Toll Brothers today (May 9) reported preliminary results for its fiscal second quarter, ended April 30, that contained significant dropoffs in revenue and sales. Still, chairman and CEO Robert Toll said that the company expected to report a profit for the second quarter when it offically reports results May 24.
Toll reported second-quarter home building revenues were approximately $1.17 billion, end backlog was approximately $4.15 billion and net signed contracts were approximately $1.17 billion, down 19%, 32% and 25%, respectively, compared to FY 2006¹s second quarter results. For the six-month period ended April 30, 2007, home building revenues were approximately $2.26 billion and net signed contracts were approximately$1.92 billion, a decline of 19% and 29%, respectively, versus fiscal 2006¹s six-month results.
The company's cancellation rate fell to 19% (384 total cancellations) compared to 30% (436 total cancellations) in the first fiscal quarter of 2007 and 37% (585 total cancellations) in the fourth quarter of fiscal 2006. The company said 70% of the cancellations were from contracts signed more than nine months ago.
Said Toll, "Twenty months into this housing downturn, we continue to face difficult conditions in most of our markets. Although there is variation among markets, our traffic this quarter, on average, has been flat on a gross basis, and down approximately 20% on a per community (same store) basis compared to last year¹s second quarter. While we have not yet finalized our analysis, we estimate that write-downs (pre-tax) in the second quarter will be between $90 million and $130 million. Given the current state of the market, we no longer expect to achieve the most recent quarterly and annual guidance we provided on February 22, 2007. However, even at the upper end of our range of second-quarter write-downs, we expect to report a profit for our second quarter."
Regarding the turmoil at the low end of the mortage market, Toll said, "We believe that fewer than 2% of our buyers use sub-prime loans. However, the impact of stricter lending standards arising from problems in the sub-prime market is negatively affecting affordability at lower price points. This, in turn, can impact the entire housing food chain, including some of our potential customers' ability to sell their existing homes. This, coupled with a lack of buyer confidence, may have served to impede the glimmers of a rebound we had started to see in early February."
Among the results:-- FY 2007 second-quarter net contracts of approximately $1.17 billion declined by 25% from FY 2006's second-quarter contracts of $1.56 billion. In addition, in FY 2007's second quarter, unconsolidated entities in which the Company had an interest signed contracts of approximately $34.6 million.
-- FY 2007's six-month net contracts of approximately $1.92 billion declined by 29% from FY 2006's six-month total of $2.70 billion. In addition, in FY 2007's six-month period, unconsolidated entities in which the Company had an interest signed contracts of approximately $63.8 million.
-- The company signed 2,031 gross contracts in FY 2007's second quarter, a 14% decrease from the 2,372 signed in FY 2006's second quarter.
-- FY 2007?s second-quarter home building revenues of approximately $1.17 billion decreased 19% from FY 2006's second-quarter home building revenues of $1.44 billion, the second-quarter record. Revenues from land sales totaled approximately $2.0 million for FY 2007's second quarter, compared to$2.1 million in FY 2006's second quarter.
-- FY 2007's six-month home building revenues of approximately $2.26 billion decreased 19% from FY 2006's six-month home building revenues of$2.78 billion, the six-month record. FY 2007 revenues from land sales for the six-month period totaled approximately $5.4 million, compared to $6.8 million in the same period in FY 2006.
-- Unconsolidated entities in which Toll had an interest delivered approximately $14.8 million and $35.4 million, respectively, compared to $29.0 million and $81.0 million, respectively, in the same periods of FY 2006.