Toll Brothers, Horsham, Pa. (NYSE:TOL) on Wednesday morning reported a net loss of $83.2 million (-$0.52 per share) for the fiscal second quarter ended April 30, an improvement from a loss of $93.7 million during the comparable quarter last year but slightly higher than the Wall Street consensus estimate of a loss of $0.44 cents a share. The results included a one-time pre-tax gain of $40.2 million resulting from a condemnation judgment.
Shares of Toll were down nearly 6% to $18.36 in late-morning trading as the entire builder group was experiencing a selloff.
The Toll loss was driven by pre-tax write-downs totaling $119.6 million, or$0.48 per share and by a 51% drop in revenues to $398.3 million. As previously reported, closings fell 47% from last year's fiscal second quarter to 648 units.
Net signed contracts fell 37% to 582 with an aggregate value $298.3 million, a decline of 40%. Cancellations were at a rate of 21.7%, down from 37.1% in the fiscal 2009 first quarter and 24.9% in the second quarter of fiscal 2008. But the value of cancelled contracts ticked upward to $746,000 from $733,000 in the previous quarter. As a percentage of beginning-quarter backlog, the rate rose to 9.8% compared to 7.7% in the previous quarter and 9.2% a year ago.
Average prices continued falling, with the average price of gross contracts signed at $563,000 for the quarter compared to $575,000 in the previous quarter and $591,000 a year earlier. On a net contracts signed basis, however, the average price increased to $513,000 from $481,000 in the fiscal first quarter but still was down versus $534,000 during the comparable period last year.
Homes in backlog was down 48% to 1,581 units worth $944.3 million, a 55% drop from last year's second quarter. Selling communities totaled 240 at quarter's end, down 20% from 300 at the same time last year. Toll expects to end the fiscal year with 225 or fewer active selling communities.
As of April 30, toll had approximately 36,600 lots owned and optioned, compared to approximately 37,900 at the end of the previous quarter and 55,000 for the comparable quarter last year. Toll's lot count peaked at 91,200 at the end of second quarter, 2006.
Toll ended the quarter with $1.96 billion of cash, up from $1.53 billion at the end of its first quarter and $1.24 billion at the same time last year.The increase was driven by the sale of $400 million in 8.91% senior notes due October 2017. Without the debt offering, the company's cash position would have been up approximately $40 million from the previous quarter. Toll also had $1.34 billion available under its $1.89 billion 31-bank credit facility, which matures in March 2011.
SG&A expenses for FY 2009's second quarter totaled $81.3 million, a decline of 25% compared to $108.7 million in 2008's fiscal second quarter.The company said it expects SG&A to remain lower throughout 2009 in total dollars than it was in 2008 but higher in percentage terms.
The company's net-debt-to-capital ratio hit an all time low of 13.1% at the end of the quarter, down from 22.7% at the same time last year. In May, Tll spent $304 million in cash to redeem all but $50 million of its public debt maturing through December 2011. Other than that $50 million, Toll will have no public debt maturing until early in FY 2013.
Toll said it would not provide earnings guidance, but said it expects to deliver between 2,200 and 2,800 homes in 2009 at an average delivered price of between $590,000 and $620,000.
In a statement, Robert I. Toll, chairman and CEO, said, "The recently reported strong rise in consumer confidence was consistent with our recentexperience: We have now experienced positive same-week, year-over-year refundable-deposits-per-community comparisons in nine of the past eleven weeks." However, he added, "Although cancellations appear to be leveling off, we believe that concerns about job security and the economy continue to inhibit traffic and the conversion of deposits to contracts."
Still, the customers who are buying are well-heeled. The company said the average buyer was putting 30% down and ordering options amounting to an 18.3% increase over base prices of homes. The average FICO score of a current Toll customer is 755.
Toll also addressed what it might do with some of its cash in coming months: "We have begun to see more offerings in the land market as sellers--individuals, companies and financial institutions--appear to be more motivated. With our solid capital base, we believe we are well-positioned to take advantage of these opportunities."
Dan Oppenheim at Credit Suisse put out a research note pointing out the positives but still expressing caution. "Deposits show signs of improvement, but [the company is] not out of the woods," he wrote. "TOL noted per community deposits (which lead contract activity) have increasedyr/yr in nine of the past eleven weeks. However, the company stressed thechallenge of generating traffic and converting the deposits to firm contracts.In addition, cancellations remain a risk (increasing to 9.8% of backlog in 2Qvs. 7.7% in 1Q and 9.2% in 2Q/08) and we believe the high end marketremains particularly vulnerable."