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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended October 31, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-9186
TOLL BROTHERS, INC.
(Exact name of Registrant as specified in its charter)
Delaware 23-2416878
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3103 Philmont Avenue, Huntingdon Valley, Pennsylvania 19006-4298
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (215) 938-8000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Stock (par value $.01) New York Stock Exchange
Pacific Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.
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 X No
As of December 31, 1994, the aggregate market value of the Common Stock held
by non-affiliates of the Registrant was approximately $182,498,000.
As of December 31, 1994, there were 33,441,509 shares of Common Stock
utstanding.
Documents Incorporated by Reference:
Toll Brothers, Inc. Proxy Statement with respect to its 1995 Annual Meeting of
Shareholders, scheduled to be held on March 16, 1995, is incorporated into
Part III hereof.
PART I
ITEM 1. BUSINESS
General
Toll Brothers, Inc. ("Toll Brothers" or the "Company"), a Delaware
corporation formed in May 1986, commenced its business operations, through
predecessor entities, in 1967. Toll Brothers designs, builds, markets and
arranges financing for single-family detached and attached homes in middle
and high income residential communities. The communities are generally
located on land the Company has developed, although, due to the poor economic
conditions during the early 1990's, the Company has been able to acquire a
number of fully approved parcels and often improved subdivisions. Currently,
Toll Brothers operates predominantly in major suburban residential areas in
southeastern Pennsylvania, central New Jersey, the Virginia and Maryland
suburbs of Washington, D.C., northern Delaware, the Boston, Massachusetts
metropolitan area, southern Connecticut and Westchester County, New York. It
is also developing communities in Orange County, California, Nassau County,
New York, the suburbs of Raleigh, North Carolina and in Charlotte, North
Carolina. The Company has recently acquired property in McKinney, Texas, a
northern suburb of Dallas and in Palm Beach County, Florida and expects to
begin offering homes for sale there in the first half of 1995.
The Company markets its homes primarily to upper-income buyers,
emphasizing high quality construction and customer satisfaction. In the five
years ended October 31, 1994, Toll Brothers closed contracts for 5,329 homes
in 111 communities. In recognition of the Company's achievements, it has
received numerous awards from national, state and local homebuilder
publications and associations including being named "The Builder of the Year"
in 1988 by Professional Builder magazine. In 1994, the Company received one
of the first place awards in the "Build America Beautiful" Awards Program,
sponsored by Better Homes and Gardens Magazine, the National Association of
Homebuilders and Keep America Beautiful, Inc. in recognition of the Company's
programs to improve the handling of solid waste on construction sites. In
1993, the Company received the "Spotlight on Building Excellence" silver
award from Builder Magazine and the National Association of Homebuilders in
recognition of the Company's demonstrated excellence in marketing, product
design, service and overall financial performance.
As of October 31, 1994, the Company was offering homes for sale in 80
communities. Single-family detached homes were being offered at prices,
excluding customized options, generally ranging from $174,900 to $664,900,
with an average base sales price of $352,000. Attached home prices,
excluding customized options, generally range from $99,900 to $467,900, with
an average base sales price of $255,000.
On October 31, 1994 and 1993, the Company had backlogs of $370,560,000
(1,025 homes) and $285,441,000 (892 homes), respectively. Substantially all
homes in backlog at October 31, 1994 are expected to be closed by October 31,
1995.
As of October 31, 1994, the Company owned, or controlled through
options, over 6,100 home sites in communities under development, as well as
land for approximately 5,100 planned home sites in proposed communities.
The Company generally attempts to reduce certain risks homebuilders
encounter, by controlling land for future development through options
whenever possible (which allows the Company to obtain the necessary
government approvals before acquiring title to the land), by beginning
construction of homes after an agreement of sale has been executed and by
using subcontractors to perform home construction and land development work
on a fixed-price basis. However, in order to obtain better terms or prices
or due to competitive pressures, the Company has purchased several properties
outright or acquired the underlying mortgage prior to obtaining all of the
necessary governmental approvals needed to commence development.
The Communities
Toll Brothers' communities are generally located in suburban areas near
major highways with access to major cities. Through 1981, all communities
were located in southeastern Pennsylvania. The Company began selling homes
in central New Jersey in 1982, in northern Delaware and Massachusetts in
1987, in Maryland in 1988, in Virginia and Connecticut in 1992, in New York
in 1993 and in California and North Carolina in 1994. The Company has
recently acquired property in McKinney, Texas, a northern suburb of Dallas
and in Palm Beach County, Florida and expects to begin offering homes for
sale there in the first half of 1995.
The Company emphasizes its high-quality, detached single-family homes
that are marketed primarily to the "upscale" luxury market, generally those
persons who have previously owned a principal residence - the so-called
"move-up" market. The Company believes its reputation as a developer of
homes for this market enhances its competitive position with respect to the
sale of more moderately priced detached homes, as well as attached homes.
Each single-family home community offers several home plans, with the
opportunity to select various exterior styles. The communities are designed
to fit existing land characteristics, blending winding streets, cul-de-sacs
and underground utilities to establish a pleasant environment. The Company
strives to create a diversity of architectural styles within an overall
planned community. This diversity arises from variations among the models
offered and in exterior design options of homes of the same basic floor plan,
from the preservation of existing trees and foliage whenever practicable, and
from the curving street layout, which allows relatively few homes to be seen
from any vantage point. Normally, homes of the same type or color may not be
built next to each other. The communities have attractive entrances with
distinctive signage and landscaping. The Company believes this avoids a
"development" appearance and gives the community a diversified neighborhood
look that enhances home value.
Attached home communities are generally one to three stories and
provide for limited exterior options and often contain commonly-owned
recreational acreage with swimming pools and tennis courts. These
communities have associations through which homeowners act jointly for their
common interest.
It is the Company's belief that the homes built by Toll Brothers in its
named communities provide homeowners with additional value upon resale.
The Homes
Most single-family detached-home communities offer at least three
different home plans, each with several substantially different architectural
styles. For example, the same basic floor plan may be selected with a
Colonial, Georgian, Federal or Provincial design, and exteriors may be varied
further by the use of stone, stucco, brick or siding. Attached home
communities generally offer two or three different floor plans with two,
three or four bedrooms.
In all of Toll Brothers' communities, certain options are available to
the purchaser for an additional charge. The options typically are more
numerous and significant on the more expensive homes. Major options include
additional garages, additional rooms, finished basements, finished lofts, and
additional fireplaces. As a result of the additional charges for such
options, the average sales price was approximately 12.8% higher than the base
sales price during fiscal 1994.
The range of base sales prices for the Company's lines of homes as of
October 31, 1994, was as follows:
Single-Family Detached Homes:
Move-up $174,900 - $407,900
Executive 229,900 - 423,900
Estate 260,900 - 664,900
Attached Homes:
Townhomes 99,900 - 255,900
Carriage Homes 273,900 - 467,900
Villas 254,900 - 412,900
Contracts for the sale of homes are at fixed prices. The prices at
which homes are offered have generally increased from time to time during the
sellout period for each community; however, there can be no assurance that
sales prices will increase in the future.
The Company uses some of the same basic home designs in similar
communities. However, the Company is continuously developing new designs to
replace or augment existing ones to assure that its homes are responsive to
current consumer preferences. For new designs, the Company has its own
architectural staff and occasionally engages unaffiliated architectural
firms. During the past two years, the Company has introduced 45 new models.
Residential Communities Under Development
The Company generally constructs model homes at each of its
communities. Construction of single-family detached homes usually commences
only after an agreement of sale has been executed, while construction of
attached-home buildings usually commences only after agreements of sale have
been executed for a majority of the homes in that building.
The following table summarizes certain information with respect to
residential communities of Toll Brothers under development as of October 31,
1994:
HOMES UNDER
NUMBER OF HOMES HOMES CONTRACT & HOME SITES
STATE COMMUNITIES APPROVED CLOSED NOT CLOSED AVAILABLE
Pennsylvania: 835 4,193 1,756 349 2,088
New Jersey:
North central 9 893 112 101 680
Central 10 811 198 125 488
South central 3 391 206 28 157
Virginia 11 869 349 96 424
Delaware 5 545 318 52 175
Massachusetts 9 871 344 107 420
Maryland 4 378 96 23 259
Connecticut 7 253 98 41 114
New York 6 276 34 85 157
California 1 160 11 17 132
North Carolina 1 15 1 1 13
Total 101(1 9,655 3,523 1,025 5,107(2)
(1) Of these 101 communities, 80 had homes being offered for sale, 7 had
not yet opened for sales, and 14 had been sold out but not all closings had
been completed. Of the 80 communities in which homes were being offered for
sale as of October 31, 1994, 72 were single-family detached-home communities
containing a total of 36 homes under construction but not under contract
(exclusive of model homes) and 8 were attached home communities containing a
total of 22 homes under construction but not under contract (exclusive of
model homes).
(2) On October 31, 1994, significant site improvements had not commenced
on approximately 3,191 of the 5,107 available home sites. Of the 5,107
available home sites, 592 were not owned, but were controlled through options.
Land Policy
Before entering into a contract to acquire land, the Company completes
extensive comparative studies and analyses on detailed Company-designed forms
that assist it in evaluating the acquisition. Toll Brothers generally
attempts to follow a policy of acquiring options to purchase land for future
communities. However, in order to obtain better terms or prices, or due to
competitive pressures, the Company has acquired property outright or acquired
the underlying mortgage allowing it to obtain title to the property.
The options or purchase agreements are generally on a non-recourse
basis, thereby limiting the Company's financial exposure to the amounts
invested in property and pre-development costs. The use of options or
purchase agreements may somewhat raise the price of land that the Company
eventually acquires, but significantly reduces risk. It also allows the
Company to obtain necessary development approvals before acquisition of the
land, thus enhancing the value of the options and the land eventually
acquired. The Company's purchase agreements are typically subject to
numerous conditions including, but not limited to, the Company's ability to
obtain necessary governmental approvals for the proposed community. Often,
the down payment on the agreement will be returned to the Company if all
approvals are not obtained, although pre-development costs may not be
recoverable. The Company has the ability to extend many of these options for
varying periods of time, in some cases by the payment of an additional
deposit and in some cases without an additional payment. The Company has the
right to cancel any of its land agreements by forfeiture of the Company's
down payment on the agreement. In such instances, the Company generally is
not able to recover any pre-development costs.
During the early 1990's, the number of buyers competing for land in the
Company's market area had diminished, while the number of sellers increased,
resulting in more advantageous prices for land acquisitions made by the
Company. Further, many of the land parcels offered for sale were fully
approved, and often improved, subdivisions. Generally, such types of
subdivisions previously had not been available for acquisition in the
Company's market area. The Company purchased several such subdivisions
outright and acquired control of several others through option contracts,
which generally provided that the Company's option would remain intact as
long as the Company purchased a specified number of home sites each quarter.
Contracts of this nature enable the Company to begin offering homes for sale
in a new community with relatively minimal capital expenditures and limited
risk.
Due to the improvement in the economy and the improved availability of
capital, during the past year, the Company has seen an increase in
competition for available land in its market areas. The continuation of the
Company's development activities over the long term will be dependent upon
its continued ability to locate, enter into contracts to acquire, obtain
governmental approvals for, consummate the acquisition of, and improve
suitable parcels of land.
The following is a summary of the parcels of land that the Company
either owns or controls through options and loan assets at October 31, 1994
for proposed communities, as distinguished from those currently under
development:
Number of Number of Number of
State Communities Acres Homes Planned
Pennsylvania 10 1,305 899
New Jersey: (1)
North central 4 225 299
Central 16 1,383 1,675
South Central 1 525 500
Virginia(2) 9 372 657
Massachusetts 1 165 180
New York 5 246 278
Maryland 1 45 89
California 1 197 34
North Carolina 2 80 199
Texas 2 280 282
Total 52 4,823 5,092 (3)
(1) New Jersey includes two communities which contain plans for 170
units which will either be rented or sold at lower than market rentals or
prices.
(2) Virginia includes one community which contains plans for 30
"affordable dwelling units" which will be sold at lower than market prices.
(3) Of these 5,092 planned home sites, 3,853 were not owned; 3,071
lots were controlled through options and 782 lots were controlled through
loan assets secured by liens.
The aggregate of loan assets, option deposits and related pre-
development costs for proposed communities was approximately $39,129,000 at
October 31, 1994. The aggregate purchase price of land parcels under option
at October 31, 1994 was approximately $210,506,000. If all of the above land
were to be developed, the Company believes it would have sufficient land to
maintain its development activities at current levels for more than the next
three years.
The Company evaluates all of the land under control for proposed
communities on an ongoing basis with respect to economic and market
feasibility. During the year ended October 31, 1994 such feasibility
analyses resulted in approximately $2,657,000 of capitalized costs related to
proposed communities being charged to expense because they were no longer
deemed to be recoverable.
There can be no assurance that the Company will be successful in
securing necessary development approvals for the land currently under its
control or for which the Company may acquire control of in the future or,
that upon obtaining such development approvals, the Company will elect to
complete its purchases under such options. The Company has generally been
successful in the past in obtaining governmental approvals, has substantial
land currently under its control for which it is seeking such approvals (as
set forth in the table above), and devotes significant resources to locating
suitable additional land and to obtaining the required approvals on land
under its control. Failure to locate sufficient suitable land or to obtain
necessary governmental approvals, however, may impair the ability of the
Company over the long term to maintain current levels of development
activities.
The Company generally has not purchased land for speculation or with
the contemplation of selling it for profit.
Community Development
The Company expends considerable effort in developing a concept for
each community, which includes determination of size, style and price range
of the homes, layout of the streets and individual lots, and overall
community design. Necessary governmental subdivision and other approvals are
sought, which typically require at least 24 months and sometimes several
years to obtain. The Company then improves the land by grading and clearing
the site, installing roads, underground utility lines and pipes, erecting
distinctive entrance structures, and staking out individual home sites.
Each community is managed by a project manager who is located at the
site. Working with construction supervisors, marketing personnel and, when
required, other Company and outside professionals such as engineers,
architects and legal counsel, the project manager is responsible for
supervising and coordinating the various developmental steps from acquisition
through the approval stage, marketing, construction and customer service,
including monitoring the progress of work and controlling expenditures.
Major decisions regarding each community are made by senior members of the
Company's management.
The Company recognizes revenue only upon the closing of the home sale
(the point at which title and possession are transferred to the buyer), which
generally occurs shortly after construction is substantially completed. The
most significant variable affecting the timing of the Company's revenue
stream, other than housing demand, is receipt of final regulatory approvals,
which, in turn, permits the Company to begin the process of obtaining
executed contracts for sales of homes. Receipt of such final approvals is
not seasonal. Although the Company's sales and construction activities vary
somewhat with the seasons, affecting the timing of closings, any such
seasonal effect is relatively insignificant compared to the effect of receipt
of final governmental approvals.
Subcontractors perform all home construction and land development work,
generally under fixed-price contracts. Toll Brothers acts as a general
contractor and purchases some, but not all, of the building supplies it
requires (see "PROPERTIES - Panel Plant"). The Company is not, and does not
anticipate, experiencing a shortage of either subcontractors or supplies of
building materials. The Company's construction superintendents and assistant
superintendents coordinate subcontracting activities and supervise all
aspects of construction work and quality control. The Company seeks to
achieve homebuyer satisfaction by generally providing its construction
superintendents with incentive compensation arrangements based on each
homebuyer's responses on pre-closing and post-closing checklists.
The Company maintains insurance to protect against certain risks
associated with its activities. These insurance coverages include, among
others, general liability, "all-risk" property, workers' compensation,
automobile, and employee fidelity. The Company believes the amounts and
extent of such insurance coverages are adequate.
Marketing
The Company believes that its marketing strategy, which emphasizes its
more expensive "Estate" and "Executive" lines of homes, has enhanced the
Company's reputation as a builder-developer of high-quality upscale housing.
The Company believes this reputation results in greater demand for all of the
Company's lines of homes. The Company generally includes attractive
decorative moldings such as chair rails, crown moldings, dentil moldings and
other aesthetic features, even in its less expensive homes, on the basis that
this additional construction expense is important to its marketing effort.
In addition to relying on management's extensive experience, the
Company determines the prices for its homes through a Company-designed value
analysis program that compares a Toll Brothers home with homes offered by
other builders in the relevant marketing area. The Company accomplishes this
by assigning a positive or negative dollar value to differences in product
features, such as amenities, location and marketing.
Toll Brothers expends great effort in creating its model homes, which
play an important role in the Company's marketing. In its models, Toll
Brothers creates an attractive atmosphere, with bread baking in the oven,
fires burning in fireplaces, and background music. Interior decorations vary
among the models and are carefully selected based upon the lifestyles of the
prospective buyers. During the past several years, the Company has received
a number of awards from various homebuilder associations for its interior
merchandising.
The sales office located in each community is generally staffed by
Company sales personnel, who are compensated with salary and commission. In
addition, a significant portion of Toll Brothers' sales is derived from the
introduction of customers to its communities by local cooperating realtors.
The Company advertises extensively in newspapers, other local and
regional publications and on billboards. The Company also uses videotapes
and attractive color brochures to describe each community.
All Toll Brothers homes are sold under the Company's one-year limited
warranty as to workmanship and two-year limited warranty as to mechanical
equipment, supplemented by privately insured programs, which provides to home
purchasers a limited ten-year warranty as to structural integrity.
Customer Financing
The Company makes arrangements with a variety of mortgage lenders to
provide homebuyers a range of conventional mortgage financing programs. By
making available an array of attractive mortgage programs to qualified
purchasers, the Company is able to better coordinate and expedite the entire
sales transaction by ensuring that mortgage commitments are received and that
closings take place on a timely and efficient basis. During fiscal 1994,
approximately 68% of the Company's closings were financed through mortgage
programs offered by the Company. In addition, during the same period, the
Company's homebuyers, on average, financed approximately 71% of the purchase
price of their home.
The Company secures the availability of a variety of competitive market
rate mortgage products from both national and regional lenders. Such
availability is generally obtained at no cost to the Company and is committed
for varying lengths of time and amounts.
The Company also obtains forward commitments for fixed and variable
rate mortgage financing which contain various rate protection features. Such
commitments generally cost the Company from zero to one percent of the
mortgage funds reserved and typically have terms of 9 to 18 months. As of
October 31, 1994, there were approximately $70 million of such commitments
available, which expire at various dates through June 1995.
Competition
The homebuilding business is highly competitive and fragmented. The
Company competes with numerous homebuilders of varying size, ranging from
local to national in scope, some of which have greater sales and financial
resources than the Company. Resales of homes also provide competition. The
Company competes primarily on the basis of price, location, design, quality,
service and reputation; however, during the past several years, the Company's
financial stability, relative to others in its industry (some of which have
gone out of business), has become an increasingly favorable competitive
factor. The Company also believes that due to the increased availability of
capital, competition has increased during the past year.
Regulation and Environmental Matters
The Company is subject to various local, state and federal statutes,
ordinances, rules and regulations concerning zoning, building design,
construction and similar matters, including local regulations which impose
restrictive zoning and density requirements in order to limit the number of
homes that can eventually be built within the boundaries of a particular
locality. In addition, the Company is subject to registration and filing
requirements in connection with the construction, advertisement and sale of
homes in its communities in certain states and localities in which it
operates. These laws have not had a material effect on the Company, except
to the extent that application of such laws may have caused the Company to
conclude that development of a proposed community would not be economically
feasible, even if any or all necessary governmental approvals were obtained
(See "Business-Land Policy"). The Company may also be subject to periodic
delays or may be precluded entirely from developing communities due to
building moratoriums in any of the states in which it operates. Generally,
such moratoriums relate to insufficient water or sewage facilities or
inadequate road capacity.
In order to secure certain approvals, the Company may have to provide
affordable housing at below market rental or sales prices. The impact on the
Company will depend on how the various state and local governments in which
the Company engages or intends to engage in development implement their
programs for affordable housing. To date, these restrictions have not had a
material impact on the Company.
The Company is also subject to a variety of local, state and federal
statutes, ordinances, rules and regulations concerning protection of health
and the environment ("environmental laws"), as well as the effects of
environmental factors. The particular environmental laws which apply to any
given community vary greatly according to the community site, the site's
environmental conditions and the present and former uses of the site. These
environmental laws may result in delays, may cause the Company to incur
substantial compliance and other costs, and can prohibit or severely restrict
development in certain environmentally sensitive regions or areas.
The Company maintains a policy of engaging, prior to consummating the
purchase of land, independent environmental engineers to formally evaluate
such land for the presence of hazardous or toxic materials, wastes or
substances. Because it has generally obtained such analyses for the land it
has purchased, the Company has not been significantly affected to date by the
potential presence of such materials.
Employees
As of October 31, 1994, the Company employed 935 full-time persons; of
these, 30 were in executive positions, 119 were engaged in sales activities,
96 in project management activities, 245 in administrative and clerical
activities, 246 in construction activities, 59 in engineering activities and
140 in the panel plant operations. The Company considers its employee
relations to be good.
ITEM 2. PROPERTIES
Headquarters
Toll Brothers' corporate offices, containing approximately 45,000
square feet, are located in a modern facility at 3103 Philmont Avenue,
Huntingdon Valley, Montgomery County, Pennsylvania. The facility was
purchased by the Company in September 1988.
Panel Plant
Toll Brothers owns a facility of approximately 200,000 square feet in
which it manufactures open wall panels, roof and floor trusses, and certain
interior and exterior millwork to supply a portion of the Company's
construction needs. This operation also permits Toll Brothers to purchase
wholesale lumber, plywood, windows, doors, certain other interior and
exterior millwork and other building materials to supply its communities.
The Company believes that increased efficiency, cost savings and productivity
result from the operation of this plant and from such wholesale purchases of
material. This plant generally does not sell or supply to any purchasers
other than Toll Brothers. The property, which is located in Morrisville,
Pennsylvania, is adjacent to U.S. Route 1, a major thoroughfare, and is
served by rail.
Regional and Other Facilities
The Company leases office and warehouse space in various locations,
none of which is material to the business of the Company.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in various claims and litigation arising from
its usual and customary business with customers and subcontractors. The
Company believes that it has adequate insurance or meritorious defenses, or
both, in all pending cases, and that adverse decisions in any or all of the
cases would not have a material adverse effect on the financial condition and
the results of operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the fourth quarter of the fiscal
year ended October 31, 1994.
EXECUTIVE OFFICERS OF THE REGISTRANT
The section entitled "Proposal One: Election of Directors" of the
Company's Proxy Statement for the 1995 Annual Meeting of Shareholders is
incorporated herein by reference.
The following table includes information with respect to all executive
officers of the Company as of October 31, 1994. All executive officers serve
at the pleasure of the Board of Directors of the Company.
Name Age Positions
Robert I. Toll 53 Chairman of the Board,
Chief Executive Officer and Director
Bruce E. Toll 51 President, Chief Operating Officer,
Secretary and Director
Zvi Barzilay 48 Executive Vice President and Director
Joel H. Rassman 49 Senior Vice President, Treasurer
and Chief Financial Officer
Robert and Bruce Toll, who are brothers, co-founded the Company's
predecessors' operations in 1967. Their principal occupations since
inception have been related to their various homebuilding and other real
estate related activities.
Zvi Barzilay joined the Company as a project manager in 1980 and has
been an officer since 1983. In 1994, Mr. Barzilay was elected a Director of
the Company.
Joel H. Rassman has been a senior vice president of the Company since
joining the Company in 1984.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The Company's common stock is principally traded on the New York Stock
Exchange (Symbol: TOL). It is also listed on the Pacific Stock Exchange.
The following table sets forth the price range of the Company's common
stock on the New York Stock Exchange for each fiscal quarter during the two
years ended October 31, 1994.
FISCAL 1994 FISCAL 1993
HIGH LOW HIGH LOW
QUARTER ENDED:
January 31 $19 5/8 $14 1/8 $16 1/8 $ 8 7/8
April 30 $19 3/8 $11 7/8 $16 7/8 $11 1/8
July 31 $14 3/8 $11 3/4 $15 1/8 $ 8 7/8
October 31 $12 3/4 $10 1/2 $16 1/8 $10 3/4
The Company has not paid any cash dividends on its common stock to date
and expects that for the foreseeable future it will follow a policy of
retaining earnings in order to finance the continued development of its
business. Payment of dividends is within the discretion of the Company's
Board of Directors and will depend upon the earnings, capital requirements
and operating and financial condition of the Company, among other factors.
The Company's 10 1/2% Senior Subordinated Notes due March 15, 2002 and 9 1/2%
Senior Subordinated Notes due March 15, 2003, contain restrictions on the
amount of dividends the Company may pay on its common stock. In addition,
the Company's Bank Revolving Credit Agreement requires the maintenance of
minimum shareholders' equity which may restrict the amount of dividends the
Company may pay. As of October 31, 1994, under the most restrictive of the
Agreements, the Company could pay up to approximately $50,245,000 of cash
dividends.
At December 31, 1994, there were approximately 1,028 record holders of
the Company's common stock.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected consolidated financial data of
the Company as of and for each of the five fiscal years ended October 31,
1994. It should be read in conjunction with the Consolidated Financial
Statements and Notes thereto and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Summary Consolidated Income Statement Data
(Amounts in thousands, except per share data)
Year Ended October 31
1994 1993 1992 1991 1990
Revenues $504,064 $395,261 $281,471 $177,418 $200,031
Income before income taxes,
extraordinary item and
change in account $ 56,840 $ 43,928 $ 28,864 $ 6,248 $ 14,964
Income before extraordinary item
and change in accounting $ 36,177 $ 27,419 $ 17,354 $ 3,717 $ 8,904
Extraordinary (loss) gain from
extinguishment of debt (668) (816) 1,296 1,084
Cumulative effect of change in
accounting 1,307
Net Income $ 36,177 $ 28,058 $ 16,538 $ 5,013 $ 9,988
Income per share
Primary:
Income before extraordinary item
and change in accounting $ 1.08 $ .82 $ .52 $ .12 $ .30
Extraordinary (loss) gain (.02) (.02) .04 .04
Cumulative effect of change in
accounting .04
Net Income $ 1.08 $ .84 $ .50 $ .16 $ .34
Weighted average number of
shares outstanding 33,626 33,467 33,234 31,412 29,714
Fully-diluted:
Income before extraordinary item
and change in accounting $ 1.05 $ .82 $ .52 $ .12 $ .30
Extraordinary (loss) gain (.02) (.02) .04 .04
Cumulative effect of change in
accounting .04
Net Income $ 1.05 $ .84 $ .50 $ .16 $ 34
Weighted average number of shares
outstanding 35,664 33,583 33,237 31,554 29,714
Summary Consolidated Balance Sheet Data (Amounts in thousands)
October 31
1994 1993 1992 1991 1990
Inventory $506,347 $402,515 $287,844 $222,775 $240,155
Total Assets $586,893 $475,998 $384,836 $312,424 $316,534
Debt
Loans payable $ 17,506 $ 24,779 $ 25,756 $ 49,943 $ 71,707
Subordinated debt 227,969 174,442 128,854 55,513 61,474
Collateralized mortgage
obligations payable 4,686 10,810 24,403 39,864 45,988
Total $250,161 $210,031 $179,013 $145,320 $179,169
Shareholders' equity $204,176 $167,006 $136,412 $117,925 $ 94,599
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain
income statement items related to homebuilding operations as percentages of
total homebuilding revenues and certain other homebuilding data:
Year Ended October 31: 1994 1993 1992
Revenues 100.0% 100.0% 100.0%
Costs and expenses:
Land and housing construction 75.4 73.5 72.3
Selling, general and administrative 9.7 11.0 11.7
Interest 3.6 4.3 5.7
Total costs and expenses 88.7 88.8 89.7
Operating income 11.3% 11.2% 10.3%
Number of homes closed 1,583 1,324 1,019
Fiscal 1994 Compared to Fiscal 1993
Revenues for fiscal 1994 of $504.1 million exceeded those of fiscal 1993 by
approximately $109 million or 28%. This increase is principally due to the
greater number of homes closed during the year and the increase in the
average selling price of these homes. The increase in the number of homes
closed is due to the substantially larger backlog of homes at the beginning
of fiscal 1994 as compared to the beginning of fiscal 1993 and the greater
number of contracts signed in fiscal 1994 as compared to 1993. The increase
in the average selling price in 1994 over that of 1993 is principally the
result of a shift in the location of homes closed to more expensive
communities, a change in product mix to larger homes and increases in selling
prices.
As of October 31, 1994, the backlog of homes under contract amounted to
$370.6 million (1,025 homes), approximately 30% higher than the $285.4
million (892 homes) backlog the Company had as of October 31, 1993. The
aggregate sales value of new contracts signed in fiscal 1994 amounted to
$586.9 million (1,716 homes), an increase of approximately 20% over the
$490.9 million (1,595 homes) of contracts signed in fiscal 1993. The Company
believes that the increase in backlog and the increase in contracts signed
are the result of (a) the Company's expansion through a greater penetration
of its existing markets, such as Connecticut and Virginia, and its entry into
new markets such as New York State and California, (b) a shift in the
location of homes sold to higher priced communities, as well as increases in
the selling prices in existing communities, (c) pent-up demand for new homes
due to poor economic conditions in the early 1990's which resulted in a
decline in housing demand and a resulting decline in construction, and (d)
diminished competition due to the aforementioned poor economic conditions.
The average selling price per home settled will vary from year to year
based upon the community and product mix of homes closed, as well as changes
in selling price and the value of options selected by homebuyers. Based upon
the average selling price of homes in backlog as of October 31, 1994, the
Company expects that the average selling price of homes closed in fiscal 1995
will exceed the average selling price of homes closed in fiscal 1994.
Land and construction costs as a percentage of revenues increased in
1994 as compared to 1993 due principally to (a) an increase in the cost of
materials, (b) an increase in costs due to the severe weather conditions the
Company experienced in the first half of fiscal 1994 which resulted in
increased spending and reduced construction activity causing an increase in
per home overhead, and (c) higher provisions in fiscal 1994 over the amounts
provided in fiscal 1993 for inventory writedowns consisting of provisions for
a reduction to net realizable value and the expensing of previously
capitalized costs which the Company no longer considered realizable. The
Company provided approximately $7.0 million in 1994 for these writedowns as
compared to $2.8 million in 1993. These increases were partially offset by
lower land and land development costs.
Selling, general and administrative expense ("SG&A") in fiscal 1994
amounted to $48.8 million or 9.7% of revenues as compared to $43.3 million or
11.0% of revenues for 1993. The decline in SG&A as a percentage of revenues
in 1994 as compared to 1993 is principally the result of revenue increasing
at a greater rate than spending. The $5.5 million increase in spending is
principally due to the increased selling costs related to the greater number
of homes closed in 1994 over 1993, the increase in the number of communities
in which the Company was offering homes for sale, and the increase in payroll
and payroll related costs due to the growth of the Company.
Interest expense was lower both as a percentage of revenues and on a
per home closed basis in 1994 as compared to 1993. On average, land and land
development costs associated with the homes closed in 1994 remained in
inventory for a shorter period of time than those closed in fiscal 1993. In
addition, the amount of interest incurred has declined as a percentage of
inventory due to lower interest rates and the decline in the amount of debt
carried by the Company in proportion to the amount of its inventory.
Accordingly, less capitalized interest was accumulated, on average, on the
homes closed in 1994 than those closed in 1993.
Fiscal 1993 Compared to Fiscal 1992
Revenues for fiscal 1993 were higher than those of fiscal 1992 by
approximately $114 million or 40%. This was principally due to the increased
number of homes closed during the year, which in turn was the result of the
much larger backlog at the beginning of fiscal 1993 as compared to the
backlog at the beginning of fiscal 1992, and the increased number of
contracts signed in 1993 as compared to 1992. In addition, the average sales
price per home increased in 1993 over 1992 as a result of a change in product
mix to larger homes and due to the shift in the location of homes closed to
more expensive communities.
The aggregate sales value of new contracts signed for fiscal 1993
amounted to $490.9 million (1,595 homes), an increase of 43% over the $342.8
million (1,202 homes) signed in fiscal 1992. As of October 31, 1993, the
backlog of homes under contract amounted to $285.4 million (892 homes),
approximately $98 million or 53% higher than the backlog as of October 31,
1992. In assessing the levels of backlog and new contracts signed it should
be noted that orders for new homes are generally strongest during the
Company's second fiscal quarter. The Company believes that the increase in
contracts signed is attributable to pent-up demand, which was caused by a
combination of homebuyers' deferral of the decision to purchase a new home
due to poor economic conditions and lack of consumer confidence, an increase
in the number of potential move-up homebuyers and the increased affordability
of homes due, in part, to the lowest interest rates in more than twenty
years. The increase is also attributable to an expansion of the Company's
markets, both through greater penetration of existing ones and entry into new
ones assisted, in part, by diminished competition resulting from the
aforementioned economic conditions as well as credit restrictions that were
placed on homebuilders by lenders and by governmental regulations.
Land and housing construction costs as a percentage of sales increased
in 1993 as compared to 1992 due to increased material costs (primarily
lumber), a change in product mix, and an increase in costs due to
construction delays resulting from adverse weather conditions during the
first half of fiscal 1993. These percentage increases were partially offset
by a decrease, as a percentage of sales, in land and land development costs.
In fiscal 1993, the Company provided $2.8 million or 0.7% of revenues for
inventory writedowns consisting of net realizable value provisions and the
expensing of previously capitalized costs which the Company no longer
considered realizable. The Company provided $2.0 million or 0.7% of revenues
in fiscal 1992 for similar items.
Selling, general and administrative expense ("SG&A") was lower as a
percentage of sales in 1993 as compared to 1992 because the year-to-year
increase in sales was greater than the increase in spending. Aggregate
spending increased $10.3 million, from $33.0 million in 1992 to $43.3 million
in 1993. Of this increase, $6.5 million was attributable to general and
administrative expenses and was principally due to the increased number of
employees and resulting increased payroll and related costs and an increase
in the accrual for incentive compensation. The remainder of the increase was
due to higher selling expenses, which were attributable to the increase in
the number of communities in which the Company was offering homes for sale.
Interest expense for fiscal 1993 was lower as a percentage of revenues
and on a per home basis than in fiscal 1992. In general, on average, the
land and land development costs associated with the homes closed in fiscal
1993 remained in inventory for a shorter period of time than those closed in
the prior year. In addition, the amount of interest incurred in recent years
has declined as a percentage of inventory due to lower interest rates and the
decline in the amount of debt in proportion to the amount of inventory.
Accordingly, less capitalized interest was accumulated on the homes closed in
1993 than on those closed in 1992. It is expected that this downward trend
will slow as more recently developed communities are held in inventory for
longer periods of time.
Income Taxes
Income taxes for fiscal 1994, 1993, 1992 and 1991 were provided at
effective rates of 36.4%, 37.6% and 39.9%, respectively.
Effective November 1, 1992, the Company adopted Statement of Financial
Accounting Standard No. 109, "Accounting for Income Taxes". This Statement
requires a liability approach for measuring deferred taxes based on temporary
differences between the financial statement and tax bases of assets and
liabilities existing at each balance sheet date using enacted tax rates for
years in which taxes are expected to be recovered or paid. The cumulative
effect of this change in accounting for income taxes of $1,307,000 of income
has been included in the consolidated statement of income for 1993.
Extraordinary (Loss) Gain
During fiscal 1993 and 1992, the Company redeemed, at prices above par,
all of its outstanding 12.95% and 12 1/8% subordinated debt, respectively.
This resulted in losses, net of income tax, of $668,000 in fiscal 1993 and
$816,000 in fiscal 1992. The losses represent the redemption premium and a
write-off of unamortized discount and deferred issuance costs.
CAPITAL RESOURCES AND LIQUIDITY
Funding for the Company's residential development activities is
principally provided by cash flows from operations, from the public debt and
equity markets and unsecured bank borrowings.
Cash flow from operations, before inventory additions, improved as
operating results improved and it is anticipated that it will continue to
improve as a result of an increase in revenues from the delivery of homes
from the existing backlog as well as from new sales agreements. During 1994,
the Company received approximately $55.5 million from the issuance of 4 3/4%
Convertible Senior Subordinated Notes to the public. The Company used the
proceeds and cash flow from operations to acquire additional land for new
communities, to fund additional expenditures for land development and
construction costs needed to meet the requirements of the increased backlog
and the continuing expansion of the number of communities in which the
Company is offering homes for sale and to reduce debt. The Company expects
that inventories will continue to increase and is currently negotiating and
searching for additional opportunities to obtain control of land for future
communities at advantageous prices and/or terms (although the availability of
such advantageous prices and terms is diminishing).
The Company has a $150 million unsecured revolving credit facility with
nine banks which extends through November 1, 1997. The agreement provides
for extensions subject to mutual agreement of the Company and the banks. As
of October 31, 1994, the Company had $10.0 million of loans and approximately
$52.6 million of letters of credit outstanding under the facility.
The Company believes that it will be able to fund its activities
through a combination of operating cash flow, cash balances and existing
sources of credit.
INFLATION
The long-term impact of inflation on the Company is manifested in
increased land, land development, construction and overhead costs, as well as
in increased sales prices. For several years prior to fiscal 1989, the
Company was able to raise sales prices by amounts at least equal to its cost
increases. From fiscal 1989 through February 1, 1991, however, sales prices
either declined slightly or remained steady, and since then have risen only
modestly. Since fiscal 1989, the Company's costs generally have increased
except for land acquisition costs, which have generally decreased.
The Company generally contracts for land significantly before
development and sales efforts begin and, accordingly, to the extent land
acquisition costs are fixed, increases or decreases in the sales prices of
homes may affect the Company's profits. Since the sales prices of homes are
fixed at the time of sale and the Company generally sells its homes prior to
commencement of construction, any inflation of costs in excess of those
anticipated may result in lower gross margins. The Company generally
attempts to minimize that effect by entering into fixed-price contracts with
its subcontractors and material suppliers for specified periods of time,
which generally do not exceed one year.
Housing demand, in general, is adversely affected by increases in
interest costs, as well as in housing costs. Interest rates, the length of
time that land remains in inventory and the proportion of inventory that is
financed affect the Company's interest costs. If the Company is unable to
raise sales prices enough to compensate for higher costs, which had generally
been the condition during prior years, or if mortgage interest rates
increased significantly, affecting prospective buyers' ability to adequately
finance a home purchase, the Company's 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 a new home.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial Statements as set forth in item 14(a)(1) and (2).
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item with respect to executive
officers of the Company is set forth in Part I. The information
required by this item with respect to the Directors of the Company is
incorporated by reference to the Company's Proxy Statement for the 1995
Annual Meeting of Shareholders.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference to
the Company's Proxy Statement for the 1995 Annual Meeting of Shareholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated by reference to
the Company's Proxy Statement for the 1995 Annual Meeting of Shareholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated by reference to
the Company's Proxy Statement for the 1995 Annual Meeting of Shareholders.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements and Financial Statement Schedules
1. Financial Statements
Page
Report of Independent Auditors F-1
Consolidated Statements of Income - F-2
Years Ended October 31, 1994, 1993 and 1992
Consolidated Balance Sheets - F-3
October 31, 1994 and 1993
Consolidated Statements of Cash Flows - F-4
Years Ended October 31, 1994, 1993 and 1992
Notes to Consolidated Financial Statements F-5 - F-11
Summary Consolidated Quarterly Data F-12
2. Financial Statement Schedule
Schedule II - Valuation and Qualifying Accounts
for the years ended October 31,
1994, 1993 and 1992 F-13
Schedules not listed above have been omitted because
they are either not applicable or the required information
is included in the financial statements or notes thereto.
3. Exhibits required to be filed by Item 601 of Regulation S-K:
Exhibit
Number Description
3.1 Certificate of Incorporation, as amended, is hereby
incorporated by reference to Exhibit 3.1 of the
Registrant's Form 10-K for the fiscal year ended
October 31, 1989.
3.2 Amendment to the Certificate of Incorporation dated
March 11, 1993, is hereby incorporated by reference
to Exhibit 3.1 of Registrant's Form 10-Q for the
quarter ended January 31, 1993.
3.3 By-laws, as amended, are hereby incorporated by
reference to Exhibit 3.2 of the Registrant's Form
10-K for the fiscal year ended October 31, 1989.
4.1 Specimen Stock Certificate is hereby incorporated by
reference to Exhibit 4.1 of the Registrant's Form
10-K for the fiscal year ended October 31, 1991.
4.2 Indenture dated as of March 15, 1992, between Toll
Corp., as issuer, the Registrant, as guarantor, NBD
Bank, National Association, as Trustee, including
Form of Guarantee, is hereby incorporated by
reference to Exhibit 4 of Toll Corp.'s Registration
Statement on Form S-3 filed with the Securities and
Exchange Commission on March 11, 1992, File No. 33-
45704.
4.3 Indenture dated as of March 15, 1993, among Toll
Corp., as issuer, the Registrant, as guarantor, and
NBD Bank, National Association, as Trustee,
including Form of Guarantee, is hereby incorporated
by reference to Exhibit 4.1 of Toll Corp.'s
Registration Statement on Form S-3 filed with the
Securities and Exchange Commission, March 10, 1993,
File No. 33-58350.
4.4 Indenture dated as of January 15, 1994 between Toll
Corp., as issuer, the Registrant, as guarantor,
Security Trust Company, N.A., as Trustee, including
Form of Guarantee, is incorporated by reference to
Exhibit 4.1 of Toll Corp.'s Registration Statement
on Form S-3 filed with the Securities and Exchange
Commission on January 23, 1995, File No. 33-51775.
Exhibit
Number Description
10.1 Revolving credit agreement, dated as of November 1,
1993, among First Huntingdon Finance Corp., the
Registrant, PNC Bank, Natinal Association,
CoreStates Bank, N.A., Meridian Bank, NBD Bank,
N.A., NationsBank of Virginia, N.A., Bank Hapoalim
B.M., Kleinwort Benson Limited, Mellon Bank and The
Fuji Bank, Limited, and PNC Bank, National
Association, as Agent, is hereby incorporated by
reference to Exhibit 10.1 of the Registrant's Form
10-K for the fiscal year ended October 31, 1993.
10.2 Revolving credit agreement, dated as of November 1,
1993 as amended on July 11, 1994, among First
Huntingdon Finance Corp., the Registrant, PNC Bank,
National Association, CoreStates Bank, N.A.,
Meridian Bank, NBD Bank, N.A., NationsBank of
Virginia, N.A., Bank Hapoalim B.M., Kleinwort Benson
Limited, Mellon Bank and The Fuji Bank, Limited, and
PNC Bank, National Association, as Agent.
10.3 Amendment dated as of November 29, 1994 to Revolving
Credit Agreement dated as of November 1, 1993 among
First Huntingdon Finance Corp., the Registrant, PNC
Bank, National Association, CoreStates Bank, N.A.,
Meridian Bank, NBD Bank, N.A., Nations Bank of
Virginia, N.A., Bank Hapoalim, B.M., Kleinwort
Benson Limited, Mellon Bank and The Fuji Bank,
Limited, and PNC Bank, National Association, as
Agent.
10.4 Toll Brothers, Inc. Amended and Restated Stock
Option Plan (1986), as amended and restated by the
Registrant's Board of Directors on February 24, 1992
and adopted by its shareholders on April 6, 1992, is
hereby incorporated by reference to Exhibit 19(a) of
the Registrant's Form 10-Q for the quarterly period
ended April 30, 1992.
10.5 Toll Brothers, Inc. Amended and Restated Stock
Purchase Plan is hereby incorporated by reference to
Exhibit 4 of the Registrant's Registration Statement
on Form S-8 filed with the Securities and Exchange
Commission on August 4, 1987, File No. 33-16250.
10.6 Toll Brothers, Inc. Key Executives and Non-Employee
Directors Stock Option Plan (1993) is hereby
incorporated by reference to Exhibit 10.1 of the
Registrant's Form 8K filed with the Securities and
Exchange Commission on May 25, 1994.
Exhibit
Number Description
10.7 Toll Brothers, Inc. Cash Bonus Plan is hereby
incorporated by reference to Exhibit 10.2 of the
Registrant's Form 8-K filed with the Securities and
Exchange Commission on May 25, 1994.
10.8 Agreement between the Registrant and Joel H.
Rassman, dated June 30, 1988, is hereby incorporated
by reference to Exhibit 10.8 of Toll Corp.'s
Registration Statement on Form S-1 filed with the
Securities and Exchange Commission on September 9,
1988, File No. 33-23162.
10.9 Agreement regarding sharing of office expenses,
dated May 29, 1986, among Robert Toll, Bruce Toll
and the Registrant, is hereby incorporated by
reference to Exhibit 10.8 of the Registrant's
Registration Statement on Form S-1 filed with the
Securities and Exchange Commission on July 8, 1986,
File No. 33-6066.
11 Statement regarding computation of Per Share
Earnings.
22 Subsidiaries of the Registrant.
24 Consent of Independent Auditors.
27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the last quarter
of the period covered by this report.
Indemnification Undertaking - Registration Statements on Form S-8
For the purpose of complying with the amendments to the rules governing
Form S-8 (effective July 13, 1990) under the Securities Act of 1933, the
undersigned Registrant hereby undertakes as follows, which undertaking shall
be incorporated by reference into Registrant's Registration Statements on
Form S-8 Nos. 33-6066 (filed July 3, 1989) and 33-16250 (filed August 4,
1987):
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
Township of Lower Moreland, Commonwealth of Pennsylvania on December 8, 1994.
TOLL BROTHERS, INC.
By: /s/ Robert I. Toll
Robert I. Toll
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/ Robert I. Toll Chairman of the Board December 8, 1994
Robert I. Toll of Directors and Chief
Executive Officer
(Principal Executive Officer)
/s/ Bruce E. Toll President, Chief December 8, 1994
Bruce E. Toll Operating Officer, Secretary
and Director
/s/ Zvi Barzilay Executive Vice President December 8, 1994
Zvi Barzilay and Director
/s/ Joel H. Rassman Senior Vice President, December 8, 1994
Joel H. Rassman Treasurer and Chief
Financial Officer
(Principal Financial
Officer)
/s/ Joseph R. Sicree Vice President and December 8, 1994
Joseph R. Sicree Chief Accounting Officer
(Principal Accounting
Officer)
/s/ Robert S. Blank Director December 8, 1994
Robert S. Blank
/s/ Richard J. Braemer Director December 8, 1994
Richard J. Braemer
/s/ Roger S. Hillas Director December 8, 1994
Roger S. Hillas
/s/ Carl B. Marbach Director December 8, 1994
Carl B. Marbach
/s/ Paul E. Shapiro Director December 8, 1994
Paul E. Shapiro
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Toll Brothers, Inc.
We have audited the accompanying consolidated balance sheets of Toll Brothers,
Inc. and subsidiaries at October 31, 1994 and 1993, and the related consolidated
statements of income and cash flows for each of the three years in the period
ended October 31, 1994. Our audits also included the financial statement
schedule listed in the Index at item 14(a). These financial statements and
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and schedule based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Toll Brothers,
Inc. and subsidiaries at October 31, 1994 and 1993, and the consolidated
results of their operations and their cash flows for each of the three years
in the period ended October 31, 1994 in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken
as a whole, presents fairly in all material respects the information set
forth therein.
As discussed in Note 1 to the financial statements, in 1993 the Company changed
its method of accounting for income taxes.
/s/ Ernst & Young LLP
----------------------
Philadelphia, Pennsylvania
December 8, 1994
Consolidated Statements of Income
(Amounts in thousands, except per share data)
October 31
1994 1993 1992
Revenues:
Housing sales $501,822 $392,560 $279,841
Interest and other 2,242 2,701 1,630
504,064 395,261 281,471
Costs and expenses:
Land and housing construction (Note 2) 380,240 290,878 203,586
Selling, general and administrative 48,789 43,326 32,973
Interest (Note 2) 18,195 17,129 16,048
447,224 351,333 252,607
Income before income taxes, extraordinary
item and change in accounting 56,840 43,928 28,864
Income taxes (Note 5): 20,663 16,509 11,510
Income before extraordinary item and
change in accounting 36,177 27,419 17,354
Extraordinary loss from extinguishment
of debt, net of income taxes (Note 4) (668) (816)
Cumulative effect of change in accounting
for income taxes (Note 1) 1,307
Net income $ 36,177 $ 28,058 $ 16,538
Earnings per share (Note 1):
Primary:
Income before extraordinary
item and change in accounting $ 1.08 $ .82 $ .52
Extraordinary loss (.02) (.02)
Cumulative effect of change in accounting
for income taxes .04
Net income $ 1.08 $ .84 $ .50
Fully-diluted:
Income before extraordinary item and
change in accounting $ 1.05 $ .82 $ .52
Extraordinary loss (.02) (.02)
Cumulative effect of change in accounting
for income taxes .04
Net Income $ 1.05 $ .84 $ .50
Weighted Average Number of Shares
Primary 33,626 33,467 33,234
Fully-diluted 35,664 33,583 33,237
See accompanying notes
Consolidated Balance Sheets (Amounts in thousands)
October 31
1994 1993
ASSETS
Cash and cash equivalents $ 38,026 $ 32,329
Marketable securities, at cost which
approximates market 3,674 1,983
Residential inventories (Note 2) 506,347 402,515
Property, construction and office
equipment (Note 1) 11,537 10,296
Receivables, prepaid expenses and other
assets 22,695 18,973
Mortgage notes receivable 4,614 9,902
$586,893 $475,998
LIABILITIES AND SHAREHOLDERS' EQUITY
Loans payable (Note 3) $ 17,506 $ 24,779
Subordinated notes (Note 4) 227,969 174,442
Customer deposits on sales contracts 30,071 22,449
Accounts payable 28,914 16,971
Accrued expenses 40,872 30,221
Collateralized mortgage obligations payable 4,686 10,810
Income taxes payable (Note 5) 32,699 29,320
Total liabilities $382,717 308,992
Commitments and contingencies (Notes 3 and 8)
Shareholders' equity (Notes 3, 4 and 6):
Preferred stock, none issued
Common stock, 33,423,309 and 33,318,760 shares
issued at October 31, 1994 and 1993, respectively 334 333
Additional paid-in capital 36,198 35,206
Retained earnings 167,644 131,467
Total shareholders' equity 204,176 167,006
$586,893 $475,998
See accompanying notes
Consolidated Statements of Cash Flows
(Amounts in thousands)
Year Ended October 31
1994 1993 1992
Cash flows from operating activities:
Net income $ 36,177 $ 28,058 $ 16,538
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation and amortization 2,687 2,700 2,606
(Gain) loss from repurchase of
subordinated debt (616) 1,108 1,371
Deferred taxes (361) (882) 1,969
Net realizable value provisions 4,300 2,400 --
Changes in operating assets and
liabilities
Increase in residential inventories (104,482) (116,253) (63,216)
Increase in receivables, prepaid
expenses and other assets (1,481) (2,950) (4,040)
Increase in customer deposits on
sales contracts 7,622 7,319 4,889
Increase in accounts payable and
accrued expenses 22,594 14,398 10,632
Increase in income taxes payable 4,046 9,906 3,353
Net cash used in operating activities (29,514) (54,196) (25,898)
Cash flows from investing activities:
(Purchase) sale of marketable securities (1,691) 13,493 (15,476)
Purchase of property, equipment, net (2,968) (1,805) (1,393)
Principal repayments of mortgage notes
receivable 5,308 13,207 16,460
Net cash provided by (used in)
investing activities 649 24,895 (409)
Cash flows from financing activities:
Proceeds from loans payable 23,493 16,380 --
Principal payments of loans payable (35,900) (18,297) (26,097)
Net proceeds from issuance of
subordinated debt 55,541 71,993 96,065
Repurchase of subordinated debt (3,290) (29,552) (27,517)
Principal payments of collateralized
mortgage obligations payable (6,152) (13,644) (15,552)
Proceeds from stock options exercised
and employee stock plan purchases 870 1,343 1,340
Net cash provided by financing
activities 34,562 28,223 28,239
Net increase (decrease) in cash and
cash equivalents 5,697 (1,078) 1,932
Cash and cash equivalents, beginning
of year 32,329 33,407 31,475
Cash and cash equivalents, end of year 38,026 $ 32,329 $ 33,407
Supplemental disclosures of cash flow
information
Interest paid, net of amount capitalized $ 6,762 $ 7,754 $ 7,184
Income taxes paid $ 16,977 $ 5,738 $ 5,633
Supplemental disclosures of noncash activities
Residential inventories acquired through
seller financing $ 5,000 $ 818 $ 1,853
Income tax benefit relating to exercise of
employee stock options $ 124 $ 1,192 $ 609
See accompanying notes
Notes to Consolidated Financial Statements
1. Significant accounting policies
Basis of presentation
The accompanying consolidated financial statements include the accounts of Toll
Brothers, Inc. (the "Company"), a Delaware corporation, and its majority-owned
subsidiaries and mortgage financing partnerships. All significant intercompany
accounts and transactions have been eliminated.
Certain amounts reported in prior years have been reclassified for comparative
purposes.
Income recognition
The Company is engaged in the development, construction and sale of residential
housing. Revenues and cost of sales are recorded at the time each home sale
is closed and title and possession have been transferred to the buyer.
Closing normally occurs shortly after construction is substantially completed.
Cash and cash equivalents
Highly liquid investments with original maturities of three months or less are
classified as cash equivalents. The carrying value of these investments
approximates fair market value.
Property, construction and office equipment
Property, construction and office equipment are recorded at cost and are
stated net of accumulated depreciation of $12,343,000 and $10,910,000 at
October 31, 1994 and 1993, respectively. Depreciation is recorded by using
the straight-line method over the estimated useful lives of the assets.
Residential inventories
General
Inventories are stated at the lower of cost or estimated net realizable
value. In addition to direct land acquisition, land development and housing
construction costs, costs include interest, real estate taxes and direct
overhead costs related to development and construction, which are
capitalized to inventories during the period beginning with the commencement
of development and ending with the completion of construction.
Land, land development and housing construction costs
Land, land development and related costs are amortized to cost of homes
closed based upon the total number of homes to be constructed in each
community. Housing construction and related costs are charged to cost of
homes closed under the specific identification method.
Deferred marketing costs
The Company capitalizes project marketing costs and charges them against
income as homes are closed.
Income taxes
During the fourth quarter of 1993, the Company adopted Statement of Financial
Accounting Standard No. 109, "Accounting for Income Taxes", effective
November 1, 1992. This Statement requires a liability approach for measuring
deferred taxes based on temporary differences between the financial statement
and tax bases of assets and liabilities existing at each balance sheet date
using enacted tax rates for years in which taxes are expected to be paid or
recovered. The cumulative effect of this change in accounting for income
taxes of $1,307,000 is included in the consolidated statement of income for
1993.
Earnings per share
The computation of primary and full-duluted earnings per share is based on the
weighted average number of shares of common stock and common stock equivalents
outstanding. In addition, the 1994 computation of fully-diluted earnings per
share assumes the conversion of the Company's 4 3/4% Convertible Subordinated
Notes due 2004 at $21.75 per share for the period that the notes were
outstanding, although the closing price of the Company's common stock on the
New York Stock Exchange on October 31, 1994 was $11 per share.
2. Residential inventories
Residential inventories consisted of the following (amounts in thousands):
October 31
1994 1993
Land and land development costs $158,686 $122,258
Construction in progress 277,098 220,680
Sample homes 22,641 15,297
Land deposits and costs of future development 13,943 15,773
Loan assets acquired for future development 25,186 21,873
Deferred marketing and financing costs 8,793 6,634
$506,347 $402,515
Construction in progress includes the cost of homes under construction, land
and land development costs and the carrying costs of lots that have been
substantially improved.
The Company acquired a number of loan assets (secured by liens on development
property) from the Resolution Trust Corporation and various banks with the
intention of converting a substantial portion of the value to land for new
communities. At the time the Company acquires title to the property, the
cost of the loan asset is reclassified to land and land development costs.
For the years ended October 31, 1994, 1993 and 1992, the Company provided for
inventory writedowns consisting of provisions for a reduction to net
realizable value and the expensing of previously capitalized costs which the
Company no longer considered realizable of $6,957,000, $2,754,000 and
$1,988,000, respectively.
Interest capitalized in inventories is charged to interest expense when the
related inventories are closed. Interest incurred, capitalized and expensed
for the three years ended October 31, 1994 is as follows (amounts in
thousands):
1994 1993 1992
Interest capitalized, beginning
of year $38,270 $34,470 $35,761
Interest incurred 21,701 20,929 14,757
Interest expensed (18,195) (17,129) (16,048)
Write off to cost of sales and other (1,941)
Interest capitalized, end of year $39,835 $38,270 $34,470
3. Loans payable
As of October 31, 1994 and 1993, the Company had loans payable of $17,506,000
and $24,779,000, respectively, including borrowings under the Company's
revolving credit agreement of $10,000,000 and $21,293,000. Due to their
relative short-term maturity and terms, the face amount of the loans
approximates fair market value.
The Company has a $150,000,000 unsecured revolving credit facility with nine
banks which extends through November 1, 1997. The agreement provides for
extensions of the maturity date. Interest is payable at 1 3/8% above the
Eurodollar rate or at other specified variable rates as selected by the
Company from time to time. The interest rate on outstanding loans at
October 31, 1994 was 6.44%. A commitment fee of 3/8 of 1% is payable on the
unused portion of the facility. As of October 31, 1994, letters of credit
and obligations under escrow agreements of $52,609,000 were outstanding.
The agreement contains various covenants, including financial covenants
related to consolidated shareholders' equity, indebtedness and inventory.
Due to the requirement that a minimum consolidated shareholders' equity be
maintained, the Company is restricted to the payment of cash dividends and
the repurchase of Company stock of approximately $50,245,000 as of
October 31, 1994.
4. Subordinated notes and debentures
In January 1994, the Company issued $57,500,000 of 4 3/4% Convertible Senior
Subordinated Notes (the "4 3/4% Notes"), due January 15, 2004, that are
subordinated to all senior indebtedness. The notes are convertible into
shares of common stock of the Company at the option of the noteholder at any
time prior to maturity at a conversion price of $21.75 per share. The 4 3/4%
Notes are redeemable, in whole or in part, at the option of the Company on or
after January 15, 1997 at various prices. During 1994, the Company acquired
$3,000,000 of these notes in the open market at prices below par. The gain
realized by the Company was immaterial and included in other income.
In March 1993, the Company issued $75,000,000 of 9 1/2% Senior Subordinated
Notes (the "9 1/2 Notes"), due March 15, 2003 that are subordinated to all
senior indebtedness. The 9 1/2% Notes are redeemable, in whole or in part,
at the option of the Company on or after March 15, 1998 at various prices.
During 1994, the Company acquired $1,040,000 of these notes in the open
market at prices below par. The gain realized by the Company was immaterial
and included in other income.
In March 1992, the Company issued $100,000,000 of 10 1/2% Senior Subordinated
Notes (the "10 1/2% Notes"), which are due March 15, 2002, provide for
semiannual interest payments and are subordinated to all senior indebtedness.
The 10 1/2% Notes are redeemable in whole or in part, at the option of the
Company on or after March 15, 1997 at various prices.
During the year ended October 31, 1993, the Company redeemed all of its
outstanding 12.95% Subordinated Notes due 1996 at a price above par. The
principal amount of Notes redeemed was $28,973,000 and the redemption
resulted in an extraordinary loss of $668,000, net of income taxes of
$440,000.
During the year ended October 31, 1992, the Company redeemed all of its
outstanding 12 1/8% Subordinated Debentures due 1998 at a price above par.
The principal amount of debentures redeemed was $26,708,000 and the
redemption resulted in an extraordinary loss of $816,000, net of income taxes
of $555,000.
The aggregate fair market value of the notes, based upon their quoted market
price as of October 31, 1994, was approximately $201,836,000.
The indentures related to the 10 1/2% and 9 1/2% Notes, restrict certain
payments including payments for cash dividends and repurchase of the
Company's stock.
5. Income taxes
The provisions for income taxes include federal and state taxes.
Substantially all of the difference between the effective tax rate (36.4%,
37.6% and 39.9% for 1994, 1993 and 1992, respectively) used in these
provisions and the statutory federal tax rate of 35% in 1994, 34.8% in 1993
and 34% in 1992 was due to state taxes, net of federal tax benefit, and in
1994 and 1993, the recalculation of the deferred tax balances due to the
increase in the Federal statutory rate and decrease in the estimated state
tax rate, and the effect of nontaxable income generated from short-term
investments. The provisions for income taxes for the three years ended
October 31, 1994 were as follows (amounts in thousands):
1994 1993 1992
Federal $19,020 $14,953 $ 9,634
State 1,643 1,556 1,876
$20,663 $16,509 $11,510
Current $21,024 $16,084 $ 9,541
Deferred (361) 425 1,969
$20,663 $16,509 $11,510
The principal components of deferred tax expense in fiscal 1992 were $486,000
for costs capitalized to inventories and $1,685,000 for net realizable value
provision recoveries offset by $883,000 for income from housing sales
reported on the installment method.
The components of income taxes payable as of October 31, 1994 and 1993 were
(amounts in thousands):
1994 1993
Current $19,211 $15,471
Deferred 13,488 13,849
$32,699 $29,320
The components of net deferred taxes payable as of October 31, 1994 and 1993
were (amounts in thousands):
1994 1993
Deferred tax liabilities
Capitalized interest $15,817 $15,290
Deferred expenses 3,004 2,797
Other 230 177
Total 19,051 18,264
Deferred tax assets
Net realizable value reserves 2,959 2,491
Inventory valuation differences 1,360 921
Accrued expenses deductible when paid 801 629
Other 443 374
Total 5,563 4,415
Net deferred tax liability $13,488 $13,849
6. Shareholders' equity
The Company's authorized capital stock consists of 40,000,000 shares of
Common Stock, $.01 par value per share, and 1,000,000 shares of Preferred
Stock, $.01 par value per share. The Company's Certificate of Incorporation,
as amended, authorizes the Board of Directors to increase the number of
authorized shares of Common Stock to 60,000,000 shares and the number of
shares of authorized Preferred Stock to 15,000,000 shares.
Changes in shareholders' equity are summarized as follows (amounts in
thousands):
Additional
Common Stock Paid-In Retained
Shares Amount Capital Earnings Total
Balance, October 31, 1991 32,812 328 30,726 86,871 117,925
Net income 16,538 16,538
Exercise of stock options 271 3 1,908 1,911
Employee stock plan
purchases 4 38 38
Balance, October 31, 1992 33,087 331 32,672 103,409 136,412
Net income 28,058 28,058
Exercise of stock options 229 2 2,500 2,502
Employee stock plan
purchases 3 34 34
Balance, October 31, 1993 33,319 333 35,206 131,467 167,006
Net income 36,177 36,177
Exercise of stock options 101 1 954 955
Employee stock plan
purchases 3 38 38
Balance, October 31, 1994 33,423 334 36,198 167,644 204,176
Stock option plans
The Company's stock option plans for employees, officers and nonemployee
directors provide for the granting of incentive stock options and
nonstatutory options with a term of up to ten years at a price not less than
the market price of the stock at the date of grant. Options available for
grant at October 31, 1994, 1993 and 1992 were 2,537,400, 2,225,200 and
2,786,550, respectively.
The following summarizes stock option activity for both plans during the three years
ended October 31, 1994:
1994
Number Option Price
of Shares Per Share
Outstanding, beginning of year 1,031,750 $ 3.25 - $15.13
Granted 729,200 15.81 - 19.00
Exercised (106,425) 3.25 - 12.75
Cancelled (41,400) 10.75 - 15.88
Outstanding, end of year 1,613,125 $ 3.25 - $19.00
Exercisable, end of year 698,900 $ 3.25 - $15.13
1993
Number Option Price
of Shares Per Share
Outstanding, beginning of year 697,700 $ 3.25 - $12.19
Granted 590,200 9.06 - 15.13
Exercised (227,300) 3.25 - 10.75
Cancelled (28,850) 10.75 - 12.75
Outstanding, end of year 1,031,750 $ 3.25 - $15.13
Exercisable, end of year 460,400 $ 3.25 - $12.19
1992
Number Option Price
of Shares Per Share
Outstanding, beginning of year 643,800 $ 3.25 - $ 7.75
Granted 347,000 7.75 - 12.19
Exercised (272,600) 3.25 - 7.75
Cancelled (20,500) 3.25 - 10.75
Outstanding, end of year 697,700 $ 3.25 - $12.19
Exercisable, end of year 343,200 $ 3.25 - $ 7.75
Employee stock purchase plan
The Company's Employee Stock Purchase Plan enables substantially all
employees to purchase the Company's common stock for 95% of the market price
of the stock on specified offering dates. The plan, which terminates in
December 1996, provides that 300,000 shares be reserved for purchase each
year. As of October 31, 1994, a total of 27,698 shares had been purchased
pursuant to the terms of the Plan since its inception.
The following summarizes stock purchases under the Plan during the three
years ended October 31, 1994:
Number of Price
Shares Range
1992 4,161 $ 7.96 - $11.88
1993 2,748 12.11 - 13.78
1994 3,124 10.81 - 17.10
7. Employee retirement plan
The Company maintains a salary deferral savings plan covering substantially all
employees. The plan provides for Company contributions totaling 2% of all
eligible compensation, plus 2% of eligible compensation above the social
security wage base, plus matching contributions of up to 2% of eligible
compensation of employees electing to contribute via salary deferrals.
Company contributions with respect to the plan totaled $770,000, $604,000
and $529,000 for the years ended October 31, 1994, 1993 and 1992,
respectively.
8. Commitments and contingencies
As of October 31, 1994, the Company had agreements to purchase land and
improved homesites for future development with purchase prices aggregating
approximately $210,506,000 of which $13,058,000 had been paid or deposited.
Purchase of the properties is contingent upon satisfaction of certain
requirements by the Company and the sellers.
As of October 31, 1994, the Company had agreements of sale outstanding to
deliver 1,025 homes with an aggregate sales value of approximately
$370,560,000. The Company has arranged through a number of outside mortgage
lenders to provide approximately $185,489,000 of mortgages related to those
sales agreements.
The Company is also involved in various claims and litigation arising from
its usual and customary business with customers and subcontractors. The
Company believes that it has adequate insurance or meritorious defenses in
all pending cases and that adverse decisions in any or all of the cases
would not have a material effect on the financial condition and the results
of operations of the Company.
Summary Consolidated Quarterly Data (Unaudited)
(Amounts in thousands, except per share data)
Three Months Ended
FISCAL 1994 Oct. 31 July 31 April 30 Jan. 31
Revenues $174,432 $120,060 $91,444 $118,128
Income before income taxes $ 23,437 $ 12,931 $ 6,976 $ 13,496
Net income $ 15,330 $ 7,992 $ 4,350 $ 8,505
Earnings per share
Primary $ .46 $ .24 $ .13 $ .25
Fully diluted $ .44 $ .23 $ .13 $ .25
Weighted average number of
shares outstanding
Primary 33,526 33,563 33,676 33,740
Fully diluted 35,994 36,149 36,317 34,195
Three Months Ended
FISCAL 1993: Oct. 31 July 31 April 30 Jan. 31
Revenues $143,146 $102,379 $ 73,942 $ 75,794
Income before income taxes,
extraordinary loss and change
in accounting $ 19,086 $ 10,547 $ 6,151 $ 8,144
Income before extraordinary loss
and change in accounting $ 12,503 $ 6,320 $ 3,705 $ 4,891
Net income $ 11,835 $ 6,320 $ 3,705 $ 6,198
Earnings per share
Primary:
Income before extraordinary loss
and change in accounting $ .37 $ .19 $ .11 $ .15
Net income $ .35 $ .19 $ .11 $ .19
Fully Diluted:
Income before extraordinary loss
and change in accounting $ .37 $ .19 $ .11 $ .15
Net income $ .35 $ .19 $ .11 $ .19
Weighted average number of
shares outstanding
Primary 33,491 33,463 33,508 33,433
Fully diluted 33,618 33,463 33,508 33,500
TOLL BROTHERS, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(Amounts in thousands)
Additions
Balance at Charged to Charged Balance
Beginning Costs and to Other at End
Description of Period Expenses Accounts Deductions of Period
(A)
Net realizable value
reserves for inventory
of land and land
development costs:
Year ended
October 31, 1992:
Massachusetts $ 6,205 $ 2,468 $ 3,737
New Jersey 2,850 1,145 1,705
Pennsylvania 1,500 253 1,247
Total $10,555 3,866 6,689
Year Ended:
October 31, 1993:
Massachusetts $ 3,737 $ 600 $ 1,578 $ 2,759
New Jersey 1,705 1,800 449 3,056
Pennsylvania 1,247 1,247
Total $ 6,689 $ 2,400 $ 2,027 $ 7,062
Year ended
October 31, 1994:
Massachusetts $ 2,759 $ 300 $ 1,393 $ 1,666
New Jersey 3,056 3,000 367 5,689
Pennsylvania 1,247 -- 1,247 --
Delaware -- 1,000 1,000
Total $ 7,062 $ 4,300 $ 3,007 $ 8,355
(A) Represents amount of reserves utilized, which is recorded at
the time that affected homes are closed.