Toll Brothers Cuts Losses in Half, Points to Signs of Rebound Ahead
"We believe the housing market is still in choppy waters but the seas are getting calmer," said Chairman and CEO Robert Toll said in the earnings press release. "We believe that more opportunity exists today than at any time in the previous four-plus years of this recession."
Even though first-quarter numbers were up significantly from the previous two first quarters' per-community average, "our results were approximately half the average of all previous first quarters dating back to 1990," Toll said. But things are looking up. Toll said that the first week of the company's annual national winter sales event "produced the highest per-community deposits for any week in February since 2006. And traffic, which had been consistently weak, began to show signs of recovery." He added that traffic in "our healthier markets," is returning to "more normalized paces of deposits per community."
Looking for New Land Opportunities
Toll Brothers focuses on the high end of the real estate market. CFO Joel Rassman said he expects the company to deliver between 2,100 and 2,750 homes in fiscal 2010 with an average delivered price between $540,000 and $560,000 per home.
Toll Brothers not only sees a pick up in sales, it's also looking for new land opportunities. While it spent the last year whittling down its number of selling communities, it expects to expand again in fiscal 2010. The company was selling homes in just 190 communities at the end of the quarter, down from 258 a year earlier. Executive Vice President Douglas Yearley expects that the company will accelerate its pace of land acquisitions in 2010, and could end the year selling in more than the 200 to 210 communities now projected. Yearly added that, "With experienced land teams in nearly all our markets, a strong cash position and low leverage, we have the capital and ability to respond to opportunities very quickly."
Though the company is operating in fewer communities, it signed gross contracts of $313.2 million on 564 units in the first quarter, which is an increase of 29% and 33%, respectively, in dollars and units, compared to $242.8 million and 423 gross contracts signed in 2009's first quarter.
Toll Brothers ended the quarter with a net debt-to-capital ratio of 10.8% compared to 14.5% a year earlier. The company ended the period with $1.75 billion in cash and marketable U.S. Treasury securities, up from $1.53 billion year-over-year. In addition to the cash, the company also had $1.38 billion available under its $1.89 billion 30-bank credit facility, which matures in March 2011.