Toll Brothers (NYSE:TOL), Horsham, Pa., on Thursday morning reported a net loss of $472.3 million (-$2.93 per share) for its fiscal third quarter of 2009, up sharply from a net loss of $29.3 million ($-0.18 per share) in last year's quarter. Analysts were expecting a loss of $1.79 per share.
The loss was driven by non-cash write-downs of federal and state deferred tax asset valuation allowances of $439.4 million and land and inventory related impairments totaling $115.0 million. Excluding the write-downs, the Company's pre-tax earnings were $3.7 million. The company said it expected that at least a portion of the tax write downs could be reversed in the future.
Revenues were down 42% from last year's fiscal third quarter to $461.4 million as closings fell 36.3% to 792. Toll signed 915 gross contracts during this year's quarter, down 9% from the comparable period last year, totaling $502.6 million, down 15%. The cancellation rate was 8.5%, the lowest since the fiscal second quarter of 2006. As a percentage of beginning-quarter backlog, the rate was 4.9%.
There was evidence of a sequential price rebound in the Toll report, with the average price of net contracts rising to $535,000 from $513,000 in the company's fiscal second quarter. The price was $579,000 in last year's fiscal third quarter.
Third-quarter-end backlog was 1,626 units with a aggregate value of $930.7 million, declined by 37% in units and 47% in value from the same time last year.
SG&A totaled $68.6 million, down 29% excluding a reversal of $4.6 million in previously expensed interest.
Lot count was down to 35,400 owned and optioned from 36,600 at the prior-quarter-end and from approximately 48,500 at the end of last year's third quarter. Owned lots totaled 30,843. Community count was down to 215 from 240 in the previous quarter and 258 at FY 2009's first-quarter-end.
Toll ended the quarter with $1.66 billion in cash, down from $1.96 billion at the end of the previous quarter but up from $1.50 billion at the end of last July. It generated approximately $100 million in cash during the quarter and paid down $338 million of debt plus related costs and paid $70 million in taxes in FY 2009's third quarter. It had $1.35 billion available under its $1.89 billion 30-bank credit facility maturing in March 2011.
Toll's net-debt-to-capital ratio at quarter's end was 14.5%, compared to 18.0% at the end of last year's fiscal third quarter.
Despite the loss, Toll CEO Robert I. Toll saw positives in the marketplace."We do see signs for optimism," he said in a statement. "Our third quarter total net signed contracts were ahead in units compared to one year ago.With 22% fewer selling communities during the quarter, that translated to a 32% improvement in per-community ("same-store") net signed contracts. ...For the first time in three years, the number of homes in our backlog grew compared to the prior quarter, reversing a twelve-quarter trend. And, four weeks into our fourth quarter, our per-community deposits, the non-binding precursor to signed contracts, are running 26% ahead of last year's comparable period."
He continued, "We believe declining cancellations and more solid demand indicate that the housing market is stabilizing. We are reducing incentives and raising prices in selected communities. We believe that customers are recognizing that now is the time to get into the market to take advantage of near-record affordability and what is still, for now, a buyer's market."
Toll said it was not comfortable providing earnings guidance for its fiscal fourth quarter but did say it was expected to deliver will deliver between475 and 725 homes in the quarter and between 2,580 and 2,830 homes for the fiscal year at prices between $550,000 and $575,000 for the quarter. It also expects incentives to increase versus last years fourth quarter while deliveries decrease, which will increase cost of sales.
Shares of Toll were down 2.1% to $22.65 shortly after market open Thursday. Analysts largely took the news of the loss in stride, with one, Buck Horne of Raymond James, pointing out that there must have been some confusion among some analysts polled for the consensus estimate because management had previously warned of the tax charge. David Goldberg at UBS put out a note reiterating his positive view of Toll's balance sheet: "We continue to believe Toll's [balance sheet] remains among the strongest in the group, with $1.66bn in cash, $1.35bn available on its credit lines, and limited near-term maturities (less than $50mm due before 2013). This provides them with the requisite flexibility to take advantage of opportunities that arise."