UBS Building & Building Products 9th Annual CEO Conference
November 9, 2011
Statement Of Forward-looking Information
Certain information included in this presentation is forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995, including, but not limited to, information related to: anticipated operating results; financial resources and condition; selling communities; home deliveries; average home prices; consumer demand and confidence; contract pricing; business and investment opportunities; and market and industry trends. "
Such forward-looking information involves important risks and uncertainties that could significantly affect actual results and cause them to differ materially from expectations expressed herein and in other Company reports, SEC filings, statements and presentations. These risks and uncertainties include, among others: local, regional, national and international economic conditions; fluctuating consumer demand and confidence; interest and unemployment rates; changes in sales conditions, including home prices, in the markets where we build homes; the competitive environment in which we operate; the availability and cost of land for future growth; conditions that could result in inventory write-downs or write-downs associated with investments in unconsolidated entities; the ability to recover our deferred tax assets; the availability of capital; uncertainties in the capital and securities markets; liquidity in the credit markets; changes in tax laws and their interpretation; effects of governmental legislation and regulation; the outcome of various legal proceedings; the availability of adequate insurance at reasonable cost; the impact of construction defect, product liability and home warranty claims, including the adequacy of self-insurance accruals, the applicability and sufficiency of our insurance coverage; the ability of customers to obtain financing for the purchase of homes; the ability of home buyers to sell their existing homes; the ability of the participants in various joint ventures to honor their commitments; the availability and cost of labor and building and construction materials; the cost of raw materials; construction delays; domestic and international political events; and weather conditions. ""
Any or all of the forward-looking statements included in this presentation are not guarantees of future performance and may turn out to be inaccurate. Forward-looking statements speak only as of the date they are made. The Company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise."
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OVERVIEW
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§ Founded in 1967"§ Public on NYSE since 1986"§ Nationʼs leading luxury home builder"§ 6th largest U.S. homebuilder "§ $1.5 billion in homebuilding revenues and over 2,600
home deliveries FY 2011"§ Builds in 19 states and approximately 50 markets"§ Serves urban and suburban, luxury move-up, empty-
nester, and active-adult buyers"§ Strong balance sheet and credit ratings "§ Insider & director ownership of over 16% at FYE 2010"§ Only brand name in luxury market""
Nationwide Footprint Positions Us For Growth
19 States"50 Markets"
λ Austin!
λ Dallas!
Phoenix!λ
λ
San Francisco!
Philadelphia! λ
λ
λ λ Charlotte!Raleigh!
Ft . Myers! West Palm Beach!
New York!
λ Washington DC!
λ Los Angeles!
Sarasota!
Naples!
Las Vegas!λ
λ San Diego!
λ
λ Hartford!
Miami!
Detroit!Chicago !
Wilmington!Princeton!
Boston!
Palm Springs!λ
Denver!λ
San Antonio!λ Jupiter!
λ Hilton Head!
Reno!λ
λ
λ Jacksonville!
λ
λ
λ λ λ
Sacramento!λ
Orlando !λ
Minneapolis !λ
λ
San Jose!
λ
λ Houston!
λ
λ λ
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Current Market
§ Macro news is choppy
§ Interest rates remain near historic lows
§ Housing affordability near an all-time high
§ Confidence is crucial to our buyer
§ Housing data is skewed by distress
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Toll FY2011 Financial Results
• Net contracts up 24% for the fourth quarter and 9% for FY 2011
• Backlog up 15% at FYE 2011
• Deliveries up 6% for the fourth quarter and flat for FY 2011
• Cancellation rate at historic norms
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Only National Homebuilder Focused On Luxury Market
Tollʼs main competitors are small private builders."
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$206 $207 $217 $240 $243 $258 $278 $284 $296 $306
$565
DR Horton KB Home Beazer Ryland Lennar Pulte MDC Hovnanian NVR St Pac Toll Brothers
Average Home Price*($000)
*Updated based on most recent reported fiscal year end deliveries as of October 31, 2011.
Why Toll Brothers?
§ Uniquely Positioned in Market
§ Experienced Management Team
§ Financial Strength
§ Demographics Favor our Brand and Industry
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FOCUS ON LUXURY
§ Only national builder focused on luxury market
§ Build high-volume semi-custom product targeted to top 20% of U.S. income households
§ 80% of our deliveries in FY 2011 less than $700,000
§ Main competitors are small local or regional private builders
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FOCUS ON LAND
§ Operate in most difficult approval markets in country
§ High concentration in Washington D.C. to Boston corridor
§ Skilled in land acquisition, approvals, and development across all markets
§ Purchased over $700 million of land last 2 years
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BRAND NAME IN LUXURY MARKET
§ Honored to have won the three most coveted awards in the home building industry
§ The only brand name in the luxury market
§ Goal is to expand brand in markets where we are already well-established
§ Grow brand name in urban and in-fill opportunities, high-rise, second home, active adult and suburban high-density markets
National Housing!Quality Award!
Americaʼs !Best Builder!
National Builder!of the Year!
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Community Entrance
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Amenities
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Maxwell Place Residents Club
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Model Home
15"
Sales Center
16"
Foyer
17"
Kitchen
18"
Family Room
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Bedroom
20"
Bathroom
21"
Walk in Closet
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Basement
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Backyard
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Focus on Broad Range of Products
§ Move-up § Empty-Nester § Active Adult § Second Home § Urban-Infill § Urban Redevelopment § Golf Course &
Country Club § High-Rise § Suburban High-Density
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Urban Infill
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THE TOURAINE – 65TH & LEX.
Evolving Product Diversification (by unit deliveries)
53%
25%
15%7%
FY 2011
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Product Diversity in a State
Hillsborough Chase - Estate Luxury Move Up
Cranbury Brook - Active Adult Condo
The Mews at Laurel Creek - Active Adult Carriage
Laurel Creek - Country Club/Resort/Golf
Regency at Monroe - Active Adult Single
Maxwell Place – Luxury High-Rise
Hudson Tea – Condo Conversion
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FOCUS ON CUSTOMIZATION
§ Developed systems over 40 years
§ Provide custom home buying experience with benefits of high volume production
§ Hundreds of structural options and thousands of designer options
§ Pre-designed, pre-engineered and pre-budgeted
§ In FY 2011 the average buyer added approximately $101,000 in options and premiums
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Why Toll Brothers?
§ Uniquely Positioned in Market
§ Experienced Management Team
§ Financial Strength
§ Demographics Favor our Brand and Industry
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Experienced Management Team
• Survived and grown through 5 previous downturns"
• Average tenure of senior management exceeds 16 years"
• Experienced land teams remain intact in most markets"
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Managed Through the Downturn
Peak Trough
Total Revenue* $6,115 $1,495
Land Position 91,200 31,900
Community Count 325 190
Cash* $633 $1,908
Net-Debt-to-Cap Ratio** 31.8% 7.4%
*$ in millions
33"**Calculated as total debt minus mortgage warehouse loans minus cash and marketable securities divided by total debt minus mortgage warehouse loans minus cash and marketable securities plus stockholders’ equity.
Preparing to Grow
Bottom of
Market
FYE 2011
Land Position 31,900 37,500
Community Count 190 215
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GIBRALTAR CAPITAL
§ Capitalize on core expertise, wide geographic footprint, and financial relationships to find distressed opportunities
§ Completed 5 transactions since June 2010
§ Approximately $100 million invested in Gibraltar Capital
§ Control nearly $2 billion of mortgage notes and REO book value
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Why Toll Brothers?
§ Uniquely Positioned in Market
§ Experienced Management Team
§ Financial Strength
§ Demographics Favor our Brand and Industry
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TOLL BROTHERS CASH AND MARKETABLE U.S. TREASURY SECURITIES
$689,000 $633,000
$900,000
$1,633,000 $1,909,000
$1,237,000 $1,146,000
2005 2006 2007 2008 2009 2010 2011
($ Thousands)
During unprecedented time of industry distress Toll grew cash
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Fiscal Year
56.5%
38.6%
47.0%50.9%50.4%49.6%50.2%48.4%
41.4%48.7%
46.0%48.2%46.2%
40.9%35.5%
27.6%31.8%
26.8%
12.6%7.4%
13.6%13.9%
At FYE October 31,
NET DEBT TO CAPITAL 1990-2010
38 Calculated as total debt minus mortgage warehouse loans minus cash and marketable
securities divided by total debt minus mortgage warehouse loans minus cash and marketable securities plus stockholdersʼ equity.!
!
Capitalization*
Toll Brothers Inc.
First Huntingdon Finance Corp. Toll Brothers Finance Corp.
$885 Million Revolving Credit Facility Due October 2014
Citi $125 MM Deutsche Bank $125 MM
Royal Bank of Scotland $125 MM
SunTrust $100 MM PNC $90 MM
Capital One $75 MM
Bank of Montreal $50 MM Sumitomo Mitsui $50 MM Wells Fargo $50 MM
Comerica $45 MM
US Bank $35 MM California Bank & Trust $15 MM
TOTAL $885 MM
Senior Notes
Principal Coupon Maturity
$140 MM 6.875% November 2012 $142 MM 5.950% September 2013 $268 MM 4.950% March 2014
$300 MM 5.150% May 2015 $400 MM 8.910% October 2017 $250 MM 6.750% November 2019
Total Weighted Average $1,499 MM 6.630% 4.3 years
*As of October 31, 2011 39"
11 12 13 14 15 16 17 18 19 20
$282 $278 $300
$400
$250
FY
Public Debt (Senior)
Conservative Debt Maturities* !
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$ millions
*As of October 31, 2011
First Builder to Access Public Capital Markets Post - Sept. 2008 Financial Crisis
Superior Capital Market Access
SENIOR/CORPORATE CREDIT RATINGS!
Fitch Inc.! BBB- (Stable)!Standard & Poorʼs! BB+ (Stable)!Moodyʼs! Ba1 (Stable)!
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Recent Credit Rating Agency Quotes § Moodyʼs:"
– “[Tollʼs credit rating] reflects the company's ability to generate improving operating results and credit metrics even as it faces the same daunting headwinds [as]… its peers”"
S & P"– “The following list ranks all the rated U.S. homebuilders from strongest to weakest based on
rating and outlook.”
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Fitch"– “[Tollʼs credit rating] reflects the company's well-entrenched market position as the pre-eminent
public builder of luxury homes, the successful execution of its operating model that has produced one of the better margins within the industry… and relatively stable debt-protection measures...”
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Why Toll Brothers?
§ Uniquely Positioned in Market
§ Experienced Management Team
§ Financial Strength
§ Demographics Favor our Brand and Industry
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Unemployment Rates
Oc tober 2011C iv ilian L abor F orc e Rate 9.0%C olleg e G raduate Rate 4.4%
0
2
4
6
8
10
12
14
16
Jan-‐92Jul-‐92Jan-‐93Jul-‐93Jan-‐94Jul-‐94Jan-‐95Jul-‐95Jan-‐96Jul-‐96Jan-‐97Jul-‐97Jan-‐98Jul-‐98Jan-‐99Jul-‐99Jan-‐00Jul-‐00Jan-‐01Jul-‐01Jan-‐02Jul-‐02Jan-‐03Jul-‐03Jan-‐04Jul-‐04Jan-‐05Jul-‐05Jan-‐06Jul-‐06Jan-‐07Jul-‐07Jan-‐08Jul-‐08Jan-‐09Jul-‐09Jan-‐10Jul-‐10Jan-‐11Jul-‐11
UNEMPLO
YMENT RATE
(%)
Civilian Labor Force
College Graduates
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U.S Bureau of Labor Statistics
Baby Boomers Drive Luxury Market Toll Serves Three Niches: Move-up, Empty Nester and Active Adult"
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$100,000+ Income Households Growing 4 Times Faster Than All U.S. Households
82.4
118.7
1980 2010
All Hous eholds (mill)
1980 2010
9.1
24.3
$100,000+ Income Households (mill)
Source: U.S. Census Bureau (P60-239)!
(2010 Dollars)
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2,200 2,100 2,000 1,900 1,800 1,700 1,600 1,500 1,400 1,300 1,200 1,100 1,000 900 800 700 600 500 400 300
Housing Starts
Total Fam
ily Starts*
Househ
olds*
U.S. Households and Total Housing Starts
Source: U.S. Census Bureau!*Numbers in thousands! 47"
Shortfall in Household Formations
Why Toll Brothers?
Investing in Toll is a way to invest in: • A proven management team with a tremendous track record. • The nation's growing number of affluent households. • The nation's strong baby-boomer driven demographic growth. • A strong balance sheet. • A premier land developer in a lot-constrained environment. • The dominant player with few competitors in the luxury market.
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