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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, 1996
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 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
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.
As of December 31, 1996, the aggregate market value of the Common Stock held by
non-affiliates of the Registrant was approximately $433,366,000.
As of December 31, 1996, there were 33,950,360 shares of Common Stock
outstanding.
Documents Incorporated by Reference:
Toll Brothers, Inc. Proxy Statement with respect to its 1997 Annual Meeting of
Shareholders, scheduled to be held on March 5, 1997, 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 in thirteen states and five regions
around the country. 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 was able to acquire a number of fully
approved parcels and several 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., the Boston, Massachusetts metropolitan area, southern
Connecticut, Westchester County, New York, Orange County and Los Angeles
County, California, the suburbs of Raleigh and Charlotte,
North Carolina and Scottsdale, Arizona. It is also developing communities in
northern Delaware, Nassau County, New York, McKinney, Texas, a northern
suburb of Dallas, Austin, Texas and Palm Beach County, Florida. The Company
has recently acquired property in the San Francisco Bay area and expects to
begin offering homes for sale there in the second half of fiscal 1997.
The Company markets its homes primarily to middle and upper-income buyers,
emphasizing high quality construction and customer satisfaction. As of
October 31, 1996, the Company was offering homes for sale in 100 communities.
Single family detached homes were being offered at prices, excluding
customized options, generally ranging from $160,000 to $645,000, with an
average base sales price of $368,000. Attached home prices, excluding
customized options, generally range from $100,000 to $477,000, with an
average base sales price of $218,000. In the five years ended October
31, 1996, Toll Brothers delivered 7,860 homes in 177 communities.
In recognition of the Company's achievements, it has received numerous
awards from national, state and local homebuilder publications and
associations. In fiscal 1996, the Company was selected "America's Best
Builder" by the National Association of Home Builders (the "NAHB") and
Builder magazine in recognition of its excellent financial performance,
unique custom-production system for building luxury homes in high
volume and the excellence of its designs. The Company also received the
National Housing Quality Award from the NAHB, which recognizes the Company's
outstanding commitment to total quality management and continuous
improvement. 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 NAHB and Keep America Beautiful, Inc., in recognition
of the Company's programs to improve the handling of solid waste
on construction sites. In addition, the Company was named "The Builder of
the Year" in 1988 by Professional Builder magazine.
On October 31, 1996 and 1995, the Company had backlogs of $526,194,000
(1,367 homes) and $400,820,000 (1,078 homes), respectively. Substantially
all homes in backlog at October 31, 1996 are expected to be delivered by
October 31, 1997.
As of October 31, 1996, the Company was offering homes for sale in 100
communities and owned or controlled through options, over 8,800 home sites in
communities under development, as well as land for approximately 8,500 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 with a
buyer 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, in Southern California and North Carolina in 1994, in the suburbs of
Dallas, Texas and Florida in 1995 and Austin, Texas in 1996.
In addition, in August 1995, the Company acquired certain assets, including two
existing communities under development and options on several future
communities, of Geoffrey H. Edmunds & Associates, a privately owned
Scottsdale, Arizona, luxury homebuilder. The Company has also acquired
property in the San Francisco Bay Area and expects to begin offering homes
for sale there in the second half of fiscal 1997.
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.
The Company also markets to the 50+ year-old "empty nester" and
believes that this market has strong growth potential. The Company has
developed a number of home designs that it believes will appeal to this
category of home buyer and integrated these designs into its communities
along with its other 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, 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 lofts, and additional fireplaces. As a
result of the additional charges for such options, the average sales price
was approximately 16% higher than the base sales price during fiscal 1996.
The range of base sales prices for the Company's lines of homes as of
October 31, 1996, was as follows:
Single Family Detached Homes:
Move-up $160,000 - $500,000
Executive 247,000 - 602,000
Estate 335,000 - 645,000
Attached Homes:
Townhomes 100,000 - 219,000
Carriage Homes 234,000 - 477,000
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 year, the Company has introduced over 35 new models.
The following table summarizes certain information with respect to
residential communities of Toll Brothers under development as of
October 31, 1996:
HOMES UNDER
NUMBER OF HOMES HOMES CONTRACT AND HOME SITES
STATE COMMUNITIES APPROVED CLOSED NOT CLOSED AVAILABLE
Arizona 12 958 88 117 753
California 7 474 85 35 354
Connecticut 6 218 86 38 94
Delaware 4 416 357 31 28
Florida 2 213 30 34 149
Maryland 4 455 60 38 357
Massachusetts 8 830 608 108 114
New Jersey:
North central 6 694 205 31 458
Central 20 1,291 421 239 631
South central 7 1,087 317 120 650
New York 9 415 151 78 186
North Carolina 5 565 73 57 435
Pennsylvania 34 4,217 2,072 264 1,881
Texas 3 426 16 27 383
Virginia 14 1,512 394 150 968
Total 141(1) 13,771 4,963 1,367 7,441(2)
(1) Of these 141 communities, 100 had homes being offered for sale, 14 had
not yet opened for sales, and 27 had been sold out but not all
closings had been completed. Of the 100 communities in which homes
were being offered for sale, 92 were single family detached-home
communities containing a total of 92 homes under construction but
not under contract (exclusive of model homes) and 8 were attached
home communities containing a total of 23 homes under construction
but not under contract (exclusive of model homes).
(2) On October 31, 1996, significant site improvements had not commenced
on approximately 3,967 of the 7,441 available home sites.
Of the 7,441 available home sites, 768 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 at times acquired property outright.
In addition, the Company has at times acquired the underlying mortgage on a
property and subsequently obtained title to that 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, which generally
enhances 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, due to the recession and the difficulties other
builders and land developers had in obtaining financing, the number of
buyers competing for land in the Company's market areas 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.
Due to the improvement in the economy and the improved availability of
capital, during the past several years, 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.
In the Company's view, the rolling recession in the United States creates a
bottoming market in some parts of the nation as other markets become strong.
While the Company believes that there is significant diversity in its
Northeast and Mid-Atlantic markets and that this diversity provides
protection from the vagaries of the individual local economies, it believes
that a greater geographic diversification will provide additional protection
and more opportunities for growth. During the past three years, the Company
has expanded into California, North Carolina, Florida, Texas and Arizona.
The Company continues to explore additional geographic areas for expansion.
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, 1996 for
proposed communities, as distinguished from those currently under development:
Number of Number of Number of
State Communities Acres Homes Planned
Arizona 2 170 158
California 5 159 316
Connecticut 2 73 68
Delaware 1 93 151
Florida 1 12 37
Massachusetts 2 302 354
New Jersey: (1)
South central 2 470 750
North central 3 209 199
Central 15 1,885 2,026
New York 5 341 254
North Carolina 1 51 98
Pennsylvania 19 1,349 1,543
Texas 8 288 530
Virginia(2) 6 1,220 2,010
Total 72 6,622 8,494(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 the 8,494 planned home sites, 3,719 lots were controlled through
options and 750 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 $20,349,000 at
October 31, 1996. The aggregate purchase price of land parcels under option
at October 31, 1996 was approximately $193,733,000.
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, 1996 such feasibility
analyses resulted in approximately $1,001,000 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 land 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 for development 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.
The Company believes that it has an adequate supply of land in its existing
communities and in land held for future development (assuming that all
properties are developed) to maintain its operations at its current levels for
several years.
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. After obtaining the necessary governmental subdivision and other
approvals, which can sometimes require 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 a 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 - Manufacturing/Distribution Facility").
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. One of the ways the Company seeks to achieve home
buyer satisfaction is by providing its construction superintendents with
incentive compensation arrangements based on each home buyer'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. The Company has
established a web site on the Internet (http://www.tollbrothers.com)
to provide its customers with additional information on the Company and its
homes.
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. Many of those warranties are supplemented by privately insured
programs, which provides the homebuyer a limited ten-year warranty as to
structural integrity.
Customer Financing
The Company makes arrangements with a variety of mortgage lenders to
provide home buyers 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 1996, approximately 56% of the Company's closings were
financed through mortgage programs offered by the Company. In addition,
during the same period, the Company's home buyers, on average, financed
approximately 71% of the purchase price of their homes.
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 have generally cost the Company from zero to one-half of one
percent of the mortgage funds reserved and typically have terms of 9 to 18
months. As of October 31, 1996, there were approximately $106 million of such
commitments available, which expire at various dates through December 1997.
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, has become an
increasingly favorable competitive factor. The Company believes that, due to
the increased availability of capital, competition has increased during the
past several years.
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 the areas 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 consultants to assess such land
for the potential of hazardous or toxic materials, wastes or substances.
Because it has generally obtained such assessments for the land it has
purchased, the Company has not been significantly affected to date by the
presence of such materials.
Employees
As of October 31, 1996, the Company employed 1,155 full-time persons; of
these, 43 were in executive positions, 134 were engaged in sales activities,
130 in project management activities, 345 in administrative and clerical
activities, 321 in construction activities, 77 in engineering activities and
105 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.
Manufacturing/Distribution Facility
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 in the
ordinary course of business. The Company believes that the disposition of
these matters will not have a material adverse effect on the business or the
financial condition 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, 1996.
EXECUTIVE OFFICERS OF THE REGISTRANT
The section entitled "Proposal One: Election of Directors" of the
Company's Proxy Statement for the 1997 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, 1996. All executive officers serve
at the pleasure of the Board of Directors of the Company.
Name Age Positions
Robert I. Toll 55 Chairman of the Board,
Chief Executive Officer and Director
Bruce E. Toll 53 President, Chief Operating Officer,
Secretary and Director
Zvi Barzilay 50 Executive Vice President and Director
Joel H. Rassman 51 Senior Vice President, Treasurer,
Chief Financial Officer and Director
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. Mr. Rassman was elected a Director of the
Company by the Board of Directors in 1996.
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, 1996.
Three Months Ended
1996 October 31 July 31 April 30 January 31
High $17 7/8 $18 5/8 $20 5/8 $23 1/2
Low $16 $14 5/8 $15 3/8 $16 5/8
1995 October 31 July 31 April 30 January 31
High $19 $17 1/4 $13 3/4 $12 1/4
Low $15 1/2 $11 5/8 $11 1/8 $9 1/8
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 restricts the amount of dividends the
Company may pay. As of October 31, 1996, under the most restrictive of the
agreements, the Company could pay up to approximately $73,678,000 of cash
dividends.
At December 31, 1996, there were approximately 703 record holders of the
Company's common stock.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected consolidated financial and housing
data of the Company as of and for each of the five fiscal years ended
October 31, 1996. 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
1996 1995 1994 1993 1992
Revenues $760,707 $646,339 $504,064 $395,261 $281,471
======== ======== ======== ======== ========
Income before income taxes,
extraordinary item and
change in accounting $ 85,793 $79,439 $ 56,840 $43,928 $ 28,864
======== ======= ======== ======= ========
Income before extraordinary
item and change in
accounting $ 53,744 $49,932 $ 36,177 $27,419 $ 17,354
Extraordinary loss (668) (816)
Cumulative effect of change
in accounting 1,307
-------- ------- -------- -------- ---------
Net income $ 53,744 $49,932 $ 36,177 $ 28,058 $ 16,538
Earnings per share
Primary
Income before extraordinary
item and change in
accounting $ 1.56 $ 1.47 $ 1.08 $ .82 $ .52
Extraordinary loss (.02) (.02)
Cumulative effect of change
in accounting .04
-------- ------- -------- -------- ---------
Net income $ 1.56 $ 1.47 $ 1.08 $ .84 $ .50
======== ======= ======== ======== =========
Weighted average number of
shares outstanding 34,492 33,909 33,626 33,467 33,234
======== ======= ======== ======== ========
Fully-diluted
Income before extraordinary
item and change in
accounting $ 1.50 $ 1.41 $ 1.05 $ .82 $ .52
Extraordinary loss (.02) (.02)
Cumulative effect of change
in accounting .04
-------- ------- -------- -------- --------
Net income $ 1.50 $ 1.41 $ 1.05 $ .84 $ .50
======== ======= ======== ======== ========
Weighted average number of
shares outstanding 36,891 36,651 35,664 33,583 33,237
======== ======= ======== ======== ========
Summary Consolidated Balance Sheet Data (Amounts in thousands)
October 31
1996 1995 1994 1993 1992
Inventory $772,471 $623,830 $506,347 $402,515 $287,844
======== ======== ======== ======== ========
Total assets $837,926 $692,457 $586,893 $475,998 $384,836
======== ======== ======== ======== ========
Debt
Loans payable $132,109 $ 59,057 $ 17,506 $ 24,779 $ 25,756
Subordinated debt 208,415 221,226 227,969 174,442 128,854
Collateralized mortgage
obligations payable 2,816 3,912 4,686 10,810 24,403
-------- -------- -------- -------- --------
Total $343,340 $284,195 $250,161 $210,031 $179,013
======== ======== ======== ======== ========
Shareholders' equity $314,677 $256,659 $204,176 $167,006 $136,412
======== ======== ======== ======== ========
Housing Data
Year ended October 31: 1996 1995 1994 1993 1992
Number of homes
closed 2,109 1,825 1,583 1,324 1,019
Sales value of homes
closed
(in thousands) $759,303 $643,017 $501,822 $392,560 $279,841
Number of homes
contracted 2,398 1,846 1,716 1,595 1,202
Sales value of homes
contracted
(in thousands) $884,677 $660,467 $586,941 $490,883 $342,811
As of October 31:
Number of homes
in backlog 1,367 1,078 1,025 892 621
Sales value of homes
in backlog
(in thousands) $526,194 $400,820 $370,560 $285,441 $187,118
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
The following table sets forth certain income statement items related to
the Company's operations as percentages of total revenues:
Year Ended October 31: 1996 1995 1994
---- ---- ----
Revenues 100.0% 100.0% 100.0%
------ ------ ------
Costs and expenses:
Land and housing construction 76.4 75.0 75.4
Selling, general and administrative 9.1 9.2 9.7
Interest 3.2 3.4 3.6
--- --- ---
Total costs and expenses 88.7 87.6 88.7
---- ---- ----
Operating income 11.3% 12.4% 11.3%
===== ===== =====
FISCAL 1996 COMPARED TO FISCAL 1995
Revenues for fiscal 1996 of $761 million exceeded those of fiscal 1995 by
$114 million or 18%. This increase in revenues was due to an increase in both
the number of homes and average price per home delivered. The increase in
the number of homes delivered was due to the higher backlog of homes at
October 31, 1995 as compared to October 31, 1994 and to the greater number of
homes sold during fiscal 1996 as compared to fiscal 1995. The increase in
the number of homes sold was the result of the higher number of selling
communities that the Company had in 1996 over 1995 and an increase in the
average number of homes sold per community. The increase in the average
delivered price per home was due principally to a change in product mix to
larger homes, a shift to more expensive locations, an increase in the value
of options that the homebuyers selected and increases in selling prices in a
number of the Company's communities. The increase in the average delivered
price was partially offset by an increase in sales incentives provided to the
homebuyers.
Land and construction costs as a percentage of revenues increased in
fiscal 1996 as compared to fiscal 1995. The increase was due principally to
increased material and overhead costs, increased costs of sales incentives
and the additional start-up costs, generally higher construction costs and
the inefficiencies of production associated with the Company's expansion
into California, Arizona, Texas, North Carolina and Florida. The increased
overhead costs were due principally to the severe winter weather conditions
that the Company encountered in many of its markets in fiscal 1996. The cost
increases were partially offset by the lower amount of inventory writedowns in
1996($4.6 million) as compared to 1995($5.4 million).
Selling, general and administrative expenses amounted to $69.7 million
or 9.1% of revenues in fiscal 1996 as compared to $59.7 million or 9.2% of
revenues in fiscal 1995. The increased spending was attributable to the
greater number of communities that the Company was operating in 1996 as
compared to 1995 as well as the additional costs associated with the
Company's geographic expansion.
Interest expense is determined on a specific lot-by-lot basis and will vary
depending on many factors including the period of time that the land under
the home was owned, the length of time that the house was under construction,
and the interest rates and amount of debt carried by the Company in
proportion to the amount of inventory during those periods.
FISCAL 1995 COMPARED TO FISCAL 1994
Revenues for fiscal 1995 of $646.3 million exceeded those of 1994 by
$142.2 million or 28%. This increase was primarily the result of the greater
number of homes delivered in 1995 which was principally due to the higher
backlog at the beginning of fiscal 1995 as compared to the backlog at the
beginning of fiscal 1994, the greater number of contracts that were signed in
1995 compared to 1994 and to a greater number of communities delivering homes in
1995 as compared to 1994. In addition, the average price per home increased
due to a change in product mix to larger homes, a shift in location of homes
closed to more expensive locations and increases in selling prices.
As of October 31, 1995, the backlog of homes under contract amounted to
$400.8 million (1,078 homes), an 8% increase over the backlog as of
October 31, 1994. In fiscal 1995, the Company signed new contracts of $660.4
million (1,846 homes), as compared to $586.9 million (1,716 homes) in fiscal
1994. The increase in new contracts in 1995 over 1994 was primarily due to
the increase in the number of communities in which the Company was offering
homes for sale, a shift in location of the communities to more expensive areas,
an increase in the size of the homes that our customers purchased and
increases in selling prices. The increase was partially offset by a decline
in the number of homes sold per community.
Land and housing construction costs amounted to $485.0 million (75.0% of
revenues) in 1995 as compared to $380.2 million (75.4% of revenues)in 1994.
As a percentage of revenues, land and land development costs, job overhead
costs and write-offs of inventory and previously capitalized costs that the
Company no longer considered realizable, were lower in 1995 than in 1994.
The percentage decrease was partially offset by increased material and
subcontractor costs. The Company provided for write-offs of inventory and
previously capitalized costs that it no longer considered realizable of $5.4
million in 1995 and $7.0 million in 1994.
Selling, general and administrative expenses ("SG&A") in 1995 and 1994
amounted to $59.7 million (9.2% of revenues) and $48.8 million (9.7% of
revenues), respectively. The increased spending in 1995 was the result of an
increase in selling expense due to the larger number of communities in which
the Company was offering homes for sale in 1995 as compared to 1994 and an
increase in general and administrative expenses, primarily payroll and
payroll-related costs, due to the overall growth and increased profitability of
the Company. The decline in SG&A, as a percentage of revenues, was due to
revenues increasing at a faster rate than SG&A spending.
Interest expense is determined on a specific lot-by-lot basis and will
vary depending on many factors including the period of time that the land was
owned, the period of time that the house was under construction, and the
interest rates and the amount of debt carried by the Company in proportion to
the amount of its inventory during those periods. As a percentage of
revenues, interest expense was lower in 1995 as compared to 1994. The decline
was principally the result of an 11% increase in the average price of
homes closed in 1995 over 1994 while capitalized interest per home closed
in 1995 only increased 6%.
INCOME TAXES
Income taxes for fiscal 1996, 1995 and 1994 were provided at effective
rates of 37.4%, 37.1% and 36.4%, respectively.
CAPITAL RESOURCES AND LIQUIDITY
Funding for the Company's residential development activities is
principally provided by cash flows from operations, public debt and equity
markets, and unsecured bank borrowings.
Cash flow from operations, before inventory additions, improved as
operating results improved and the Company anticipates that the cash flow
from operations 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. The Company has used the cash flow from
operations and borrowings under its revolving credit facility 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, 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.
The Company has a $250 million unsecured revolving credit facility with
fifteen banks which extends through June 2000. The facility reduces by 50%
in June 1999 unless extended as provided for in the agreement. As of
October 31, 1996, the Company had $50 million of loans and approximately
$26.1 million of letters of credit outstanding under the facility. In
addition, the Company has a $50,000,000 loan commitment from two banks under
which the Company will borrow the funds in March 1997 for a period of five
years at a fixed interest rate of 7.82%.
In November 1996, the Company issued $100,000,000 of 8 3/4% Senior
Subordinated Notes to the public. The notes mature in November 2006. The
net proceeds are to be used for general corporate purposes.
The Company believes that it will be able to fund its activities through
a combination of existing cash resources, operating cash flow 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.
The Company generally contracts for land significantly before
development and sales efforts begin. Accordingly, to the extent land
acquisition costs are fixed, increases or decreases in the sales prices of
homes 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 1997 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 1997 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 1997 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 1997 Annual Meeting of Shareholders.
STATEMENT ON FORWARD-LOOKING INFORMATION
Certain information included herein and in other Company statements, reports
and S.E.C. filings is forward-looking within the meaning of the Private
Securities Litigation Reform Act of 1995, including, but not limited to,
statements concerning anticipated operating results, financial resources,
growth and expansion. Such forward-looking information involves
important risks and uncertainties that could significantly affect actual
results and cause them to differ materially from expectations expressed
therein. These risks and uncertainties include local, regional and national
economic conditions, the effects of governmental regulation, the competitive
environment in which the Company operates, fluctuations in interest rates,
changes in home prices, the availability and cost of land for future growth,
the availability of capital, the availability and cost of labor and
materials, and weather conditions.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements and Financial Statement Schedule
1. Financial Statements
Page
Report of Independent Auditors F-1
Consolidated Statements of Income for the
Years Ended October 31, 1996, 1995 and 1994 F-2
Consolidated Balance Sheets as of
October 31, 1996 and 1995 F-3
Consolidated Statement of Shareholder's Equity
for the Years Ended October 31, 1996, 1995 and 1994 F-4
Consolidated Statements of Cash Flows for the
Years Ended October 31, 1996, 1995 and 1994 F-5
Notes to Consolidated Financial Statements F-6 - F-13
Summary Consolidated Quarterly Data F-14
2. Financial Statement Schedule
Schedule II - Valuation and Qualifying Accounts
for the Years Ended October 31,
1996, 1995 and 1994 F-15
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:
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.
Exhibit
Number Description
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.
4.5 Indenture dated as of November 12, 1996 between Toll Corp.,
as issuer, the Registrant, as guarantor, NBD Bank, a
Michigan banking corporation, as Trustee, including form of
guarantee, is hereby incorporated by reference to
Exhibit 4.1 of the Registrant's Form 8-K dated November 6,
1996 filed with the Securities and Exchange Commission.
10.1 Revolving credit agreement, dated as of November 1, 1993 as
amended through May 8, 1996, among First Huntingdon Finance
Corp., the Registrant, PNC Bank, National Association,
CoreStates Bank, N.A., The First National Bank of Chicago,
NationsBank National Association, Bank Hapoalim B.M.,
Kleinwort Benson Limited, Mellon Bank, The Fuji Bank,
Limited, Credit Lyonnais, New York Branch, Banque Paribas,
Krieditbank N.V., Comerica Bank, Bayerische Vereinsbank AG,
New York Branch, The Industrial Bank of Japan Trust Company,
The Sanwa Bank Limited and PNC Bank, National Association,
as Agent.
10.2 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.
10.3 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.
10.4 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.
10.5 Amendment to the Toll Brothers, Inc. Key Executives and
Non-Employee Directors Stock Option Plan (1993) is hereby
incorporated by reference to Exhibit 10.2 of the
Registrant's's Quarterly Report on Form 10-Q for the quarter
ended April 30, 1995.
Exhibit
Number Description
10.6 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.
10.7 Amendment to the Toll Brothers, Inc. Cash Bonus Plan adopted
by the Board of Directors subject to shareholder approval.
10.8 Toll Brothers, Inc. Stock Option and Incentive Stock Plan
(1995) is hereby incorporated by reference to Exhibit 10.1
to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended April 30, 1995.
10.9 Amendment to the Toll Brothers, Inc. Stock Option and
Incentive Stock Plan (1995) adopted by the Board of Directors
on May 29, 1996 subject to shareholder approval.
10.10 Stock Redemption Agreement between the Registrant and Robert
I. Toll, dated October 28, 1995, is hereby incorporated by
reference to Exhibit 10.7 of the Registrants Form 10-K for
the Fiscal Year ended October 31, 1995.
10.11 Stock Redemption Agreement between the Registrant and Bruce
E. Toll, dated October 28, 1995, is hereby incorporated by
reference to Exhibit 10.8 of the Registrants Form 10-K for
the Fiscal Year ended October 31, 1995.
10.12 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.
10.13 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.
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 12, 1996.
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 12, 1996
Robert I. Toll of Directors and Chief
Executive Officer
(Principal Executive Officer)
/s/ Bruce E. Toll President, Chief Operating December 12, 1996
Bruce E. Toll Officer, Secretary
and Director
/s/ Zvi Barzilay Executive Vice President December 12, 1996
Zvi Barzilay and Director
/s/ Joel H. Rassman Senior Vice President, December 12, 1996
Joel H. Rassman Treasurer, Chief
Financial Officer and Director
(Principal Financial Officer)
/s/ Joseph R. Sicree Vice President and December 12, 1996
Joseph R. Sicree Chief Accounting Officer
(Principal Accounting
Officer)
/s/ Robert S. Blank Director December 12, 1996
Robert S. Blank
/s/ Richard J. Braemer Director December 12, 1996
Richard J. Braemer
/s/ Roger S. Hillas Director December 12, 1996
Roger S. Hillas
/s/ Carl B. Marbach Director December 12, 1996
Carl B. Marbach
/s/ Paul E. Shapiro Director December 12, 1996
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, 1996 and 1995, and the
related consolidated statements of income, shareholders' equity, and cash
flows for each of the three years in the period ended October 31, 1996.
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, 1996 and 1995, and the
consolidated results of their operations and their cash flows for each of
the three years in the period ended October 31, 1996, 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.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
December 10, 1996
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except per share data)
Year Ended October 31
1996 1995 1994
Revenues:
Housing sales $759,303 $643,017 $501,822
Interest and other 1,404 3,322 2,242
-------- -------- --------
760,707 646,339 504,064
-------- -------- --------
Costs and expenses:
Land and housing construction 580,990 485,009 380,240
Selling, general and administrative 69,735 59,684 48,789
Interest 24,189 22,207 18,195
-------- -------- --------
674,914 566,900 447,224
-------- -------- --------
Income before incomd taxes 85,793 79,439 56,840
Income taxes 32,049 29,507 20,663
-------- -------- --------
Net income $ 53,744 $ 49,932 $ 36,177
======== ======== ========
Earnings per share
Primary $ 1.56 $ 1.47 $ 1.08
Fully-diluted $ 1.50 $ 1.41 $ 1.05
Weighted average number of shares
Primary 34,492 33,909 33,626
======== ======== ========
Fully-diluted 36,891 36,651 35,664
======== ======== ========
See accompanying notes.
CONSOLIDATED BALANCE SHEETS (Amounts in thousands, except share amounts)
October 31
1996 1995
ASSETS
Cash and cash equivalents $ 22,891 $ 27,772
Inventory 772,471 623,830
Property, construction and office
equipment, net 12,948 11,898
Receivables, prepaid expenses and other
assets 26,783 25,017
Mortgage notes receivable 2,833 3,940
-------- --------
$837,926 $692,457
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Loans payable $132,109 $ 59,057
Subordinated notes 208,415 221,226
Customer deposits on sales contracts 43,387 36,194
Accounts payable 42,423 31,640
Accrued expenses 58,211 46,771
Collateralized mortgage obligations payable 2,816 3,912
Income taxes payable 35,888 36,998
-------- --------
Total liabilities 523,249 435,798
-------- --------
Shareholders' equity
Preferred stock, none issued
Common stock, 33,918,606 and 33,638,026 shares
issued at October 31, 1996 and 1995, respectively 339 336
Additional paid-in capital 43,018 38,747
Retained earnings 271,320 217,576
-------- --------
Total shareholders' equity 314,677 256,659
-------- --------
$837,926 $692,457
======== ========
See accompanying notes.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Amounts in thousands)
Additional
Common Stock Paid-In Retained
Shares Amount Capital Earnings Total
Balance, November 1, 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
Net income 49,932 49,932
Exercise of stock options 213 2 2,525 2,527
Employee stock plan
purchases 2 24 24
------- ------ ------- -------- --------
Balance, October 31, 1995 33,638 336 38,747 217,576 256,659
Net income 53,744 53,744
Exercise of stock options 276 3 4,196 4,199
Employee stock plan
purchases 5 75 75
------- ------ ------- -------- --------
Balance, October 31, 1996 33,919 $ 339 $43,018 $271,320 $314,677
======= ====== ======= ======== ========
See accompanying notes.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands)
Year Ended October 31
1996 1995 1994
Cash flows from operating activities:
Net income 53,744 $ 49,932 $ 36,177
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 3,306 2,943 2,687
Loss (gain) from repurchase of subordinated debt 540 (355) (616)
Deferred tax provision (benefit) 877 (476) (361)
Net realizable value provisions 1,000 3,800 4,300
Changes in operating assets and liabilities:
Increase in inventory (138,059)(118,720)(104,482)
Increase in receivables, prepaid
expenses and other assets (2,783) (3,345) (1,481)
Increase in customer deposits on sales contracts 7,193 6,123 7,622
Increase in accounts payable
and accrued expenses 22,223 8,625 22,594
(Decrease) increase in income taxes payable (1,805) 4,957 4,046
-------- ------- --------
Net cash used in operating activities (53,764) (46,516)(29,514)
-------- ------- --------
Cash flows from investing activities:
Sale (purchase) of marketable securities 3,674 (1,691)
Purchase of property and equipment, net (3,596) (2,452) (2,968)
Principal repayments of mortgage
notes receivable 1,107 684 5,308
------- ------- -------
Net cash (used in) provided by investing activities (2,489) 1,906 649
Cash flows from financing activities: ------- ------- -------
Proceeds from loans payable 173,028 160,000 23,493
Principal payments of loans payable (111,738)(121,159)(35,900)
Net proceeds from issuance of subordinated debt 55,541
Repurchase of subordinated debt (13,096) (6,256) (3,290)
Principal payments of collateralized mortgage
obligations payable (1,096) (780) (6,152)
Proceeds from stock options exercised and
employee stock plan purchases 4,274 2,551 870
------- ------- ------
Net cash provided by financing activities 51,372 34,356 34,562
------- ------- ------
Net (decrease) increase in cash and cash equivalents (4,881)(10,254) 5,697
Cash and cash equivalents, beginning of year 27,772 38,026 32,329
------- ------- -------
Cash and cash equivalents, end of year $22,891 $27,772 $38,026
======= ======= =======
Supplemental disclosures of cash flow information
Interest paid, net of amount capitalized $ 8,612 $ 7,587 $ 6,762
======= ======= =======
Income taxes paid $32,116 $24,547 $16,977
======= ======= =======
Supplemental disclosures of noncash activities
Residential inventories acquired through
seller financing $11,582 $ 2,563 $ 5,000
======= ======= =======
Income tax benefit relating to exercise of
employee stock options $ 861 $ 478 $ 124
======= ======= =======
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. All significant intercompany accounts and transactions have been
eliminated.
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
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
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 $16,159,000 and $14,079,000 at October 31,
1996 and 1995, respectively. Depreciation is recorded by using the straight-
line method over the estimated useful lives of the assets.
Inventories
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 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.
The Company capitalizes project marketing costs and charges them against income
as homes are closed.
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" ("FAS 121").
The new rules establish standards for the recognition and measurement of
impairment losses on long-lived assets. The Company will adopt FAS 121 in the
first quarter of fiscal 1997 and does not believe that it will have a
material effect on its financial position or results of operations
Income taxes
Income taxes are provided using the liability method prescribed by Statement of
Financial Accounting Standards 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 paid or recovered.
Earnings per share
The computation of primary and fully-diluted earnings per share is based on the
weighted average number of shares of common stock and common stock equivalents
outstanding. In addition, the computation of fully-diluted earnings per share
assumes the conversion of the Company's 4 3/4% Convertible Senior 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, 1996 was $17.125 per share.
Acquisition
In August 1995, the Company acquired certain assets of Geoffrey H. Edmunds &
Associates, a privately owned luxury homebuilder located in Scottsdale,
Arizona. The Company, through this acquisition, obtained ownership or control
of 773 lots in the Scottsdale area. The acquisition took place in phases
with the merger of the Edmunds organization completed in April 1996. The
acquisition price was not material to the financial position of the Company.
2. Inventory
Inventory consists of the following(amounts in thousands):
October 31
1996 1995
Land and land development costs $204,527 $182,790
Construction in progress 491,552 377,456
Sample homes 40,017 32,448
Land deposits and costs of
future development 16,243 13,555
Loan assets acquired for
future development 4,106 5,157
Deferred marketing and
financing costs 16,026 12,424
-------- --------
$772,471 $623,830
======== ========
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.
Loan assets acquired for future development represent loans secured by liens on
real property purchased from various banks. If 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, 1996, 1995 and 1994, the Company provided for
inventory writedowns to net realizable value and the expensing of costs which
it believed not to be recoverable of $4,611,000, $5,366,000 and $6,957,000,
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, 1996 is as follows(amounts in thousands):
1996 1995 1994
Interest capitalized,
beginning of year $43,142 $39,835 $38,270
Interest incurred 27,695 25,780 21,701
Interest expensed (24,189) (22,207) (18,195)
Write-off to cost
and expenses (457) (266) (1,941)
Interest capitalized, ------- ------- -------
end of year $46,191 $43,142 $39,835
======= ======= =======
3. Loans payable and subordinated notes
Loans payable consists of the following(amounts in thousands):
October 31,
1996 1995
Revolving credit facility borrowing $50,000 $52,000
Term loan due July 2001 68,000
Other 14,109 7,057
-------- -------
$132,109 $59,057
======== =======
The Company has a $250,000,000 unsecured revolving credit facility with fifteen
banks which extends through June 2000. The facility reduces by 50% in June 1999
unless extended as provided for by the agreement. Interest is payable on
short-term borrowing at 1.10% above the Eurodollar rate or at other specified
variable rates as selected by the Company from time to time. The Company
fixed the interest rate on $50,000,000 of borrowing at 7.54% until June 2000.
As of October 31, 1996, letters of credit and obligations under escrow
agreements of $26,127,000, were outstanding. The agreement contains various
covenants, including financial covenants related to consolidated
shareholders' equity, indebtedness and inventory. The agreement requires that
the Company maintain a minimum consolidated shareholders' equity which
restricts the payment of cash dividends and the repurchase of Company stock
to approximately $73,678,000 as of October 31, 1996.
In July 1996, the Company borrowed $68,000,000 from eight banks for a period
of five years at a fixed interest rate of 7.91%. The agreement contains the
same financial covenants as the Company's revolving credit facility.
The carrying value of the loans payable approximates the estimated fair market
value
Subordinated notes consists of the following(amounts in thousands):
October 31,
1996 1995
>
10 1/2% Senior Subordinated Notes, due March 15,2002 $ 87,800 $ 94,500
9 1/2% Senior Subordinated Notes, due March 15,2003 69,960 73,960
4 3/4% Convertible Senior Subordinated Notes,
due January 15, 2004 50,999 53,199
Bond discount (344) (433)
-------- --------
$208,415 $221,226
======== ========
The 10 1/2% notes are subordinated to all senior indebtedness of the Company.
These notes are redeemable in whole or in part, at the option of the Company
on or after March 15, 1997 at various prices. The indenture restricts certain
payments by the Company including cash dividends and the repurchase of
Company stock.
The 9 1/2% notes are subordinated to all senior indebtedness of the Company.
The notes are redeemable in whole or in part, at the option of the Company on or
after March 15, 1998 at various prices. The indenture restricts certain
payments by the Company including cash dividends and the repurchase of
Company stock.
The 4 3/4% convertible notes are subordinated to all senior indebtedness of the
Company. The notes are convertible into shares of common stock of the
Company at the option of the noteholders at any time prior to maturity at a
conversion price of $21.75 per share. The notes are redeemable, in whole or
in part, at the option of the Company on or after January 15, 1997 at various
prices.
In November 1996, the Company issued $100,000,000 of 8 3/4% senior
subordinated notes due in 2006. The notes, redeemable in whole or in part,
at the option of the Company on or after November 15, 2001 at various prices,
are subordinated to all senior indebtedness of the Company and have the same
restrictions as to the payment of dividends and the repurchase of Company
stock as the 9 1/2% notes.
During fiscal 1996, 1995 and 1994, the Company repurchased $12,900,000,
$6,801,000 and $4,040,000, respectively, of the various issues of notes in
open market purchases. The gains and losses from the repurchases were
immaterial and included in other income.
As of October 31, 1996, the aggregate fair market value of all the outstanding
subordinated notes, based upon their quoted market prices, was approximately
$214,574,000.
The annual aggregate maturities of the Company's loans and notes during the
next five fiscal years are: 1997 - $8,941,000; 1998 -$ 2,944,000; 1999 -
$353,000; 2000 - $51,871,000 and 2001 - $68,000,000.
4. 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.
Stock option plans
The Company's three stock option plans for employees, officers and non-employee
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. The Company's Stock Option and
Incentive Stock Plan (1995) provides for automatic increases each January 1
in the number of shares available for grant by 2% of the number of shares
outstanding (including treasury shares). The 1995 Plan restricts the number
of options that may be granted in a calendar year to the lesser of the number
of shares available for grant or 2,500,000 shares.
The following summarizes stock option activity for the three plans during
the three years ended October 31, 1996:
Number Option Price
of Shares Per Share
Outstanding,
November 1, 1993 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,
October 31, 1994 1,613,125 $ 3.25 - $19.00
Granted 1,022,200 9.94 - 11.00
Exercised (212,775) 3.25 - 15.88
Cancelled (80,350) 9.94 - 15.88
Outstanding,
October 31, 1995 2,342,200 $ 3.25 - $19.00
Granted 843,450 17.31 - 20.25
Exercised (276,000) 3.25 - 15.88
Cancelled (37,825) 9.94 - 20.25
Outstanding
October 31, 1996 2,871,825 $ 3.25 - $20.25
Exercisable,
October 31, 1996 1,751,800 $ 3.25 - $19.00
Options available for grant at October 31, 1996, 1995 and 1994 under all the
plans were 2,899,000, 3,260,000, and 2,537,000, respectively.
Bonus Award Shares
Under the terms of the Company's Cash Bonus Plan covering the Chairman of the
Board and Chief Operating Officer (the "Executives"), each Executive is
entitled to receive cash bonus awards based upon the pretax earnings and
shareholders' equity of the Company. In May 1996, the Board of Directors and
the Executives agreed, subject to shareholder approval, that any bonus
payable under the plan for each of the three fiscal years ended
October 31, 1998 shall be made (except for specified conditions) in shares of
the Company's common stock using the value of the stock as of the date
of the agreement ($17.125 per share). On October 31, 1996, the closing
price of the Company's common stock on the New York Stock Exchange was
$17.125. The shares will be allocated from the Company's Stock Option and
Incentive Stock Plan (1995). The Executives will receive 66,975 shares each
for their 1996 bonus award if the shareholders approve the amendments to the
Cash Bonus Plan and the Stock Option and Incentive Stock Plan (1995).
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 2001, provides that 100,000 shares be reserved for purchase. As of
October 31, 1996, a total of 65,780 shares were available for issuance.
The following summarizes stock purchases under this plan during the three
years ended October 31, 1996:
Number of Price
Shares Range
1994 3,124 $10.81 - $17.10
1995 1,942 9.62 - 17.81
1996 4,580 15.68 - 21.73
Redemption of Common Stock
In order to help provide for an orderly market in the Company's common
stock in the event of the death of either Robert I. Toll or Bruce E. Toll
(the "Tolls"), or both of them, the Company and the Tolls have entered into
agreements in which the Company has agreed to purchase from the estate of
each of the Tolls $10,000,000 of the Company's common stock (or a lesser
amount under certain circumstances) at a price equal to the greater of fair
market value (as defined) or book value (as defined).
Further, the Tolls have agreed to allow the Company to purchase $10,000,000
of life insurance on each of their lives. In addition, the Tolls granted the
Company an option to purchase up to an additional $30,000,000 (or a lesser
amount under certain circumstances) of common stock from each of their
estates. The agreements expire in October 2005.
5. Income taxes
The provision for income taxes includes federal and state taxes.
Substantially all of the difference between the effective tax rate
(37.4%, 37.1% and 36.4% for 1996, 1995 and 1994, respectively) used in these
provisions and the statutory federal tax rate of 35% was due to state taxes,
net of federal tax benefit, and in 1994, the recalculation of the deferred
tax balances due to an increase in the federal statutory rate, a 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, 1996
were as follows (amounts in thousands):
1996 1995 1994
Federal $29,013 $27,586 $19,020
State 3,036 1,921 1,643
$32,049 $29,507 $20,663
Current $31,172 $29,983 $21,024
Deferred 877 (476) (361)
$32,049 $29,507 $20,663
The components of income taxes payable as of October 31, 1996 and 1995
were (amounts in thousands):
1996 1995
Current $21,999 $23,986
Deferred 13,889 13,012
------- -------
$35,888 $36,998
======= =======
The components of net deferred taxes payable as of October 31, 1996 and
1995 were (amounts in thousands):
1996 1995
Deferred tax liabilities
Capitalized interest $16,203 $16,776
Deferred expenses 4,434 2,955
Other 314 225
------- -------
Total 20,951 19,956
------- -------
Deferred tax assets
Net realizable value
reserves 3,640 3,699
Inventory valuation
differences 1,556 1,780
Accrued expenses
deductible when paid 522 791
Other 1,344 674
------- -------
Total 7,062 6,944
------- -------
Net deferred tax liability $13,889 $13,012
======= =======
6. 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 $1,061,000, $851,000
and $770,000, for the years ended October 31, 1996, 1995 and 1994, respectively.
7. Commitments and contingencies
As of October 31, 1996, the Company had agreements to purchase land and
improved home sites for future development with purchase prices aggregating
approximately $193,733,000 of which $9,802,000 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, 1996, the Company had agreements of sale outstanding to
deliver 1,367 homes with an aggregate sales value of approximately
$526,194,000. As of that date, the Company has arranged through a number of
outside mortgage lenders to provide approximately $174,000,000 of mortgages
related to those sales agreements.
In August 1996, the Company entered into an agreement with two banks to borrow
$50,000,000 in March 1997, at a fixed interest rate of 7.82% for a period of
five years. The agreement contains covenants similar to the Company's
revolving credit facility.
The Company is involved in various claims and litigation arising in the ordinary
course of business. The Company believes that the disposition of these
matters will not have a material effect on the business or on the financial
condition of the Company.
Summary Consolidated Quarterly Financial Data (Unaudited)
(Amounts in thousands, except per share data)
Three Months Ended
Oct. 31 July 31 April 30 Jan. 31
FISCAL 1996:
Revenues $260,351 $212,778 $145,508 $142,070
Income before income taxes $ 35,216 $ 24,609 $ 12,753 $ 13,215
Net income $ 22,085 $ 15,413 $ 7,978 $ 8,268
Earnings per share
Primary $ .64 $ .45 $ .23 $ .24
Fully-diluted $ .61 $ .43 $ .23 $ .23
Weighted average number of
shares outstanding
Primary 34,479 34,435 34,506 34,547
Fully-diluted 36,833 36,780 36,929 37,023
FISCAL 1995:
Revenues $199,606 $186,928 $137,488 $122,317
Income before income taxes $ 27,151 $ 24,360 $ 15,081 $ 12,847
Net income $ 16,986 $ 15,242 $ 9,445 $ 8,259
Earnings per share
Primary $ .49 $ .45 $ .28 $ .25
Fully-diluted $ .47 $ .43 $ .27 $ .24
Weighted average number of
shares outstanding
Primary 34,326 34,074 33,707 33,527
Fully-diluted 36,774 36,605 36,153 36,009
TOLL BROTHERS, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(Amounts in thousands)
Additions
Balance at Charged to Charged to Balance
Beginning Costs and 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, 1994:
Delaware $1,000 $1,000
Massachusetts $2,759 300 $1,393 1,666
New Jersey 3,056 3,000 367 5,689
Pennsylvania 1,247 1,247
Total $7,062 $4,300 $3,007 $8,355
Year ended
October 31, 1995:
Delaware $1,000 $ 320 $ 680
Massachusetts 1,666 $1,000 270 2,396
New Jersey 5,689 2,800 1,131 7,358
Total $8,355 $3,800 $1,721 $10,434
Year ended
October 31, 1996:
Delaware $ 680 $ 183 $ 497
Massachusetts 2,396 1,698 698
New Jersey 7,358 $1,000 150 8,208
Total $10,434 $1,000 $2,031 $9,403
(A) Represents amount of reserves utilized, which is recorded at the time
that affected homes are closed.