Toll Brothers Issues Preliminary 1st Qtr FY2009 Report

Toll Brothers priliminary report shows some promise.

HORSHAM, Pa., Feb. 11, 2009 (GLOBE NEWSWIRE) – Toll Brothers, Inc. (NYSE:TOL) (www.tollbrothers.com), the nation’s leading builder of luxury homes, today reported preliminary results for revenues, backlog and contracts for its first quarter ended January 31, 2009. The Company will release final results when it announces earnings on March 4, 2009.

Home building revenues were approximately $409.3 million (665 units), backlog was approximately $1.04 billion (1,647 units), and net (after cancellations) signed contracts were approximately $128.1 million (266 units). These totals represented declines of 51%, 56%, and 66%, respectively, in dollars, and 45%, 51% and 59%, respectively, in units, compared to FY 2008’s first-quarter results.

In FY 2009’s first quarter, the Company had 157 cancellations totaling approximately $115.0 million. This compared to 257 cancellations totaling $198.0 million in FY 2008’s first quarter and 233 cancellations totaling $183.0 million in FY 2008’s fourth quarter.

The Company continues to focus on maintaining liquidity as it positions itself for opportunities that it believes should arise from this downturn. The Company ended FY 2009’s first quarter with approximately $1.53 billion of cash, compared to $956.6 million at FY 2008’s first-quarter-end, and $1.32 billion available under its 31-bank credit facility, which matures in March 2011. The Company’s cash position was down slightly from $1.63 billion at FY 2008’s fourth-quarter-end, principally due to the payment in the first quarter of previously accrued taxes and the retirement of purchase money mortgages and other debt.

As it continues to manage its costs, the Company ended FY 2009’s first quarter with 258 selling communities, compared to 273 at FYE 2008. The Company now expects to end FY 2009 with approximately 240 selling communities, down approximately 26% from its peak of 325 communities at FY 2007’s second-quarter-end. The Company ended FY 2009’s first quarter with approximately 38,000 lots owned and optioned, compared to approximately 55,000 one year earlier and approximately 91,200 at its peak at FY 2006’s second-quarter-end.

Robert I. Toll, chairman and chief executive officer, stated: "The past five months have been among the most difficult in U.S. economic history. Many potential buyers are now concerned about their job security and the economy’s financial stability, in addition to their ability to sell their current homes.

"Our first-quarter results reflect the impact of this turmoil. January was somewhat better than November and December, perhaps influenced by our 3.99%, 0-point, 30-year fixed-rate mortgage promotion, which complemented the typical post-holiday seasonal bounce. Traffic from January 19th through February 8th was up about 34% from the prior several weeks, but was still quite low, on a per-community basis, compared to the corresponding weeks at any other time in our history.

"Preferred-client private sales events held for pre-qualified customers at several communities in selected markets were quite successful in generating new deposits, reinforcing our belief that buyers are out there. While it appears that some buyers are tired of postponing their purchase decision and although, on a national basis, home price affordability has improved dramatically (according to the National Association of Realtors, affordability is at a twenty-year high), we believe many potential buyers still lack the confidence to commit and are waiting for a sign, whether from the government or the market, that home prices have stabilized.

"If the President and Congress, in effect, take action to ‘call the bottom’ on home prices by approving a significant program to spur demand, home prices might stabilize. This could also stem foreclosures, reduce inventories, and shore up existing difficult-to-value mortgage-backed securities so they can be traded.

"We believe the home building industry is the most important direct and indirect generator of jobs in the United States. New home production is at its lowest level in fifty years and the resultant impact on our economy from job losses has been devastating. We believe that getting buyers back in the market will ultimately help put Americans back to work, not just building homes, but also providing the housing-related services and products that go into them."

Joel H. Rassman, chief financial officer, stated: "We ended FY 2009’s first quarter with approximately $2.85 billion of liquidity from cash and availability under our bank credit facility. In addition, we have no public debt maturities until 2011. We believe this liquidity should enable us to take advantage of opportunities we expect will arise from the industry’s current turmoil.

"In FY 2009’s first quarter, the average price per unit of gross contracts signed, cancellations and net contracts signed were $575,000, $732,000 and $482,000, respectively, compared to $583,000, $785,000 and $495,000, respectively, in FY 2008’s fourth quarter and $634,000, $770,000 and $580,000, respectively, in FY 2008’s first quarter. The decrease in average price per unit of gross contracts signed in FY 2009’s first quarter, as compared to FY 2008’s first quarter, was partially due to greater incentives and partially due to differences in our product mix. The gap between the average price per unit of gross versus net signed contracts in FY 2009’s first quarter was attributable to the higher average price of the 157 first-quarter FY 2009 cancellations, compared to the average price of first-quarter gross contracts signed. Presently, we are typically re-offering the cancelled units near their original contract prices.

"While we have not yet finalized our impairment analysis, we estimate that pre-tax write-downs related to operating communities, land and land options, and joint ventures in FY 2009’s first quarter will be between $100 million and $200 million. Given the significant uncertainty surrounding sales paces, cancellation rates, market direction, unemployment trends and numerous other aspects of the overall economy, we are not prepared in this preliminary release to offer new, or comment on previous, guidance."