Toll Brothers 4Q loss narrows

December 4, 2008 6:23:07 AM PST
Toll Brothers Inc. said Thursday its fiscal fourth-quarter loss narrowed slightly as it took fewer write-downs on land values, but warned that fiscal 2009 revenue will fall significantly below 2008 levels. The luxury home builder said the economic environment is too uncertain to be able to further forecast fiscal 2009 results.

For the quarter ended Oct. 31, losses totaled $78.8 million, or 49 cents per share, including $175.9 million worth of pretax write-downs. That's slightly better than the year-ago loss of $81.8 million, or 52 cents, on $314.9 million write-downs.

Excluding items, profit totaled 23 cents per share.

Revenue fell to $698.9 million from $1.17 billion a year ago, slightly above the preliminary sales results of $691 million Horsham, Pa.-based Toll issued last month. The cancellation rate dipped to 30.2 percent from 38.9 percent last year.

Analysts surveyed by Thomson Reuters expected a loss of 46 cents per share on revenue of $681.4 million.

The company said it ended fiscal 2008 with more than $1.63 billion in cash and over $1.32 billion available under its 32-bank credit facility, which matures in March 2011. Toll said it has no public debt due until its 2011 second quarter.

Looking ahead, Toll Brothers said it expects revenue next year will be "significantly below" fiscal 2008's $3.16 billion, but declined to issue earnings guidance.

"Given the numerous uncertainties related to sales paces, sales prices, mortgage markets, cancellations, market direction and the potential for and size of future impairments, in the current climate it is particularly difficult to provide guidance for FY 2009," Chief Financial Office Joel H. Rassman said in a statement.

Toll estimates it will deliver between 2,000 and 3,000 homes in 2009 at an average price between $600,000 and $625,000 each. It expects costs to rise, due to continuing incentives and slower sales.

"As we look to the future, we see reduced competition from the small and mid-sized private builders who are our primary competitors in the luxury market," said Robert I. Toll, chairman and chief executive, in a statement. "Their access to capital already appears to be severely constrained. We believe a less crowded playing field, combined with attractive long-term demographics, will reward those well-capitalized builders who can persevere through the current challenging environment."

Financial industry lobbyists are urging the Treasury Department to take steps to lower mortgage rates and help stabilize the battered U.S. housing market. Under one proposal, the Treasury would seek to lower the rate on a 30-year mortgage to 4.5 percent by purchasing mortgage-backed securities from Fannie Mae and Freddie Mac, Scott Talbott, chief lobbyist at the Financial Services Roundtable, said Wednesday.

Such a plan could jumpstart home sales for builders.

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