Toll Brothers loses $111 million in fourth quarter, but sees signs of housing turnaround

Toll Bros. loses $111 million in Q4, but sees hope

HORSHAM, Pa., — Toll Brothers Inc. lost $111.4 million in the fiscal fourth quarter, but the luxury homebuilder is seeing signs of a turnaround in the housing market.

The company’s loss of 68 cents a share was largely due to continued write downs on the value of its land holdings and staff reductions. Excluding those charges, the builder almost broke even. In the year-ago quarter, which included a larger amount of write downs, Toll lost $78.8 million, or 49 cents a share.

Revenue for the quarter ended Oct. 31 fell 30 percent to $486.6 million from $691.1 million.

Analysts polled by Thomson Reuters were expecting a loss of 46 cents a share on revenue of about $450.1 million.

Investors were disappointed and sent Toll’s shares down almost 7 percent, or $1.32 a share, to $18.17 in afternoon trading.

The industry has been buoyed by an $8,000 federal tax credit for first-time homebuyers, which was extended last month and expanded to include $6,500 for existing homeowners. That was especially good news for Toll, whose luxury homes are marketed to buyers looking to trade up from their existing homes.

Sales of new homes have increased six out of the past seven months, according to government data. They dipped in September, but surged in October to the highest level in more than a year.

“The choppiness in demand that began after Labor Day, following a stronger period from late March through late August, has continued,” Robert Toll, chief executive officer, said in a statement. “This is consistent with recent weaker economic news. Since the holiday season is not typically the busiest time to be purchasing or selling homes, we suspect the housing market may be following seasonal buying patterns.”

Toll said he believes there will be further consolidation in the industry. With fewer competitors and a strong balance sheet, he said, “we believe we are well-positioned to gain market share as the housing market gradually recovers.”

Soleil Securities Group analyst Anna Torma echoed that assessment, citing the builder’s financial strength. The company ended the year with $1.91 billion in cash.

“Although we believe the housing market continues to face headwinds, Toll’s liquidity and balance sheet strength continue to be key positives,” Torma wrote in a research note.

Toll Brothers posted a 42 percent jump in new sales contracts and a healthy cancellation rate of just 7 percent. Stronger sales in some of its communities have allowed Toll to cut back on incentives and even raise its prices.

But the builder noted it expects completed sales in the 2010 fiscal year to decline, at a minimum, about 7 percent from fiscal 2009.

The Horsham, Pa., company has operations in 21 states and was ranked the 14th largest homebuilder in the U.S. last year by Builder magazine.

For Toll Brothers’ full fiscal year, the net loss was $755.8 million, or $4.68 per share, which included write downs of $848.9 million. For fiscal 2008, the builder lost $297.8 million, or $1.88 per share.

Total revenue dropped to $1.76 billion from $3.15 billion.

On the Net: Toll Brothers: www.tollbrothers.com