Toll Bros. posts smaller Q2 loss than in ’09

Citing improvements in many of its markets, luxury-home builder Toll Bros. Inc. reported Wednesday that its second-quarter loss was about half that of the same period in 2009.

The Horsham company said its net loss was $40.4 million, or 24 cents a share, compared with $83.2 million (52 cents a share) in the second quarter of 2009. That included pretax write-down of $42.3 million, compared with $119.6 million a year earlier.

Excluding write-downs, the second-quarter pretax loss was $9.5 million, compared with $2.3 million in the 2009 period. The loss was related to a Superfund-site designation near a New York project, issues in a Nevada master-planned development, and the anticipated closing and sale of a project in the Southeast.

Although second-quarter revenue dropped 22 percent from the 2009 quarter, to $311.3 million, the value of net signed contracts for the period rose 56 percent, to $464.6 million.

The number of houses delivered to buyers in the second quarter fell 16 percent, to 543 units, while net signed contracts rose 41 percent, to 820 units. The cancellation rate fell to 5.3 percent, from 21.7 percent a year earlier, or 46 vs. 161.

Although not anticipating a rapid return to boom times, Toll Bros. chief executive officer Robert I. Toll said: "It appears our business has emerged from the tunnel and into a bit of daylight.

"We believe many markets are turning the corner, and housing in general is beginning its recovery," said Toll, who steps down as CEO on June 16 after 43 years.

"The high rate of unemployment, coupled with volatility in the financial markets, continues to weigh on the nation's psyche," he said. "We believe that, as the unemployment rate comes down and confidence improves, pent-up demand will be released, and, gradually, more buyers will step into the market."

Toll will remain executive board chairman, but he will be replaced as CEO by Douglas C. Yearley Jr., the company's executive vice president.

Yearley said Toll's "urban metro New York City market and most of the suburban corridor from metro Washington, D.C., to metro Boston are doing better." "We have also seen notable improvement in parts of California and North Carolina."

Toll, 69, said in an interview last week that sales in New England and the Mid-Atlantic region were "snowballing," and he emphasized that there were parts of California that had not been seriously affected by the downturn, and so building there continues.

He said the obvious signs of recovery in the housing market had resulted in his decision to hand the reins over to Yearley, 50.

Though other segments of the new-home market appear to have benefited from the now-expired federal tax credit, the luxury-home market, in which a maximum $6,500 has little effect on price, did not.

On the other hand, Toll said, activity has increased markedly since May 1 in many of the company's communities in 20 states.

"May's activity suggests that for us the tax credit wasn't the determinant," but instead it was "an increase in confidence among our buyers in their job security, their ability to sell their existing homes, and general trends in home prices," he said.

In the last 12 months, the number of communities in the 20 states has been reduced by 50, to 190 from 240. The company has 33,600 lots owned and optioned, the most since 2006, when there were more than 91,000.

In the second quarter, "our lot count increased for the first time in four years," Yearley said. "We are seeing better land deals from financial institutions and traditional sellers than last year."

Rather than expand to more markets, Yearley said, his strategy as CEO will be "to increase our share in the markets we already are in and return to profitability." He said the company also was looking into other lines outside home-building, including buying real estate portfolios.

He began his career at Toll buying distressed property held by failed savings and loans.

As of April 30, Toll's backlog had risen to $993.5 million from $944.3 million a year earlier.

Toll expects to deliver 2,200 to 2,750 houses in fiscal 2010, with an average price of $540,000 to $560,000 in the last six months of the year, according to chief financial officer Joel H. Rassman.

The earnings report helped boost Toll's shares on the New York Stock Exchange to $20.78, up 17 cents.