|
|
|
|
|
135,756
|
|
Distributions of earnings from unconsolidated entities
|
|
|
|
|
|
|
|
|
|
|
41,669
|
|
|
|
|
|
|
|
|
|
|
|
41,669
|
|
Deferred tax benefit
|
|
|
(193,253
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(193,253
|
)
|
Inventory write-offs
|
|
|
|
|
|
|
|
|
|
|
526,729
|
|
|
|
|
|
|
|
|
|
|
|
526,729
|
|
Changes in operating assets and liabilities Decrease (increase)
in inventory
|
|
|
|
|
|
|
|
|
|
|
556,710
|
|
|
|
(57,195
|
)
|
|
|
|
|
|
|
499,515
|
|
Origination of mortgage loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(720,917
|
)
|
|
|
|
|
|
|
(720,917
|
)
|
Sale of mortgage loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
764,389
|
|
|
|
|
|
|
|
764,389
|
|
Decrease (increase) in contracts receivable
|
|
|
|
|
|
|
|
|
|
|
42,793
|
|
|
|
(940
|
)
|
|
|
|
|
|
|
41,853
|
|
Decrease (increase) in receivables, prepaid expenses and other
assets
|
|
|
420,260
|
|
|
|
1,478
|
|
|
|
(171,962
|
)
|
|
|
21,825
|
|
|
|
(248,561
|
)
|
|
|
23,040
|
|
(Decrease) increase in customer deposits
|
|
|
|
|
|
|
|
|
|
|
(78,975
|
)
|
|
|
2,945
|
|
|
|
|
|
|
|
(76,030
|
)
|
Decrease in accounts payable and accrued expenses
|
|
|
(2,832
|
)
|
|
|
(2,332
|
)
|
|
|
(116,345
|
)
|
|
|
(42,278
|
)
|
|
|
5,122
|
|
|
|
(158,665
|
)
|
Decrease in current income taxes payable
|
|
|
(36,638
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(36,638
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
(20,111
|
)
|
|
|
|
|
|
|
675,418
|
|
|
|
5,555
|
|
|
|
|
|
|
|
660,862
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
|
|
|
|
|
|
|
|
(3,122
|
)
|
|
|
(432
|
)
|
|
|
|
|
|
|
(3,554
|
)
|
Purchase of marketable securities
|
|
|
|
|
|
|
|
|
|
|
(1,239,715
|
)
|
|
|
(228,725
|
)
|
|
|
|
|
|
|
(1,468,440
|
)
|
Sale of marketable securities
|
|
|
|
|
|
|
|
|
|
|
1,230,162
|
|
|
|
228,725
|
|
|
|
|
|
|
|
1,458,887
|
|
Investments in and advances to unconsolidated entities
|
|
|
|
|
|
|
|
|
|
|
(42,964
|
)
|
|
|
(3,936
|
)
|
|
|
|
|
|
|
(46,900
|
)
|
Distributions of investments in unconsolidated entities
|
|
|
|
|
|
|
|
|
|
|
2,623
|
|
|
|
|
|
|
|
|
|
|
|
2,623
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
|
|
|
|
|
|
|
|
(53,016
|
)
|
|
|
(4,368
|
)
|
|
|
|
|
|
|
(57,384
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from loans payable
|
|
|
|
|
|
|
|
|
|
|
435
|
|
|
|
801,123
|
|
|
|
|
|
|
|
801,558
|
|
Principal payments of loans payable
|
|
|
|
|
|
|
|
|
|
|
(39,509
|
)
|
|
|
(783,618
|
)
|
|
|
|
|
|
|
(823,127
|
)
|
Proceeds from stock-based benefit plans
|
|
|
13,044
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,044
|
|
Excess tax benefit from stock-based compensation
|
|
|
8,543
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,543
|
|
Purchase of treasury stock
|
|
|
(1,476
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,476
|
)
|
Change in minority interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities
|
|
|
20,111
|
|
|
|
|
|
|
|
(39,074
|
)
|
|
|
17,508
|
|
|
|
|
|
|
|
(1,455
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
583,328
|
|
|
|
18,695
|
|
|
|
|
|
|
|
602,023
|
|
Cash and cash equivalents, beginning of period
|
|
|
|
|
|
|
|
|
|
|
783,891
|
|
|
|
116,446
|
|
|
|
|
|
|
|
900,337
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
|
|
|
|
|
|
|
|
|
1,367,219
|
|
|
|
135,141
|
|
|
|
|
|
|
|
1,502,360
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24
TOLL
BROTHERS, INC. AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Condensed
Consolidating Statement of Cash Flows for the nine months ended
July 31, 2007 ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Toll
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Brothers,
|
|
|
Subsidiary
|
|
|
Guarantor
|
|
|
Guarantor
|
|
|
|
|
|
|
|
|
|
Inc.
|
|
|
Issuer
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Cash flow from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
117,492
|
|
|
|
|
|
|
|
125,163
|
|
|
|
(6,120
|
)
|
|
|
(119,043
|
)
|
|
|
117,492
|
|
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
|
|
|
854
|
|
|
|
21,644
|
|
|
|
335
|
|
|
|
|
|
|
|
22,833
|
|
Amortization of initial benefit obligation
|
|
|
|
|
|
|
|
|
|
|
1,088
|
|
|
|
|
|
|
|
|
|
|
|
1,088
|
|
Stock-based compensation
|
|
|
22,956
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,956
|
|
Excess tax benefit from stock-based compensation
|
|
|
(14,736
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14,736
|
)
|
(Earnings) loss from unconsolidated entities
|
|
|
|
|
|
|
|
|
|
|
(15,388
|
)
|
|
|
13
|
|
|
|
|
|
|
|
(15,375
|
)
|
Distributions of earnings from unconsolidated entities
|
|
|
|
|
|
|
|
|
|
|
16,501
|
|
|
|
|
|
|
|
|
|
|
|
16,501
|
|
Deferred tax provision
|
|
|
(137,350
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(137,350
|
)
|
Inventory write-offs
|
|
|
|
|
|
|
|
|
|
|
324,204
|
|
|
|
39,700
|
|
|
|
|
|
|
|
363,904
|
|
Goodwill impairment charge
|
|
|
|
|
|
|
|
|
|
|
8,973
|
|
|
|
|
|
|
|
|
|
|
|
8,973
|
|
Gain on sales of ancillary businesses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(24,643
|
)
|
|
|
|
|
|
|
(24,643
|
)
|
Changes in operating assets and liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease in inventory
|
|
|
|
|
|
|
|
|
|
|
(143,472
|
)
|
|
|
(40,238
|
)
|
|
|
|
|
|
|
(183,710
|
)
|
Origination of mortgage loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,064,537
|
)
|
|
|
|
|
|
|
(1,064,537
|
)
|
Sale of mortgage loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,054,717
|
|
|
|
|
|
|
|
1,054,717
|
|
Decrease in contracts receivable
|
|
|
|
|
|
|
|
|
|
|
43,888
|
|
|
|
78,150
|
|
|
|
|
|
|
|
122,038
|
|
Decrease (increase) in receivables, prepaid expenses and other
assets
|
|
|
48,224
|
|
|
|
733
|
|
|
|
(138,900
|
)
|
|
|
(2,815
|
)
|
|
|
119,043
|
|
|
|
26,285
|
|
Decrease in customer deposits
|
|
|
|
|
|
|
|
|
|
|
(47,763
|
)
|
|
|
(5,474
|
)
|
|
|
|
|
|
|
(53,237
|
)
|
(Decrease) increase in accounts payable and accrued expenses
|
|
|
9,774
|
|
|
|
(1,587
|
)
|
|
|
(116,461
|
)
|
|
|
26,123
|
|
|
|
|
|
|
|
(82,151
|
)
|
Decrease in current income taxes payable
|
|
|
(79,495
|
)
|
|
|
|
|
|
|
|
|
|
|
(53
|
)
|
|
|
|
|
|
|
(79,548
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
(33,135
|
)
|
|
|
|
|
|
|
79,477
|
|
|
|
55,158
|
|
|
|
|
|
|
|
101,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
|
|
|
|
|
|
|
|
(12,925
|
)
|
|
|
(792
|
)
|
|
|
|
|
|
|
(13,717
|
)
|
Proceeds from sale of ancillary business
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,299
|
|
|
|
|
|
|
|
32,299
|
|
Purchase of marketable securities
|
|
|
|
|
|
|
|
|
|
|
(3,505,995
|
)
|
|
|
(334,625
|
)
|
|
|
|
|
|
|
(3,840,620
|
)
|
Sale of marketable securities
|
|
|
|
|
|
|
|
|
|
|
3,505,995
|
|
|
|
334,625
|
|
|
|
|
|
|
|
3,840,620
|
|
Investments in and advances to unconsolidated entities
|
|
|
|
|
|
|
|
|
|
|
(21,194
|
)
|
|
|
|
|
|
|
|
|
|
|
(21,194
|
)
|
Distributions of investments in unconsolidated entities
|
|
|
|
|
|
|
|
|
|
|
35,953
|
|
|
|
|
|
|
|
|
|
|
|
35,953
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by in investing activities
|
|
|
|
|
|
|
|
|
|
|
1,834
|
|
|
|
31,507
|
|
|
|
|
|
|
|
33,341
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from loans payable
|
|
|
|
|
|
|
|
|
|
|
32,986
|
|
|
|
1,100,906
|
|
|
|
|
|
|
|
1,133,892
|
|
Principal payments of loans payable
|
|
|
|
|
|
|
|
|
|
|
(37,099
|
)
|
|
|
(1,125,874
|
)
|
|
|
|
|
|
|
(1,162,973
|
)
|
Proceeds from stock-based benefit plans
|
|
|
17,994
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,994
|
|
Proceeds from restricted stock award
|
|
|
1,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,800
|
|
Excess tax benefit from stock-based compensation
|
|
|
14,736
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,736
|
|
Purchase of treasury stock
|
|
|
(1,395
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,395
|
)
|
Change in minority interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
302
|
|
|
|
|
|
|
|
302
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
33,135
|
|
|
|
|
|
|
|
(4,113
|
)
|
|
|
(24,666
|
)
|
|
|
|
|
|
|
4,356
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
77,198
|
|
|
|
61,999
|
|
|
|
|
|
|
|
139,197
|
|
Cash and cash equivalents, beginning of period
|
|
|
|
|
|
|
|
|
|
|
582,465
|
|
|
|
50,059
|
|
|
|
|
|
|
|
632,524
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
|
|
|
|
|
|
|
|
|
659,663
|
|
|
|
112,058
|
|
|
|
|
|
|
|
771,721
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
|
|
ITEM 2.
|
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
OVERVIEW
In the nine-month and three-month periods ended July 31,
2008, we recognized $2.46 billion and $797.7 million
of revenues, respectively, and recorded net losses of
$219.0 million and $29.3 million, respectively. In the
nine-month and three-month periods ended July 31, 2007, we
recognized $3.48 billion and $1.21 billion of
revenues, respectively, and recorded net income of
$117.5 million and $26.5 million, respectively. The
losses recognized in the fiscal 2008 periods, as compared to the
income recognized in the comparable periods of fiscal 2007, were
due primarily to the higher inventory impairment charges and
write-offs 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 nine-month period ended July 31, 2008, we recognized
inventory impairment charges and write-offs and joint venture
impairment charges of $673.0 million, as compared to
$372.9 million of inventory charges and write-offs and
goodwill impairment charges in the comparable period of fiscal
2007. In the three-month period ended July 31, 2008, we
recognized inventory charges and write-offs and joint venture
impairment charges of $139.4 million, as compared to
$147.3 million of inventory impairment charges and
write-offs in the comparable period of fiscal 2007.
The value of net new contracts signed declined by 49% and 35% in
the nine-month and three-month periods ended July 31, 2008,
respectively, as compared to the comparable periods of fiscal
2007. These decreases were the result of a decrease in the
number of net new contracts signed and a decline in the average
value of the contracts signed. When we report the number and
value of net new contracts signed, we report such totals net of
any cancellations occurring during the reporting period, whether
signed in that reporting period or in a prior period.
The decline in the value of net new contracts signed in the
nine-month period ended July 31, 2008, as compared to the
comparable period of fiscal 2007, is the result of a 37%
decrease in the number of net new contracts signed and a 20%
decline in the average value of each contract signed. The
decrease in the number of net new contracts signed was due to
the slowdown in our business discussed below. The decrease in
the average value of contracts signed in the nine-month period
of fiscal 2008, as compared to the comparable fiscal 2007
period, was due primarily to the higher average value of the
contracts cancelled during the fiscal 2008 period, as compared
to the fiscal 2007 period, higher sales incentives given to
homebuyers in the fiscal 2008 period, as compared to the fiscal
2007 period and a shift in the number of contracts signed to
less expensive areas
and/or
products in the fiscal 2008 period, as compared to the fiscal
2007 period. During the nine-month period ended July 31,
2008, our customers cancelled 760 contracts with an aggregate
sales value of $550.3 million, as compared to 1,167
cancelled contracts with an aggregate sales value of
$838.8 million in the comparable period of fiscal 2007.
These cancellations represented 24.1% and 23.6%, respectively,
of the gross number of contracts signed, and 29.1% and 24.1%,
respectively, of the gross value of contracts signed, in the
nine-month periods of fiscal 2008 and 2007.
The decline in the value of net new contracts signed in the
three-month period ended July 31, 2008, as compared to the
comparable period of fiscal 2007, is the result of a 27%
decrease in the number of net new contracts signed and a 12%
decline in the average value of contracts signed. The decrease
in the number of net new contracts signed in the period is due
to the slowdown in our business, discussed below. The decrease
in the average value of contracts signed in the period was due
primarily to higher sales incentives given to homebuyers in the
fiscal 2008 period, as compared to the comparable period of
fiscal 2007, and a shift in the number of contracts signed to
less expensive areas
and/or
products in the fiscal 2008 period, as compared to the fiscal
2007 period. During the three-month period ended July 31,
2008, our customers cancelled 195 contracts with an aggregate
sales value of $118.2 million, as compared to 347 contracts
with an aggregate sales value of $245.1 million in the
comparable period of fiscal 2007. These cancellations
represented 19.4% and 23.8%, respectively, of the gross number
of contracts signed, and 20.1% and 25.2%, respectively, of the
gross value of contracts signed, in the three-month periods of
fiscal 2008 and 2007.
Our backlog at July 31, 2008 of $1.75 billion
decreased 52%, as compared to our backlog at July 31, 2007
of $3.67 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. Only
outstanding
26
agreements of sale that have been signed by both the home buyer
and us as of the end of the period for which we are reporting
are included in backlog.
The slowdown that we have experienced since the fourth quarter
of fiscal 2005 has continued into the fourth quarter of fiscal
2008. The value of net new contracts signed declined by 76% in
each of the nine-month and three-month periods ended
July 31, 2008, as compared to the respective periods of
fiscal 2005.
We attribute the slowdown in our business to an overall
softening of demand for new homes, due, in part, to a decline in
consumer confidence, the inability of some of our home buyers to
sell their current homes and the direct and indirect impact of
the turmoil in the mortgage loan and credit markets. In
addition, we believe the softening of demand is the result of
concerns on the part of potential home buyers about the overall
direction of home prices, which we believe are due, in part, to
the constant media attention regarding the potential for
mortgage foreclosures and recession, continued advertising by
many other builders of price reductions and increased sales
incentives and the oversupply of homes currently available for
sale. With the passage of the Housing and Economic Recovery Act
of 2008 (HERA 2008), Congress and the White House
have offered a lifeline to many homeowners facing foreclosure,
which should help keep many distressed properties from coming on
the market. In addition, HERA 2008 has provided an incentive for
people to become first-time home buyers in a market that we
believe offers prices that are in their favor. This may help to
restore confidence in the market and help address the issue of
oversupply. While we try to avoid selling homes to speculators
and generally do not build detached homes without first having a
signed agreement of sale, 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 purchased
or cancel contracts for homes under construction, and as other
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,
cancellations by non-speculative buyers are also adding to the
oversupply of homes in the marketplace. At July 31, 2008,
we had 1,330 unsold units under construction (excluding
condominium conversion units), including 772 units in high
density product that generally have a longer construction time
than our traditional product. At October 31, 2007, we had
1,613 unsold units (excluding condominium conversion units)
including 672 units in high density product that generally
have a longer construction time than our traditional product.
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 the industry. With few
exceptions, the mortgage providers that furnish 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 difficult to sell their
existing homes as their buyers face the problem of obtaining a
mortgage. We believe that our home 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 home buyer. Because 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.
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. In
the current challenging environment, we believe our access to
reliable capital, our strong balance sheet, our broad geographic
presence, our diversified product lines, our experienced
personnel and our national brand name all position us well for
such opportunities now and in the future. At July 31, 2008,
we had $1.50 billion of cash and cash equivalents on hand
and
27
approximately $1.30 billion available under our 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 (also referred to herein as
land purchase contracts, contracts,
purchase agreements or option
agreements) 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 or
canceling many of our land purchase contracts. As a result, we
have reduced our land position from a high of approximately
91,200 home sites at April 30, 2006, to approximately
48,500 home sites at July 31, 2008. Of the 48,500 home
sites that we controlled at July 31, 2008, we owned
approximately 32,900 of them. Of the 32,900 home sites owned at
July 31, 2008, significant improvements have been completed
on approximately 14,600 of them.
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 then currently available.
Actual results may differ from these estimates, assumptions and
conditions.
At July 31, 2008, we were selling from 290 communities,
compared to 315 communities at October 31, 2007 and 315
communities at July 31, 2007. We expect to be selling from
approximately 275 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
also include interest, real estate taxes and direct overhead
related to development and construction, which are capitalized
to inventory 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 may
take 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.
28
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. Estimated 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 future undiscounted 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
the approvals. 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 impairment charges and
write-offs related to current and future communities.
Variable Interest Entities: We have a
significant number of land purchase contracts 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 FASB
Interpretation No. 46R (collectively referred to as
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 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 July 31, 2008, we determined that we were the
primary beneficiary of two VIEs related to land purchase
contracts and had recorded $20.9 million of inventory and
$17.3 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
29
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 retain the deposit.
Home Sales-Percentage of Completion Method: We
currently 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 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 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 retain 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.
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 July 31, 2008, we had
investments in and advances to these entities of
$141.8 million, and were committed to invest or advance
additional funds to these entities if needed and had guaranteed
to several of these entities indebtedness
and/or loan
commitments. See Note 3 of the Notes to Condensed
Consolidated Financial Statements-Investments in and
Advances to Unconsolidated Entities for more information
regarding these entities. Our investments in these entities are
accounted for using the equity method.
30
RESULTS
OF OPERATIONS
The following table sets forth, for the nine-month and
three-month periods ended July 31, 2008 and 2007, a
comparison of certain statement of operations items ($ amounts
in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended July 31,
|
|
|
Three Months Ended July 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
$
|
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|
%
|
|
|
$
|
|
|
%
|
|
|
$
|
|
|
%
|
|
|
$
|
|
|
%
|
|
|
Completed contract
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|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
2,417.9
|
|
|
|
|
|
|
|
3,356.9
|
|
|
|
|
|
|
|
791.1
|
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|
|
|
|
|
|
1,178.5
|
|
|
|
|
|
Costs(1)
|
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|
2,350.1
|
|
|
|
97.2
|
|
|
|
2,811.4
|
|
|
|
83.7
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|
|
|
711.2
|
|
|
|
89.9
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|
|
|
1,023.2
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|
|
|
86.8
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
67.8
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|
|
|
|
|
|
|
545.5
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|
|
|
|
|
|
|
79.9
|
|
|
|
|
|
|
|
155.3
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
Percentage of completion
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
39.1
|
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|
|
|
|
|
|
110.9
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|
|
|
|
|
|
|
5.6
|
|
|
|
|
|
|
|
29.4
|
|
|
|
|
|
Costs
|
|
|
32.2
|
|
|
|
82.2
|
|
|
|
87.5
|
|
|
|
78.9
|
|
|
|
4.7
|
|
|
|
83.1
|
|
|
|
24.3
|
|
|
|
82.7
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
7.0
|
|
|
|
|
|
|
|
23.4
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|
|
|
|
|
|
|
1.0
|
|
|
|
|
|
|
|
5.1
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
2.3
|
|
|
|
|
|
|
|
9.9
|
|
|
|
|
|
|
|
1.0
|
|
|
|
|
|
|
|
4.5
|
|
|
|
|
|
Costs
|
|
|
1.9
|
|
|
|
84.0
|
|
|
|
6.4
|
|
|
|
65.4
|
|
|
|
0.8
|
|
|
|
85.1
|
|
|
|
3.7
|
|
|
|
82.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.4
|
|
|
|
|
|
|
|
3.4
|
|
|
|
|
|
|
|
0.2
|
|
|
|
|
|
|
|
0.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense(2)
|
|
|
67.3
|
|
|
|
2.7
|
|
|
|
76.3
|
|
|
|
2.2
|
|
|
|
23.2
|
|
|
|
2.9
|
|
|
|
27.1
|
|
|
|
2.2
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
2,459.3
|
|
|
|
|
|
|
|
3,477.6
|
|
|
|
|
|
|
|
797.7
|
|
|
|
|
|
|
|
1,212.4
|
|
|
|
|
|
Costs(1)
|
|
|
2,451.4
|
|
|
|
99.7
|
|
|
|
2,981.6
|
|
|
|
85.7
|
|
|
|
739.8
|
|
|
|
92.7
|
|
|
|
1,078.3
|
|
|
|
88.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7.9
|
|
|
|
|
|
|
|
496.0
|
|
|
|
|
|
|
|
57.8
|
|
|
|
|
|
|
|
134.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative(2)
|
|
|
333.1
|
|
|
|
13.5
|
|
|
|
396.3
|
|
|
|
11.4
|
|
|
|
103.1
|
|
|
|
12.9
|
|
|
|
131.7
|
|
|
|
10.9
|
|
Goodwill impairment
|
|
|
|
|
|
|
|
|
|
|
9.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from operations
|
|
|
(325.3
|
)
|
|
|
|
|
|
|
90.8
|
|
|
|
|
|
|
|
(45.3
|
)
|
|
|
|
|
|
|
2.4
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) earnings from unconsolidated entities(3)
|
|
|
(135.8
|
)
|
|
|
|
|
|
|
15.4
|
|
|
|
|
|
|
|
(30.1
|
)
|
|
|
|
|
|
|
3.8
|
|
|
|
|
|
Interest and other
|
|
|
100.2
|
|
|
|
|
|
|
|
85.6
|
|
|
|
|
|
|
|
20.6
|
|
|
|
|
|
|
|
38.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before income taxes
|
|
|
(360.8
|
)
|
|
|
|
|
|
|
191.7
|
|
|
|
|
|
|
|
(54.8
|
)
|
|
|
|
|
|
|
45.0
|
|
|
|
|
|
Income tax (benefit) provision
|
|
|
(141.8
|
)
|
|
|
|
|
|
|
74.2
|
|
|
|
|
|
|
|
(25.5
|
)
|
|
|
|
|
|
|
18.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
|
(219.0
|
)
|
|
|
|
|
|
|
117.5
|
|
|
|
|
|
|
|
(29.3
|
)
|
|
|
|
|
|
|
26.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: Amounts may not add due to rounding.
|
|
|
(1) |
|
Includes inventory impairment charges and write-offs of
$526.7 million and $363.9 million in the nine-month
periods ended July 31, 2008 and 2007, respectively, and
$106.0 million and $147.3 million in the three-month
periods ended July 31, 2008 and 2007, respectively. |
|
(2) |
|
Percentages are based on total revenues. |
|
(3) |
|
Includes write-downs of our investments in, and our pro-rata
share of impairment charges recognized by, unconsolidated
entities in which we have an investment of $146.3 million
and $33.4 million in the nine-month and three month periods
ended July 31, 2008, respectively. |
31
REVENUES
AND COSTS COMPLETED CONTRACT
Revenues for the nine months ended July 31, 2008 were lower
than those for the comparable period of fiscal 2007 by
$939.0 million, or 28%. The decrease was primarily
attributable to a 27% 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 nine-month period of fiscal 2008 was comparable
to the average price of the homes delivered in the comparable
fiscal 2007 period, average sales incentives increased on homes
closed in the nine-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 higher-priced high rise
projects (not accounted for under the percentage of completion
accounting method) in the fiscal 2008 period that did not have
settlements in the comparable fiscal 2007 period, and a shift in
product mix during the fiscal 2008 period to higher-priced
product. Sales incentives given on homes delivered in the
nine-month period of fiscal 2008 averaged $70,500 per home, as
compared to $31,300 in the comparable period of fiscal 2007.
Revenues for the three months ended July 31, 2008 were
lower than those for the comparable period of fiscal 2007 by
approximately $387.4 million, or 33%. The decrease was
attributable to a 31% decrease in the number of homes delivered
and a 3% decrease in the average price of the homes delivered.
The decrease in the number of homes delivered in the three-month
period ended July 31, 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. 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 higher-priced high
rise projects (not accounted for under the percentage of
completion accounting method) in the fiscal 2008 period that did
not have settlements in the fiscal 2007 periods, and a shift in
product mix during the fiscal 2008 period 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 $35,300 in the comparable period of fiscal 2007.
The value of net new sales contracts signed was
$1.34 billion (2,379 homes) and $468.3 million (809
homes) in the nine-month and three-month periods of fiscal 2008,
respectively, as compared to $2.61 billion (3,743 homes)
and $723.1 million (1,107 homes) in the comparable periods
of fiscal 2007.
The value of net new contracts signed in the nine-month and
three-month periods of fiscal 2008, as compared to the
comparable periods of fiscal 2007, decreased 49% and 35%,
respectively. The decrease in the nine-month period was the
result of a 36% decrease in the number of net new contracts
signed and a 20% decrease in the average value of each contract
signed. The decrease in the three-month period was the result of
a 27% decrease in the number of net new contracts signed and an
11% decrease in the average value of each contract signed.
We believe the decrease in the number of new contracts signed
was attributable to the overall softening of demand for new
homes. (See Overview above for an expanded
discussion related to the decrease in the number of signed
contracts and the slowdown in our business.)
The decrease in the average value of net new contracts signed in
the nine-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, as compared to the fiscal 2007
periods, higher sales incentives given to homebuyers in the
fiscal 2008 periods, as compared to the fiscal 2007 periods, and
a shift in the number of contracts signed to less expensive
areas and/or
products in the fiscal 2008 periods, as compared to the fiscal
2007 periods. At July 31, 2008, we were offering sales
incentives that averaged approximately 8.5% of the sales price
of the home, as compared to an average of approximately 4.8% at
July 31, 2007.
At July 31, 2008, our backlog of homes under contract was
$1.74 billion (2,582 homes), 51% lower than our
$3.59 billion (4,847 homes) backlog at July 31, 2007.
The decrease in backlog at July 31, 2008 compared to our
backlog at July 31, 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 nine-month period
of fiscal 2008, as compared to the comparable period of fiscal
2007, offset in part by lower deliveries in the fiscal 2008
period, as compared to the fiscal 2007 period.
32
Home costs, including inventory impairment charges and
write-offs but before interest, as a percentage of home sales
revenue were 97.2% and 89.9% in the nine-month and three-month
periods ended July 31, 2008, respectively, as compared to
83.7% and 86.8% in the comparable periods of fiscal 2007. In the
nine-month periods ended July 31, 2008 and 2007, we
recognized inventory impairment charges and write-offs of
$526.7 million and $363.9 million, respectively. In
the three-month periods ended July 31, 2008 and 2007, we
recognized inventory impairment charges and write-offs of
$106.0 million and $147.3 million, respectively.
Excluding inventory impairment charges and write-offs, cost of
revenues was 75.4% and 76.5% of revenues in the nine-month and
three-month periods of fiscal 2008, respectively, as compared to
72.9% and 74.3% in the comparable periods of fiscal 2007. The
increase in the cost of revenues percentage before inventory
write-offs and impairment charges 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 September 4,
2008 (which is not being reconfirmed or updated in this
Form 10-Q),
we believe home deliveries accounted for under the completed
contract method of accounting for the quarter ending
October 31, 2008 will be between 850 and 1,050 homes,
resulting in deliveries for the full 2008 fiscal year of between
4,500 to 4,700 homes. We believe that the average delivered
price of homes for the three months ended October 31,
2008 will be between $640,000 and $650,000. We believe that, due
to higher sales incentives and lower deliveries per community,
our costs as a percentage of revenues, before impairment charges
and write-offs and interest, will be higher in the quarter
ending October 31, 2008 as compared to the quarter ended
July 31, 2008.
REVENUES
AND COSTS PERCENTAGE OF COMPLETION
In the nine-month periods ended July 31, 2008 and 2007, we
recognized $39.1 million and $110.9 million of
revenues, respectively, and $32.2 million and
$87.5 million of costs (excluding interest), respectively,
on projects accounted for using the percentage of completion
method. In the three-month periods ended July 31, 2008 and
2007, we recognized $5.6 million and $29.4 million of
revenues, respectively, and $4.7 million and
$24.3 million of costs, respectively, on projects accounted
for using the percentage of completion method. At July 31,
2008, our backlog of homes in communities that we account for
using the percentage of completion method of accounting was
$7.4 million (net of $4.3 million of revenue
recognized), as compared to $75.9 million at July 31,
2007 (net of $48.1 million of revenue recognized). This
decline in backlog at July 31, 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 nine-month periods ended July 31, 2008
and 2007, we recognized $2.3 million and $9.9 million
of land sales revenues, respectively, and $1.9 million and
$6.4 million of costs, respectively. In the three-month
periods ended July 31, 2008 and 2007, we recognized
$1.0 million and $4.5 million of land sales revenues,
respectively, and $0.8 million and $3.7 million of
costs (excluding interest), respectively.
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.
33
Interest expense as a percentage of revenues was 2.7% of total
revenues in the nine-month period ended July 31, 2008, as
compared to 2.2% in the comparable period of fiscal 2007.
Interest expense as a percentage of revenues was 2.9% of total
revenues in the three-month period ended July 31, 2008, as
compared to 2.2% 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 fiscal 2008 remained in inventory and accumulated
additional capitalized interest. In addition, as our inventory
has been reduced, there is less available inventory to which we
allocate the interest incurred.
SELLING,
GENERAL AND ADMINISTRATIVE EXPENSES
(SG&A)
As a percentage of revenues, SG&A was 13.5% in the
nine-month period ended July 31, 2008, as compared to 11.4%
in the comparable period of fiscal 2007. SG&A spending
decreased by $63.1 million, or 16.0%, in the nine-month
period ended July 31, 2008, as compared to the comparable
period of fiscal 2007. The reduction in spending was due to
reduced compensation costs and reduced costs for advertising,
promotions and marketing.
As a percentage of revenues, SG&A was 12.9% in the
three-month period ended July 31, 2008, as compared to
10.9% in the comparable period of fiscal 2007. SG&A
spending decreased by $28.6 million, or 21.7%, in the
three-month period ended July 31, 2008, as compared to 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 September 4, 2008 stated
that, based on the lower projected revenues for the three months
ending October 31, 2008, as compared to the three months
ended July 31, 2008, we believe SG&A will be higher as
a percentage of revenues in the three-month period ending
October 31, 2008, as compared to the three months
ended July 31, 2008.
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 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 nine months ended July 31, 2008, we recognized
$135.8 million of losses from unconsolidated entities as
compared to $15.4 million of income in the comparable
period of fiscal 2007. The loss in the nine-month period ended
July 31, 2008 was attributable to $146.3 million of
impairment charges related to five of our investments in
unconsolidated entities.
In the three months ended July 31, 2008, we recognized
$30.1 million of losses from unconsolidated entities as
compared to $3.8 million of income in the comparable period
of fiscal 2007. The loss in the three-month period ended
July 31, 2008 was attributable to $33.4 million of
impairment charges related to two of our investments in
unconsolidated entities.
INTEREST
AND OTHER INCOME
For the nine months ended July 31, 2008 and 2007, interest
and other income was $100.2 million and $85.6 million,
respectively. The increase in other income in the fiscal 2008
period, as compared to the fiscal 2007 period, was primarily due
to the recognition of a gain of $40.2 million related to
the receipt of proceeds from a
34
condemnation judgment in the Companys favor, and higher
interest income, offset, in part, by $24.7 million of gains
from the sales of our cable TV and broadband internet business
and our security monitoring business, and higher income from
ancillary businesses and management fees in the fiscal 2007
period.
For the three months ended July 31, 2008 and 2007, interest
and other income was $20.6 million and $38.8 million,
respectively. The decrease in other income in the fiscal 2008
period, as compared to the fiscal 2007 period, was primarily due
to a $14.8 million gain from the sale our security
monitoring business that was recognized in the fiscal 2007
period, and lower income from ancillary businesses, lower
retained customer deposits and lower management fees in the
fiscal 2008 period, as compared to the fiscal 2007 period,
offset, in part, by higher interest income in the fiscal 2008
period.
The guidance we provided on September 4, 2008 stated
that, due to the low current investment rates, the lower
contract cancellations in the quarter ended July 31, 2008
and the lower income from ancillary businesses expected in the
quarter ending October 31, 2008, as compared to the quarter
ended July 31, 2008, we believe that interest and other
income may be lower in the quarter ending October 31, 2008,
as compared to the quarter ended July 31, 2008.
(LOSS)
INCOME BEFORE INCOME TAXES
For the nine-month period ended July 31, 2008, we reported
a loss before income tax benefits of $360.8 million, as
compared to $191.7 million of income before taxes for the
nine-month period ended July 31, 2007. For the
three-month
period ended July 31, 2008, we reported a loss before
income tax benefits of $54.8 million, as compared to
$45.0 million of income before taxes for the three-month
period ended July 31, 2007.
INCOME
TAXES
An income tax benefit was provided in the nine-month and
three-month periods ended July 31, 2008 at an effective
rate of 39.3% and 46.5%, respectively. For the nine-month and
three-month periods ended July 31, 2007, an income tax
provision was provided at an effective rate of 38.7% and 41.2%,
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, purchase our stock, and repay debt.
In the nine-month period ended July 31, 2008, we generated
$602.0 million of cash. In the fiscal 2008 period, we
generated $660.9 million of cash flow from operating
activities, primarily from net income before inventory and
investment impairment losses, reductions in inventory, and a
decrease in contracts receivable 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. We used $57.4 million in
investing activities, primarily for additional investments in
unconsolidated entities.
In the nine-month period ended July 31, 2007, we generated
$139.2 million of cash, including $101.5 million from
operating activities, $33.3 million from investing
activities and $4.4 million from financing activities. In
the fiscal 2007 period, net cash generated from operating
activities was primarily attributable to net income before
write-offs, offset, in part, by inventory additions, a reduction
in accounts payable, accrued expenses and current income taxes
payable, a reduction in customer deposits and an increase in
deferred tax assets. 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 July 31, 2008, the aggregate purchase price of land
parcels under option and purchase agreements was approximately
$1.62 billion (including $1.04 billion of land to be
acquired from joint ventures in which we have
35
invested). Of the $1.62 billion of land purchase
commitments, we had paid or deposited $77.5 million. Of the
$1.04 billion of land to be acquired from joint ventures,
$139.4 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 those which
we deliver. 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 the high cancellation rate of customer contracts and the
increase in the number of attached-home communities from which
we were operating (all of the units of which are generally not
sold prior to the commencement of construction), the number of
speculative homes in our inventory increased significantly. The
value of net new contracts signed declined by 76% in the
nine-month period ended July 31, 2008, as compared to the
comparable period of 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, as we complete
the improvements on the land we already own and as we sell and
deliver the speculative homes that are currently in inventory,
resulting in additional 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 July 31, 2008, we owned or controlled through
options approximately 48,500 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 to 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 33 banks, which extends to
March 2011. At July 31, 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
July 31, 2008, we had no outstanding borrowings against the
revolving credit facility but had letters of credit of
approximately $273.7 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 leverage
ratios) above the Eurodollar rate or at other specified variable
rates as selected by us from time to time. At July 31,
2008, interest was payable on the term loan at 2.97%. Under the
terms of the Credit Facility, our maximum leverage ratio (as
defined in the agreement) may not exceed 2.00 to 1.00 and at
July 31, 2008, we were required to maintain a minimum
tangible net worth (as defined in the agreement) of
approximately $2.29 billion. At July 31, 2008, our
leverage ratio was approximately 0.19 to 1.00, and our tangible
net worth was approximately $3.28 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.
36
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.
The following table summarizes by geographic segment total
revenues and (loss) income before income taxes for each of the
nine-month and three-month periods ended July 31, 2008 and
2007 (amounts in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
Three Months Ended
|
|
|
|
July 31,
|
|
|
July 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
|
|
$
|
693.8
|
|
|
$
|
755.3
|
|
|
$
|
227.4
|
|
|
$
|
296.8
|
|
Mid-Atlantic
|
|
|
668.2
|
|
|
|
1,015.1
|
|
|
|
214.4
|
|
|
|
350.6
|
|
South
|
|
|
439.9
|
|
|
|
778.0
|
|
|
|
145.0
|
|
|
|
243.3
|
|
West
|
|
|
657.4
|
|
|
|
929.2
|
|
|
|
210.9
|
|
|
|
321.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,459.3
|
|
|
$
|
3,477.6
|
|
|
$
|
797.7
|
|
|
$
|
1,212.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
|
|
$
|
54.3
|
|
|
$
|
19.0
|
|
|
$
|
24.0
|
|
|
$
|
26.8
|
|
Mid-Atlantic
|
|
|
(28.3
|
)
|
|
|
182.4
|
|
|
|
(16.0
|
)
|
|
|
61.6
|
|
South
|
|
|
(161.8
|
)
|
|
|
(4.4
|
)
|
|
|
5.1
|
|
|
|
(30.3
|
)
|
West
|
|
|
(149.6
|
)
|
|
|
60.5
|
|
|
|
(48.0
|
)
|
|
|
(1.9
|
)
|
Other
|
|
|
(75.4
|
)
|
|
|
(65.8
|
)
|
|
|
(19.9
|
)
|
|
|
(11.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(360.8
|
)
|
|
$
|
191.7
|
|
|
$
|
(54.8
|
)
|
|
$
|
45.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
Revenues in the nine months ended July 31, 2008 were lower
than those for the nine months ended July 31, 2007 by
$61.5 million, or 8%. The decrease in revenues was
attributable to a decrease of $37.5 million in percentage
of completion revenues and a 9% decrease in the number of homes
delivered, partially offset by a 7% increase in the average
price of homes delivered. The increase in the average price of
homes delivered in the nine months ended July 31, 2008, as
compared to the comparable period of the prior year, was
primarily due to closings during the first nine 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
nine months of fiscal 2008 decreased 5%, 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 in the fiscal 2008 period. The decrease in the number
of homes delivered in the nine-month period ended July 31,
2008, as compared to the comparable period of fiscal 2007, was
primarily due to lower backlog at October 31, 2007, as
compared to October 31, 2006. The decline in backlog at
October 31, 2007, as compared to October 31, 2006, was
due primarily to an 11% decrease in the number of new contracts
signed in fiscal 2007 over fiscal 2006.
For the three months ended July 31, 2008, revenues were
lower than those of the comparable period of fiscal 2007 by
$69.4 million, or 23%. The decrease in revenues was the
result of a decrease in percentage of completion
37
revenues of $15.0 million and a 20% decrease in the number
of homes delivered, offset, in part, by a 1% increase in the
average price of homes delivered. The increase in the average
price of homes delivered in the quarter ended July 31,
2008, as compared to the quarter ended July 31, 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 July 31, 2008 decreased 6%, as compared to the
three months ended July 31, 2007, primarily due to higher
sales incentives and a shift in the number of settlements to
less expensive products
and/or
locations in the fiscal 2008 period. The decrease in the number
of homes delivered in the three-month period ended July 31,
2008, as compared to the comparable period of fiscal 2007, was
primarily due to lower backlog at October 31, 2007 as
compared to October 31, 2006.
The value of net new contracts signed in the nine-month and
three-month periods ended July 31, 2008 was
$348.7 million and $148.1 million, respectively, a 60%
and 33% decline, respectively, from the net new contracts signed
in the nine-month and three-month periods ended July 31,
2007. The decline in the nine-month period of fiscal 2008, as
compared to the comparable period of fiscal 2007, was due to a
53% decrease in the number of net new contracts signed and a 16%
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 the result of a 32%
decrease in the number of net new contracts signed and a 1%
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 nine months
and three months ended July 31, 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 nine months and three months ended
July 31, 2008, were 176 and 20, respectively, as compared
to 172 and 75 in the nine months and three months ended
July 31, 2007, respectively.
We reported $54.3 million of income before income taxes in
the nine-month period ended July 31, 2008, as compared to
income before income taxes of $19.0 million in the
nine-month period ended July 31, 2007. The increase in
income was due to the recognition of a $9.0 million charge
for goodwill impairment in the first quarter of 2007, lower cost
of revenues as a percentage of revenues and lower selling,
general and administrative costs in the fiscal 2008 period, as
compared to the fiscal 2007 period, offset, in part, by lower
revenues in the fiscal 2008 period, as compared to the fiscal
2007 period, and a $10.6 million decrease in income
realized from the earnings of unconsolidated entities in the
nine months ended July 31, 2008, as compared to the
comparable period of fiscal 2007. The decrease in income
realized from the earnings from unconsolidated entities includes
a $5.0 million charge in the fiscal 2008 period
representing our
pro-rata
share of an impairment charge recognized by one of these
unconsolidated entities. The lower cost of revenues as a
percentage of revenues, in the nine-month period ended
July 31, 2008, as compared to the comparable period of
fiscal 2007, was primarily the result of the lower inventory
impairment charges recognized. In the nine months ended
July 31, 2008, we recorded $73.4 million of inventory
impairments, as compared to $93.0 million in the fiscal
2007 period.
We reported $24.0 million and $26.8 million of income
before income taxes in the three-month periods ended
July 31, 2008 and 2007, respectively. The decrease in
income was the result of lower revenues and a $5.0 million
impairment charge in the three months ended July 31, 2008
representing our pro-rata share of an impairment charge
recognized by one of the unconsolidated entities, partially
offset by lower cost of revenues as a percentage of revenues and
lower selling, general and administrative costs in the fiscal
2008 period as compared to the fiscal 2007 period. In the
three-month
periods ended July 31, 2008 and 2007, we recognized
inventory impairment charges of $9.7 million and
$10.3 million, respectively.
Mid-Atlantic
Revenues for the nine-month and three-month periods ended
July 31, 2008 were lower than those for the comparable
periods of 2007 by $346.9 million and $136.2 million,
or 34% and 39%, respectively. The decrease in revenues for the
nine-month period ended July 31, 2008 was attributable to a
33% 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 July 31, 2008 was due to a 37%
and a 2%
38
decrease in the number of homes and average price of homes
delivered, respectively. The decreases in the number of homes
delivered in the fiscal 2008 periods were primarily due to a
lower backlog at October 31, 2007, as compared to
October 31, 2006. The decrease in the backlog of homes at
October 31, 2007 was primarily the result of a 23% decrease
in the number of net new contracts signed in fiscal 2007 over
fiscal 2006. 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 nine months ended
July 31, 2008 of $468.5 million decreased 40% from the
$776.2 million of net new contracts signed in the
comparable period of fiscal 2007. The decline was due to a 30%
decrease in the number of contracts signed and a 13% decrease in
the average value of each contract. The value of net new
contracts signed during the three-month period ended
July 31, 2008 was $143.5 million, a decrease of 36%
from the $222.9 million of net new contracts signed in the
comparable period of fiscal 2007. This decrease was due to a 21%
decrease in the number of net new contracts signed and an 18%
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
for the nine months ended July 31, 2008, as compared to the
comparable fiscal 2007 period. The number of contract
cancellations decreased from 196 in the nine-month period ended
July 31, 2007, to 150 in the comparable period of fiscal
2008. For the three months ended July 31, 2008 and 2007,
the number of contracts canceled was 56 and 49, respectively.
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.
We reported a loss before income taxes for the nine months and
three months ended July 31, 2008 of $28.3 million and
$16.0 million, respectively, as compared to income before
taxes of $182.4 million and $61.6 million,
respectively, for the fiscal 2007 periods. These declines were
primarily due to a decline in revenues and higher cost of
revenues as a percentage of revenues in the fiscal 2008 periods,
as compared to the fiscal 2007 periods, offset, in part, by
lower selling, general and administrative expenses. For the
nine-month and three-month periods ended July 31, 2008,
cost of revenues before interest as a percentage of revenues was
94.0% and 97.4%, respectively, as compared to 74.0% and 74.6%,
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 $123.2 million and $43.8 million
in the nine months and three months ended July 31, 2008,
respectively, as compared to $34.8 million and
$11.2 million in the comparable periods of fiscal 2007. As
a percentage of revenues, higher sales incentives increased cost
of revenues approximately 3.7% and 3.6%, respectively, in the
nine-month and three-month periods ended July 31, 2008, as
compared to the comparable periods of fiscal 2007.
South
Revenues for the nine months ended July 31, 2008 were lower
than those for the nine months ended July 31, 2007 by
$338.1 million, or 43%. The decrease in revenues was
attributable to a 33% decrease in the number of homes delivered,
a 13% decrease in the average selling price of the homes
delivered, and a reduction in percentage of completion revenues
of $34.3 million. Revenues for the three months ended
July 31, 2008 were lower than those for the comparable
period of fiscal 2007 by approximately $98.3 million, or
40%. The decrease in the revenues was attributable to a 29%
decrease in the number of homes delivered, a 13% decrease in the
average selling price of homes delivered and a $8.8 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 decrease in the backlog of homes at
October 31, 2007 for the entire segment was primarily the
result of a 36% decrease in the number of net new contracts
signed in fiscal 2007 over fiscal 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 nine-month and
three-month periods ended July 31, 2008 was
$275.7 million and $71.3 million, respectively, a 31%
and 39% decline, respectively, from the net new contracts signed
in the nine-month and three-month periods ended July 31,
2007. The decline in the nine-month period of
39
fiscal 2008, as compared to the comparable period of fiscal
2007, was due to a 24% decrease in the number of net new
contracts signed and a 10% 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 40% decrease in the number of net new contracts signed,
partially offset by a 2% increase 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 nine
months and three months ended July 31, 2008 increased 54%
and 75%, 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 272 and 82 in the nine-month and three-month
periods ended July 31, 2007, respectively, to 97 and 33 in
the comparable periods of fiscal 2008, respectively. The number
of cancellations in this geographic segment for the nine months
and three months ended July 31, 2007 was 347 and 107,
respectively, and 206 and 77 for the nine months and three
months ended July 31, 2008, respectively. The decrease in
the average value of each contract signed in the nine-month
period for 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 nine months
ended July 31, 2008 was negatively impacted by
cancellations at high-rise projects in the first quarter of
fiscal 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
less expensive products in the fiscal 2008 periods, as compared
to the fiscal 2007 periods.
We reported a loss before income taxes of $161.8 million in
the nine-month period ended July 31, 2008 and income before
income taxes of $5.1 million in the three-month period
ended July 31, 2008, as compared to losses before income
taxes of $4.4 million and $30.3 million, respectively,
in the nine-month and three-month periods ended July 31,
2007. The increase in the loss in the nine months ended
July 31, 2008 as compared to the comparable period in
fiscal 2007 was primarily due to a decline in revenues and
higher cost of revenues as a percentage of revenues in the
fiscal 2008 period, as compared to the fiscal 2007 period,
partially offset by lower selling, general and administrative
expenses in the fiscal 2008 period, as compared to the fiscal
2007 period. Cost of revenues before interest as a percentage of
revenues was 123.3% in the nine months ended July 31, 2008,
as compared to 91.0% in the comparable period of fiscal 2007.
The increase in the fiscal 2008 percentage was 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 period, as compared to
the comparable period of fiscal 2007. In the nine months ended
July 31, 2008, we recorded $186.5 million of inventory
impairments, as compared to $109.8 million in the fiscal
2007 period. As a percentage of revenues, higher sales
incentives increased cost of revenues approximately 6.0% and in
the nine-month period ended July 31, 2008, as compared to
the comparable fiscal 2007 period.
The increase in income before income taxes in the three-month
period ended July 31, 2008, as compared to the same period
in fiscal 2007, was primarily due to lower costs of revenues as
a percentage of revenues in the fiscal 2008 period, as compared
to the fiscal 2007 period, and lower selling, general and
administrative expenses in the fiscal 2008 period, as compared
to the fiscal 2007 period, offset, in part, by lower revenues in
the fiscal 2008 period, as compared to the fiscal 2007 period.
In the three-month periods ended July 31, 2008 and 2007, we
recognized inventory impairment charges of $5.8 million and
$63.0 million, respectively. For the three months ended
July 31, 2008 and 2007, cost of revenues before interest as
a percentage of revenues was 83.8% and 103.6%, respectively.
West
Revenues for the nine-month and three-month periods ended
July 31, 2008 were lower than those for the comparable
periods of 2007 by $271.8 million and $110.8 million,
or 29% and 34%, respectively. The decrease in revenues for the
nine-month period of fiscal 2008, as compared to the comparable
period of 2007, was attributable to a 31% decrease in the number
of homes delivered, partially offset by a 2% increase in the
average selling price of homes delivered. The decrease in
revenues for the three months ended July 31, 2008 was due
to a 34% decrease in the number of homes delivered. The
decreases 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 period, as compared to the
fiscal 2007 period. The increase in the average price of homes
delivered in the nine months ended July 31, 2008, as
compared to the
40
comparable 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 nine-month period
ended July 31, 2008 of $248.5 million decreased 58%
from the net new contracts signed of $588.6 million in the
nine-month period ended July 31, 2007. The decline was due
primarily to a 32% decrease in the number of contracts signed
and a 37% decrease in the average value of each contract. The
value of net new contracts signed during the three-month period
ended July 31, 2008 was $107.0 million, a decrease of
36% from the $168.0 million of net new contracts signed in
the comparable period of fiscal 2007. This decrease was due to a
10% decrease in the number of net new contracts signed and a 29%
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 nine months and
three months ended July 31, 2008, we had 228 and 42
contract cancellations, respectively, as compared to 452 and 116
in the comparable periods of fiscal 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 $149.6 million and $48.0 million of losses
before income taxes in the nine-month and three-month periods
ended July 31, 2008, respectively, as compared to income
before income taxes of $60.5 million in the
nine-month
period ended July 31, 2007 and a loss of $1.9 million
in three-month period ended July 31, 2007. These decreases
were attributable to lower revenues and higher cost of revenues
as a percentage of revenues in the fiscal 2008 periods, as
compared to the fiscal 2007 periods, and impairment charges of
$141.3 million and $28.4 million in the nine months
and three months ended July 31, 2008, respectively, related
to unconsolidated entities in which we have investments. For the
nine-month and three-month periods ended July 31, 2008,
cost of revenues before interest as a percentage of revenues was
96.8% and 98.2%, respectively, as compared to 84.3% and 91.6%,
respectively, in the comparable periods of fiscal 2007. The
increases in the fiscal 2008 percentages were primarily the
result of increased sales incentives given to home buyers on the
homes delivered and for the nine-month period, higher inventory
impairment charges. As a percentage of revenues, higher sales
incentives increased cost of revenues approximately 7.4% and
9.0%, respectively, in the nine months and three months ended
July 31, 2008, as compared to the comparable periods of
fiscal 2007. We recognized inventory impairment charges of
$143.6 million and $46.7 million in the nine months
and three months ended July 31, 2008 and 2007,
respectively, as compared to $126.3 million and
$62.8 million in the comparable periods of fiscal 2007. The
region also benefited from the recognition of $40.2 million
of income, in the nine-month period of fiscal 2008, related to
the receipt of proceeds from a favorable condemnation judgment
on property we owned in this geographic segment.
Other
Other loss before income taxes for the nine months ended
July 31, 2008 was $75.4 million, an increase of
$9.6 million from the $65.8 million loss before income
taxes reported for the nine months ended July 31, 2007.
This increase was primarily the result of a $24.7 million
gain realized from the sale of our cable TV and broadband
internet business and security 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 July 31, 2008 and 2007, other
loss before income taxes was $19.9 million and
$11.2 million, respectively. This increase was primarily
due a $14.8 million gain realized from the sales of our
security business in fiscal 2007, offset, in part, by lower
corporate general and administrative expenses and higher
interest income in the three-month period ended July 31,
2008, as compared to the comparable period of fiscal 2007.
41
HOUSING
DATA
Revenues
Three months ended July 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
Units
|
|
|
Units
|
|
|
(In millions)
|
|
|
(In millions)
|
|
|
Completed contract communities(a):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
|
|
|
339
|
|
|
|
423
|
|
|
$
|
221.8
|
|
|
$
|
272.8
|
|
Mid-Atlantic
|
|
|
360
|
|
|
|
575
|
|
|
|
214.4
|
|
|
|
350.6
|
|
South
|
|
|
295
|
|
|
|
416
|
|
|
|
144.4
|
|
|
|
233.4
|
|
West
|
|
|
250
|
|
|
|
378
|
|
|
|
210.5
|
|
|
|
321.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,244
|
|
|
|
1,792
|
|
|
|
791.1
|
|
|
|
1,178.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of completion communities(b):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
|
|
|
|
|
|
|
|
|
|
|
5.6
|
|
|
|
20.6
|
|
South
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
5.6
|
|
|
|
29.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
|
|
|
339
|
|
|
|
423
|
|
|
|
227.4
|
|
|
|
293.4
|
|
Mid-Atlantic
|
|
|
360
|
|
|
|
575
|
|
|
|
214.4
|
|
|
|
350.6
|
|
South
|
|
|
295
|
|
|
|
416
|
|
|
|
144.4
|
|
|
|
242.2
|
|
West
|
|
|
250
|
|
|
|
378
|
|
|
|
210.5
|
|
|
|
321.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated
|
|
|
1,244
|
|
|
|
1,792
|
|
|
$
|
796.7
|
|
|
$
|
1,207.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 in
communities accounted for using the percentage of completion
accounting method. |
Contracts
Three months ended July 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
Units
|
|
|
Units
|
|
|
(In millions)
|
|
|
(In millions)
|
|
|
Completed contract communities(c):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
|
|
|
247
|
|
|
|
366
|
|
|
$
|
146.5
|
|
|
$
|
216.0
|
|
Mid-Atlantic
|
|
|
274
|
|
|
|
349
|
|
|
|
143.5
|
|
|
|
222.9
|
|
South
|
|
|
132
|
|
|
|
219
|
|
|
|
71.3
|
|
|
|
116.2
|
|
West
|
|
|
156
|
|
|
|
173
|
|
|
|
107.0
|
|
|
|
168.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
809
|
|
|
|
1,107
|
|
|
|
468.3
|
|
|
|
723.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of completion communities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
|
|
|
3
|
|
|
|
3
|
|
|
|
1.6
|
|
|
|
4.0
|
|
South
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
3
|
|
|
|
3
|
|
|
|
1.6
|
|
|
|
3.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
|
|
|
250
|
|
|
|
369
|
|
|
|
148.1
|
|
|
|
220.0
|
|
Mid-Atlantic
|
|
|
274
|
|
|
|
349
|
|
|
|
143.5
|
|
|
|
222.9
|
|
South
|
|
|
132
|
|
|
|
219
|
|
|
|
71.3
|
|
|
|
116.1
|
|
West
|
|
|
156
|
|
|
|
173
|
|
|
|
107.0
|
|
|
|
168.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated
|
|
|
812
|
|
|
|
1,110
|
|
|
$
|
469.9
|
|
|
$
|
727.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(c) |
|
Includes communities that have extended construction cycles. See
tables below entitled Extended Delivery Communities
for information related to these communities. |
42
Backlog
at July 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
Units
|
|
|
Units
|
|
|
(In millions)
|
|
|
(In millions)
|
|
|
Completed contract communities(d):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
|
|
|
1,066
|
|
|
|
1,614
|
|
|
$
|
730.0
|
|
|
$
|
1,205.2
|
|
Mid-Atlantic
|
|
|
724
|
|
|
|
1,198
|
|
|
|
477.0
|
|
|
|
828.0
|
|
South
|
|
|
471
|
|
|
|
1,021
|
|
|
|
276.7
|
|
|
|
560.4
|
|
West
|
|
|
321
|
|
|
|
1,014
|
|
|
|
259.2
|
|
|
|
995.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2,582
|
|
|
|
4,847
|
|
|
|
1,742.9
|
|
|
|
3,589.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of completion communities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
|
|
|
9
|
|
|
|
132
|
|
|
|
8.9
|
|
|
|
76.4
|
|
South
|
|
|
1
|
|
|
|
18
|
|
|
|
2.8
|
|
|
|
47.6
|
|
Less revenue recognized on units remaining in backlog
|
|
|
|
|
|
|
|
|
|
|
(4.3
|
)
|
|
|
(48.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
10
|
|
|
|
150
|
|
|
|
7.4
|
|
|
|
75.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
|
|
|
1,075
|
|
|
|
1,746
|
|
|
|
738.9
|
|
|
|
1,281.6
|
|
Mid-Atlantic
|
|
|
724
|
|
|
|
1,198
|
|
|
|
477.0
|
|
|
|
828.0
|
|
South
|
|
|
472
|
|
|
|
1,039
|
|
|
|
279.5
|
|
|
|
608.0
|
|
West
|
|
|
321
|
|
|
|
1,014
|
|
|
|
259.2
|
|
|
|
995.7
|
|
Less revenue recognized on units remaining in backlog
|
|
|
|
|
|
|
|
|
|
|
(4.3
|
)
|
|
|
(48.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated
|
|
|
2,592
|
|
|
|
4,997
|
|
|
$
|
1,750.3
|
|
|
$
|
3,665.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(d) |
|
Includes communities that have extended construction cycles. See
tables below entitled Extended Delivery Communities
for information related to these communities. |
Revenues
Nine months ended July 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
Units
|
|
|
Units
|
|
|
(In millions)
|
|
|
(In millions)
|
|
|
Completed contract communities(e):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
|
|
|
941
|
|
|
|
1,035
|
|
|
$
|
658.6
|
|
|
$
|
679.7
|
|
Mid-Atlantic
|
|
|
1,094
|
|
|
|
1,621
|
|
|
|
668.3
|
|
|
|
1,012.8
|
|
South
|
|
|
868
|
|
|
|
1,286
|
|
|
|
434.2
|
|
|
|
735.2
|
|
West
|
|
|
761
|
|
|
|
1,095
|
|
|
|
656.9
|
|
|
|
929.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
3,664
|
|
|
|
5,037
|
|
|
|
2,418.0
|
|
|
|
3,356.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of completion communities(f):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
|
|
|
|
|
|
|
|
|
|
|
34.8
|
|
|
|
72.3
|
|
South
|
|
|
|
|
|
|
|
|
|
|
4.3
|
|
|
|
38.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
39.1
|
|
|
|
110.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
|
|
|
941
|
|
|
|
1,035
|
|
|
|
693.4
|
|
|
|
752.0
|
|
Mid-Atlantic
|
|
|
1,094
|
|
|
|
1,621
|
|
|
|
668.3
|
|
|
|
1,012.8
|
|
South
|
|
|
868
|
|
|
|
1,286
|
|
|
|
438.5
|
|
|
|
773.8
|
|
West
|
|
|
761
|
|
|
|
1,095
|
|
|
|
656.9
|
|
|
|
929.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated
|
|
|
3,664
|
|
|
|
5,037
|
|
|
$
|
2,457.1
|
|
|
$
|
3,467.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(e) |
|
Includes communities that have extended construction cycles. See
tables below entitled Extended Delivery Communities
for information related to these communities. |
|
(f) |
|
See tables below entitled Percentage of Completion
Deliveries for information related to deliveries in
communities accounted for using the percentage of completion
accounting method. |
43
Contracts
Nine months ended July 31: