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Toll Brothers, Inc. (TOL)
F3Q09 (Qtr End 07/31/2009) Earnings Call
August 27, 2009 2:00 pm ET
Robert Toll - Chairman and CEO
Joel Rassman - EVP, CFO and Treasurer
Don Salmon - President of Toll Architecture, Inc
Mike Snyder- SVP and Chief Planning Officer
Joe Sicree - CAO
Doug Yearley - Regional President and Head of M&A
Greg Ziegler - VP of Finance
Joshua Pollard - Goldman Sachs
Stephen Kim - Alpine Wood
Rob Hansen - Deutsche Bank
Megan McGrath - Barclays Capital
Ivy Zelman - Zelman & Associates
Susan Berliner - JPMorgan
Daniel Oppenheim - Credit Suisse
Michael Rehaut - JPMorgan
Bose George - KBW
Timothy Jones - Wasserman & Associates
Buck Horne - Raymond James
Alex Barron - Agency Trading Group
Eric Landry - Morningstar
At this time, I would like to welcome everyone to the Toll Brothers Third Quarter Earnings Conference Call. (Operator Instructions).
Thank you. Mr. Toll, you may begin your conference.
Previous Statements by TOL
» Toll Brothers F4Q09 (Qtr End 10/31/2009) Earnings Call Transcript
» Toll Brothers Inc. F4Q09 Outlook Call Transcript
» Toll Brothers Inc. Q3 2009 Outlook Call Transcript
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, such as our accounts. Those listening on the Web can email questions to firstname.lastname@example.org.
Today, we reported earnings results for our third quarter ended July 31, 2009. Since our detailed release has been out since 5:00 AM and is posted on our website, I would just hit certain highlights.
In fiscal '09 third quarter we reported a net loss of $472.3 million or $2.93 per share diluted. Our results were impacted by both non-cash federal and state deferred tax asset valuation allowances of $439.4 million and non-cash pre-tax write-downs totaling $115 million. Excluding write-downs, our pre-tax earnings were $3.7 million.
Our fiscal '09 third quarter deliveries and revenues were down 36% and 42% respectively versus '08's third quarter. Fiscal '09 third quarter net signed contracts rose 3% in units and declined 5% in dollars compared to '08's third quarter. Our fiscal '09 third quarter backlog declined 37% in units and 47% in dollars compared to fiscal year '08's third quarter.
We continue to focus on maintaining a strong balance sheet and liquidity. We ended fiscal '09 third quarter with a net debt to cap ratio of 14.5% compared to 18% at fiscal year '08's third quarter end. At fiscal year '09 third quarter end, we had $1.66 billion in cash and $1.35 billion available under our $1.89 billion 30-bank credit facility, which matures in March 2011.
While our fiscal year '09 third quarter earnings results reflect tough housing market conditions, things sure feel better than they did six months ago. For the first time since our fiscal year '05 fourth quarter, our third quarter total net signed contracts were ahead in units compared to one year ago. With 22% fewer selling communities during the quarter, that translated to a 32% improvement in per community same-store net signed contracts in our third quarter.
Also, fiscal '09 third quarter end backlog was up 3% in units compared to fiscal year 2009's second quarter end backlog, marking the first time that backlog units had increased from one quarter to the next in 12 quarters. Four weeks into our fourth quarter, our per community deposits, the non-binding precursor to signed contracts, are running 26% ahead of last year's comparable period.
Our fiscal year '09 third quarter cancellation rate, current quarter cancellations divided by current quarter signed contracts, of 8.5% was the lowest since fiscal year '06's second quarter. As a percentage of beginning quarter backlog, fiscal year '09's third quarter cancellation rate was 4.9%, the lowest in three years.
We believe declining cancellations and more solid demand indicate that the housing market is stabilizing. We are reducing incentives and raising prices in selected communities. We believe that customers are recognizing that now is the time to get into the market to take advantage of near-record affordability and what is still for now a buyer's market.
Our cautious optimism is coincident with encouraging data released this week from several sources related to housing and consumer confidence. On Tuesday, the S&P Shiller Index reported that "Home prices are on an upswing." The index rose 1.4% in June from the previous month, which was the second consecutive month-over-month gain and the largest gain since June, 2005. Home prices rose in 18 of 20 metropolitan areas.
That same day the Conference Board announced that its Consumer Confidence Index had shown a significant rebound, particularly the longer term expectations index, which improved considerably and is now at its highest level since December, 2007.
Yesterday, the US Commerce Department reported that new home sales in July had their biggest increase since February, '05, and that the number of months supply of new homes on the market, 7.5 months, was the lowest since April of '07. These are encouraging signs.
Now, let me turn it over to Joel for the numbers. Joel?