Toll Brothers announced results for its third quarter ended July 31, 2016. Net income increased 58% to $105.5 million, or $0.61 per share diluted.
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This compares to net income of $66.7 million, or $0.36 per share diluted, in FY 2015’s third quarter.
Pre-tax income of $163.7 million increased 52%, compared to pre-tax income of $107.5 million in FY 2015’s third quarter. Included in FY 2016’s third-quarter cost of sales were impairments of $3.7 million, compared to impairments of $18.0 million in FY 2015’s third quarter.
Toll Brothers revenues of $1.27 billion and home building deliveries of 1,507 units rose 24% in dollars and 6% in units, compared to FY 2015’s third quarter. The average price of homes delivered was $843,000, compared to $724,000 in FY 2015’s third quarter.
Net signed contracts of $1.45 billion and 1,748 units rose 18% in dollars and units, compared to FY 2015’s third quarter. The average price of net signed contracts was $831,000, compared to $834,000 in FY 2015’s third quarter.
Backlog of $4.37 billion and 5,181 units rose 19% in dollars and 17% in units, compared to FY 2015’s third-quarter-end backlog. At FY 2016’s third-quarter end, the average price of homes in backlog was $844,000, compared to $829,000 at FY 2015’s third-quarter end.
Toll Brothers gross margin, as a percentage of revenues, was 21.9% in FY 2016’s third quarter, compared to 19.8% in FY 2015’s third quarter. Adjusted gross margin, which excludes interest and inventory write-downs, as a percentage of revenues (Adjusted Gross Margin), was 25.3%, compared to 25.2% in FY 2015’s third quarter.
SG&A, as a percentage of revenue, was 10.6%, compared to 11.3% in FY 2015’s third quarter.
Income from operations was 11.3% of revenue, compared to 8.5% of revenue in FY 2015’s third quarter.
Other income and Income from unconsolidated entities totaled $20.1 million, compared to $20.0 million in FY 2015’s third quarter.
Toll Brothers ended its third quarter with 297 selling communities, compared to 299 at FY 2016’s second-quarter end, and 267 at FY 2015’s third-quarter end. The company expects to end FY 2016 with between 305 and 315 selling communities.
At FY 2016’s third-quarter end, the company had approximately 48,700 lots owned and optioned, compared to approximately 45,400 one quarter earlier and 45,400 one year ago.
Toll Brothers ended its FY 2016 third quarter with $351.9 million of cash and marketable securities, compared to $423.2 million at 2016’s second-quarter end and $404.8 million at FY 2015’s third-quarter end.
During the third quarter of FY 2016, the company repurchased approximately 3.7 million shares, representing approximately 2% of outstanding shares, of its common stock at an average price of $26.33 per share for a total purchase price of approximately $97.3 million.
Cumulatively, since the start of FY 2016, the company has repurchased approximately 11.4 million shares, representing approximately 7% of outstanding shares, at an average price of $28.72 per share for a total purchase price of approximately $327.6 million.
Toll Brothers expects FY 2016 fourth quarter deliveries of between 2,025 and 2,325 units with an average price of between $815,000 and $835,000.
This range results in projected full FY 2016 deliveries of between 5,900 and 6,200 units with an average delivered price of between $840,000 and $850,000. This would result in FY 2016 revenues of between $4.96 billion and $5.27 billion, up approximately 19% to 26% over FY 2015.
Due primarily to a shift in its mix of deliveries, the company now expects its full FY 2016 Adjusted Gross Margin to be between 25.6% and 25.8% of revenues, which is 30 basis points below the mid-point of its previous guidance.
The company’s full FY 2016 Other income and Income from unconsolidated entities is now expected to be between $88.5 million and $93.5 million, down from its previous guidance of $105 million to $130 million, as some of the closings of sold units in joint ventures originally projected for this fourth quarter will instead be delivered early in FY 2017. ■