Exhibit 99.2
FINANCIAL GUIDANCE
In our second quarter 2007 Earnings Conference Call to be held at 12:00 Noon (EDT) on May 24, 2007, we will provide the following guidance regarding our expected results of operations for our fiscal year ending October 31, 2007. These forecasts are subject to many risks, uncertainties and assumptions and may vary significantly from the actual results, as further noted below. Information with respect to quarterly data is subject to even greater fluctuation and risk. We undertake no obligation to publicly update the information provided due to changes in economic conditions, future events or otherwise. However, any further disclosures made on related subjects in our subsequent filings, releases or presentations should be consulted. We suggest that you listen to the conference call in its entirety. The conference call in its entirety can be heard via the Investor Relations portion of our website, www.tollbrothers.com, until August 7, 2007.
For ease of reference, we have included the actual results for fiscal 2006 and the first and second quarters of fiscal 2007. The columns designated as “Low” and “High” represents the low and high ends of the ranges for unit deliveries of homes, average delivered price of homes, land sales revenues, percentage of completion revenues, cost of revenue by line as a percentage of the applicable revenue and selling, general and administrative expenses (“SG&A”) as a percentage of total revenues expected for fiscal 2007. We expect that the actual results of operations before inventory write-offs will be somewhere between the low end and the high end of the ranges provided. Due to the uncertain economic conditions in the homebuilding industry, we do not believe that we can give a reasonable forecast of future inventory write-downs for the remainder of fiscal 2007.
Unit deliveries of homes, average delivered price of homes, land sales and percentage of completion revenues in fiscal 2007 are expected to be:
Revenues
Traditional home sales
Unit deliveries
| | | | | | | | | | | | | | | | | |
| | | 2006 | | 2007 | | 2007 Estimated |
| | | Actual | | Actual | | Low | | High |
| Quarter ended January 31 | | | 1,879 | | | | 1,559 | | | | | | | | | |
| Quarter ended April 30 | | | 2,063 | | | | 1,686 | | | | | | | | | |
| Quarter ending July 31 | | | 2,157 | | | | | | | | 1,400 | | | | 1,800 | |
| Quarter ending October 31 | | | 2,502 | | | | | | | | 1,450 | | | | 1,850 | |
| Year | | | 8,601 | | | | | | | | 6,100 | | | | 6,900 | |
Average delivered price
| | | | | | | | | | | | | | | | | |
| | | 2006 | | 2007 | | 2007 Estimated |
| | | Actual | | Actual | | Low | | High |
| Quarter ended January 31 | | $ | 680,526 | | | $ | 676,162 | | | | | | | | | |
| Quarter ended April 30 | | $ | 678,855 | | | $ | 666,820 | | | | | | | | | |
| Quarter ending July 31 | | $ | 690,267 | | | | | | | $ | 665,000 | | | $ | 675,000 | |
| Quarter ending October 31 | | $ | 710,263 | | | | | | | $ | 680,000 | | | $ | 690,000 | |
| Year | | $ | 691,218 | | | | | | | $ | 670,000 | | | $ | 680,000 | |
Percentage of completion revenues (in thousands)
| | | | | | | | | | | | | | | | | |
| | | 2006 | | 2007 | | 2007 Estimated |
| | | Actual | | Actual | | Low | | High |
| Quarter ended January 31 | | $ | 57,569 | | | $ | 33,085 | | | | | | | | | |
| Quarter ended April 30 | | $ | 39,955 | | | | 48,437 | | | | | | | | | |
| Quarter ending July 31 | | $ | 41,163 | | | | | | | $ | 55,000 | | | $ | 60,000 | |
| Quarter ending October 31 | | $ | 31,424 | | | | | | | $ | 40,000 | | | $ | 45,000 | |
| Year | | $ | 170,111 | | | | | | | $ | 175,000 | | | $ | 185,000 | |
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Land sales (in thousands)
| | | | | | | | | | | | | | | | | |
| | | 2006 | | 2007 | | 2007 Estimated |
| | | Actual | | Actual | | Low | | High |
| Quarter ended January 31 | | $ | 4,678 | | | $ | 3,390 | | | | | | | | | |
| Quarter ended April 30 | | $ | 2,100 | | | | 1,981 | | | | | | | | | |
| Quarter ending July 31 | | $ | 1,145 | | | | | | | $ | 5,000 | | | $ | 5,000 | |
| Quarter ending October 31 | | $ | 250 | | | | | | | $ | 2,500 | | | $ | 2,250 | |
| Year | | $ | 8,173 | | | | | | | $ | 12,900 | | | $ | 12,900 | |
Cost of revenues for home sales before inventory write-offs, land sales and percentage of completion revenues as a percentage of the applicable revenues, and interest as a percentage of total revenues in fiscal 2007 are expected to be:
Cost of revenues before inventory write-offs
Traditional home sales
| | | | | | | | | | | | | | | | | |
| | | 2006 | | 2007 | | 2007 Estimated |
| | | Actual | | Actual | | Low | | High |
| Quarter ended January 31 | | | 69.05 | % | | | 71.10 | % | | | | | | | | |
| Quarter ended April 30 | | | 68.87 | % | | | 73.12 | % | | | | | | | | |
| Quarter ending July 31 | | | 69.06 | % | | | | | | | 76.50 | % | | | 75.90 | % |
| Quarter ending October 31 | | | 69.52 | % | | | | | | | 77.25 | % | | | 76.50 | % |
| Year | | | 69.15 | % | | | | | | | 74.40 | % | | | 74.30 | % |
Percentage of completion
| | | | | | | | | | | | | | | | | |
| | | 2006 | | 2007 | | 2007 Estimated |
| | | Actual | | Actual | | Low | | High |
| Quarter ended January 31 | | | 82.24 | % | | | 78.28 | % | | | | | | | | |
| Quarter ended April 30 | | | 78.03 | % | | | 77.14 | % | | | | | | | | |
| Quarter ending July 31 | | | 77.73 | % | | | | | | | 80.00 | % | | | 80.00 | % |
| Quarter ending October 31 | | | 69.21 | % | | | | | | | 80.00 | % | | | 80.00 | % |
| Year | | | 77.75 | % | | | | | | | 79.00 | % | | | 79.00 | % |
Land sales
| | | | | | | | | | | | | | | | | |
| | | 2006 | | 2007 | | 2007 Estimated |
| | | Actual | | Actual | | Low | | High |
| Quarter ended January 31 | | | 82.00 | % | | | 30.60 | % | | | | | | | | |
| Quarter ended April 30 | | | 100.14 | % | | | 87.18 | % | | | | | | | | |
| Quarter ending July 31 | | | 78.86 | % | | | | | | | 80.00 | % | | | 80.00 | % |
| Quarter ending October 31 | | | 62.05 | % | | | | | | | 85.00 | % | | | 85.00 | % |
| Year | | | 85.61 | % | | | | | | | 69.00 | % | | | 69.00 | % |
Cost of revenues — write-offs
| | | | | | | | | | | | | | | | | |
| | | 2006 | | 2007 | | 2007 Estimated |
| | | Actual | | Actual | | Low | | High |
| Quarter ended January 31 | | | 0.09 | % | | | 9.19 | % | | | | | | | | |
| Quarter ended April 30 | | | 0.86 | % | | | 10.65 | % | | | | | | | | |
| Quarter ending July 31 | | | 1.60 | % | | | | | | | * | | | | * | |
| Quarter ending October 31 | | | 6.47 | % | | | | | | | * | | | | * | |
| Year | | | 2.56 | % | | | | | | | * | | | | * | |
* Due to the uncertain economic conditions in the homebuilding industry, we do not believe that we can give a reasonable forecast of future inventory write-downs for the remainder of fiscal 2007.
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Cost of revenues — interest
| | | | | | | | | | | | | | | | | |
| | | 2006 | | 2007 | | 2007 Estimated |
| | | Actual | | Actual | | Low | | High |
| Quarter ended January 31 | | | 2.14 | % | | | 2.08 | % | | | | | | | | |
| Quarter ended April 30 | | | 2.07 | % | | | 2.26 | % | | | | | | | | |
| Quarter ending July 31 | | | 1.95 | % | | | | | | | 2.20 | % | | | 2.20 | % |
| Quarter ending October 31 | | | 1.85 | % | | | | | | | 2.20 | % | | | 2.20 | % |
| Year | | | 1.99 | % | | | | | | | 2.20 | % | | | 2.20 | % |
Selling, general and administrative expenses as a percentage of total revenues in fiscal 2007 are expected to be:
| | | | | | | | | | | | | | | | | |
| | | 2006 | | 2007 | | 2007 Estimated |
| | | Actual | | Actual | | Low | | High |
| Quarter ended January 31 | | | 10.38 | % | | | 12.31 | % | | | | | | | | |
| Quarter ended April 30 | | | 9.85 | % | | | 11.10 | % | | | | | | | | |
| Quarter ending July 31 | | | 9.67 | % | | | | | | | 12.00 | % | | | 11.60 | % |
| Quarter ending October 31 | | | 7.96 | % | | | | | | | 11.50 | % | | | 11.10 | % |
| Year | | | 9.36 | % | | | | | | | 11.70 | % | | | 11.50 | % |
Goodwill Impairment
The Company recognized a $9.0 million impairment charge in the three-month period ended January 31, 2007.
Income from unconsolidated entities for fiscal 2007 is expected to be approximately (in thousands):
| | | | | | | | | | | | | |
| | | 2006 | | 2007 | | 2007 |
| | | Actual | | Actual | | Estimated |
| Quarter ended January 31 | | $ | 16,569 | | | $ | 6,792 | | | | | |
| Quarter ended April 30 | | $ | 12,824 | | | $ | 4,735 | | | | | |
| Quarter ending July 31 | | $ | 7,269 | | | | | | | $ | 3,000 | |
| Quarter ending October 31 | | $ | 11,699 | | | | | | | $ | 4,000 | |
| Year | | $ | 48,360 | | | | | | | $ | 18,500 | |
Interest and other income for fiscal 2007 is expected to be approximately (in thousands):
| | | | | | | | | | | | | |
| | | 2006 | | 2007 | | 2007 |
| | | Actual | | Actual | | Estimated |
| Quarter ended January 31 | | $ | 11,327 | | | $ | 28,960 | | | | | |
| Quarter ended April 30 | | $ | 10,966 | | | $ | 17,798 | | | | | |
| Quarter ending July 31 | | $ | 9,699 | | | | | | | $ | 9,000 | |
| Quarter ending October 31 | | $ | 20,672 | | | | | | | $ | 8,000 | |
| Year | | $ | 52,664 | | | | | | | $ | 63,500 | |
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Our income before inventory write-offs and income taxes for fiscal 2007 is expected to be approximately (in thousands):
| | | | | | | | | | | | | | | | | |
| | | 2006 | | 2007 | | 2007 Estimated |
| | | Actual | | Actual | | Low | | High |
| Quarter ended January 31 | | $ | 266,777 | | | $ | 184,101 | | | | | | | | | |
| Quarter ended April 30 | | $ | 296,593 | | | $ | 179,204 | | | | | | | | | |
| Quarter ending July 31 | | $ | 309,085 | | | | | | | $ | 102,063 | | | $ | 141,175 | |
| Quarter ending October 31 | | $ | 406,202 | | | | | | | $ | 103,786 | | | $ | 145,261 | |
| Year | | $ | 1,278,661 | | | | | | | $ | 565,800 | | | $ | 651,800 | |
Our effective income tax rate for fiscal 2007 is expected to be approximately:
| | | | | | | | | | | | | |
| | | 2006 | | 2007 | | 2007 |
| | | Actual | | Actual | | Estimated |
| Quarter ended January 31 | | | 38.32 | % | | | 37.71 | % | | | | |
| Quarter ended April 30 | | | 38.53 | % | | | 38.33 | % | | | 39.00 | % |
| Quarter ending July 31 | | | 38.78 | % | | | | | | | 39.00 | % |
| Quarter ending October 31 | | | 40.31 | % | | | | | | | 39.00 | % |
| Year | | | 39.00 | % | | | | | | | 38.60 | % |
We estimate that the share count for determining diluted earnings per share for fiscal 2007 will be approximately(in thousands):
| | | | | | | | | | | | | |
| | | 2006 | | | 2007 | | | 2007 | |
| | | Actual | | | Actual | | | Estimated | |
| | | | (in thousands) | | | | | | | | | | |
| Quarter ended January 31 | | | 167,027 | | | | 164,048 | | | | | |
| Quarter ended April 30 | | | 165,727 | | | | 164,294 | | | | | |
| Quarter ending July 31 | | | 163,514 | | | | | | | | 164,600 | |
| Quarter ending October 31 | | | 163,139 | | | | | | | | 164,600 | |
| Year | | | 164,852 | | | | | | | | 164,400 | |
Net Income and Earnings per Share
Because we cannot reasonably forecast future inventory write-downs, we cannot provide guidance on income before income taxes, net income and earnings per share. However, based on our estimated effective tax rate and our estimated weighted average number of diluted shares outstanding, diluted earnings per share would be impacted approximately $0.037 per share for each $10 million of inventory write-down.
FORWARD LOOKING STATEMENT
Certain information included herein and in other Company reports, SEC filings, verbal or written statements and presentations is forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995, including, but not limited to, information related to anticipated operating results, financial resources, changes in revenues, changes in profitability, changes in margins, changes in accounting treatment, interest expense, land-related write-downs, effects of home buyer cancellations, growth and expansion, anticipated income to be realized from our investments in unconsolidated entities, the ability to acquire land, the ability to gain approvals and to open new communities, the ability to sell homes and properties, the ability to deliver homes from backlog, the ability to secure materials and subcontractors, the ability to produce the liquidity and capital necessary to expand and take advantage of opportunities in the future, industry trends, and stock market valuations. Such forward-looking information involves important risks and uncertainties that could significantly affect actual results and cause them to differ materially from expectations expressed herein and in other Company reports, SEC filings, statements and presentations. These risks and uncertainties include local, regional and national economic
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conditions, the demand for homes, domestic and international political events, uncertainties created by terrorist attacks, 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, uncertainties and fluctuations in capital and securities markets, changes in tax laws and their interpretation, legal proceedings, the availability of adequate insurance at reasonable cost, the ability of customers to finance the purchase of homes, the availability and cost of labor and materials, and weather conditions.
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