Toll Brothers Inc. (NYSE:TOL), Horsham, Pa., on Wednesday before market open reported a net loss of $40.4 million (-$0.24 per diluted share) for its fiscal second quarter of 2010 ended April 30. It was less than half the loss of $83.2 million (-$0.52 per share) for the comparable quarter in 2009.
The loss included pre-tax write-downs totaling $42.3 million, compared to FY 2009's pre-tax write-downs totaling $119.6 million. Excluding write-downs, FY 2010's second-quarter pre-tax loss was $9.5 million, compared to a pre-tax loss of $2.3 million in FY 2009's second quarter. Of the $42.3 million, $5.3 million was due to a Toll property in New York City that was recently designated a Superfund site; $10.1 million was attributable to two Toll Brothers communities located in a large Las Vegas master planned resort-style community developed and owned by a third party in which most major common amenities were recently shut down; and $8.5 million was attributable to the anticipated closing and potential sale of a community in the Southeast that the company did not identify. Of the remaining impairments, $15 million was taken against operating communities and $26.7 million against owned lots.
Revenues declined 22% to $311.3 million for the quarter as closings fell 16% to 543, both compared to the same quarter last year.
New orders, however, shot up 41% to 820, with new-order dollars up 56% to$464.6 million. The cancellation rate improved dramatically to 5.3% in this year's quarter from 21.7% in the comparable quarter last year and 6.7% in this year's first fiscal quarter. The average new-order price rose to approximately $567,000 from approximately $555,000 in the first fiscal quarter and $513,000 in 2009's second quarter.
The absorption rate of 4.32 units per community was 85% ahead of the 2009 quarter but was still off the company's historical second-quarter average, dating back to 1990, of 8.05 units per community. Community count was down 21% to 190 from the same time last year.
Backlog at quarter's end was 1,738 units, up 10% from the prior year quarter, with an aggregate value of $993.5 million, up 5%. It was Toll's first quarter-to-prior-year-quarter backlog increase in dollars or units in four years and the first sequential increase in backlog in three years, the company said.
SG&A was down to $371.5 million from $529.1 million in the prior year quarter.
Joint ventures delivered homes valued at $17.7 million, up sharply from $5 million in the second quarter of 2009.
Lot count was up for the first time since mid 2006, to 33,600 lots owned and optioned, compared to 31,700 one quarter earlier, 36,600 a year before that and 91,200 at its peak at FY 2006's second-quarter-end. Approximately 28,000 lots were owned, of which approximately 10,700 lots, including those in backlog, were substantially improved.
Toll ended the quarter with $1.55 billion in cash and marketable U.S.Treasury securities compared to $1.75 billion at 2010's first-quarter end and $1.96 billion at FY 2009's second-quarter end. During this year's quarter, the company spent $52 million to reduce debt and approximately $143 million to buy land.
At FY 2010's second-quarter end, it had $1.40 billion available under its$1.89 billion 30-bank credit facility, which matures in March 2011. Net debt-to-capital was 16.2%, compared to 10.8% at first-quarter end and 13.1% at 2009's second-quarter end. Long-term debt remained relatively stable with the 2009 quarter at $1.588 billion.
"We believe many markets are turning the corner and housing in general is beginning its recovery," said Robert I. Toll, CEO until he passes the reins on to Douglas Yearley, Jr. on June 16 and becomes executive chairman. "We don't expect housing to roar back right away," he added. "We are encouraged by the volume of business we've done recently, in light of the gyrations in the financial markets...May's activity suggests that for us the tax credit wasn't the determinative factor--rather, we believe, the past few months'activity has been driven by an increase in confidence among our buyers in their job security, their ability to sell their existing homes, and general trends in home prices."
Said Yearley, "We are seeing solid activity in many markets. The urban metro New York City market and most of the suburban corridor from metro Washington, DC to metro Boston are doing better. We have also seen notable improvement in parts of California and North Carolina."
CFO Joel Rassman said the company now expects to deliver between 2,200 and 2,750 homes in fiscal 2010 at average prices between $540,000 and $560,000.
Toll shares were up 3.2% at $21.28 in mid-afternoon trading on Wednesday.