Attached files
| file | filename |
|---|---|
| 8-K/A - 8-K/A - Toll Brothers, Inc. | toll_shapellxproforma.htm |
| EX-99.3 - EXHIBIT 99.3 - Toll Brothers, Inc. | shapellproforma2013_exh993.htm |
| EX-99.1 - EXHIBIT 99.1 - Toll Brothers, Inc. | shapellaudit2012_exh991.htm |
| EX-23 - EXHIBIT 23 - Toll Brothers, Inc. | shapellconsent2012_exh23.htm |
Exhibit 99.2
Shapell Homebuilding Company
Unaudited Condensed Consolidated Financial Statements
For the Nine Months Ended September 30, 2013
TABLE OF CONTENTS
2
Shapell Homebuilding Company
Condensed Consolidated Balance Sheets
September 30, 2013 | December 31, 2012 | ||||||
(Unaudited) | |||||||
Assets | |||||||
Cash and cash equivalents: | |||||||
Cash | $ | 15,929,000 | $ | 10,956,000 | |||
Short-term investments, at fair value | 58,485,000 | 46,517,000 | |||||
Total cash and cash equivalents | 74,414,000 | 57,473,000 | |||||
Receivables | 5,340,000 | 3,840,000 | |||||
Real estate held for development and sale: | |||||||
Land and improvement costs of residential subdivisions | 441,463,000 | 414,529,000 | |||||
Land held for future development and investment | 111,939,000 | 126,574,000 | |||||
Total real estate held for development and sale | 553,402,000 | 541,103,000 | |||||
Furniture, fixtures and equipment: | |||||||
At cost, less accumulated depreciation of $4,635,000 and $4,214,000 at September 30, 2013 and December 31, 2012, respectively | 593,000 | 949,000 | |||||
Prepaid expenses and other assets | 10,561,000 | 6,757,000 | |||||
Total assets | $ | 644,310,000 | $ | 610,122,000 | |||
Liabilities and equity | |||||||
Accounts payable, accrued liabilities, and customer deposits | $ | 44,004,000 | $ | 28,191,000 | |||
Dividends payable | 50,000,000 | ||||||
Notes payable: | |||||||
Uncollateralized notes payable | 8,593,000 | 14,593,000 | |||||
Notes collateralized by security interests in real estate | 3,489,000 | 12,949,000 | |||||
Total notes payable | 12,082,000 | 27,542,000 | |||||
Withdrawals and losses in excess of investments in and advances to unconsolidated joint ventures | 457,000 | 457,000 | |||||
Total liabilities | 56,543,000 | 106,190,000 | |||||
Equity: | |||||||
Shareholder’s equity | 562,948,000 | 479,649,000 | |||||
Noncontrolling interests | 24,819,000 | 24,283,000 | |||||
Total equity | 587,767,000 | 503,932,000 | |||||
Total liabilities and equity | $ | 644,310,000 | $ | 610,122,000 | |||
See accompanying notes
3
Shapell Homebuilding Company
Condensed Consolidated Statements of Income
Nine months ended September 30, | |||||||
2013 | 2012 | ||||||
(Unaudited) | |||||||
Revenue and other income | |||||||
Sales of single-family residences | $ | 313,605,000 | $ | 157,728,000 | |||
Interest income | 129,000 | 92,000 | |||||
Other income, net | 488,000 | 739,000 | |||||
Total revenue and other income | 314,222,000 | 158,559,000 | |||||
Costs and expenses | |||||||
Cost of sales of single-family residences | 197,697,000 | 130,335,000 | |||||
Depreciation and amortization | 421,000 | 623,000 | |||||
General and administrative expenses | 18,952,000 | 14,106,000 | |||||
Total costs and expenses | 217,070,000 | 145,064,000 | |||||
Income before provision for income taxes | 97,152,000 | 13,495,000 | |||||
Provision for income taxes | 1,513,000 | 204,000 | |||||
Net income | 95,639,000 | 13,291,000 | |||||
Net income attributable to noncontrolling interests | 6,369,000 | 1,468,000 | |||||
Net income attributable to Shapell Homebuilding Company | $ | 89,270,000 | $ | 11,823,000 | |||
See accompanying notes
4
Shapell Homebuilding Company
Condensed Consolidated Statements of Cash Flows
Nine months ended September 30, | |||||||
2013 | 2012 | ||||||
(Unaudited) | |||||||
Operating activities | |||||||
Net income | $ | 95,639,000 | $ | 13,291,000 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 421,000 | 623,000 | |||||
Change in assets and liabilities: | |||||||
Receivables | (1,500,000 | ) | (289,000 | ) | |||
Real estate held for development and sale | (12,299,000 | ) | (42,603,000 | ) | |||
Prepaid expenses and other assets | (3,906,000 | ) | 522,000 | ||||
Accounts payable, accrued liabilities, and customer deposits | 15,813,000 | 33,481,000 | |||||
Net cash provided by operating activities | 94,168,000 | 5,025,000 | |||||
Investing activities | |||||||
Purchases of furniture, fixtures and equipment | (246,000 | ) | |||||
Proceeds from sale of equipment | 37,000 | ||||||
Net cash provided by (used in) investing activities | 37,000 | (246,000 | ) | ||||
Financing activities | |||||||
Borrowings under notes payable agreements: | |||||||
Uncollateralized | 6,000,000 | 16,000,000 | |||||
Collateralized by securities interests in real estate | 20,013,000 | 9,192,000 | |||||
Payments on notes payable: | |||||||
Uncollateralized | (12,000,000 | ) | (1,000,000 | ) | |||
Collateralized by securities interests in real estate | (29,473,000 | ) | (25,338,000 | ) | |||
Contributions received | 107,503,000 | 33,767,000 | |||||
Distributions to noncontrolling interests | (5,833,000 | ) | (2,481,000 | ) | |||
Dividends paid | (163,474,000 | ) | (26,533,000 | ) | |||
Net cash (used in) provided by financing activities | (77,264,000 | ) | 3,607,000 | ||||
Net increase in cash and cash equivalents | 16,941,000 | 8,386,000 | |||||
Cash and cash equivalents at beginning of period | 57,473,000 | 32,812,000 | |||||
Cash and cash equivalents at end of period | $ | 74,414,000 | $ | 41,198,000 | |||
Supplemental disclosure of cash flow information | |||||||
Cash paid during the year for interest | $ | 101,000 | $ | 266,000 | |||
See accompanying notes
5
Shapell Homebuilding Company
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Summary of Significant Accounting Policies and Other Information
Nature of Operations and Principles of Consolidation
The principal operations of Shapell Homebuilding Company (the “Company”) consist of residential land development and construction of single-family residences for sale. All of the Company’s principal operations are located in California.
The Company is comprised of Shapell Homes, Inc. and Shapell Land Company, LLC, all of which are wholly owned subsidiaries of Shapell Industries, Inc. (“SII”). In addition to the home building operations, SII owns and operates residential and commercial rental properties and engages in mortgage lending activities as of the date of these financial statements. However, the financial statements presented here represent a consolidation of only SII’s residential land development, construction and sale of single-family residences in California. The financial statements also exclude an undeveloped, unentitled land parcel with a book value of $5,201,000 at September 30, 2013; this parcel was not acquired by Toll Brothers, Inc. in the acquisition which is further discussed below in Note 8.
The condensed consolidated financial statements include the accounts of the Company and certain partnerships (the “Affiliates”) which are controlled by the Company. The equity interests of other partners in consolidated partnerships are reflected as noncontrolling interests. Intercompany transactions and balances have been eliminated in consolidation.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements were prepared for the purpose of complying with the provisions of Article 3-05 of Regulation S-X promulgated by the Securities and Exchange Commission (“SEC”), which requires certain information information with respect to business combinations to be included with certain filings with the SEC. The December 31, 2012 balance sheet amounts and disclosures included herein have been derived from the Company’s December 31, 2012 audited financial statements, adjusted for the mortgage lending activities and the unentitled land parcel not included in these condensed consolidated financial statements. Since the accompanying condensed consolidated financial statements do not include all the information and footnotes required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements, the Company suggests that they be read in conjunction with the consolidated financial statements and notes thereto included as Exhibit 99.1 in the Current Report on Form 8-K/A. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, which are of a normal recurring nature, necessary to present fairly the Company’s financial position as of September 30, 2013, the results of its operations and its cash flows for the nine-month periods ended September 30, 2013 and 2012. The results of operations for such interim periods are not necessarily indicative of the results to be expected for the full year.
Shareholders’ equity represents common stock and retained earnings of the consolidated entities.
Use of Estimates
The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements. These estimates and assumptions also affect the reported amounts of revenues and expenses during the reporting period. Although management believes these estimates and assumptions to be reasonably accurate, actual results could differ from those estimates.
Revenue and Cost Recognition
Sales of single-family residences and undeveloped land are recognized when the following conditions have been met: (a) construction has been completed; (b) escrow has closed and title, possession and risk of ownership have been transferred to the buyer; (c) an adequate initial cash investment has been made by the buyer; (d) collectibility of the sales price is reasonably assured; and (e) the Company is not obligated to perform significant development activity and has no further continuing involvement after the sale.
Land and improvements of residential subdivision costs are accumulated by specific development and allocated to lots and undeveloped land within the development using the specific cost identification and relative sales value methods. Cost of sales of single-family residences is determined using specific cost identification and relative sales values, where appropriate, for all common costs incurred.
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Shapell Homebuilding Company
Notes to Condensed Consolidated Financial Statements (continued)
(Unaudited)
Other revenue includes dividend income and rental income from miscellaneous agreements. Dividend income is recognized when dividends are declared. Rental income is recognized when earned.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of three months or less at date of purchase to be cash equivalents. The Company’s cash and cash equivalents include cash and short-term investments.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash deposited with financial institutions in excess of amounts insured by the FDIC. The Company believes it places cash balances with stable financial institutions, which limits its credit risk. In addition, a majority of the financial institutions in which the Company places cash balances have elected to participate in the “Transaction Account Guarantee Program” under the FDIC’s Temporary Liquidity Guarantee Program. This program provides for full FDIC insurance coverage for noninterest bearing accounts. Beginning on January 1, 2013, the FDIC insurance coverage was reduced to $250,000 and the Company has not experienced any losses to date on the deposited cash.
Credit risk also includes the possibility that a loss may occur from the failure of counterparties or issuers to make payments according to the terms of a contract. The Company’s exposure to credit risk at any time is generally limited to amounts recorded as cash or receivables on the condensed consolidated balance sheet.
Market and Diversification Risk
The Company’s business is concentrated in the development and operation of real estate assets and the results of operations and financial condition are greatly affected by the performance of the residential real estate industry. The residential real estate development industry has historically been subject to up and down cycles driven by numerous market and economic factors, both national and local, beyond the control of the Company. Because of the effect these factors have on real estate values, it is difficult to predict with certainty when future sales will occur or what the sales prices will be.
The home building industry is highly competitive and the Company competes with numerous other residential developers, including large national and regional firms, for customers, raw materials, skilled labor and employees. The Company competes for customers primarily based on the location, design, quality and price of homes and the availability of mortgage financing.
The Company’s business is concentrated in California. As a result, financial results are dependent on the economic strength of this region. Significant increases in local unemployment and cost of living, including increases in residential property taxes, or concerns about the financial condition of the municipalities in which the Company develops in, could adversely affect consumer demand for the Company’s housing projects and negatively impact financial results.
Concentrations of market, interest rate and credit risk may exist with respect to the Company’s investments and its other assets and liabilities. Market risk is a potential loss the Company may incur as a result of changes in the fair value of its investments. The Company may also be subject to risk associated with concentrations of investments in geographic regions and industries.
Receivables
Receivables, net consist primarily of other construction related receivables. Other construction related receivables are due to be collected in less than one year and are presented net of allowance for doubtful accounts of $708,000 at September 30, 2013 and December 31, 2012.
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Shapell Homebuilding Company
Notes to Condensed Consolidated Financial Statements (continued)
(Unaudited)
Real Estate Held for Development and Sale
The Company carries real estate held for development and sale at cost unless factors are present which indicate that impairment may exist. The carrying value is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment charge is recognized when estimated expected future net cash flows (undiscounted) from the development and sale of real estate are less than its carrying value, in which case the Company is required to write down the carrying value of the real estate to its estimated fair value. The estimation of expected future net cash flows is inherently uncertain and relies to a considerable extent on assumptions regarding current and future economics and market conditions and the availability of capital. If, in future periods, there are changes in the estimates or assumptions incorporated into the impairment review analysis, the changes could result in an adjustment to the carrying amount of the Company’s real estate. Refer to Note 3 for further discussion.
Costs associated with the acquisition, development and construction of residential subdivisions are capitalized and allocated to individual lots based on the specific cost identification and relative sales value methods. These costs include pre-acquisition costs, interest, taxes, insurance, and indirect costs. Interest is capitalized as part of the historical cost of developing assets during the period required to bring the assets to the condition necessary for their intended use. Interest capitalized and expensed, for the periods indicated, was as follows:
Nine months ended September 30, | ||||||||
2013 | 2012 | |||||||
Capitalized interest at beginning of period | $ | 5,207,000 | $ | 9,637,000 | ||||
Interest capitalized | 2,594,000 | 664,000 | ||||||
Interest amortized to cost of sales | (1,612,000 | ) | (4,426,000 | ) | ||||
Capitalized interest at end of period | $ | 6,189,000 | $ | 5,875,000 | ||||
Under the terms of single-family residence sale agreements, the Company is obligated to fix certain defects in construction for periods of up to ten years after sale. At the time of sale, the Company records a liability for the warranty costs expected to be incurred. Accrued warranty costs are included in accounts payable, accrued liabilities and customer deposits. The calculation for accrued warranty costs is based on historical average of warranty costs per unit multiplied by the average units under warranty. Warranty expense totaled $1,620,000 and $1,714,000 for the nine months ended September 30, 2013 and 2012, respectively, and is included in cost of sales in the accompanying condensed consolidated statement of operations.
The changes in the Company’s warranty accrual, for the periods indicated, was as follows:
Nine months ended September 30, | ||||||||
2013 | 2012 | |||||||
Balance at beginning of period | $ | 6,737,000 | $ | 4,970,000 | ||||
New warranties issued | 1,620,000 | 1,714,000 | ||||||
Cash expenditures | (740,000 | ) | (566,000 | ) | ||||
Balance at end of period | $ | 7,617,000 | $ | 6,118,000 | ||||
Variable Interest Entities
The Company’s investment in joint ventures may create a variable interest entity (“VIE”), depending on the contractual terms of the arrangement. Under Accounting Standards Codification (“ASC”) No. 810, “Consolidations”, the Company analyzes its joint ventures to identify which reporting entity has the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and (i) the obligation to absorb losses of the VIE or (ii) the right to receive benefits from the VIE. The Company analyzes its joint ventures to determine whether they are VIEs and, if so, whether the Company is the primary beneficiary.
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Shapell Homebuilding Company
Notes to Condensed Consolidated Financial Statements (continued)
(Unaudited)
Investments in and Advances to Unconsolidated Entities
Investments in and advances to unconsolidated entities are stated at cost and adjusted by the Company’s equity in the entities’ results of operations, contributions and distributions. In certain of the Company’s investments in unconsolidated entities, the Company has recognized distributions and losses in excess of its investment. In instances where the Company has guaranteed debt of an unconsolidated entity, serves as the general partner or has an obligation or intention to restore the deficit in its capital accounts, it will recognize losses in excess of its investment in an entity. Refer to Note 5 with respect to the condensed combined financial information of these entities.
Tax Status
The Company is taxed in accordance with the provisions of Subchapter S of the Internal Revenue Code and similar provisions of the California Revenue and Taxation Code. The Company is required to pay California franchise taxes amounting to 1.5% of its taxable income. The provision for income taxes in the accompanying financial statements reflects only those payments of the pro forma consolidation of the Company’s single-family development and construction activities.
In accordance with ASC 740, “Income Taxes”, the Company periodically evaluates its tax positions to determine whether it is more likely than not that such positions would be sustained upon examinations by a tax authority based on its technical merits. No liability for uncertain income tax positions is included in the accompanying condensed consolidated financial statements.
2. Fair Value Measurement
ASC No. 820, “Fair Value Measurements and Disclosures” (“ASC 820”), clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. ASC 820 also clarifies that transaction costs should be excluded from the fair value measurement.
ASC 820 establishes a framework for measuring fair value, which includes a hierarchy based on the quality of inputs used to measure fair value. ASC 820 also expands disclosures about fair value measurements. ASC 820 does not require any new fair value measurements. ASC 820 requires the categorization of assets and liabilities, based on the inputs to the valuation technique, into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to the quoted prices in active markets for identical assets and liabilities and lowest priority to unobservable inputs. ASC 820 requires the use of observable market data, when available, in making fair value measurements. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement. The Company’s assessment of the significance of an input requires judgment and considers factors specific to the investment. The levels of the ASC 820 fair value hierarchy are described as follows:
Level 1 – Inputs that reflect unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
Level 2 – Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly, including inputs in markets that are not considered to be active.
Level 3 – Inputs that are unobservable.
The following table presents the Company’s short-term investments measured on a recurring basis by level within the valuation hierarchy as of September 30, 2013 and December 31, 2012:
September 30, 2013 | December 31, 2012 | |||||||
Valuation Inputs | ||||||||
Level 1 – quoted prices | $ | 58,485,000 | $ | 46,517,000 | ||||
Level 2 – other significant observable inputs | — | — | ||||||
Level 3 – significant unobservable inputs | — | — | ||||||
$ | 58,485,000 | $ | 46,517,000 | |||||
Level 1 securities consist of money market securities that are valued using quoted market prices with no valuation adjustments.
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Shapell Homebuilding Company
Notes to Condensed Consolidated Financial Statements (continued)
(Unaudited)
3. Real Estate Impairments
Each land parcel or community is assessed to determine if indicators of potential impairment exist. Given the inherent challenges and uncertainties in forecasting future results, inventory assessments take into consideration whether a community or land parcel is active, or whether it is being held for future development. For active communities and land parcels, due to their short-term nature as compared to land held for future development, inventory assessments generally assume the continuation of then-current market conditions, subject to identifying information suggesting a significant sustained deterioration or other changes in such conditions. These assessments, at the time made, generally anticipate net orders, average selling prices, volume of homes delivered and costs to continue at or near then-current levels through the asset’s estimated remaining life.
Inventory assessments for the Company’s land held for future development consider then-current market conditions as well as subjective forecasts regarding the timing and costs of land development and home construction and related cost inflation; the product(s) to be offered; and the net orders, volume of homes delivered, and selling prices and related price appreciation of the offered product(s) when an associated community is anticipated to open for sales. The Company evaluates various factors to develop these forecasts, including the availability of and demand for homes and finished lots within the relevant marketplace; historical, current and expected future sales trends for the marketplace; and third-party data, if available. These various estimates, trends, expectations, and assumptions used in the Company’s inventory assessments are specific to each community or land parcel based on what the Company believes are reasonable forecasts for performance and may vary among communities or land parcels and may vary over time. As discussed in Note 1, if indicators of potential impairment exist for a land parcel or community, the identified asset is evaluated for recoverability in accordance with ASC 360, “Property, Plant and Equipment”, by comparing the carrying amount of the asset to the undiscounted future net cash flows expected to be generated by the asset. Also taken into account are the Company’s future expectations related to the following: market supply and demand, including estimates concerning average selling prices; sales and cancellation rates; and anticipated land development, construction, and overhead costs to be incurred.
In the nine months ended September 30, 2013 and 2012, the Company did not recognize any inventory impairment charges.
4. Investments in and Advances to Unconsolidated Joint Ventures
The Company is both a general partner in partnerships and an investor in companies primarily involved in the development and leasing of real estate projects. The Company consolidates entities where it has a controlling operating or financial interest. In instances where the Company does not have voting or economic control, the financial statements of such entities are not consolidated in the preparation of the Company’s consolidated financial statements and are accounted for using the equity method of accounting. Such projects include government housing programs, urban redevelopment projects and other real estate projects. The accounting policies of these partnerships are substantially the same as those of the Company.
Condensed combined financial information of these entities as of September 30, 2013 and December 31, 2012 is summarized as follows:
Condensed Combined Balance Sheets | September 30, 2013 | December 31, 2012 | ||||||
Assets | ||||||||
Cash and cash equivalents | $ | 548,000 | $ | 548,000 | ||||
Total assets | 548,000 | 548,000 | ||||||
Liabilities and partners’ deficit | ||||||||
Accounts payable | $ | 1,462,000 | $ | 1,462,000 | ||||
Partners’ deficit: | ||||||||
Shapell Homebuilding Company | (457,000 | ) | (457,000 | ) | ||||
Other | (457,000 | ) | (457,000 | ) | ||||
Total liabilities and partners’ deficit | $ | 548,000 | $ | 548,000 | ||||
Condensed combined statements of operations of these entities were not material for the nine-month periods ended September 30, 2013 and 2012.
10
Shapell Homebuilding Company
Notes to Condensed Consolidated Financial Statements (continued)
(Unaudited)
5. Notes Payable
Uncollateralized notes payable totaling $8,593,000 at September 30, 2013, consists of four short-term notes payable to banks bearing interest at rates ranging from 0.43% to 1.88% under revolving lines of credit maturing in 2013. Additional funds available under uncollateralized notes payable at September 30, 2013, approximate $33,407,000.
Notes payable of $3,489,000 at September 30, 2013, collateralized by security interests in real estate with an aggregate cost of $104,279,000, bear interest at a rate of 1.93% and are payable over various periods of up to two years. Additional funds available under notes payable collateralized by security interests in land and land improvement costs of residential subdivisions at September 30, 2013, are approximately $16,206,000 contingent upon maintaining collateral, which may require the Company to fund improvements in advance of the date the funds can be received.
The Company is required to comply with certain financial covenants under the terms of its credit agreements. Management has determined that the Company was in compliance with these covenants as of September 30, 2013.
6. Fair Value of Financial Instruments
The following disclosure of the estimated fair value of financial instruments at September 30, 2013, is made in accordance with the requirements of ASC No. 825, Financial Instruments. The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.
Based on the borrowing rates currently available to the Company for loans with similar terms and maturities, the carrying value of notes payable (Note 6), secured and uncollateralized are a reasonable estimate of their fair value.
The carrying values of cash and cash equivalents, receivables, prepaid expenses and other assets, and accounts payable, accrued liabilities and customer deposits at September 30, 2013, are a reasonable estimate of their fair value.
7. Commitments and Contingencies
The Company is obligated under certain financing and development agreements to guarantee the performance of its obligations at a future date. In some cases, the Company is required to obtain an unsecured standby letter of credit in favor of the counterparty. At September 30, 2013, the Company has approximately $441,000 of undrawn letters of credit outstanding.
The Company is required, due primarily to various development agreements, to construct various infrastructure improvements. In many cases, the Company is required to post a surety bond to ensure completion of infrastructure improvements in the event that the Company is unable to fulfill its obligation under these agreements. At September 30, 2013, the Company has $111,586,000 of undrawn surety bond obligations outstanding and has expended $45,565,000 towards construction of the various required infrastructure improvements.
The Company has been named as defendant in various legal actions, all of which are typically associated with the activities of a builder and developer. In the opinion of management, the amounts at which all such matters will ultimately be settled will not materially impact the financial position, results of operations or cash flows of the Company.
8. Subsequent Events
On February 4, 2014, SII was sold to Toll Brothers, Inc. (“Toll”) pursuant to the Purchase and Sale Agreement (the “Purchase Agreement”), dated November 6, 2013. Pursuant to the Purchase Agreement, Toll acquired, for cash, all of the equity interests in SII for an aggregate purchase price of approximately $1.60 billion. The sale included the single-family residential real property development business of the Company, including a portfolio of approximately 4,950 home sites in California. In addition, Toll acquired approximately $106 million of cash. As of the acquisition date, the Company’s home building operation had 11 active selling communities in Northern California and Southern California, within which it is focused on a select number of premium markets.
11