Toll Bros narrows 2Q loss, chairman questions data on home prices
Home builder Toll Brothers (TOL) cut its fiscal second-quarter loss in half, as margins improved on higher revenue and increased units delivered. The luxury construction firm reported a loss of $20.8 million, or 12 cents a share, for the three months ended April 30, narrower than the loss of $40.4 million, or 24 cents a share, a year earlier. Second-quarter revenue rose 2.7% to $319.7 million from $311.3 million last year. The company delivered 591 homes in the quarter, up 9% from 543 a year earlier. At $541,000, the average price of delivery rose slightly from the year ago and was down 7.7% from $586,000 for first quarter. The second-quarter gross margin, excluding interest and write-downs, rose to 23% from 20.3% a year ago. "We continue to see stability, and, in some cases, improvement, across our various luxury product lines," Chief Executive Douglas Yearley said. "Our target customers generally have remained employed during this downturn, and, with their solid credit profiles, been able to secure mortgages at good rates." He said many potential customers have put off acquiring a home due to concerns about declining property values and the overall economy. "We believe that some of our clients, after waiting so long, are starting to move off the fence and into the market, motivated by attractive pricing, low interest rates and, most importantly, the desire to take the next step in their lives," Yearly said. Toll Brothers now expects to deliver 2,300 to 2,800 homes for its fiscal 2011. Executive Chairman Robert Toll said second-quarter results strengthened despite the benefits of the federal homebuyer tax credit in the year-earlier period. The tax incentive "pulled demand forward at the bottom rungs of the homeownership ladder and may have energized activity in higher price points, as well," Toll said. He also said the company disputes recent media accounts of declining home prices. "Many studies quoted in the media combine distressed sales data, including foreclosures and short sales, with new and/or non-distressed existing home sales data. We believe that averaging distressed and non-distressed sales data provides a misleading picture to the public regarding home price direction," Toll said. The company reported total assets of $5.08 billion at April 30, down from $5.17 billion at Oct. 31. Write to Jason Philyaw.