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Toll Brothers, Inc. (TOL)
F4Q11 Earnings Call
December 6, 2011 02:00 pm ET
Bob Toll – Executive Chairman
Doug Yearly – Chief Executive Officer
Marty Connor – Chief Financial officer
Fred Cooper – Senior Vice President Finance, International Development and Investor Relations
Joe Sicree – Chief Accounting Officer
Kira Sterling – Chief Marketing Officer
Mike Snyder – Chief Planning Officer
Don Salmon – President, TBI Mortgage Company
Gregg Ziegler – Senior Vice President Treasury
Dan Oppenheim – Credit Suisse
Susan – UBS
David Goldberg – UBS
Stephen Kim – Barclays Capital
Adam Rudiger – Wells Fargo Securities
Ken Zener – Keybanc
Nishu Sood – Deutsche Bank
Stephen East – Ticonderoga
Jason Markinson – JP Morgan
Joel Locker – FBN Securities
Jade Rahmani – KBW
Susan Berlinger – JP Morgan
John Micenko – SIG
Previous Statements by TOL
» Toll Brothers' CEO Discusses F3Q 2011 Results - Earnings Call Transcript
» Toll Brothers F4Q09 (Qtr End 10/31/2009) Earnings Call Transcript
» Toll Brothers Inc. F4Q09 Outlook Call Transcript
Thank you, Dawn. Welcome and thank you for joining us. I’m Doug Yearly, CEO. With me today are Bob Toll, Executive Chairman; Marty Connor, Chief Financial Officer; Fred Cooper, Senior VP of Finance, International Development and Investor Relations; Joe Sicree, Chief Accounting Officer; Kira Sterling, Chief Marketing Officer; Mike Snyder, Chief Planning Officer; Don Salmon, President of TBI Mortgage Company; and Gregg Ziegler, Senior VP, Treasury.
Before I begin I ask you to read the statement on forward-looking information in today’s release and on our website. I caution you that many statements on this call are based on assumptions about the economy, world events, housing and financial markets, and many other factors beyond our control that could significantly affect future results. Those listening on the web can email questions to firstname.lastname@example.org.
As has become our regular practice we’re going to limit our prepared remarks to provide more time for Q&A. Since our detailed release has been up since early this morning and is posted on our website, I’m sure most have read it so I won’t reread it to you.
Against the backdrop of US government gridlock and persistently high unemployment rates at home, political and economic crises around the globe and dramatic volatility in the capital markets, we produced our second consecutive quarter of pre-tax profitability and our sixth consecutive quarter of pre-tax pre-impairment profitability. Although US housing starts remain down 60% from historical norms, we’ve had a solid improvement in most key metrics in F2011. Our pre-impairment homebuilding gross margin improved nearly 250 basis points in 2011 compared to 2010 and improved in each of the past four quarters compared to the prior year’s same period.
Our FQ4 2011 net income was $15 million or $0.09 per share diluted. On a pre-tax basis, FQ4 2011 net income was $15.3 million. Excluding inventory and joint venture write downs and debt retirement charges, FQ4 2011’s pre-tax income was $33.9 million. For the full F2011 net income was $39.8 million or $0.24 per share diluted. In F2011 we reported a pre-tax loss of $29.4 million as F2011’s inventory and joint venture write downs totaled $92.7 million, and charges related to early retirement of debts totaled $3.8 million. Excluding inventory and joint venture write downs and debt retirement charges, F2011’s pre-tax income was $67.1 million.
In FQ4 2011 revenues and homebuilding deliveries increased 6% in dollars and 8% in units compared to F2010. FQ4 net signed contracts rose 24% in dollars and 15% in units compared to F2010. The average price of FQ4 net signed contracts was $606,000 compared to $565,000 in FQ4 2010. For the full F2011, homebuilding revenues declined both 1% in both dollars and units compared to F2010. F2011 net signed contracts increased 9% in dollars and 7% in units compared to F2010. We ended F2011 with a backlog of $981.1 million and 1667 units, up 15% in dollars and 12% in units compared to F2010.
We ended F2011 with $1.14 billion of cash and marketable securities and $785 million available under our $885 million twelve-bank credit facility, which matures in October, 2014. Our F2011 year-end net debt to capital ratio was 15%.
Our strong balance sheet gives us the financial flexibility to invest in the future. During F2011 we spent approximately $281 million on land for our core traditional and urban new home business, purchasing approximately 3400 lots and optioning another 5800. This resulted in a net increase to 37,500 lots under control at F2011 year-end versus 34,900 at F2010 year-end. Nearly 60% of our lots are concentrated in the land-constrained metro Washington, D.C. to Boston corridor which enjoys lower unemployment and greater affluence than many other regions.
Two weeks ago we announced our entry into the Seattle market through the acquisition of CamWest which added approximately 1300 lots owned and 200 under option to our land position. During F2012 including Seattle, we project growing our community count by between 9% and 19% and reaching F2012 year-end with between 235 and 255 selling communities.
The urban metro New York City market remains a bright spot for us. In F2011 we opened for sale three new buildings under the Toll Brothers City Living brand. We launched 1450 Washington St., the fourth building in our successful Hudson T project at the northern tip of Hoboken, New Jersey. In Manhattan we opened the Terrain on the Upper East Side at 65th St. and Lexington Ave., a small boutique building with an average projected sales price of $5 million per unit. On the Brooklyn waterfront we opened 205 Water St. in the Dumbo neighborhood. Before opening for sale the Terrain and 205 Water, each had lists of over 3000 interested parties. In total, in the urban metro New York City market we have completed 13 buildings of approximately 2550 units, approximately 2430 of which have been sold. We are in construction on three buildings of 245 units and have eight more buildings of approximately 1600 units in planning.