托爾兄弟 (TOL) 2004 Q1 法說會逐字稿

Good afternoon and welcome, ladies and gentlemen, to the Toll Brothers first quarter earnings conference call.

At this time, I would like to inform you that this conference is being recorded, and that all participants are on a listen-only mode.

At the request of the Company, we will open up the conference for questions and answers after the presentation.

I would now like to turn the conference over to Mr. Robert I. Toll, Chairman of the Board and Chief Executive Officer.

Please go ahead, sir.

Thank you, Heather.

Hello, everybody.

Thanks for joining us.

Today, I have with me, Joel Rassman, CFO;

Fred Cooper, VP of Finance;

Joe Sicree, Chief Accounting Officer.

Before I begin, please read the statement on forward-looking information in today's release or on our Web site.

I caution you that many statements on this call are based on assumptions about the economy, world events, housing and financial markets, weather and other factors, whose performance is uncertain and could significantly affect future results.

Those listening on the Web can e-mail questions to rtoll@tollbrothersinc.com.

We'll try to answer as many of those as we get.

Today we reported record first quarter results for net income, revenues, contracts and backlog for the period ended January 31, 2004.

First quarter, 2004 net income of $50.1 million, 62 cents per share diluted, grew 10% versus 2003 net income, the previous first quarter record.

Revenues of $597 million, grew 5% versus 2003 revenues which was the previous first quarter record.

First quarter contracts of $904 million, 1,517 homes, grew by 54%, versus 2003 contracts the previous record.

In our first quarter end backlog of $2.95 billion, 5,094 homes, the highest for any quarter in our history, increased 56% versus fiscal year 2003's first quarter end, the previous first quarter end record.

Due to strong demand and increasing community counts, our first quarter contracts and backlog were up more than 20% over first quarter 2003, in each of the six geographic regions that we operate in.

The strong demand we have enjoyed for the past several months have continued unabated in February.

Over the past four, eight, and 12-week periods reservation deposits and traffic, the leading indicators for revenues 9 to 12 months out, have been up more than 50% gross and 35% on a same-store per community basis versus the same period last year.

Although for comparison, last year's deposits and traffic in February were tempered by the buildup of the war in Iraq, this year's numbers are the strongest on average per community for any February going back to 1987.

Since most of 2004's remaining deliveries are already in our backlog, we believe that 2004 will be another record year with net income growth of 20% or more.

With backlogs of 10 to 12 months at many of our communities, we are now signing contracts for homes to be delivered in the second quarter of 2005.

With this backlog, and our supply of more than 51,000 home sites, we project continued strong sustainable growth for the next several years.

As previously discussed, while the severe winter weather apparently has not slowed demand, it has slowed production and delayed closings.

The frozen ground also delayed the start of new home foundations in our Northeast, Midwest and Mid-Atlantic regions.

Therefore, we're lowering the top end of our projected range of fiscal 2004 deliveries by 100 homes to 6,200.

While holding at 5,900 homes the low end of our projected range.

This represents an increase of between 20% and 26%, compared to fiscal 2003's record deliveries of 4,911 homes.

Since these homes are already sold, our buyers signed contracts, putting up a substantial amount of non-refundable deposit before we build, those homes that don't close in a particular quarter will close in the next quarter.

These are revenues, therefore, postponed, not revenues lost.

The February 23rd issue of Business Week included the fourth quarter corporate scoreboard which measures the performance of the major U.S. public companies.

The home building companies were included in the consumer durable's category.

In reviewing the numbers, I was struck first by how well the home building companies' numbers compared to the other companies on the list and then by how low our company's -- our industry's price earnings -- I guess both are true, the company's and the industries price earnings ratio were compared to the other companies in the group.

The home building companies occupied the 14 bottom spots for PE ratio, of the 31 firms in the category.

Many of whom's performance was tied to the housing industry.

Excluding the builders, the average PE of the group was 21.4.

The home building companies themselves had PEs averaging about nine times earnings.

Even if investors were running a doomsday scenario, where home building companies earnings were to drop in half, our PE ratios would still be below those of the other firms in the consumer durables group.

Considering that nearly all the builders are projecting strong growth for 2004, that's a lot of down side protection, and I think a real bargain.

Now, let's review for you this state of our individual markets.

In Massachusetts where we have three communities, the market is excellent.

Rhode Island with three communities is good.

And New York and New Hampshire with one community is still poor.

New York, we have three communities, it's excellent.

Connecticut we have six communities, it's excellent.

New Jersey we have 20 communities, increasing regulation continues to enhance the value of these communities substantially.

The market in New Jersey is excellent.

Pennsylvania and Delaware, we have 24 communities.

They're also severe supply constraints.

The market is excellent.

Metro DC, which includes northern Virginia, Maryland, as well as suburban Baltimore, our largest market with 36 communities, the market is excellent.

This is another market where increasing regulation continues to increase the value of the community substantially that we have under development.

In North Carolina we have six communities, in Raleigh.

They have been very good.

One community in Charlotte recently improved to fair.

In the Hilton Head market of South Carolina, we have one community -- actually two communities and one master plan of 900-plus homes, and JV, the JV is selling lots.

The lots are going well, but the sale of our homes has been poor.

In Florida, the seven communities in the metro Jacksonville area, via the acquisition of Dolstie are very good.

On the Southwest Coast, where we have five communities, the market has been excellent.

On the Southeast Coast, where we have ten communities, the market has been very good.

In Michigan, where we have 16 communities, the market has been a bit slower than a few months ago, but it is still good.

In the Chicago market, where we have seven communities, the market is very good.

Columbus, Ohio, three communities, fair.

Texas, six communities in Austin, fair, showing improvement lately.

Four communities in Dallas, which has been improving, and is good.

One community in San Antonio, where things are good.

Colorado, we have two communities south of Denver.

The market is fair-plus.

In Arizona our community count is 14.

The market has been excellent.

Las Vegas, Nevada, where we are temporarily down to four communities due to rapid sellouts, the market has been excellent.

Reno we just opened, we have one community and it has been very good.

In California, we now have 21 communities in three regions.

Palm Springs with four communities has been excellent.

Northern California, which is the Bay Area for us, we have 13 communities, and the market has been excellent.

Southern California, four communities, mostly in the metro L.A. area, excellent.

Now, Joel, please do the numbers.

Thank you, Bob.

As Bob noted, we just completed a record first quarter.

We delivered 1,085 homes, with a $543,000 average sales price, for total home building revenues of $589.6 million.

This year's difficult weather which started with a very wet spring in 2003, and ended with extremely cold last four months, resulted in settlements in revenues, which was slightly lower than the bottom of our range.

Net income from land sales, at $684,000 was slightly below guidance as land sales revenues were slightly higher than our guidance, but costs were also higher than our guidance.

Other income at $1,683,000, and joint venture income at $665,000, were approximately equal to our guidance.

First quarter, home building cost of sales at 71.6% of revenues was 100 basis points better than last year's first quarter and better than the guidance we had previously given you.

Writeoffs were $897,000, which were lower than the budgeted amount of $3 million.

We benefited from a richer mix of closings and margins were also slightly higher than we had estimated.

SG&A for 2004's first quarter was 12.8% of total revenues, versus 11.5% of total revenues in 2003.

This first quarter was higher than the guidance we had provided you in December, but in line with the revised guidance we provided in early February.

As we discussed earlier this month, on our contracts and backlogs conference call, SG&A is expensed when incurred and since revenues were lower than projected due to delays, SG&A as a percentage of revenues was significantly higher in this first quarter than in last year's first quarter.

Interest expense, at 2.4% of revenues and land sales revenues -- our home building and land sales revenues were lower than our guidance of 2.6%.

Interest expense will vary from quarter to quarter for many reasons and we benefited somewhat from the mix of deliveries.

We would expect interest expense as a percentage of sales to be approximately 2.6% in the second quarter and 2.5% in the third and the fourth quarters.

This is a slight improvement to the previous guidance we had given you.

The number of diluted shares using the calculation of EPS was approximately 80,819,000 shares close to the 81 million shares we had estimated in December.

And during this recent quarter, we had bought back approximately 237,000 shares.

In order to assist you in creating your own annual and quarterly models, I will highlight some information I think you should consider.

If you miss any of the details, you can find them on our Web site, and in the 8-K we filed this morning.

We expect total deliveries for the year to be between 5,900 and 6,200 homes.

This is 100 less at the top of the range than the guidance we previously gave you.

To arrive at our projections we estimated or closings on a community by community basis, evaluating each community's ability to deliver specific homes.

Although we are attempting to catch up on closings, weather and continuing governmental permit process delays, may make it difficult.

We believe the average delivered price for the full fiscal 2004 year will be between $550,000 and $560,000.

This is an increase over the $545,000 to $555,000 average delivery price we previously provided you.

On a quarterly basis, we estimate second quarter deliveries of between 1,300 and 1,425 homes.

We have narrowed our range in expected deliveries, however the midpoint is the same as in our previous guidance.

We estimate the average delivery price at between $545,000, and $555,000, which is slightly higher than our previous range of $540,000 to $550,000.

We estimate that the third quarter deliveries will be between 1,475 and 1,575 homes, which is lower than our previous guidance of 1,550 to 1,700 homes.

The average estimated delivery price of between $550,000, and $560,000 is the same as our previous guidance.

We project deliveries in the fourth quarter will increase to between 1,900 and 2,150 homes.

Slightly higher than the range we gave you previously.

And our average delivery price will be between $565,000, and $575,000, which is also an increase from the previous guidance, between $550,000 and $560,000.

We believe land sales for the year will be approximately $17 million.

This is an increase of approximately $1 million from our previous guidance.

On a quarterly basis, we expect $500,000 of land sales for the second quarter, $5 million in the third quarter, and $6 million in the fourth quarter.

We believe the cost of land sales for the year will be approximately 75%, with cost of land sales for each of the remaining quarters at approximately 70%.

We estimate that other income for the year will be approximately $15 million, the same full-year guidance we gave you in December, with approximately $2.5 million in the second quarter, $4 million in the third quarter and $6.5 million in the fourth quarter.

We project joint venture income at approximately $6.5 million, which is approximately $1.5 million higher than our previous guidance for the full year.

We expect $500,000 will be in our second quarter, $2.5 million in each our third and fourth quarters, as we see new joint ventures start to have some settlements.

Remember, home building cost of sales can vary significantly quarter to quarter, affected by seasons, weather, the mix of deliveries, geographies and product.

We expect that home building gross margins will be 30 to 50 basis points higher than last year's gross margins.

This is an improvement over our previous guidance of approximately flat to slightly higher.

We expect gross margins will be 40 to 75 basis points in this second year's quarter versus -- excuse me, 40 to 75 basis points higher in this year's second quarter versus last year's second quarter, 20 to 40 basis points higher in this year's third quarter versus last year's third quarter and approximately flat in the fourth quarter compared to last year's fourth quarter.

Since we expect revenues for the year to be below our previous guidance, we would expect that SG&A as a percentage of total revenues for the year will be slightly higher than our previous guidance.

For the year, we currently estimate that SG&A will be 25 to 45 basis points higher as a percentage of revenues than last year's.

It will be 40 to 60 basis points higher in the second quarter, compared to last year's second quarter. 25 to 45 basis points higher in the third quarter compared to last year's third quarter and approximately flat in the fourth quarter when compared to last year's fourth quarter.

We still expect the tax rate to be 37%.

The last component of earnings per share is share count.

We believe our previous guidance is still the best estimate.

Accordingly, we project that the average shares to be used in the calculation of earnings per share will be $81.7 million for the year, increasing quarterly from approximately $81.5 million in the second quarter to $82.2 million in the fourth quarter.

At this point I would like to hand it back to Bob for questions.

Thanks, Joel.

Heather, have you got any questions?

And, Fred, would you check to see if anyone's sent anything over the Internet?

Thank you, sir.

The question-and-answer session will begin at this time.

If you are using a speaker phone, please pick up the handset before pressing any numbers.

Should you have a question, please press star one on your push-button telephone.

If you wish to withdraw your question, please press star two.

Your question will be taken in the order that it is received.

Please stand by for your first question.

Our first question comes from Margaret Whelan with UBS.

Please state your question.

Good morning, it's actually William Lamb on Margaret's behalf.

Just a few questions.

One is, in terms of your gross margin, what was the impact in terms of mixed pricing or building efficiency.

Joel, go ahead.

Roughly 30 basis points to 35 basis points based on the writeoffs being different.

Roughly, the same in each of the other two categories, where we had better mix, and then slightly higher margins from efficiencies.

And did you see any impact from lumber pricing?

Joel?

All of our lumber pricing for this quarter was already locked in, so there would have been no impact on any changes, and --

For the most part, we're locked until July.

We buy our lumber by rolling 12-month contracts.

So if lumber stays high, past July, then we'll start to feel an impact, but I don't think it will be anything major at all.

And what percent of your sales comes from New Jersey?

Or your closings?

Joe, do you know that?

What percent of closings from New Jersey?

I was going to say about 12%.

12% would be my --

10 to 12% is about right.

Yeah, because you have 23 communities added to 105 [ph], so.

We're basically trying to figure out if there's -- do you see any impact from a potential rise in luxury home tax in New Jersey?

A rise in the luxury home tax?

I guess the implementation of a luxury tax in New Jersey.

Do I see any implication, did you say?

Yes, they passed that.

It will be less money for me and my shareholders and more money for the government of New Jersey, but I don't expect that to pay us.

Okay.

I just wanted to get your thoughts on that.

Thank you.

You're welcome.

Thank you.

Thank you.

The next question comes from Jim Wilson with J&P Securities.

Please state your question.

Sorry, good afternoon.

I was wondering, I guess, Joel, I mean in the ASP guidance, as you've gone through it, even particularly just relative to change in three weeks, is this just certain types of homes or have there sort of been incrementally more upgrades factored through some of this?

Is it all purely mix?

Because it seems like in three weeks that's a reasonable good-sized change in average sales price guidance, obviously to the positive, but I was wondering if you could color it a little bit.

Yeah, it's really a guidance from last December.

We didn't change our average sales price guidance, we just reaffirmed it in the beginning of February.

It's a mix issue in some cases and also price increases that have come through.

Okay.

So it's mainly just direct price increases, as opposed to big or any material change in upgrades or things that people are asking for at this point?

No change in upgrades.

Just change in combination of mix and increased sales prices.

Okay.

Okay.

I guess that was my primary question.

So I guess maybe then I will give it back to Bob.

If you take in what you have seen as of late, how would you characterize general sales price trends or price trends in the market price?

Any real change in the last, like I said, since December in the last couple of months that you would note in terms of relative pricing strength or weakness in any of your major markets.

Yeah, relatively, you've had much greater strength in pricing power and so prices have gone up more recently than they have in the past.

Okay.

And that's just generally across the country?

There's some markets where you haven't been able to raise prices and some markets where it appears as though you can't raise them fast enough.

California, north, south, Palm Desert, just fantastic.

Same with Washington, D.C., Connecticut, New York, Chicago recently.

However, if you go to Charlotte or Raleigh, Austin or Dallas, you haven't been able to put through price increases anywhere near the markets I just mentioned.

Yeah.

All right.

Makes sense.

Okay, very good.

Thanks.

You're welcome.

Excuse me, Heather, we have a question from Gregory Scott.

He says, "Gentlemen," Thank you for that, Gregory, "previously you have indicated that you expect to achieve net income growth of 20% or more during fiscal 2004 and fiscal 2005.

I interpreted that to mean a 20% increase in earnings per share as well."

A very reasonable assumption, Greg. "It appears that during the first quarter there's been significant dilution, 10% net income growth, but only 2% earnings per share growth due to equity issuances and options.

What are your expectations for EPS growth during 2004 and 2005?"

Well, the short of it is our expectations are for in excess of 20%, earnings per share growth in 2004, and in 2005.

Joel?

I think we gave a range of estimates and the share count that we use, and obviously, there was a share equity offering in August that impacted the difference between 2003 and 2004.

And there is some increase in price of the shares which will affect the diluted number of shares using the calculation.

And we tried to give you the details so that you can look at it.

And within range, I think the midpoints of the range will get you roughly 20%, I think, but you would have to do that yourself, depends on the set of assumptions that you employ.

Thank you, Joel.

And thank you, Greg Scott.

Heather?

Yes, our next question comes from Tom Dehuddy with MTV Investments.

Please state your question.

Good afternoon, gentlemen.

Hi, Tom.

A quick question in terms of recent activity.

I noticed in your release you did talk about February.

I know this might be a little early, but on the East Coast here, we're finally starting to unfreeze.

Are you seeing any pickup in terms of traffic, just because of the weather improvements?

I don't know that it's because of the weather improvement, but we have seen a pickup in traffic.

Let me get the sheets in front of me.

Yeah, in February, as a matter of fact, starting with the last weekend in January, to the present, which takes you through five weeks, there has been quite a significant pickup in traffic.

We've also had some pretty miserable weather still, up until just a couple of weeks ago.

Yeah, two days ago, Fred says.

So I don't think the weather has anything to do with it.

Can you give us some idea of what significant means?

Sure.

On a same-store basis, traffic was up this past week 90% over the previous year.

However, remember, the previous year we had this thing going with Iraq, but even if you go back to the prior year, we would be up approximately 50% and that 50% would be the same for the year before that and the year before that and the year before that.

So quite a bit.

You have 85% up for last weekend.

Remember, these are same-store stats.

That's not 85% up gross.

The gross is up even more.

This is on a same-store basis.

Equal number of communities.

The week before that, up 46%, the week before that, up 31% and the weekend before that, which is the last weekend in January, up 43%.

So you got a whole lot of traffic all of a sudden coming through our model homes and that's probably true for the other builders as well.

Great.

Thank you.

You're welcome.

Thank you.

As a reminder, ladies and gentlemen, should you have a question, please press star, followed by one at this time.

Our next question comes from Michael Rehaut with J.P. Morgan.

Please state your question.

Hi, good afternoon.

Just had a question on the backlog ASP, the second quarter to -- 2Q '03 to 4Q '03, it was in the 563 to 565.

That jumped up last quarter to 579.

Could you just explain the difference between that, which I would expect that ASP to come through over the next few quarters and your guidance which is modestly below that?

Joel?

Part of the problem in analyzing the numbers that you just indicated is the fact that the smaller homes and the multi-family homes tend to move through the pipeline much quicker.

So in general, the average delivered price per year is lower than the backlog price at the beginning of the year because you can move the lower price multi-family homes through much quicker, and that lowers the average prices.

What we do is we individually identify which homes are scheduled to close in a quarter.

And assuming there isn't much slippage in that, that's what we use for guidance in giving you the price ranges.

So in our attempt to do that, we try to take into account the mix that we expect to deliver in each particular quarter, based on their projected building times.

Okay.

Great.

Thanks a lot.

Thank you.

Thanks, Joel.

Our next question comes from Tim Jones with Wasserman & Associates.

Please state your question.

Good afternoon.

Hi, Tim.

How are you?

A couple of questions, okay?

First of all, with your backlogs up so strongly, and 50% up in orders and 35 same-store, I know you like to cap the chestnuts in your mouth, or in your pocket, but going out 13 months and having your lumber contracts locked in for about five of them or six months, aren't you taking a big -- two things, aren't you on one side, the cost side, taking a risk of a rise in either labor or materials costs?

And, two, aren't you just maybe giving the strong markets, giving up a substantial amount of margins that you could just wait for?

A lot of builders I know are simply cutting back and strong markets could easily sell twice as much of the homes they are selling just for that reason?

I think you are right that we may be leaving some additional profit a/k/a margins on the floor.

A bird in the hand is worth two in the bush, and we're not going out 13 months, but we are going out in some cases 12 months.

Quite a few more cases 11 months and almost everywhere, nine to 10 months.

So, yeah, by not holding back, if the market continues to go up and everything stays hunky-dory, we are leaving some profit on the floor.

But my daddy taught me that we're already rich.

The idea is not to die poor, and we're conservative in that as long as the business is there to be had, we would rather grab it.

You may have volatility arriving for whatever reason that we don't want to take a chance on.

We see almost no cancellation, as you know, in our contracts because we take substantial down payments.

So we're pretty satisfied with what we've got.

You're not worrying on the cost side particularly.

I was just going to say, with respect to the cost side, we really don't see any risk.

If lumber goes up $100 per thousand board feet --

What would that cost you?

I don't think it's going to ruin us.

So lumber would go up 10%, and -- I'm sorry, lumber would have been up in that case, let's say 25%.

Yeah, 25%.

I mean, roughly --

It costs you $15,000 for the lumber for the house, so you will take a beating of $5,000.

Okay.

Nickels and dimes, okay.

$4,000.

Because most of our product -- well, all of our product averages about $590.

Yeah.

I understand.

It's not that much [inaudible] to us.

That's nothing.

The rest of our costs have been holding really steady.

So 25% rise in lumber could hit you by a percentage point, and that's, obviously, if lumber is that strong, I would think that the housing market would be quite strong too.

Yeah.

And you can offset it.

Joel, just handed me something, Tim.

What is this, Joel?

Based on the price increases that have taken place, if it all passed through to the bottom line and we didn't hedge any of it --

And what you're talking about is not our prices but the costs.

Yeah, the cost increases, right, we would be off about $3,000 in the Northeast and Mid-Atlantic, and it would cost us less than that to deliver houses nine or ten months down, because we hedged some of it.

About $4,000 in the dollars per house -- this is all costs, all materials, not just lumber.

That's what you experienced during what?

Just in the last couple of months.

Over a year ago or what?

No, it's not -- Over the earlier --

Some of this went down and came up.

Okay.

[inaudible] do that.

Some of it -- OSB went down and then came back up, so I'm hitting OSB much harder the year than I would have year over year.

Okay.

So your raw material costs are up about $7,000.

No.

No.

No.

Between $2,000 and depending on the worst state would be California and that may be $10,000.

$2,000 to $10,000?

Right.

Okay.

And obviously those prices are reflected in your sales price of the stuff you sold.

Those are included in our estimates, correct.

Okay.

Now the second question that I am very confused about, and perhaps you can help me with, you talked about the three northeast markets, the two northeast and the Midwest being hurt by weather.

And I suspect in your closing, it was disappointing, yet if you take those three markets, the three combined was up 26 units.

The one that was down 40 units was the southeast, and since I live in Florida, I can tell you, and you have said that particularly Florida and North Carolina were excellent to very good.

I don't understand what's going on there.

I didn't say North Carolina and Florida are very good.

I said Florida is very good.

As a matter of fact, I think I said East Coast very good.

West Coast, excellent.

And good in Charlotte, I think.

And Charlotte -- let me find it.

I thought --

You have very good orders, Bobby.

It's the deliveries I'm having the trouble.

You are up 50 units -- you are up about 40% in the deliveries and the orders, we're mixing apples and oranges.

My problem is, the area you said you were hurt by in deliveries or actually all those three northern areas by weather, were up 26 units and Florida, North Carolina, and Tennessee, where weather was pretty good was down 40 and I don't understand what happened in that --

We just didn't sell --

Ten months, nine months ago, or ten months ago, when we had the conference calls, we talked about running out of inventory.

Right.

In the West Coast of Florida and that we had less contracts being signed in the West Coast of Florida.

So that was an an anticipated reduction in deliveries.

So weather didn't affect us.

We knew we were going to sell less because we had less inventory to sell ten months ago.

We delivered less.

Okay.

It was not weather-related.

What happened in the Northeast and the Mid-Atlantic states and the Midwest, was that we had a lot more sales sold and we couldn't deliver it, so even though it went up, we could have delivered more in those states if weather had cooperated.

But you had a very big increase in the orders in the Southeast, so do you have more stuff coming in on the West Coast of Florida?

Yes.

Thank you very much.

Okay.

By the way we did say, Tim, that Charlotte, we had one community which had improved to fair.

In other words, we've only got one community there.

Which is the one you have six communities in?

That's in Raleigh.

Raleigh.

That I said was very good.

Yeah.

And it was.

And it's a lack of product in the West Coast, basically what caused that.

That's definite.

Okay, thank you.

Thank you, Tim.

Heather?

Our next question comes from Myron Kaplan with Kaplan, Mason & Company.

Hi, guys.

Hi, Myron.

Excellent quarter.

Thank you.

Okay, a couple of my questions have been answered.

I was going to ask about pricing power in Texas and so forth.

Do you see any improvement in Texas?

Yeah, recently we see a little improvement to fair improvement in Austin.

I would say we see fair improvement to good improvement in Dallas.

And San Antonio we only have one community, it's been improving steadily and I would say that market is very good.

I wouldn't say overall, however, that you could push a lot of price increases through in Texas.

It's still very competitive.

It's one of the few places left in the U.S. where supply is no problem, and thank goodness, the rest of the country subscribes to nimby politics because, as I've said before on these conference calls, if the builders were left to themselves we wouldn't be doing nearly as well as we are with the government running an oligopoly for us by restricting supply.

Mm-hmm.

So, it's not a real testimony to the quality of the industry, even though we're being asked to believe that modern management techniques have appeared in the building industry.

You might say.

Uh-huh.

So in any event, are there any new markets where you are expected, that you can discuss, that you are expecting to enter, especially with multi-family products?

No.

Not with multi-family product.

Other than with the highrises coming on board in New Jersey, that we have discussed recently, in .

And Hoboken, Weehawken and Jersey City, Bayonne, we have a lot of land and there will be a lot of multi-family that we'll bring on in those areas.

Those will be in '05 and '06 and following I assume?

Yep.

Yep.

Well, it sounds awfully good.

Thanks very much.

Thank you.

Thank you.

Our next question comes from William Nobla with Atlanta Softna.

Please state your question.

Thanks.

In terms of the share buybacks, I notice you indicated you bought 237,000 shares in the quarter.

What are your plans for the full year?

I think we look at that quarter by quarter and I don't think I have a plan.

Do you, Bob?

Oh, when the stock goes down I plan to buy it, and as the stock goes up, I plan not to buy it.

Okay.

And in that 81 -- in the share count that you've given, are you assuming the buybacks, the 81.7 since you, I believe haven't assumed --

No, I don't think we are.

No, we haven't.

Okay.

Can we get an update on community count that you've given previously?

Are you still looking for 225 by the end of the year.

Yes.

And would you expect the increase in the share count to parallel the forecast in 2005 that you have given?

In other words, another significant increase?

Guys?

Joel?

Joe?

We're not planning to do an additional equity offering, so I don't expect --

No.

No.

No.

Community count.

The question is, you expect your earnings to go up.

Yes.

We would expect stock price to go up.

Right.

And you expect stock price to go up.

That's correct.

And you expect share count to go up, accordingly.

That's correct.

Right.

And just last question, your thoughts about further growth in the community count.

Beyond the 225.

The growth in the community count.

What was the number for --

225 by the end of '04.

Do you have a number for '05 yet guys?

No.

No, I'm sorry, we haven't developed that.

Okay.

Thank you.

You're welcome.

Our last question comes again from Margaret Whelan with UBS.

Please state your question. [silence]

I don't know what the button is, Heather.

Ms. Whelan, your line is live.

Could you tell William [ph] which button?

Heather?

Let's go to another question, if you have it, or is that the end?

One moment, sir.

Okay.

Yes, our last question comes from again Tim Jones with Wasserman & Associates.

Please state your question.

Thank you, Heather.

Tim?

I think they were scared of having me come on again [laughter].

Probably.

I know you.

You're not so scary.

All right.

Okay.

First question.

I just -- I saw an offering there for Toll finance.

I know you don't make money on that.

I'm not quite sure what that is.

I mean, I know that you -- I thought you just facilitated the financing or do you have some involvement too.

No, we absolutely make money in the mortgage business.

Our mortgage company is called Westminster Mortgage Co. And it makes us a pretty decent income.

Is that --

But, Joe, the question is Toll financing.

Those are just our senior notes.

That's a conduit for our bond borrowing, Tim.

It has nothing to do with the --

It has nothing to do with the mortgage company.

Okay.

Now the last question I asked you, Joel and the last time you gave me a lovely answer but I didn't understand it.

So let's try it again, okay?

Okay.

Please do.

All righty.

If you add your first quarter deliveries and your backlogs, last year -- it comes up to about 4,400, and you basically did 110% of that, and this year, it adds up to -- if you did 110% of it that sum today would be 6,800 and you are leading us to around 6,100 midpoint.

Now you said -- I asked you about the slowdown in turnover.

I know part of it is the weather.

A little bit is mix.

You're not being affected by specs and probably a little bit on government delays, but you went into something else that was the big factor and I don't remember that.

And I think it's meaningful.

We have longer lead times.

We're now selling houses out for 10 and 11 and 12 months out.

So they don't turn as quickly.

So if you manage your backlog, what we did in the previous year where the leadtime may have been eight or nine months, you get a different answer.

And I guess that goes back to my question that you weren't -- you were comfortable because you did not believe that prices would go up that much to get you into serious trouble?

Correct.

That's right.

Thank you.

Thank you, Tim.

Heather, thank you very much.

Everybody, have a great one.

Good-bye.

Ladies and gentlemen, if you you wish to access the replay for this call, you may do so by dialing 1-800-428-6091 or 973-709-2089 with an I.D. number of 337556.

This concludes our conference for today.

Thank you all for participating and have a nice day.

All parties may now disconnect.

See you, Heather.

Good luck.