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Raymond James' 39th Annual Institutional
Investors ConferenceMarch 5, 2018
Information presented herein for the first quarter ended January 31, 2018 is subject tofinalization of the Company's regulatory filings, related financial and accountingreporting procedures and external auditor procedures.
This report contains or may contain forward-looking statements within the meaning ofSection 27A of the Securities Act and Section 21E of the Exchange Act. One can identifythese statements by the fact that they do not relate to matters of a strictly historical orfactual nature and generally discuss or relate to future events. These statementscontain words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,”“believe,” “may,” “can,” “could,” “might,” “should” and other words or phrases of similarmeaning. Such statements may include, but are not limited to, information related to theanticipated closing of the offering of the Notes; anticipated operating results; homedeliveries; financial resources and condition; changes in revenues; changes inprofitability; changes in margins; changes in accounting treatment; cost of revenues;selling, general and administrative expenses; interest expense; inventory write-downs;home warranty and construction defect claims; unrecognized tax benefits; anticipatedtax refunds; sales paces and prices; effects of home buyer cancellations; growth andexpansion; joint ventures in which we are involved; anticipated results from ourinvestments in unconsolidated entities; the ability to acquire land and pursue real estateopportunities; the ability to gain approvals and open new communities; the ability to sellhomes and properties; the ability to deliver homes from backlog; the ability to securematerials and subcontractors; the ability to produce the liquidity and capital necessaryto expand and take advantage of opportunities; and legal proceedings, investigationsand claims.
Any or all of the forward-looking statements included in this report are not guaranteesof future performance and may turn out to be inaccurate. Consequently, actual resultsmay differ materially from those that might be anticipated from our forward-lookingstatements. Therefore, we caution you not to place undue reliance on our forward-looking statements.
The factors that could cause actual results to differ from those expressed or implied byour forward-looking statements include, among others: demand fluctuations in thehousing industry; adverse changes in economic conditions in markets where we conductour operations and where prospective purchasers of our homes live; increases in
cancellations of existing agreements of sale; the competitive environment in which weoperate; changes in interest rates or our credit ratings; the availability of capital;uncertainties in the capital and securities markets; the ability of customers to obtainfinancing for the purchase of homes; the availability and cost of land for future growth;the ability of the participants in various joint ventures to honor their commitments;effects of governmental legislation and regulation; effects of increased taxes orgovernmental fees; weatherconditions; the availability and cost of labor and building and construction materials; thecost of raw materials; the outcome of various product liability claims, litigation andwarranty claims; the effect of the loss of key management personnel; changes in taxlaws and their interpretation; construction delays; and the seasonal nature of ourbusiness. For a more detailed discussion of these factors, see the risk factors in theinformation under the captions “Risk Factors” and “Management’s Discussion andAnalysis of Financial Condition and Results of Operations” in our most recent annualreport on Form 10-K filed with the SEC.
From time to time, forward-looking statements also are included in our periodic reportson Forms 10-K, 10-Q and 8-K, in press releases, in presentations, on our website and inother materials released to the public.
Any or all of the forward-looking statements included in our reports or publicstatements made by us are not guarantees of future performance and may turn out tobe inaccurate. This can occur as a result of incorrect assumptions or as a consequence ofknown or unknown risks and uncertainties. Many factors mentioned in our reports orpublic statements made by us, such as market conditions, government regulation, andthe competitive environment, will be important in determining our future performance.Consequently, actual results may differ materially from those that might be anticipatedfrom our forward-looking statements.
This discussion is provided as permitted by the Private Securities Litigation Reform Actof 1995, and all of our forward-looking statements are expressly qualified in theirentirety by the cautionary statements contained or referenced in this section.
Forward-looking statements speak only as of the date they are made. We undertake noobligation to publicly update any forward-looking statements, whether as a result ofnew information, future events or otherwise.
STATEMENT OF FORWARD‐LOOKING INFORMATION
2
OVERVIEW
3
#1 LUXURY BRAND
Nation’s leading luxury home builder Nationally recognized, award-winning brand Founded in 1967 and listed on NYSE since 1986 Average Q1 FY 2018 delivered home price of $826,000 Average price is double that of most other public homebuilders Fortune Magazine's World’s Most Admired Companies - #1
Homebuilder four years in a row: 2015, 2016, 2017 & 2018*
SOLID MANAGEMENT & FINANCIAL BASE
Strong balance sheet and credit ratings Approx. $ 1.7 BN of available liquidity at Q1 2018 Member of the 2017 FORTUNE 500 Executive & director beneficial ownership of approx. 9.0%†
Average senior management tenure of 19 years
GEOGRAPHIC & PRODUCT DIVERSITY
Builds in 20 states and approximately 50 markets Balanced footprint across the East, West and South Strong land position – Own or Control lots 49,500 Urban presence in NYC, Metro DC & Philadelphia Serves urban/suburban, luxury move-up, millennial, empty
nester, & active-adult buyers and renters in select markets
*From Fortune magazine, February 1, 2018 ©2018 Time Inc. FORTUNE and “World's Most Admired Companies®” are registered trademarks of Time Inc. and are used under license. FORTUNE and Time Inc. are not affiliated with, and do not endorse products or services of Toll Brothers, Inc.
† At January 19, 2018
THE #1 BRAND IN LUXURY HOME BUILDING
4
4 Y e a r s i n a R o w
2018
5
$1.48 $1.88
$2.67
$3.91 $4.17
$5.17
$5.81
$6.90
TOTAL REVENUES($ in billions)
6
Fiscal Year
* Mid-point of ESTIMATED range
3 Months Ended January 31, Fiscal Year Ended October 31,
($ in millions), except Avg Prices 2018 2017 % Change 2017 2016 % Change
Contracts
Units 1,822 1,522 20% 8,175 6,719 22%
Dollars $1,690 $1,243 36% $6,828 $5,650 21%
Avg price ($ in 000s) $928 $817 14% $835 $841 (1%)
Backlog
Units 6,250 5,145 21% 5,851 4,685 25%
Dollars $5,576 $4,345 28% $5,062 $3,984 27%
Avg price ($ in 000s) $892 $845 6% $865 $850 2%
Deliveries
Units 1,423 1,190 20% 7,151 6,098 17%
Dollars $1,175 $921 28% $5,815 $5,170 12%
Avg price ($ in 000s) $826 $774 7% $813 $848 (4%)
TOLL BROTHERS RESULTS
7
CURRENT U.S. HOUSING MARKET
PERSONAL BALANCE SHEETS IMPROVING
Unemployment rate at lowest point since 2000 Mortgage rates still low. Affordability is solid Purchase decision is a confidence-sensitive issue Rising home prices improve home equity of our potential buyers
CONSTRAINED SUPPLY
Fewer land entitlements processed for several years Inventory/lot shortages in some markets Constrained capital access favors largest builders
PENT-UP DEMAND
Continued population growth through recession and recovery Household formations are increasing Seven years of pent-up demand releasing Homeownership rate rising-still below historic norms
MARKET IS GROWING
Market continues on its pace of steady growth Increasing volumes of new home sales but still below long-term averages Rising home values and stock market strengthen personal balance
sheets and provide additional equity for down payments
8
WELL‐POSITIONED FOR KEY TRENDS
9
REGIONAL GROWTH
Expanded in California and Nevada Expanded in Texas & Colorado Entered Seattle and Boise Maintained dominance in affluent core
markets from Washington DC to Boston Seeking more land in Florida
URBAN GROWTH
Growing City Living in NYC Entered the Metro Washington DC market Exploring additional cities Building urban rentals Seeking urban infill/re-use opportunities
DEMOGRAPHIC TRENDS
Expanding Active Adult to new markets Expanding Toll’s rental business Designing more homes attractive to
multigenerational buyers Reaching affluent millennials with
targeted products
1970-2007 2008-2017
Annual Shortfall
Average Annual Production
Source: U.S. Census Bureau
Total estimated construction shortfall (concentrated in single family) of 7.0 million houses from 2008-2017
Actual Average Annual Housing
Starts
Average Annual Housing Starts
BASIC DEMOGRAPHICS DRIVE AN INDUSTRY EMERGING FROM ITS SLUMBER
10
1,585,000
885,000
700,000
11
NATIONWIDE FOOTPRINT POSITIONSUS FOR GROWTH
* As of January 31, 2018
20 STATES, 50 MARKETS
North
Mid-Atlantic
South
West
California
City Living
R E G I O N S /S e l l i n g C o m m u n i t i e s
49
60
72
67
41
6
Total: 295
Seattle
San Francisco
San Jose
Los Angeles
San DiegoPhoenix
Dallas
Denver
Miami
ChicagoPhiladelphia
New York City
Boston
Charlotte
Raleigh
Ft . MyersWest Palm Beach
Naples
Las Vegas
Detroit
Palm Springs
Jupiter
Reno
Jacksonville
Minneapolis
Houston
Tucson
Fort Collins
Boca Raton
Sacramento
Orlando
Wilmington
Princeton
Austin
Baltimore
Hartford
Boise
Washington DC
16%
15%
16%19%
30%
4%
FYE 2017 Backlog($)
GEOGRAPHICALLY DIVERSIFIED PORTFOLIO
12 North Mid-Atlantic South West California City Living
13%
18%
16%20%
27%
7%17%
20%
15%
28%
16%
4%
FYE 2017 Lots Owned
FY 2017 Revenue($)
$298 $343
$369 $381 $387 $395 $397 $413 $418$451
$473
$582
$813 $826
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
DR Horton Beazer M/I Lennar NVR Pulte KB Home Meritage Hovnanian MDC TaylorMorrison
TRI Pointe TollBrothersFY 2017
TollBrothers
Q1 FY 2018
Average Delivered Home Price*($000)
ONLY NATIONAL HOMEBUILDER FOCUSED ON LUXURY MARKET
Toll’s main competitors are small private builders, not the larger public builders.
* Updated based on most recent reported fiscal-year-end deliveries.13
TOLL HOME PRICES Q1 FY 2018*(by unit deliveries)
4%
58%
16%
22%
Less than $300,000
$300,000 to $749,000
$750,000 to $999,999
Over $1,000,000
*Numbers may not add due to rounding in units* Through January 31, 2018
62%Under
$750,000
14
77.8%
11.3%
2.9%
8.0%
California161 Homes
ONLY 8.0% OF OUR HOMES SETTLED OUTSIDE CALIFORNIA& CITY LIVING ARE OVER $1 MM
(Homes Settled Q1 FY 2018*)
15* Through January 31, 2018
1,107 Homes
Settlements $ > $1 MMCity Living 41 Homes
Other States114 Homes
Settlements $ < $1 MM
HOW MUCH HOUSEHOLD INCOME IS REQUIRED FOR A $657,000 HOUSE?
TOTAL HOUSE PRICE $657,000
20% Down Payment $131,200
Loan Amount at 4.5% Interest (80% LTV) $525,500
Monthly Payment $2,700
Monthly Earning (25% of gross income for mortgage) $10,700
Required Annual Household Income: ~$128,000
Toll Brothers: Average Delivered Price Q1 FY 2018
Avg. Delivered Price: $826,000
Avg. Price Excluding City Living: $778,000
Avg. Price Excluding CA and City Living: $657,000
16
17
• Move-up
• Empty Nester
• Active Adult
• Second Home
• Urban-Infill
• Urban Redevelopment
• Golf Course & Country Club
• High-Rise
• Suburban High Density
• Urban & Suburban Rental
THE WIDEST VARIETY OF HOMES IN THE INDUSTRY
62%
15%
19%
4%
FY 2017
89%
1%
10%
FY 2000
EVOLVING PRODUCT DIVERSIFICATION(by unit deliveries)
Single Family Attached Age Qualified City Living18
MOVE ‐UP
19
Southlake Meadows, Southlake, TX
Canyon Oaks, Chatsworth, CAEMPTY NESTER
20
ACTIVE ADULT
21
Regency at Summerlin, Las Vegas, NV
Sienna Plantation, Missouri City, TXMASTER PLANNED
22
SECOND HOME Alara at Altair, Irvine, CA
23
URBAN REDEVELOPMENT Maxwell Place, Hoboken, NJ
24
25
URBAN MIXED USE Pierhouse at Brooklyn Bridge Park, Brooklyn, NY
SUBURBAN HIGH DENSITY
26
URBAN & SUBURBAN RENTAL
27
The Morgan at Provost Square, Jersey City, NJ
Parc Plymouth Meeting, Plymouth Meeting, PA
The Kendrick, Needham, MA
URBAN INFILL
28
TOLL BROTHERS CITY LIVING
29* As January 31, 2018
DISTINCTIVE PRODUCT
Focus on buildings in the 50 – 200 unit range located in upscale neighborhoods
Develop differentiated products based on granular analysis of each neighborhood
Not focused on super luxury, targeting $2,000 -$2,500 per square foot in NYC
SUCCESSFUL URBAN TRACK RECORD
Formed in 2003 to leverage luxury brand Follows demographic trends of Millennials, more
families and Boomers living in cities Communities in NYC, North Jersey’s Gold Coast,
Philadelphia & Urban Metro DC
BROAD EXPERIENCE
Completed construction on 32 buildings totaling approximately 4,000 units*
Selling from 11 buildings, totaling 1,100 units* Future pipeline consists of 5 buildings, totaling
approximately 700 units* Exploring Boston, Los Angeles, San Francisco & Miami
FOCUS ON LAND
30* As of January 31, 2018
CAREFULLY MANAGED INVENTORY
Protects against potential land shortages in lot-constrained markets All land deals approved at corporate
headquarters by senior management Most land bought post-approvals
ACQUISITION
Control 49,500 home sites* Operate in most difficult land approval
markets in U.S. Skilled in land acquisition, approvals, &
development across all markets
DEVELOPMENT
One of U.S.’s largest land developers In-house engineering company, ESE,
manages site design & land improvements Every ESE plan is designed for approvals,
constructability & most importantly, the end use…a luxury home community
BUILDING ON A SOLID LAND POSITION
33,118
39,146 40,844
48,058
60,189
83,126
91,207
73,768
59,251
39,784
31,91734,852
37,49740,350
48,628 47,16744,253
48,837 48,311 49,547
2000 2001 2002 2003 2004 2005 Q22006
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Q12018
Owned Optioned
17,420
32,127
Lots Owned and Optioned
17,600 Finished Lots at 1/31/18
Fiscal Year End31
HOMEBUILDER SCHOOL QUALITY INDEX
9.06
8.40
7.306.89 6.82 6.67
6.335.87
5.59 5.47 5.47 5.44
4.754.20 4.11
3.66
1.17
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
10.00
TOL TMHC MHO TPH CAA HOV PHM NVR LEN MTH WLH BZH MDC DHI CCS KBH LGIH
Average School District Rating(0-10 Scale)
Source: Raymond James, “’Back to School, Episode IV’: Our Expanded Land Analysis of Public Homebuilders” U.S. Research, October 20, 201532
• Toll’s luxury systems developed over 50 years
• Buyers choose from hundreds of structural and designer options
• In Q1 2018 the average buyer added approximately $149,000 in options and premiums, consistent with approximately 20% of base price in prior years
• Provides competitive advantage vs. small builders
• Toll Architecture systemizes high-volume home production
CUSTOM HOMES BUILT USING HIGH ‐VOLUME TECHNOLOGY
33
Madison at Parkside, Lake Forest, CA
* As January 31, 2018
TOLL INTEGRATED SYSTEMS –PANEL & TRUSS PLANT
• Manufactures and distributes lumber packages, wall panels, floor & roof trusses, interior & exterior trim, signature millwork, windows, and doors
• Operates four plants in suburban Pennsylvania, Virginia, and Indiana
• Supplied components for approximately 3,200 homes in FY 2017 from Massachusetts to South Carolina on the East Coast, and Michigan & Illinois in the Mid-West
• Builds more than 190 different home plans with multiple elevations and hundreds of options
• Supplies material to condo & City Living developments
• Improves timeline, quality, costs, and reduces waste
• Reduces dependence on skilled carpenters in times of labor shortage
34
• 24% of buyers paid cash
• Our buyers have strong credit profiles with an average Q1 FY 2018 FICO score of 756 on conforming loans and jumbo loans
• Average LTV of 70% Q1 FY 2018
• 29% of buyers used jumbo mortgages in Q1 FY 2018
• TBI served 53% of Toll buyers using mortgages in Q1 FY 2018
• Pre-sells loans individually to minimize risk
• Investors who provide our customers with mortgages have continued to issue new commitments
• Long term rate locks available
STRONG BUYER PROFILE/TBI MORTGAGE
The Hills at Parker, Parker, CO
35
36
DIVERSIFYING INCOME STREAMS
Suburban Home Building (For Sale)
Land Sales &Development
City Living(Condo for Sale)
Apartment Living(Rental)*
Ancillary Businesses
- 50 markets in 20 states
• Move up
• Empty nester
• Active Adult
• Second home
• Master-planned resort style
• Suburban high density
- Gibraltar Real Estate Capital
- TBI Mortgage
- Golf Course Development & Management
- Toll Landscaping
- TBI Smart Home Solutions, Inc.
- Westminster Title
- Located in Urban and Suburban locations
- 6 projects (2,792 units) stabilized
- 2 projects (749 units) leasing
- 7 projects (2,336 units) under development
- 26 projects (8,300 units) in the pipeline
- Manhattan, Brooklyn, and Queens, NYC
- Hoboken and Jersey City, NJ
- Metro Washington, DC
- Philadelphia, PA
- Lot sales to 3rd
parties builders
• Shapell (CA)
• Northgrove at Spring Creek (TX)
• Woodson's Reserve (TX)
• Travisso (TX)
• Sienna South (TX)
* As January 31, 2018
$49,515
$66,630
$107,334
$88,692$98,966
$169,375
$150,000
$0
$18,500
$37,000
$55,500
$74,000
$92,500
$111,000
$129,500
$148,000
$166,500
$185,000
2012 2013 2014 2015 2016 2017 2018*
Other Income Joint Venture Income
37
OTHER INCOME AND JOINT VENTURE INCOME($ Thousands)
* Project $130 million to $170 million of pre‐tax income in FY 2018
90,000
60,000
FY
TOLL APARTMENT LIVING/CAMPUS LIVING*
38* As of January 31, 2018
COMPLEMENT FOR-SALE BUSINESS
Investing in Apartment & Student Housing rental development to maximize operational synergies
Building on Toll Brothers brand name and skills A hedge against For-Sale cyclicality Own or control land for approximately 14,200 units
BROAD EXPERIENCE
Developed & operate 2,792 units Developed and sold 418 Campus Living units (1,493
beds) at Univ. of Maryland in College Park Leasing up at 2 communities of 749 units 2,336 rental units under construction in 7 projects
from Massachusetts to Atlanta
STRATEGIC GROWTH
Control land for 8,300 future apartment & student living units in Northeast/Mid-Atlantic, Dallas-Fort Worth metro, Atlanta, Phoenix & California
Expect to invest additional $100 - $200 million Plan to expand business nationally Combine premier locations with luxury, for-sale
finishes, services and amenities
SUPERIOR CAPITAL MARKET ACCESS
SENIOR/CORPORATE CREDIT RATINGS
Fitch Inc. BBB- (Stable)
Standard & Poor’s BB+ (Stable)
Moody’s Ba1 (Stable)
39
CAPITALIZATION*
Toll Brothers, Inc.
First Huntingdon Finance Corp. Toll Brothers Finance Corp.
* As of January 31, 201840
† The Company finished the period ending 1/31/2018 with $1.15 billion available under its revolving credit facility.
$1.295 BN Revolving Credit Facility $500 MM Term LoanDue May 2021 † Due August 2021
Commitment Commitment■ Citi $100 MM ■ SunTrust $100 MM■ Deutsche Bank $100 MM ■ Sumitomo Mitsui $75 MM■ Mizuho Bank $100 MM ■ US Bank $75 MM■ PNC $100 MM ■ Wells Fargo $60 MM■ SunTrust $100 MM ■ The Bank of New York $55 MM■ Wells Fargo $100 MM ■ Capital One $50 MM■ Capital One $75 MM ■ Beneficial Bank $30 MM■ Sumitomo Mitsui $75 MM ■ Fifth Third Bank $30 MM■ US Bank $75 MM ■ PNC $25 MM■ BB&T $50 MM $500 MM■ Comerica $50 MM■ Fifth Third Bank $50 MM■ Regions Bank $50 MM■ TD Bank $50 MM■ The Bank of New York $50 MM■ Citizens Bank $50 MM■ Texas Capital Bank $35 MM■ Bank of the West $30 MM■ Flagstar Bank $30 MM■ Associated Bank $25 MM
$1,295 MM
Senior Notes
Series Coupon Principal Maturity (yrs)
December 2018 4.000% $350 MM 0.92 years
November 2019 6.750% $250 MM 1.75 years
February 2022 5.875% $420 MM 4.04 years
April 2023 4.375% $400 MM 5.21 years
January 2024 5.625% $250 MM 5.96 years
November 2025 4.875% $350 MM 7.79 years
March 2027 4.875% $450 MM 9.12 years
February 2028 4.350% $400 MM 10.05 years
5.000% $2,870 MM 5.88 years
Source Coupon Outstanding Maturity (yrs)
Senior Debt (Public) 5.000% $2,870 MM 5.88 years
Bank Debt 2.667% $ 644 MM 3.46 years
Total 4.573% $3,513 MM 5.44 years
WHY TOLL BROTHERS?
STRONG FINANCIAL BASE
Strong balance sheet and credit ratings Approximately $ 1.7 BN of available liquidity at Q1 FY 2018 No corporate debt maturities until December 2018
STRONG DEMOGRAPHICTRENDS
Serving the nation's growing number of affluent households Strongest buyer profile in the industry Millennials beginning to enter home buying years Household formation data returning to long term averages
GEOGRAPHIC PRODUCT DIVERSITY
Strong land position – Own or Control 49,500 lots* Balanced footprint across the East, West and South Diversified move-up, active adult, and high-density product lines A homebuilder with core urban land development, rental and distressed
real estate revenue sources
WELL-ESTABLISHED BRAND
A proven management team with an established track record The dominant player with few competitors in the luxury market Nationally recognized, award-winning brand Highly service-oriented culture
* As of January 31, 201841
42