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, 1995
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, 1995, the aggregate market value of the Common Stock
held by non-affiliates of the Registrant was approximately $498,259,000.
As of December 31, 1995, there were 33,800,826 shares of Common Stock
outstanding.
Documents Incorporated by Reference:
Toll Brothers, Inc. Proxy Statement with respect to its 1996 Annual Meeting
of Shareholders, scheduled to be held on March 7, 1996, 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 has been able to acquire a number
of fully approved parcels and often improved subdivisions. Currently,
Toll Brothers operates predominantly in major suburban residential areas
in southeastern Pennsylvania, central New Jersey, the Virginia and
Maryland suburbs of Washington, D.C., northern Delaware, the Boston,
Massachusetts metropolitan area, southern Connecticut, Westchester County,
New York, Orange County, California, the suburbs of Raleigh and Charlotte,
North Carolina and Scottsdale, Arizona. It is also developing communities
in Nassau County, New York, McKinney, Texas, a northern suburb of Dallas and
in Palm Beach County, Florida. The Company has recently acquired property
in Austin, Texas and expects to begin offering homes for sale in the
second quarter of fiscal 1996.
The Company markets its homes primarily to upper-income buyers, emphasizing
high quality construction and customer satisfaction. In the five years ended
October 31, 1995, Toll Brothers delivered 6,427 homes in 144 communities. In
recognition of the Company's achievements, it has received numerous awards
from national, state and local homebuilder publications and associations.
In 1995, 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.
As of October 31, 1995, the Company was offering homes for sale in 97
communities. Single-family detached homes were being offered at prices,
excluding customized options, generally ranging from $164,900 to $709,000,
with an average base sales price of $351,300. Attached home prices,
excluding customized options, generally range from $99,900 to $476,900,
with an average base sales price of $263,800.
On October 31, 1995 and 1994, the Company had backlogs of $400,820,000
(1,078 homes) and $370,560,000 (1,025 homes), respectively. Substantially
all homes in backlog at October 31, 1995 are expected to be delivered
by October 31, 1996.
As of October 31, 1995, the Company owned, or controlled through options,
over 8,300 home sites in communities under development, as well as land for
approximately 6,300 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 California and North Carolina in 1994 and in Texas and Florida in
1995. In addition, in August 1995, the Company acquired certain assets,
including two existing communities under development, of Geoffrey H. Edmunds
& Associates, a privately owned Scottsdale, Arizona, luxury homebuilder.
The Company recently acquired property in Austin, Texas and expects to
begin offering homes for sale in the second quarter of fiscal 1996.
The Company emphasizes its high-quality, detached single-family homes
that are marketed primarily to the "upscale" luxury market, generally
those persons who have previously owned a principal residence - the
so-called "move-up" market. The Company believes its reputation as a
developer of homes for this market enhances its competitive position
with respect to the sale of more moderately priced detached homes, as
well as attached homes.
Each single-family home community offers several home plans, with the
opportunity to select various exterior styles. The communities are
designed to fit existing land characteristics, blending winding streets,
cul-de-sacs and underground utilities to establish a pleasant environment.
The Company strives to create a diversity of architectural styles within
an overall planned community. This diversity arises from variations
among the models offered and in exterior design options of homes of
the same basic floor plan, from the preservation of existing trees and
foliage whenever practicable, and from the curving street layout, which
allows relatively few homes to be seen from any vantage point. Normally,
homes of the same type or color may not be built next to each other.
The communities have attractive entrances with distinctive
signage and landscaping. The Company believes this avoids a "development"
appearance and gives the community a diversified neighborhood look that
enhances home value.
Attached home communities are generally one to three stories, 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 14% higher than the
base sales price during fiscal 1995.
The range of base sales prices for the Company's lines of homes as of
October 31, 1995, was as follows:
Single-Family Detached Homes:
Move-up $164,900 - $459,900
Executive 229,900 - 486,900
Estate 275,900 - 709,000
Attached Homes:
Townhomes 99,900 - 206,900
Carriage Homes 221,900 - 476,900
Villas 276,900 - 459,900
Contracts for the sale of homes are at fixed prices. The prices at which
homes are offered have generally increased from time to time during the sellout
period for each community; however, there can be no assurance that sales prices
will increase in the future.
The Company uses some of the same basic home designs in similar
communities. However, the Company is continuously developing new designs to
replace or augment existing ones to assure that its homes are responsive to
current consumer preferences. For new designs, the Company has its own
architectural staff and occasionally engages unaffiliated architectural firms.
During the past year, the Company has introduced over 40 new models.
Residential Communities Under Development
The Company generally constructs model homes at each of its communities.
Construction of single-family detached homes usually commences only after an
agreement of sale has been executed, while construction of attached-home
buildings usually commences only after agreements of sale have been executed
for a majority of the homes in that building.
The following table summarizes certain information with respect to
residential communities of Toll Brothers under development as of October 31,
1995:
HOMES UNDER
NUMBER OF HOMES HOMES CONTRACT AND HOME SITES
STATE COMMUNITIES APPROVED CLOSED NOT CLOSED AVAILABLE
Pennsylvania 32 4,139 2,168 304 1,667
New Jersey:
North central 11 917 277 90 550
Central 19 1,122 244 175 703
South central 6 1,058 220 49 789
Virginia 13 1,360 322 91 947
Maryland 5 347 143 35 169
Massachusetts 9 872 525 103 244
Connecticut 7 240 58 35 147
New York 9 459 133 55 271
Delaware 5 545 412 45 88
Arizona 7 619 6 32 581
California 4 281 45 13 223
North Carolina 5 426 15 27 384
Florida 2 213 1 20 192
Texas 2 279 1 4 274
----- ------ ----- ----- -----
Total 136(1) 12,877 4,570 1,078 7,229(2)
===== ====== ===== ===== =====
(1) Of these 136 communities, 97 had homes being offered for sale, 16
had not yet opened for sales, and 23 had been sold out but not
all closings had been completed. Of the 97 communities in which
homes were being offered for sale, 88 were single-family
detached-home communities containing a total of 89 homes under
construction but not under contract (exclusive of model homes) and
9 were attached home communities containing a total of 24 homes
under construction but not under contract (exclusive of model
homes).
(2) On October 31, 1995, significant site improvements had not
commenced on approximately 4,317 of the 7,229 available home sites.
Of the 7,229 available home sites, 1,161 were not owned, but were
controlled through options.
Land Policy
Before entering into a contract to acquire land, the Company completes
extensive comparative studies and analyses on detailed Company-designed forms
that assist it in evaluating the acquisition. Toll Brothers generally attempts
to follow a policy of acquiring options to purchase land for future
communities. However, in order to obtain better terms or prices, or due to
competitive pressures, the Company has acquired property outright or
acquired the underlying mortgage allowing it to obtain title to the property.
The options or purchase agreements are generally on a non-recourse basis,
thereby limiting the Company's financial exposure to the amounts invested in
property and pre-development costs. The use of options or purchase agreements
may somewhat raise the price of land that the Company eventually acquires, but
significantly reduces risk. It also allows the Company to obtain necessary
development approvals before acquisition of the land, 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 diversification will provide additional protection and
more opportunities for growth. During the past two 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, 1995 for
proposed communities, as distinguished from those currently under development:
Number of Number of Number of
State Communities Acres Homes Planned
Pennsylvania 18 1,731 1,681
New Jersey: (1)
North central 3 201 272
Central 8 678 1,242
Virginia(2) 10 1,341 2,287
Massachusetts 1 165 180
New York 5 293 192
Connecticut 1 46 67
California 1 48 52
Arizona 1 50 154
Delaware 1 90 150
---- ----- -----
Total 49 4,643 6,277 (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 6,277 planned home sites, 3,665 lots were controlled through
options and 216 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 $18,712,000 at October 31,
1995. The aggregate purchase price of land parcels under option at
October 31, 1995 was approximately $150,476,000.
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, 1995 such feasibility
analyses resulted in approximately $1,566,000 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 approximately four to five 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 - Panel Plant"). The Company is not, and does
not anticipate, experiencing a shortage of either subcontractors or
supplies of building materials. The Company's construction superintendents
and assistant superintendents coordinate subcontracting activities and
supervise all aspects of construction work and quality control. One of
the ways the Company seeks to achieve homebuyer satisfaction is by providing
its construction superintendents with incentive compensation arrangements
based on each homebuyer's responses on pre-closing and post-closing checklists.
The Company maintains insurance to protect against certain risks associated
with its activities. These insurance coverages include, among others, general
liability, "all-risk" property, workers' compensation, automobile, and employee
fidelity. The Company believes the amounts and extent of such insurance
coverages are adequate.
Marketing
The Company believes that its marketing strategy, which emphasizes its more
expensive "Estate" and "Executive" lines of homes, has enhanced the Company's
reputation as a builder-developer of high-quality upscale housing. The Company
believes this reputation results in greater demand for all of the Company's
lines of homes. The Company generally includes attractive decorative
moldings such as chair rails, crown moldings, dentil moldings and other
aesthetic features, even in its less expensive homes, on the basis that
this additional construction expense is important to its marketing effort.
In addition to relying on management's extensive experience, the Company
determines the prices for its homes through a Company-designed value analysis
program that compares a Toll Brothers home with homes offered by other builders
in the relevant marketing area. The Company accomplishes this by assigning a
positive or negative dollar value to differences in product features, such as
amenities, location and marketing.
Toll Brothers expends great effort in creating its model homes, which play
an important role in the Company's marketing. In its models, Toll Brothers
creates an attractive atmosphere, with bread baking in the oven, fires burning
in fireplaces, and background music. Interior decorations vary among the models
and are carefully selected based upon the lifestyles of the prospective buyers.
During the past several years, the Company has received a number of awards from
various homebuilder associations for its interior merchandising.
The sales office located in each community is generally staffed by Company
sales personnel, who are compensated with salary and commission. In addition,
a significant portion of Toll Brothers' sales is derived from the introduction
of customers to its communities by local cooperating realtors.
The Company advertises extensively in newspapers, other local and regional
publications and on billboards. The Company also uses videotapes and
attractive color brochures to describe each community.
All Toll Brothers homes are sold under the Company's one-year limited
warranty as to workmanship and two-year limited warranty as to mechanical
equipment, supplemented by privately insured programs, which provides to home
purchasers a limited ten-year warranty as to structural integrity.
Customer Financing
The Company makes arrangements with a variety of mortgage lenders to
provide homebuyers a range of conventional mortgage financing programs. By
making available an array of attractive mortgage programs to qualified
purchasers, the Company is able to better coordinate and expedite the entire
sales transaction by ensuring that mortgage commitments are received and that
closings take place on a timely and efficient basis. During fiscal 1995,
approximately 76% of the Company's closings were financed through mortgage
programs offered by the Company. In addition, during the same period, the
Company's homebuyers, on average, financed approximately 71% of the purchase
price of their home.
The Company secures the availability of a variety of competitive market
rate mortgage products from both national and regional lenders. Such
availability is generally obtained at no cost to the Company and is committed
for varying lengths of time and amounts.
The Company also obtains forward commitments for fixed and variable rate
mortgage financing which contain various rate protection features. Such
commitments generally cost the Company from zero to one-half of one percent of
the mortgage funds reserved and typically have terms of 9 to 18 months. As of
October 31, 1995, there were approximately $41 million of such commitments
available, which expire at various dates through October 1996.
Competition
The homebuilding business is highly competitive and fragmented. The
Company competes with numerous homebuilders of varying size, ranging from
local to national in scope, some of which have greater sales and financial
resources than the Company. Resales of homes also provide competition.
The Company competes primarily on the basis of price, location, design,
quality, service and reputation; however, during the past several years,
the Company's financial stability, relative to others in its industry
(some of which have gone out of business), has become an increasingly
favorable competitive factor. The Company believes that due to the
increased availability of capital, competition has increased during the
past two 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 engineers to formally evaluate
such land for the presence of hazardous or toxic materials, wastes or
substances. Because it has generally obtained such analyses for the land it
has purchased, the Company has not been significantly affected to date
by the potential presence of such materials.
Employees
As of October 31, 1995, the Company employed 1,025 full-time persons; of
these, 38 were in executive positions, 137 were engaged in sales activities,
107 in project management activities, 288 in administrative and clerical
activities, 277 in construction activities, 68 in engineering activities
and 110 in the panel plant operations. The Company considers its
employee relations to be good.
ITEM 2. PROPERTIES
Headquarters
Toll Brothers' corporate offices, containing approximately 45,000 square
feet, are located in a modern facility at 3103 Philmont Avenue, Huntingdon
Valley, Montgomery County, Pennsylvania. The facility was purchased by the
Company in September 1988.
Panel Plant
Toll Brothers owns a facility of approximately 200,000 square feet in which
it manufactures open wall panels, roof and floor trusses, and certain interior
and exterior millwork to supply a portion of the Company's construction needs.
This operation also permits Toll Brothers to purchase wholesale lumber, plywood,
windows, doors, certain other interior and exterior millwork and other building
materials to supply its communities. The Company believes that increased
efficiency, cost savings and productivity result from the operation of this
plant and from such wholesale purchases of material. This plant generally
does not sell or supply to any purchasers other than Toll Brothers. The
property, which is located in Morrisville, Pennsylvania, is adjacent to U.S.
Route 1, a major thoroughfare, and is served by rail.
Regional and Other Facilities
The Company leases office and warehouse space in various locations, none
of which is material to the business of the Company.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in various claims and litigation arising from its
usual and customary business with customers and subcontractors. The Company
believes that it has adequate insurance or meritorious defenses, or both, in
all pending cases, and that adverse decisions in any or all of the cases
would not have a material adverse effect on the financial condition and
the results of operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the fourth quarter of the fiscal
year ended October 31, 1995.
EXECUTIVE OFFICERS OF THE REGISTRANT
The section entitled "Proposal One: Election of Directors" of the
Company's Proxy Statement for the 1996 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, 1995. All executive officers serve at
the pleasure of the Board of Directors of the Company.
Name Age Positions
Robert I. Toll 54 Chairman of the Board,
Chief Executive Officer and
Director
Bruce E. Toll 52 President, Chief Operating Officer,
Secretary and Director
Zvi Barzilay 49 Executive Vice President and
Director
Joel H. Rassman 50 Senior Vice President, Treasurer
and Chief Financial Officer
Robert and Bruce Toll, who are brothers, co-founded the Company's
predecessors' operations in 1967. Their principal occupations since inception
have been related to their various homebuilding and other real estate related
activities.
Zvi Barzilay joined the Company as a project manager in 1980 and has been
an officer since 1983. In 1994, Mr. Barzilay was elected a Director of the
Company.
Joel H. Rassman has been a senior vice president of the Company since
joining the Company in 1984.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The Company's common stock is principally traded on the New York Stock
Exchange (Symbol: TOL). It is also listed on the Pacific Stock Exchange.
The following table sets forth the price range of the Company's common
stock on the New York Stock Exchange for each fiscal quarter during the two
years ended October 31, 1995.
Three Months Ended
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
1994
High $12 3/4 $14 3/8 $19 3/8 $19 5/8
Low $10 1/2 $11 3/4 $11 7/8 $14 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 may restrict the amount of dividends the
Company may pay. As of October 31, 1995, under the most restrictive of the
agreements, the Company could pay up to approximately $44,641,000 of cash
dividends.
At December 31, 1995, there were approximately 766 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, 1995. 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
1995 1994 1993 1992 1991
Revenues $646,339 $504,064 $395,261 $281,471 $177,418
======== ======== ======== ======== ========
Income before income taxes,
extraordinary item and
change in accounting $79,439 $56,840 $43,928 $28,864 $6,248
======= ======= ======= ======= ======
Income before extraordinary
item and change in
accounting $49,932 $36,177 $27,419 $17,354 $3,717
Extraordinary (loss) gain
from extinguishment of debt -- -- (668) (816) 1,296
Cumulative effect of change
in accounting -- -- 1,307 -- --
------- ------- -------- ------- -------
Net income $49,932 $36,177 $ 28,058 $16,538 $ 5,013
======= ======= ======== ======= =======
Earnings per share
Primary:
Income before extraordinary
item and change in
accounting $ 1.47 $ 1.08 $ .82 $ .52 $ .12
Extraordinary (loss) gain -- -- (.02) (.02) .04
Cumulative effect of change
in accounting -- -- .04 -- --
------ ------ ----- ----- -----
Net income $ 1.47 $ 1.08 $ .84 $ .50 $ .16
====== ====== ===== ===== =====
Weighted average number of
shares outstanding 33,909 33,626 33,467 33,234 31,412
====== ====== ====== ====== ======
Fully-diluted:
Income before extraordinary
item and change in
accounting $1.41 $1.05 $ .82 $ .52 $ .12
Extraordinary (loss) gain -- -- (.02) (.02) .04
Cumulative effect of change
in accounting -- -- .04 -- --
----- ------ ------ ------ ------
Net income $1.41 $1.05 $ .84 $ .50 $ .16
====== ====== ====== ====== ======
Weighted average number of
shares outstanding 36,651 35,664 33,583 33,237 31,554
====== ====== ====== ====== ======
Summary Consolidated Balance Sheet Data (Amounts in thousands)
October 31
1995 1994 1993 1992 1991
Inventory $623,830 $506,347 $402,515 $287,844 $222,775
======== ======== ======== ======== ========
Total assets $692,457 $586,893 $475,998 $384,836 $312,424
======== ======== ======== ======== ========
Debt
Loans payable $59,057 $17,506 $24,779 $25,756 $49,943
Subordinated debt 221,226 227,969 174,442 128,854 55,513
Collateralized mortgage
obligations payable 3,912 4,686 10,810 24,403 39,864
-------- -------- -------- -------- --------
Total $284,195 $250,161 $210,031 $179,013 $145,320
======== ======== ======== ======== ========
Shareholders' equity $256,659 $204,176 $167,006 $136,412 $117,925
======== ======== ======== ======== ========
Housing Data
Year ended October 31: 1995 1994 1993 1992 1991
Number of homes
closed 1,825 1,583 1,324 1,019 676
Number of homes
contracted 1,846 1,716 1,595 1,202 863
Sales value of homes
contracted
(in thousands) $660,467 $586,941 $490,883 $342,811 $230,324
As of October 31:
Number of homes
in backlog 1,078 1,025 892 621 438
Sales value of
homes in backlog
(in thousands) $400,820 $370,560 $285,441 $187,118 $124,148
PAGE
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain income
statement items related to the Company's operations as percentages of total
revenues and certain other homebuilding data:
Year Ended October 31: 1995 1994 1993
Revenues 100.0% 100.0% 100.0%
------ ------ ------
Costs and expenses:
Land and housing construction 75.0 75.4 73.5
Selling, general and administrative 9.2 9.7 11.0
Interest 3.4 3.6 4.3
---- ---- ----
Total costs and expenses 87.6 88.7 88.8
---- ---- ----
Operating income 12.4% 11.3% 11.2%
===== ===== =====
Number of homes closed 1,825 1,583 1,324
===== ===== =====
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 revenue increasing at a faster rate than SG&A spending.
Interest expense is determined on a specific house-by-house 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%.
FISCAL 1994 COMPARED TO FISCAL 1993
Revenues for fiscal 1994 of $504.1 million exceeded those of fiscal 1993
by approximately $109 million or 28%. This increase was principally due to the
greater number of homes closed during the year and the increase in the average
selling price of those homes. The increase in the number of homes closed was
due to the substantially larger backlog of homes at the beginning of
fiscal 1994 as compared to the beginning of fiscal 1993 and the
greater number of contracts signed in fiscal 1994 as compared to 1993.
The increase in the average selling price in 1994 over that of 1993 was
principally the result of a shift in the location of homes closed to more
expensive communities, a change in product mix to larger homes and
increases in selling prices.
As of October 31, 1994, the backlog of homes under contract amounted to
$370.6 million (1,025 homes), approximately 30% higher than the $285.4 million
(892 homes) backlog the Company had as of October 31, 1993. The aggregate
sales value of new contracts signed in fiscal 1994 amounted to
$586.9 million (1,716 homes), an increase of approximately 20% over the
$490.9 million (1,595 homes) of contracts signed in fiscal 1993. The
Company believes that the increase in backlog and the increase in contracts
signed were the result of (a) the Company's expansion through a greater
penetration of its existing markets, such as Connecticut and Virginia, and
its entry into new markets such as New York State and California, (b) a
shift in the location of homes sold to higher priced communities, as well
as increases in the selling prices in existing communities,
(c) pent-up demand for new homes due to poor economic conditions in the early
1990s which resulted in a decline in housing demand and a resulting decline in
construction, and (d) diminished competition due to the aforementioned poor
economic conditions.
The average selling price per home settled will vary from year to year
based upon the community and product mix of homes closed, as well as changes in
selling price and the value of options selected by homebuyers.
Land and construction costs as a percentage of revenues increased in 1994
as compared to 1993 due principally to (a) an increase in the cost of
materials, (b) an increase in costs due to the severe weather conditions the
Company experienced in the first half of fiscal 1994 which resulted in
increased spending and reduced construction activity causing an increase in
per-home overhead, and (c) higher provisions in fiscal 1994 over the
amounts provided in fiscal 1993 for inventory writedowns consisting of
provisions for a reduction to net realizable value and the expensing of
previously capitalized costs which the Company no longer considered
realizable. The Company provided approximately $7.0 million in 1994 for
writedowns as compared to $2.8 million in 1993. The increases were
partially offset by lower land and land development costs.
Selling, general and administrative expense ("SG&A") in fiscal 1994
amounted to $48.8 million or 9.7% of revenues as compared to $43.3 million or
11.0% of revenues for 1993. The decline in SG&A as a percentage of revenues in
1994 as compared to 1993 was principally the result of revenue increasing at a
greater rate than spending. The $5.5 million increase in spending was
principally due to the increased selling costs related to the greater number of
homes closed in 1994 over 1993, the increase in the number of communities in
which the Company was offering homes for sale, and the increase in payroll and
payroll-related costs due to the growth of the Company.
Interest expense was lower both as a percentage of revenues and on a per-
home-closed basis in 1994 as compared to 1993. On average, land and land
development costs associated with the homes closed in 1994 remained in
inventory for a shorter period of time than those closed in fiscal 1993.
In addition, the amount of interest incurred declined as a percentage of
inventory due to lower interest rates and the decline in the amount of
debt carried by the Company in proportion to the amount of its inventory.
Accordingly, less capitalized interest was accumulated, on average, on the
homes closed in 1994 than those closed in 1993.
INCOME TAXES
Income taxes for fiscal 1995, 1994, and 1993 were provided at effective
rates of 37.1%, 36.4%, and 37.6%, respectively.
Effective November 1, 1992, the Company adopted Statement of Financial
Accounting Standard No. 109, "Accounting for Income Taxes." This Statement
requires a liability approach for measuring deferred taxes based on temporary
differences between the financial statement and tax bases of assets and
liabilities existing at each balance sheet date using enacted tax rates for
years in which taxes are expected to be recovered or paid. The cumulative
effect of this change in accounting for income taxes of $1,307,000 was
included in the consolidated statement of income for 1993.
EXTRAORDINARY LOSS
During fiscal 1993, the Company redeemed, at prices above par, all of its
outstanding 12.95% subordinated debt which resulted in a loss, net of income
tax, of $668,000. The loss represents the redemption premium and a write-off
of unamortized discount and deferred issuance costs.
CAPITAL RESOURCES AND LIQUIDITY
Funding for the Company's residential development activities is
principally provided by cash flows from operations, 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 and
the continuing expansion of the number of communities in which the Company is
offering homes for sale and to reduce debt. The Company expects that
inventories will continue to increase and is currently negotiating and
searching for additional opportunities to obtain control of land for
future communities.
The Company has a $230 million unsecured revolving credit facility with
fourteen banks which extends through June 2000. The facility reduces by 50% in
June 1998 unless extended as provided for in the agreement. As of October 31,
1995, the Company had $52.0 million of loans and approximately $31.7 million of
letters of credit outstanding under the facility.
The Company believes that it will be able to fund its activities through
a combination of operating cash flow and existing sources of credit.
INFLATION
The long-term impact of inflation on the Company is manifested in
increased land, land development, construction and overhead costs, as well as
in increased sales prices. For several years prior to fiscal 1989, the
Company was able to raise sales prices by amounts at least equal to its
cost increases. From fiscal 1989 through February 1, 1991, however,
sales prices either declined slightly or remained steady, and since then
have risen only modestly. Since fiscal 1989, the Company's costs
generally have increased except for land acquisition costs, which have
generally decreased.
The Company generally contracts for land significantly before development
and sales efforts begin and, accordingly, to the extent land acquisition costs
are fixed, increases or decreases in the sales prices of homes may affect the
Company's profits. Since the sales prices of homes are fixed at the time of
sale and the Company generally sells its homes prior to commencement of
construction, any inflation of costs in excess of those anticipated may
result in lower gross margins. The Company generally attempts to minimize
that effect by entering into fixed-price contracts with its subcontractors
and material suppliers for specified periods of time, which generally
do not exceed one year.
Housing demand, in general, is adversely affected by increases in interest
costs, as well as in housing costs. Interest rates, the length of time that
land remains in inventory and the proportion of inventory that is
financed affect the Company's interest costs. If the Company is unable to
raise sales prices enough to compensate for higher costs, which had generally
been the condition during prior years, or if mortgage interest rates increased
significantly, affecting prospective buyers' ability to adequately finance a
home purchase, the Company's revenues, gross margins and net income would be
adversely affected. Increases in sales prices, whether the result of
inflation or demand, may affect the ability of prospective buyers to afford
a new home.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial Statements as set forth in item 14(a)(1) and (2).
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item with respect to executive officers
of the Company is set forth in Part I. The information required by this item
with respect to the Directors of the Company is incorporated by reference to
the Company's Proxy Statement for the 1996 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 1996 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 1996 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 1996 Annual Meeting of Shareholders.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements and Financial Statement Schedules
1. Financial Statements
Page
Report of Independent Auditors F-1
Consolidated Statements of Income for the
Years Ended October 31, 1995, 1994 and 1993 F-2
Consolidated Balance Sheets as of
October 31, 1995 and 1994 F-3
Consolidated Statement of Shareholder's
Equity for the Years Ended
October 31, 1995, 1994 and 1993 F-4
Consolidated Statements of Cash Flows for the
Years Ended October 31, 1995, 1994 and 1993 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,
1995, 1994 and 1993 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:
Exhibit
Number Description
3.1 Certificate of Incorporation, as amended, is
hereby incorporated by reference to Exhibit 3.1
of the Registrant's Form 10-K for the fiscal year
ended October 31, 1989.
3.2 Amendment to the Certificate of Incorporation
dated March 11, 1993, is hereby incorporated by
reference to Exhibit 3.1 of Registrant's Form 10-
Q for the quarter ended January 31, 1993.
3.3 By-laws, as amended, are hereby incorporated by
reference to Exhibit 3.2 of the Registrant's Form
10-K for the fiscal year ended October 31, 1989.
Exhibit
Number Description
4.1 Specimen Stock Certificate is hereby incorporated
by reference to Exhibit 4.1 of the Registrant's
Form 10-K for the fiscal year ended October 31,
1991.
4.2 Indenture dated as of March 15, 1992, between
Toll Corp., as issuer, the Registrant, as
guarantor, NBD Bank, National Association, as
Trustee, including Form of Guarantee, is hereby
incorporated by reference to Exhibit 4 of Toll
Corp.'s Registration Statement on Form S-3 filed
with the Securities and Exchange Commission on
March 11, 1992, File No. 33-45704.
4.3 Indenture dated as of March 15, 1993, among Toll
Corp., as issuer, the Registrant, as guarantor,
and NBD Bank, National Association, as Trustee,
including Form of Guarantee, is hereby
incorporated by reference to Exhibit 4.1 of Toll
Corp.'s Registration Statement on Form S-3 filed
with the Securities and Exchange Commission,
March 10, 1993, File No. 33-58350.
4.4 Indenture dated as of January 15, 1994 between
Toll Corp., as issuer, the Registrant, as
guarantor, Security Trust Company, N.A., as
Trustee, including Form of Guarantee, is
incorporated by reference to Exhibit 4.1 of Toll
Corp.'s Registration Statement on Form S-3 filed
with the Securities and Exchange Commission on
January 23, 1995, File No. 33-51775.
10.1 Revolving credit agreement, dated as of November
1, 1993 as amended through July 25, 1995, among
First Huntingdon Finance Corp., the Registrant,
PNC Bank, National Association, CoreStates Bank,
N.A., Meridian Bank, NBD Bank, N.A., NationsBank
National Association, Bank Hapoalim B.M.,
Kleinwort Benson Limited, Mellon Bank, The Fuji
Bank, Limited, Credit Lyonnais, New York Branch,
Banque Paribas, Krieditbank Bank, Comerica Bank
and Bayerische Vereinsbank AG, New York Branch
and PNC Bank, National Association, as Agent.
PAGE
Exhibit
Number Description
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.
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 Stock Redemption Agreement between the Registrant
and Robert I. Toll, dated October 28, 1995.
10.8 Stock Redemption Agreement between the Registrant
and Bruce E. Toll, dated October 28, 1995.
10.9 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.
PAGE
Exhibit
Number Description
10.10 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.
10.11 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 14, 1995.
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 14, 1995
Robert I. Toll of Directors and Chief
Executive Officer
(Principal Executive Officer)
/s/ Bruce E. Toll President, Chief December 14, 1995
Bruce E. Toll Operating Officer, Secretary
and Director
/s/ Zvi Barzilay Executive Vice President December 14, 1995
Zvi Barzilay and Director
/s/ Joel H. Rassman Senior Vice President, December 14, 1995
Joel H. Rassman Treasurer and Chief
Financial Officer
(Principal Financial
Officer)
/s/ Joseph R. Sicree Vice President and December 14, 1995
Joseph R. Sicree Chief Accounting Officer
(Principal Accounting
Officer)
/s/ Robert S. Blank Director December 14, 1995
Robert S. Blank
/s/ Richard J. Braemer Director December 14, 1995
Richard J. Braemer
/s/ Roger S. Hillas Director December 14, 1995
Roger S. Hillas
/s/ Carl B. Marbach Director December 14, 1995
Carl B. Marbach
/s/ Paul E. Shapiro Director December 14, 1995
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, 1995 and 1994, and
the related consolidated statements of income, shareholders' equity, and
cash flows for each of the three years in the period ended
October 31, 1995. 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, 1995 and 1994, and the consolidated
results of their operations and their cash flows for each of the three years
in the period ended October 31, 1995, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken
as a whole, presents fairly in all material respects the information set
forth therein.
As discussed in Note 1 to the financial statements, in 1993 the Company
changed its method of accounting for income taxes.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
December 7, 1995
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except per share data)
October 31
1995 1994 1993
Revenues:
Housing sales $643,017 $501,822 $392,560
Interest and other 3,322 2,242 2,701
-------- -------- --------
646,339 504,064 395,261
======== ======== ========
Costs and expenses:
Land and housing construction 485,009 380,240 290,878
Selling, general and administrative 59,684 48,789 43,326
Interest 22,207 18,195 17,129
-------- ------- -------
566,900 447,224 351,333
-------- ------- -------
Income before income taxes, extraordinary
item and change in accounting 79,439 56,840 43,928
Income taxes 29,507 20,663 16,509
-------- ------- -------
Income before extraordinary item and
change in accounting 49,932 36,177 27,419
Extraordinary loss from extinguishment
of debt, net of income taxes -- -- (668)
Cumulative effect of change in
accounting for income taxes -- -- 1,307
-------- ------ -------
Net income $ 49,932 $ 36,177 $28,058
======== ======== =======
Earnings per share
Primary:
Income before extraordinary
item and change in accounting $ 1.47 $ 1.08 $ .82
Extraordinary loss -- -- (.02)
Cumulative effect of change in
accounting for income taxes -- -- .04
-------- -------- -------
Net income $ 1.47 $ 1.08 $ .84
======== ======== =======
Fully-diluted:
Income before extraordinary item and
change in accounting $ 1.41 $ 1.05 $ .82
Extraordinary loss -- -- (.02)
Cumulative effect of change in
accounting for income taxes -- -- .04
-------- -------- ------
Net Income $ 1.41 $ 1.05 $ .84
======== ======== ======
Weighted average number of shares
Primary 33,909 33,626 33,467
======== ======== ======
Fully-diluted 36,651 35,664 33,583
======== ======== ======
See accompanying notes.
CONSOLIDATED BALANCE SHEETS (Amounts in thousands)
October 31
1995 1994
ASSETS
Cash and cash equivalents $ 27,772 $ 38,026
Marketable securities, at fair value 3,674
Inventory 623,830 506,347
Property, construction and office
equipment 11,898 11,537
Receivables, prepaid expenses and other
assets 25,017 22,695
Mortgage notes receivable 3,940 4,614
-------- --------
$692,457 $586,893
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Loans payable $ 59,057 $ 17,506
Subordinated notes 221,226 227,969
Customer deposits on sales contracts 36,194 30,071
Accounts payable 31,640 28,914
Accrued expenses 46,771 40,872
Collateralized mortgage obligations payable 3,912 4,686
Income taxes payable 36,998 32,699
-------- -------
Total liabilities 435,798 382,717
-------- -------
Shareholders' equity
Preferred stock, none issued
Common stock, 33,638,026 and 33,423,309 shares
issued at October 31, 1995 and 1994, respectively 336 334
Additional paid-in capital 38,747 36,198
Retained earnings 217,576 167,644
------- -------
Total shareholders' equity 256,659 204,176
------- --------
$692,457 $586,893
======== ========
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, 1992 33,087 $331 $32,672 $103,409 $136,412
Net income -- -- -- 28,058 28,058
Exercise of stock options 229 2 2,500 2,502
Employee stock plan
purchases 3 34 34
------ ---- ------ ------- -------
Balance, October 31, 1993 33,319 333 35,206 131,467 167,006
Net income 36,177 36,177
Exercise of stock options 101 1 954 955
Employee stock plan
purchases 3 38 38
------ ---- ------ ------- --------
Balance, October 31, 1994 33,423 334 36,198 167,644 204,176
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
====== ===== ======= ======== ========
See accompanying notes.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands)
Year Ended October 31
1995 1994 1993
Cash flows from operating activities:
Net income $ 49,932 $ 36,177 $ 28,058
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation and amortization 2,943 2,687 2,700
(Gain) loss from repurchase of
subordinated debt (355) (616) 1,108
Deferred taxes (476) (361) (882)
Net realizable value provisions 3,800 4,300 2,400
Changes in operating assets and liabilities:
Increase in inventory (118,720) (104,482) (116,253)
Increase in receivables, prepaid
expenses and other assets (3,345) (1,481) (2,950)
Increase in customer deposits on
sales contracts 6,123 7,622 7,319
Increase in accounts payable and
accrued expenses 8,625 22,594 14,398
Increase in income taxes payable 4,957 4,046 9,906
-------- -------- -------
Net cash used in operating activities (46,516) (29,514) (54,196)
-------- -------- -------
Cash flows from investing activities:
Sale (purchase) of marketable securities 3,674 (1,691) 13,493
Purchase of property and equipment, net (2,452) (2,968) (1,805)
Principal repayments of mortgage
notes receivable 684 5,308 13,207
------ ------ ------
Net cash provided by investing activities 1,906 649 24,895
------ ------ ------
Cash flows from financing activities:
Proceeds from loans payable 160,000 23,493 16,380
Principal payments of loans payable (121,159) (35,900) (18,297)
Net proceeds from issuance of subordinated debt 55,541 71,993
Repurchase of subordinated debt (6,256) (3,290) (29,552)
Principal payments of collateralized mortgage
obligations payable (780) (6,152) (13,644)
Proceeds from stock options exercised and
employee stock plan purchases 2,551 870 1,343
------- ------- ------
Net cash provided by financing activities 34,356 34,562 28,223
------- ------- ------
Net (decrease) increase in cash and
cash equivalents (10,254) 5,697 (1,078)
Cash and cash equivalents, beginning of year 38,026 32,329 33,407
-------- -------- -------
Cash and cash equivalents, end of year $ 27,772 $ 38,026 $32,329
======== ======== =======
Supplemental disclosures of cash flow information
Interest paid, net of amount capitalized 7,587 $ 6,762 $ 7,754
======== ======== =======
Income taxes paid $ 24,547 $ 16,977 $ 5,738
======== ======== =======
Supplemental disclosures of noncash activities
Residential inventories acquired through
seller financing $ 2,563 $ 5,000 $ 818
======== ======== =======
Income tax benefit relating to exercise of
employee stock options $ 478 $ 124 $ 1,192
======== ======== =======
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.
Income recognition
The Company is engaged in the development, construction and sale of residential
housing. Revenues and cost of sales are recorded at the time each home sale is
closed and title and possession have been transferred to the buyer. Closing
normally occurs shortly after construction is substantially completed.
Cash and cash equivalents
Highly liquid investments with original maturities of three months or less are
classified as cash equivalents. The carrying value of these investments
approximates fair market value.
Property, construction and office equipment
Property, construction and office equipment are recorded at cost and are stated
net of accumulated depreciation of $14,079,000 and $12,343,000 at October 31,
1995 and 1994, 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.
Income taxes
During the fourth quarter of 1993, the Company adopted Statement of Financial
Accounting Standard No. 109, "Accounting for Income Taxes," effective November
1, 1992. This Statement requires a liability approach for measuring deferred
taxes based on temporary differences between the financial statement and tax
bases of assets and liabilities existing at each balance sheet date using
enacted tax rates for years in which taxes are expected to be paid or
recovered. The cumulative effect of this change in accounting for income
taxes of $1,307,000 was included in the consolidated statement of
income for 1993.
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 1995 and 1994 computation of fully-diluted
earnings per share assumes the conversion of the Company's 4 3/4% Convertible
Subordinated Notes due 2004 at $21.75 per share for the period that the notes
were outstanding, although the closing price of the Company's common stock on
the New York Stock Exchange on October 31, 1995 was $17 7/8 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 will take place
in phases with the merger of the Edmunds organization to be completed by
April 1, 1996. The acquisition price is not material to the financial
position of the Company.
2. Inventory
Inventory consists of the following (amounts in thousands):
October 31
1995 1994
Land and land development costs $182,790 $158,686
Construction in progress 377,456 277,098
Sample homes 32,448 22,641
Land deposits and costs of
future development 13,555 13,943
Loan assets acquired for
future development 5,157 25,186
Deferred marketing and
financing costs 12,424 8,793
-------- --------
$623,830 $506,347
======== ========
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 the Resolution Trust Corporation and various banks
with the intention of converting a substantial portion of the value to land for
new communities. At the time the Company acquires title to the property, the
cost of the loan asset is reclassified to land and land development costs.
For the years ended October 31, 1995, 1994 and 1993, the Company provided for
inventory writedowns to net realizable value and the expensing of previously
capitalized costs of $5,366,000, $6,957,000, and $2,754,000, 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, 1995 is as follows (amounts in thousands):
1995 1994 1993
Interest capitalized,
beginning of year $39,835 $38,270 $34,470
Interest incurred 25,780 21,701 20,929
Interest expensed (22,207) (18,195) (17,129)
Write-off to cost
and expenses (266) (1,941)
--------- -------- --------
Interest capitalized,
end of year $43,142 $39,835 $38,270
======== ======== ========
3. Loans payable
As of October 31, 1995 and 1994, the Company had loans payable of $59,057,000
and $17,506,000, respectively, including borrowings under the Company's
revolving credit agreement of $52,000,000 and $10,000,000, respectively.
As of October 31, 1995, the face amount of the loans approximates
estimated fair market value.
The Company has a $230,000,000 unsecured revolving credit facility with
fourteen banks which extends through June 2000. The facility reduces by 50%
in June 1998 unless extended as provided for by the agreement.
Interest is payable on short-term borrowings at 1 1/8% 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
borrowings under the facility at 7.54% until June 2000. The weighted average
interest rate on outstanding loans at October 31, 1995 was 7.52%.
An annual commitment fee of 3/8 of 1% is payable on the unused portion of
the facility. As of October 31, 1995, letters of credit and
obligations under escrow agreements of $31,716,000 were outstanding. The
agreement contains various covenants, including financial covenants related to
consolidated shareholders' equity, indebtedness and inventory. Due to the
requirement that a minimum consolidated shareholders' equity be maintained, the
Company is restricted to the payment of cash dividends and the repurchase of
Company stock of approximately $44,641,000 as of October 31, 1995.
4. Subordinated notes and debentures
In January 1994, the Company issued $57,500,000 of 4 3/4% Convertible Senior
Subordinated Notes (the "4 3/4% Notes"), due January 15, 2004, that are
subordinated to all senior indebtedness. The 4 3/4% 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 4 3/4%
Notes are redeemable, in whole or in part, at the option of the Company on or
after January 15, 1997 at various prices. During 1995 and 1994, the Company
acquired $1,301,000 and $3,000,000, respectively, of these notes in the open
market at prices below par. The gains realized by the Company were immaterial
and included in other income.
In March 1993, the Company issued $75,000,000 of 9 1/2% Senior Subordinated
Notes (the "9 1/2% Notes"), due March 15, 2003, that are subordinated to
all senior indebtedness. The 9 1/2% Notes are redeemable, in whole or
in part, at the option of the Company on or after March 15, 1998 at
various prices. During 1994, the Company acquired $1,040,000 of these
notes in the open market at prices below par. The gain realized by the
Company was immaterial and included in other income.
In March 1992, the Company issued $100,000,000 of 10 1/2% Senior Subordinated
Notes (the "10 1/2% Notes"), due March 15, 2002, that are subordinated to all
senior indebtedness. The 10 1/2% Notes are redeemable in whole or in part, at
the option of the Company on or after March 15, 1997 at various prices. During
1995, the Company acquired $5,500,000 of these notes in the open market at
prices above par. The loss realized by the Company was immaterial and
included in other income.
During the year ended October 31, 1993, the Company redeemed all of its
outstanding 12.95% Subordinated Notes due 1996 at a price above par. The
principal amount of the notes redeemed was $28,973,000 and the redemption
resulted in an extraordinary loss of $668,000, net of income taxes of $440,000.
The aggregate fair market value of all of the outstanding notes, based upon
their quoted market price as of October 31, 1995, was
approximately $225,906,000.
The indentures related to the 10 1/2% Notes and 9 1/2% Notes restrict certain
payments including cash dividends and repurchase of the Company's stock.
5. 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 nonemployee
directors provide for the granting of incentive stock options ("ISO"s) 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 to the sum of the number of shares
available for grant at the end of the preceding calendar year and 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, 1995:
Number Option Price
of Shares Per Share
Outstanding,
November 1, 1992 697,700 $ 3.25 - $12.19
Granted 590,200 9.06 - 15.13
Exercised (227,300) 3.25 - 10.75
Cancelled (28,850) 10.75 - 12.75
--------
Outstanding,
October 31, 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
=========
Exercisable,
October 31, 1995 1,086,375 $ 3.25 - $19.00
=========
Options available for grant at October 31, 1995, 1994 and 1993 under all the
plans were 3,260,000, 2,537,400 and 2,225,200, respectively.
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, 1995,
a total of 29,640 shares had been purchased pursuant to the terms of the Plan
since its inception.
The following summarizes stock purchases under the Plan during the three years
ended October 31, 1995:
Number of Price
Shares Range
1993 2,748 $12.11 - $13.78
1994 3,124 10.81 - 17.10
1995 1,942 9.62 - 17.81
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 million 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 million 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.
6. Income taxes
The provision for income taxes includes federal and state taxes. Substantially
all of the difference between the effective tax rate (37.1%, 36.4% and 37.6% for
1995, 1994 and 1993, respectively) used in these provisions and the statutory
federal tax rate of 35% in 1995 and 1994 and 34.8% in 1993 was due to state
taxes, net of federal tax benefit, and in 1994 and 1993, the recalculation of
the deferred tax balances due to the increase in the federal statutory rate and
decrease in the estimated state tax rate, and the effect of nontaxable income
generated from short-term investments.
The provisions for income taxes for the three years ended October 31, 1995 were
as follows (amounts in thousands):
1995 1994 1993
Federal $27,586 $19,020 $14,953
State 1,921 1,643 1,556
------- ------- -------
$29,507 $20,663 $16,509
======= ======= =======
Current $29,983 $21,024 $16,084
Deferred (476) (361) 425
------- ------- -------
$29,507 $20,663 $16,509
======= ======= =======
The components of income taxes payable as of October 31, 1995 and 1994 were
(amounts in thousands):
1995 1994
Current $23,986 $19,211
Deferred 13,012 13,488
------- -------
$36,998 $32,699
======= =======
The components of net deferred taxes payable as of October 31, 1995 and 1994
were (amounts in thousands):
1995 1994
Deferred tax liabilities
Capitalized interest $16,776 $15,817
Deferred expenses 2,955 3,004
Other 225 230
------- -------
Total 19,956 19,051
------- -------
Deferred tax assets
Net realizable value
Reserves 3,699 2,959
Inventory valuation
differences 1,780 1,360
Accrued expenses
deductible when paid 791 801
Other 674 443
------- -------
Total 6,944 5,563
======= =======
Net deferred tax liability $13,012 $13,488
======= =======
7. Employee retirement plan
The Company maintains a salary deferral savings plan covering substantially all
employees. The plan provides for Company contributions totaling 2% of all
eligible compensation, plus 2% of eligible compensation above the social
security wage base, plus matching contributions of up to 2% of eligible
compensation of employees electing to contribute via salary deferrals.
Company contributions with respect to the plan totaled $851,000, $770,000,
and $604,000 for the years ended October 31, 1995, 1994 and 1993, respectively.
8. Commitments and contingencies
As of October 31, 1995, the Company had agreements to purchase land and
improved homesites for future development with purchase prices aggregating
approximately $150,476,000 of which $11,729,000 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, 1995, the Company had agreements of sale outstanding to
deliver 1,078 homes with an aggregate sales value of approximately
$400,820,000. As of that date, the Company has arranged through a number of
outside mortgage lenders to provide approximately $130,338,000 of mortgages
related to those sales agreements.
The Company is involved in various claims and litigation arising from its usual
and customary business with customers and subcontractors. The Company believes
that it has adequate insurance or meritorious defenses in all pending cases and
that adverse decisions in any or all of the cases would not have a material
effect on the financial condition and the results of operations of the Company.
Summary Consolidated Quarterly Financial Data (Unaudited)
(Amounts in thousands, except per share data)
Three Months Ended
FISCAL 1995: Oct. 31 July 31 April 30 Jan. 31
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
Three Months Ended
FISCAL 1994: Oct. 31 July 31 April 30 Jan. 31
Revenues $174,432 $120,060 $91,444 $118,128
Income before income taxes $ 23,437 $ 12,931 $ 6,976 $ 13,496
Net income $ 15,330 $ 7,992 $ 4,350 $ 8,505
Earnings per share
Primary $ .46 $ .24 $ .13 $ .25
Fully-diluted $ .44 $ .23 $ .13 $ .25
Weighted average number of
shares outstanding
Primary 33,526 33,563 33,676 33,740
Fully-diluted 35,994 36,149 36,317 34,195
TOLL BROTHERS, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(Amounts in thousands)
Additions
Balance at Charged to Charged Balance
Beginning Costs and to Other at End
Description of Period Expenses Accounts Deductions of Period
(A)
Net realizable
value reserves
for inventory
of land and land
development costs:
Year ended
October 31, 1993:
Massachusetts $3,737 $600 $1,578 $2,759
New Jersey 1,705 1,800 449 3,056
Pennsylvania 1,247 1,247
------ ------ ------ ------
Total $6,689 $2,400 $2,027 $7,062
====== ====== ====== ======
Year ended
October 31, 1994:
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
Massachusettes 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
====== ====== ====== =======
(A) Represents amount of reserves utilized, which is recorded at the time
that affected homes are closed.