Toll Brothers, Inc. early this morning (Feb. 27) reported a net loss of $96 million, or 61 cents per diluted share, for its fiscal first quarter ended January 31, 2008. The loss exceeded the 44-cent-per-share loss estimate of analysts polled by Thomson Financial.
Contributing to the loss were a 23% drop in revenues from the same quarter in 2007 to $842.9 million and pre-tax write downs of $245.5 million, or 93 cents per diluted share. Home building revenues were down 23% from first-quarter, 2007 to $842.3 million.
Write-downs included $145.2 million on operating communities and owned land,$27.8 million on unconsolidated entities in which the Company has an investment, and $72.5 million on optioned land. In comparison, the company wrote-down a total of $105.9 million in the first quarter of 2007.
Excluding write-downs, earnings were $57.3 million, or 35 cents per diluted share.
Gross signed contracts fell 38% to 904 from year-ago levels, with the sales value of those contracts falling 46% to $573.1. The cancellation rate was 28.4%, down from 38.9% in the previous quarter and 29.8% in the same quarter last year. Backlog was down 42% from 2007's first quarter to $2.4 billion.As a percentage of beginning-quarter backlog, FY 2008¹s first quarter cancellation rate was 6.5%, compared to 8.3% in the previous quarter and 6.7% for the comparable quarter last year.
The average price per unit of gross contracts signed in FY 2008¹s first quarter was $634,000, down from $646,000 in 2007¹s fourth quarter and $730,000 in 2007¹s first quarter. The company attributed the year-over-year decline to a shift in the Company¹s product mix, as well as to additional incentives.
The company said that because the average price of the 257 first-quarter was a much higher $770,000 per unit, the cancellations coupled with the shift in its product mix drove the average price of net signed contracts down to $580,000.
Toll Brothers said its net debt-to-capital ratio at the end of the quarter was 26.8%, a historical low, down from to 31% at the end of last year's first quarter. The company ended the quarter with approximately 55,000 lots owned and optioned, compared to approximately 91,200 at its peak at thesecond- quarter-end of FY 2006. It's community count was 315, down from a peak of 325 during last year's second quater. It said it expects that number to drop to 300 by the end of this fiscal year.
It ended the quarter with more than $950 million in cash plus more than $1.2 billion available under its bank credit facility, which matures in 2011.
"The selling season, which we believe starts in mid-January, has been weak for the third year in a row," said Robert I. Toll, chairman and CEO. "We have seen a few glimmers of hope, for example, in the Naples, Florida area and the suburban Washington D.C. market. The improvement in Naples, which was a tremendous market before the downturn, is noteworthy because from March 2006 through late 2007, it seemed as though we couldn¹t give away a home there. In metro D.C., which was among the first markets to weaken, we have seen the glimmer before and it faded; perhaps this time it won¹t."
He continued, "Ceaseless talk of a recession continues to dampen the mood of consumers in general, whether or not a recession actually occurs. For home buyers, we believe this drumbeat, coupled with concerns over mortgages, the direction of home prices, and foreclosures, has kept pent-up demand on the sidelines."
And he concluded, "We believe that revived buyer confidence is paramount to getting the market moving again. Only when customers believe we are done with housing deflation will the excess supply clear and the market return to equilibrium."