UPDATE:Toll Brothers 3Q Loss Widens; Sees Signs For Optimism
August 27 2009 - 10:33AM
Dow Jones News
Toll Brothers Inc.'s (TOL) fiscal third-quarter loss widened
sharply on tax charges and write-downs, but the luxury-home builder
said it sees signs that buyers are tiptoeing back into the
market.
For the quarter ended July 31, the company posted a loss of
$472.3 million, or $2.93 a share, compared with a prior-year loss
of $29.3 million, or 18 cents a share.
The latest results included federal and state deferred tax asset
valuation allowances of $439.4 million, and pretax inventory and
joint-venture-related write-downs totaling $115 million, while the
previous year's results included $139.4 million in write-downs.
Excluding write-downs, Toll reported a pretax profit of $3.7
million for the quarter, compared with year-earlier pretax profit
$84.6 million.
Shares of the builder, which have gained more than 25% in the
last three months, fell more than 2% in early trading, nearly
matching the Dow Jones US Home Construction Index's decline.
Earlier this month, the company said revenue decreased 42% to
$461.3 million. It added net orders surprisingly rose 3.1%,
although they fell 4.7% in dollar terms. The cancellation rate fell
to 8.5% from 19% a year earlier,as fewer buyers abandoned
deals.
Still, Toll Brothers said that while its third-quarter results
reflect continuing challenging market conditions, "we do see signs
for optimism." The company said declining cancellations and more
solid demand indicate that the housing market is stabilizing.
"We are reducing incentives and raising prices in selected
communities," said Chairman and Chief Executive Robert I. Toll. "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."
That's a big deal for the sector, because desperate builders had
to discount heavily and offer profit-eroding incentives during the
downturn. Toll's peers offered everything from free vacations to
upgraded kitchens to tempt jittery buyers.
The company said that four weeks into its fiscal fourth quarter,
its per-community deposits, the non-binding precursor to signed
contracts, are running 26% ahead of the year-ago period.
Toll Brothers said it now expects to deliver between 2,580 and
2,830 homes in its current fiscal year, compared with its June view
of 2,200 to 2,800 homes. It could deliver between 475 and 725 homes
in the fourth quarter at an average delivered price of $550,000 and
$575,000 apiece.
Credit Suisse analyst Dan Oppenheim said he "would not be
surprised to see Toll increase its community count in 2010 to take
advantage of the improved demand."
Toll Brothers previously forecast an average delivered price of
$590,000 to $600,000 for the fiscal year. Its prices are the
sector's highest.
-By Dawn Wotapka, Dow Jones Newswires; 212-416-2193;
dawn.wotapka@dowjones.com
(Joan E. Solsman and Colin Kellaher contributed to this
article.)