Toll Brothers Reports FY 2021 1st Quarter Results

February 23, 2021 4:45 PM EST

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FORT WASHINGTON, Pa., Feb. 23, 2021 (GLOBE NEWSWIRE) -- Toll Brothers, Inc. (NYSE: TOL) (TollBrothers.com), the nation’s leading builder of luxury homes, today announced results for its first quarter ended January 31, 2021.

FY 2021’s First Quarter Financial Highlights:

  • Net income and earnings per share were $96.5 million and $0.76 per share diluted, compared to net income of $56.9 million and $0.41 per share diluted in FY 2020’s first quarter.
  • Pre-tax income was $127.4 million, compared to $65.9 million in FY 2020’s first quarter.
  • Home sales revenues were $1.41 billion, up 9% compared to FY 2020’s first quarter; delivered homes were 1,777, up 10%.
  • Net signed contract value was $2.51 billion, up 68% compared to FY 2020’s first quarter; contracted homes were 2,874, up 59%.
  • Backlog value was $7.47 billion at first quarter end, up 37% compared to FY 2020’s first quarter; homes in backlog were 8,888, up 38%.
  • Home sales gross margin was 20.5%, compared to FY 2020’s first quarter home sales gross margin of 20.4%.
  • Adjusted home sales gross margin, which excludes interest and inventory write-downs, was 22.9%, compared to FY 2020’s first quarter adjusted home sales gross margin of 23.0%.
  • SG&A, as a percentage of home sales revenues, was 14.9%, compared to 16.8% in FY 2020’s first quarter.
  • Income from operations was $119.1 million.
  • Other income, income from unconsolidated entities, and land sales and other gross profit was $49.2 million.
  • The Company repurchased approximately 4.0 million shares of its common stock during the quarter at an average price of $44.54 per share for an aggregate purchase price of approximately $179.4 million, which reduced share count by approximately 3% compared to FYE 2020.
  • In January 2021, the Company voluntarily repaid $150.0 million of the $800.0 million principal amount outstanding under its five-year senior unsecured bank term loan. The remaining principal amount outstanding under the term loan is scheduled to mature on November 1, 2025. No prepayment charges were incurred in connection with the repayment.

Second Quarter and Full Year Financial Guidance:

  • Second quarter deliveries of approximately 2,175 homes with an average price of between $785,000 and $805,000. Delivery guidance for the second quarter reflects the slower COVID-19 impacted sales environment of mid-March through May 2020.
  • FY 2021 deliveries of between 10,000 and 10,400 homes with an average price of between $790,000 and $810,000.
  • Second quarter adjusted home sales gross margin of approximately 23.4%.
  • FY 2021 adjusted home sales gross margin of approximately 24.3%.
  • Second quarter SG&A, as a percentage of home sales revenues, of approximately 13.0%.
  • FY 2021 SG&A, as a percentage of home sales revenues, of approximately 11.9%.
  • Second quarter other income, income from unconsolidated entities, and land sales and other gross profit of approximately $7 million.
  • FY 2021 other income, income from unconsolidated entities, and land sales and other gross profit of approximately $80 million.
  • Second quarter tax rate of approximately 26.0%.
  • FY 2021 tax rate of approximately 25.8%.
  • Community count growth to approximately 320 at second quarter end.
  • Community count growth to approximately 340 at fiscal year end.
  • In February 2021, the Company delivered a notice of redemption to holders of all $250 million of its outstanding 5.625% senior notes due 2024. The notes will be redeemed on March 15, 2021. The Company expects to incur a pre-tax charge of approximately $33 million in the second quarter for the early extinguishment of debt.
  • FY 2021 return on beginning equity increase of approximately 425 basis points.

Douglas C. Yearley, Jr., chairman and chief executive officer, stated: “The housing market remains very strong, driven by a tight supply of new and existing homes for sale, favorable demographic trends, low mortgage rates, and a heightened appreciation for home ownership, especially among our customers.

“These market conditions, which we expect to continue for the foreseeable future, clearly play to our strengths. We have luxury communities in desirable locations in both high-growth and high barrier-to-entry markets where our tremendous brand, broad range of home price points and unique build-to-order model give us a competitive advantage. In addition, our extensive geographic footprint and deep land position will allow us to grow community count in FY 2021 and 2022, even as we sell out of existing communities faster than anticipated and deliver the most homes in our history in FY 2021.

“We produced strong first quarter results and raised our fiscal year guidance across nearly all key metrics. Our backlog provides good visibility through the first half of FY 2022, when we expect even stronger results. We remain acutely focused on driving our return on equity while growing our business, increasing gross margin and reducing SG&A. We have substantial liquidity and expect continued strong operating cash flow, which gives us the financial flexibility to further invest in growth, return capital to shareholders and reduce debt.”

Toll Brothers’ Financial Highlights for the FY 2021 first quarter ended January 31, 2021 (unaudited):  

  • FY 2021’s first quarter net income was $96.5 million, or $0.76 per share diluted, compared to FY 2020’s first quarter net income of $56.9 million, or $0.41 per share diluted.
  • FY 2021’s first quarter pre-tax income was $127.4 million, compared to FY 2020’s first quarter pre-tax income of $65.9 million.
  • FY 2021’s first quarter results included pre-tax inventory impairments totaling $1.3 million, compared to FY 2020’s first quarter pre-tax inventory impairments of $1.0 million.
  • FY 2021’s first quarter home sales revenues were $1.41 billion and 1,777 units, compared to FY 2020’s first quarter totals of $1.30 billion and 1,611 units.
  • FY 2021's first quarter net signed contracts were $2.51 billion and 2,874 units, compared to FY 2020’s first quarter net signed contracts of $1.49 billion and 1,806 units.
  • FY 2021's first quarter net signed contracts, on a per-community basis, were 9.4 units, compared to first quarter net signed contracts on a per-community basis of 5.6 units in FY 2020, 4.4 units in FY 2019, 6.0 units in FY 2018 and 4.7 units in FY 2017.
  • In FY 2021, first quarter-end backlog was $7.47 billion and 8,888 units, compared to FY 2020’s first quarter-end backlog of $5.45 billion and 6,461 units. The average price of homes in backlog was $840,900, compared to $843,500 at FY 2020’s first quarter end.
  • FY 2021’s first quarter home sales gross margin was 20.5%, compared to FY 2020’s first quarter home sales gross margin of 20.4%. 
  • FY 2021’s first quarter adjusted home sales gross margin was 22.9%, compared to FY 2020’s first quarter adjusted home sales gross margin of 23.0%.
  • FY 2021’s first quarter interest included in cost of sales was 2.4% of revenue, compared to 2.5% in FY 2020’s first quarter.
  • FY 2021’s first quarter SG&A, as a percentage of home sales revenues, was 14.9%, compared to 16.8% in FY 2020’s first quarter.
  • FY 2021's first quarter other income, income from unconsolidated entities, and land sales and other gross profit totaled $49.2 million, compared to FY 2020’s first quarter total of $20.2 million.
  • FY 2021’s first quarter cancellation rate (current quarter cancellations divided by current quarter signed contracts) was 3.7%, compared to FY 2020’s first quarter cancellation rate of 9.4%.
  • FY 2021's first quarter cancellation rate as a percentage of beginning-quarter backlog was 1.4%, compared to FY 2020’s first quarter cancellation rate as a percentage of beginning-quarter backlog of 3.0%.

Additional Financial Information:

  • The Company ended its FY 2021 first quarter with approximately $950 million in cash and cash equivalents, compared to $1.37 billion at FYE 2020 and $520 million at FY 2020’s first-quarter end. At FY 2021 first quarter end, the Company also had $1.785 billion available under its $1.905 billion bank revolving credit facility, substantially all of which is scheduled to mature in November 2025.
  • On January 8, 2021, the Company paid its quarterly dividend of $0.11 per share to shareholders of record at the close of business on January 22, 2021.
  • The Company repurchased approximately 4.0 million shares of its common stock during the quarter at an average price of $44.54 per share for an aggregate purchase price of approximately $179.4 million, which reduced share count by approximately 3% compared to FYE 2020.
  • Stockholders' Equity at FY 2021 first quarter end was $4.79 billion, compared to $4.88 billion at FYE 2020.
  • FY 2021's first quarter end book value per share was $38.93 per share, compared to $38.53 at FYE 2020.
  • The Company ended its FY 2021 first quarter with a debt-to-capital ratio of 43.8%, compared to 44.8% at FY 2020’s fourth quarter end and 46.4% at FY 2020's first quarter end. The Company ended FY 2021’s first quarter with a net debt-to-capital ratio(1) of 35.8%, compared to 33.3% at FY 2020’s fourth quarter end, and 42.3% at FY 2020's first quarter end.
  • The Company ended FY 2021’s first quarter with approximately 67,700 lots owned and optioned, compared to 63,200 one quarter earlier, and 62,000 one year earlier. Approximately 36,400 of these lots were owned, of which approximately 17,400 lots, including those in backlog, were substantially improved.
  • In the first quarter of FY 2021, the Company spent approximately $195.0 million on land to purchase approximately 2,095 lots.
  • The Company ended FY 2021’s first quarter with 309 selling communities, compared to 317 at FY 2020’s fourth quarter end and 328 at FY 2020’s first quarter end.
  • In February 2021, the Company delivered a notice of redemption to holders of all $250 million of its outstanding 5.625% senior notes due 2024. The notes will be redeemed on March 15, 2021. The Company expects to incur a pre-tax charge of approximately $33 million in the second quarter for the early extinguishment of debt.
  • In January 2021, the Company voluntarily repaid $150.0 million of the $800.0 million principal amount outstanding under its five-year senior unsecured term loan. The remaining principal amount outstanding under the term loan is scheduled to mature on November 1, 2025. No prepayment charges were incurred in connection with the repayment.

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

Toll Brothers will be broadcasting live via the Investor Relations section of its website, investors.TollBrothers.com, a conference call hosted by Chairman & CEO Douglas C. Yearley, Jr. at 8:30 a.m. (EST) Wednesday, February 24, 2021, to discuss these results and its outlook for the second quarter and FY 2021. To access the call, enter the Toll Brothers website, click on the Investor Relations page, and select “Events & Presentations.” Participants are encouraged to log on at least fifteen minutes prior to the start of the presentation to register and download any necessary software.

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

ABOUT TOLL BROTHERS

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

In 2020, Toll Brothers was named World’s Most Admired Home Building Company in Fortune magazine’s survey of the World’s Most Admired Companies®, the sixth year in a row it has been so honored. Toll Brothers has won numerous other awards, including Builder of the Year from both Professional Builder magazine and Builder magazine, the first two-time recipient from Builder magazine. For more information visit TollBrothers.com.

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

FORWARD-LOOKING STATEMENTS

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

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

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

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

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

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

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

TOLL BROTHERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)

 January 31,
2021
 October 31,
2020
 (Unaudited)  
ASSETS   
Cash and cash equivalents$949,696  $1,370,944 
Inventory7,923,635  7,658,906 
Property, construction and office equipment, net277,696  316,125 
Receivables, prepaid expenses and other assets907,775  956,294 
Mortgage loans held for sale125,475  231,797 
Customer deposits held in escrow80,889  77,291 
Investments in unconsolidated entities571,632  430,701 
Income taxes receivable27,195  23,675 
 $10,863,993  $11,065,733 
    
LIABILITIES AND EQUITY   
Liabilities:   
Loans payable$971,504  $1,147,955 
Senior notes2,652,162  2,661,718 
Mortgage company loan facility112,619  148,611 
Customer deposits523,584  459,406 
Accounts payable460,113  411,397 
Accrued expenses1,109,129  1,110,196 
Income taxes payable200,390  198,974 
Total liabilities6,029,501  6,138,257 
    
Equity:   
Stockholders’ Equity   
Common stock1,529  1,529 
Additional paid-in capital708,668  717,272 
Retained earnings5,245,935  5,164,086 
Treasury stock, at cost(1,162,811) (1,000,454)
Accumulated other comprehensive loss(6,486) (7,198)
Total stockholders' equity4,786,835  4,875,235 
Noncontrolling interest47,657  52,241 
Total equity4,834,492  4,927,476 
 $10,863,993  $11,065,733 
        

TOLL BROTHERS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data and percentages)
(Unaudited)

 Three Months Ended
January 31,
 2021 2020
 $% $%
Revenues:     
Home sales$1,410,704   $1,297,337  
Land sales and other152,672   34,094  
 1,563,376   1,331,431  
      
Cost of revenues:     
Home sales1,121,793 79.5% 1,033,122 79.6%
Land sales and other111,734 73.2% 32,282 94.7%
 1,233,527   1,065,404  
      
Gross margin - home sales288,911 20.5% 264,215 20.4%
Gross margin - land sales and other40,938 26.8% 1,812 5.3%
      
Selling, general and administrative expenses$210,739 14.9% $218,531 16.8%
Income from operations119,110   47,496  
      
Other:     
Income from unconsolidated entities1,194   12,141  
Other income - net7,101   6,295  
Income before income taxes127,405   65,932  
Income tax provision30,906   9,056  
Net income$96,499   $56,876  
Per share:     
Basic earnings$0.77   $0.41  
Diluted earnings$0.76   $0.41  
Cash dividend declared$0.11   $0.11  
Weighted-average number of shares:     
Basic126,060   138,145  
Diluted127,562   139,889  
      
Effective tax rate24.3%  13.7% 
        

TOLL BROTHERS, INC. AND SUBSIDIARIES
SUPPLEMENTAL DATA
(Amounts in thousands)
(unaudited)

 Three Months Ended
January 31,
 2021 2020
Inventory impairment charges recognized:   
Cost of home sales - land owned/controlled for future communities$167  $1,031 
Cost of home sales - operating communities1,100   - 
 $1,267  $1,031 
    
Depreciation and amortization$16,876  $14,667 
Interest incurred$41,268  $43,695 
Interest expense:   
Charged to home sales cost of sales$33,325  $32,774 
Charged to land sales and other cost of sales1,838  567 
 $35,163  $33,341 
    
Home sites controlled:January 31,
2021
 January 31,
2020
Owned36,430  37,136 
Optioned31,306  24,835 
 67,736  61,971 
      

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

 January 31,
2021
 October 31,
2020
Land and land development costs$2,132,556  $2,094,775 
Construction in progress5,130,381  4,848,647 
Sample homes358,052  398,053 
Land deposits and costs of future development302,646  317,431 
 $7,923,635  $7,658,906 
        

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

  • North: Connecticut, Delaware, Illinois, Massachusetts, Michigan, Pennsylvania, New Jersey and New York
  • Mid-Atlantic: Georgia, Maryland, North Carolina, Tennessee and Virginia
  • South: Florida, South Carolina and Texas
  • Mountain: Arizona, Colorado, Idaho, Nevada and Utah
  • Pacific: California, Oregon and Washington
 Three Months Ended
January 31,
 Units $ (Millions) Average Price Per Unit $
 2021 2020 2021 2020 2021 2020
REVENUES           
North451 393 $312.6 $254.1  $693,200 $646,500
Mid-Atlantic227 240 164.0 162.5  $722,400 $677,000
South341 274 216.9 183.6  $636,000 $670,200
Mountain525 401 378.0 263.1  $720,000 $656,100
Pacific226 267 331.1 395.3  $1,465,300 $1,480,700
Traditional Home Building1,770 1,575 1,402.6 1,258.6  $792,500 $799,100
City Living7 36 7.8 39.8  $1,113,400 $1,106,500
Corporate and other    0.3 (1.1)    
Total home sales1,777 1,611 1,410.7 1,297.3  $793,900 $805,300
Land sales and other    152.7 34.1     
Total consolidated    $1,563.4 $1,331.4     
            
CONTRACTS           
North449 400 $356.8 $287.2  $794,600 $717,900
Mid-Atlantic373 242 327.5 169.4  $878,000 $700,100
South568 353 388.8 244.4  $684,500 $692,400
Mountain978 490 751.8 357.5  $768,700 $729,500
Pacific473 287 644.1 383.4  $1,361,800 $1,335,800
Traditional Home Building2,841 1,772 2,469.0 1,441.9  $869,100 $813,700
City Living33 34 39.0 47.4  $1,181,800 $1,394,900
Total consolidated2,874 1,806 $2,508.0 $1,489.3  $872,600 $824,600
            
BACKLOG           
North1,904 1,749 $1,413.5 $1,213.1  $742,400 $693,600
Mid-Atlantic1,136 786 934.0 542.5  $822,100 $690,200
South1,715 1,127 1,210.4 818.4  $705,800 $726,100
Mountain2,727 1,695 2,044.8 1,246.4  $749,800 $735,400
Pacific1,291 994 1,700.7 1,472.6  $1,317,400 $1,481,500
Traditional Home Building8,773 6,351 7,303.4 5,293.0  $832,500 $833,400
City Living115 110 170.1 157.2  $1,478,900 $1,428,900
Total consolidated8,888 6,461 $7,473.5 $5,450.2  $840,900 $843,500
                 

Unconsolidated entities:

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

 Units $ (Millions) Average Price Per Unit $
 2021 2020 2021 2020 2021 2020
Three months ended January 31,           
Revenues5  23  $11.2  $67.1  $2,235,100  $2,917,600 
Contracts5  8  $11.6  $23.8  $2,317,200  $2,971,400 
            
Backlog at January 31,4  11  $10.4  $33.0  $2,598,600  $2,998,300 
                      

RECONCILIATION OF NON-GAAP MEASURES

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

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

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

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

Adjusted Home Sales Gross Margin Reconciliation
(Amounts in thousands, except percentages)

  Three Months Ended
January 31,
  2021 2020
Revenues - homes sales$1,410,704  $1,297,337 
Cost of revenues - home sales1,121,793  1,033,122 
Home sales gross margin288,911  264,215 
Add:Interest recognized in cost of revenues - home sales33,325  32,774 
 Inventory write-downs1,267  1,031 
Adjusted homes sales gross margin$323,503  $298,020 
     
Homes sales gross margin as a percentage of home sale revenues20.5% 20.4%
     
Adjusted home sales gross margin as a percentage of home sale revenues22.9% 23.0%
      

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

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

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

Net Debt-to-Capital Ratio Reconciliation
(Amounts in thousands, except percentages)

  January 31, 2021 January 31, 2020 October 31, 2020
Loans payable$971,504  $1,277,183  $1,147,955 
Senior notes2,652,162  2,660,352  2,661,718 
Mortgage company loan facility112,619  97,653  148,611 
Total debt3,736,285  4,035,188  3,958,284 
Total stockholders' equity4,786,835  4,655,551  4,875,235 
Total capital$8,523,120  $8,690,739  $8,833,519 
Ratio of debt-to-capital43.8% 46.4% 44.8%
       
Total debt$3,736,285  $4,035,188  $3,958,284 
Less:Mortgage company loan facility(112,619) (97,653) (148,611)
 Cash and cash equivalents(949,696) (519,793) (1,370,944)
Total net debt2,673,970  3,417,742  2,438,729 
Total stockholders' equity4,786,835  4,655,551  4,875,235 
Total net capital$7,460,805  $8,073,293  $7,313,964 
Net debt-to-capital ratio35.8% 42.3% 33.3%
         

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

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

A photo accompanying this announcement is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/1453a1ae-2f84-4de4-afbf-0b8b4c405c0e




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