Toll Brothers Inc. (TOL)

TOL 
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Toll Brothers (TOL)

Q1 2013 Earnings Call

February 20, 2013 2:00 pm ET

Executives

Douglas C. Yearley - Chief Executive Officer and Director

Martin P. Connor - Chief Financial Officer, Senior Vice President and Treasurer

Robert I. Toll - Co-Founder and Executive Chairman

Donald Salmon

Gregg Ziegler

Analysts

Stephen F. East - ISI Group Inc., Research Division

David Goldberg - UBS Investment Bank, Research Division

Dennis McGill - Zelman & Associates, LLC

Freda Zhuo - Barclays Capital, Research Division

Daniel Oppenheim - Crédit Suisse AG, Research Division

Michael Jason Rehaut - JP Morgan Chase & Co, Research Division

Joey Matthews - Wells Fargo Securities, LLC, Research Division

Jade J. Rahmani - Keefe, Bruyette, & Woods, Inc., Research Division

Kenneth R. Zener - KeyBanc Capital Markets Inc., Research Division

Joel Locker - FBN Securities, Inc., Research Division

Michael A. Roxland - BofA Merrill Lynch, Research Division

Buck Horne - Raymond James & Associates, Inc., Research Division

Jack Micenko - Susquehanna Financial Group, LLLP, Research Division

Presentation

Operator

Good afternoon. My name is Dawn, and I will be your conference operator today. At this time, I would like to welcome everyone to the Toll Brothers First Quarter Earnings Conference Call. [Operator Instructions] Thank you. Mr. Douglas Yearley, you may begin your conference, sir.

Douglas C. Yearley

Thank you, Dawn. Welcome, and thank you for joining us. I'm Doug Yearley, CEO. With me today are Bob Toll, Executive Chairman; Marty Connor, Chief Financial Officer; Fred Cooper, Senior VP of Finance, International Development and Investor Relations; Joe Sicree, Chief Accounting Officer; Kira Sterling, Chief Marketing Officer; Mike Snyder, Chief Planning Officer; Don Salmon, President of TBI Mortgage Company; and Gregg Ziegler, Senior VP, Treasury.

Before I begin, I ask you to read the statement on forward-looking information in today's release and on our website. I caution you that many statements on this call are based on assumptions about the economy, world events, housing and financial markets and many other factors beyond our control that could significantly affect future results. Those listening on the web can e-mail questions to rtoll@tollbrothersinc.com.

As has become our regular practice, we are going to limit our prepared remarks to provide more time for Q&A. Since our detailed release has been out since early this morning and is posted on our website, I'm sure most have read it, so I won't reread it to you.

Our fiscal year 2013 first quarter ended January 31. Fiscal year 2013 first quarter net income was $4.4 million or $0.03 per share compared to a net loss of $2.8 million or $0.02 per share in fiscal year 2012's first quarter. Fiscal year 2013 first quarter revenues rose 32% in both dollars and units compared to fiscal year 2012's first quarter. Our backlog rose 66% in dollars and 57% in units, and our net signed contracts rose 38% in dollars and 49% in units.

On a per-community basis, fiscal year 2013's first quarter net signed contracts were the highest for any first quarter since 2006. Demand has increased, and it appears that momentum is building. Through the first 3 weeks of our fiscal year '13 second quarter, contracts were up 40%. We are also enjoying increasing pricing power due to the release of pent-up demand colliding with limited supply.

Here are some recent examples. At Maxwell Place in Hoboken, we just opened our third building. In the last 2 weeks, we took 28 deposits at an average unit price of $735,000. At the Estates at Sunnyvale in Silicon Valley, California, we sold 30 homes in 4 months at an average price of $1.5 million. Prices are up $91,000 over those 4 months. At Steeplechase of Northville in Northville, Michigan, yes, Michigan, we sold 24 homes in the last 4 months at an average price of about $650,000. At the Enclave at Shrewsbury at the Jersey Shore, we sold 19 homes in 2 months at an average price of $700,000. Prices are up $37,000 over those 2 months.

At Liseter, our new flagship master-plan community on the mainline of Philadelphia, we opened our first phase of carriage homes and sold out in the first weekend. We have a lengthy VIP waiting list for future product lines that will be coming online later this winter and spring. At Belvedere, our community with spectacular views overlooking Seattle, we sold 21 homes in 5 months at an average price of $1.3 million. Prices are up $100,000 over those 5 months.

We are also excited about the pipeline of new City Living projects opening for sale in New York City this year. These include 400 Park Avenue South, 99 units; 160 East 22nd Street, 81 units; 1110 Park Avenue, 11 units; and the Pierhouse at Brooklyn Bridge Park, 123 units.

This quarter, we invested over $330 million in what we believe are very well-located land deals in strong markets. While many of these new deals will not open for sale until fiscal year 2014 or later, we are projecting to open approximately 70 new communities in the second, third and fourth quarters of fiscal year 2013. Adjusting for communities which we expect will sell out in the next 3 quarters, we project ending fiscal year 2013 with between 225 and 255 selling communities. We also expect to see community count growth in 2014.

We ended the quarter with 43,750 lots owned and controlled compared to 40,400 lots last quarter. With over $1.6 billion of cash and committed credit facilities, a low 29.7% debt-to-capital ratio and demonstrated ability to access the capital markets, we are in a strong position to continue to build our land position for future growth.

Read the rest of this transcript for free on seekingalpha.com