Despite Heavy Fourth-Quarter Loss, Toll Brothers Sees Glimmer of Hope

Toll Brothers, a builder of luxury homes in 21 states and one of the nation’s top-10 homebuilders, reported a fiscal fourth-quarter loss of $111.4 million, or 68 cents a share, compared to a fourth-quarter loss of $78.8 million, or 49 cents a share, in 2008. About 75% of the 2009 loss ($85.5 million) is attributed to pretax inventory write-downs. Excluding charges, Toll Brothers posted a pretax loss of $6.9 million for 4Q 09, compared with a pretax profit of $69.9 million the previous year. 

Despite the heavy losses and uneven housing market, the company is seeing some signs of economic recovery in the housing market: 

• Driven by low mortgage rates and the first-time homebuyer tax credit, new contracts jumped 42% in 4Q 09.

• Although home-building revenue fell by 30% and closings by 20%, both drops were less than analysts expected. 

• Net signed contracts rose 42% to 765 units, with an increase of 62% in dollar value to $430.8 million—about 17% higher than 4Q 08. 

• Cancellation rate for 4Q 09 was 6.9%, about the same as pre-recession averages. 

• Toll Brothers ended fiscal 2009 with a significantly lower backlog of projects than the previous year.