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Luxury Builder Posts 1st Quarterly Loss In 21 Years

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By JEREMY HERRON, The Associated Press

Published: December 7, 2007

NEW YORK - Toll Bros. Inc., the nation's largest builder of luxury homes, reported its first quarterly loss in 21 years Thursday as the housing downturn that the company called the worst in four decades deepened.

"By many measures, fiscal 2007 was the most challenging of the 40 years that Toll Brothers has been in business," chairman and chief executive officer Robert Toll said in a statement. "1974 was perhaps rougher, but the difficult times only lasted one year."

Toll Bros., based in Horsham, Pa., reported a loss of $81.8 million, or 52 cents a share, in its fiscal fourth quarter, compared with net income of $173.8 million, or $1.07 a share, a year ago.

The company booked a charge of $314.9 million in write-downs, mainly for houses it could no longer sell at a profit. Without the write-downs, the company would have posted profit of 72 cents a share, less than half the $1.49 a share profit that was posted during the same quarter a year earlier.

The loss was narrower than expected on Wall Street, where analysts polled by Thomson Financial estimated a loss of 77 cents a share.

Revenue fell 35 percent to $1.17 billion in the quarter ended Oct. 31, slightly ahead of Wall Street's forecast of $1.166 billion. Net signed contracts, a measure of future sales activity, fell by 48 percent to $365.3 million.

The housing market, after booming for several years, is now in its third year of decline, plagued by excess inventory, defaults in subprime mortgages and tightening of credit as lenders become choosier about borrowers. Home prices have been falling in most major markets across the country.

Now, investors are hoping that a plan crafted by the Bush administration and the mortgage industry to freeze adjustable interest rates on troubled subprime loans will stabilize housing prices and give home builders a brighter spring. Toll shares surged $2.70, or 13 percent, to $23.42 Thursday, amid a broader rally in the sector on the White House announcement.

The S&P 500 home builders index climbed more than 13 percent Thursday, setting a one-day record, according to S&P. The group is still down nearly 59 percent from a year ago.

The administration's effort is aimed at s stanching a tidal wave of foreclosures in coming years as 2 million subprime mortgages reset to higher rates. Bush and lenders were moved to act over concern that a surge in defaults could deepen the housing slump and drag the economy into recession.

The plan overshadowed an industry report that foreclosures hit an all-time high in the July-September period.

Robert Toll said he didn't think much of the White House plan and that odds are there will be a recession.

"If I had to make a bet on recession or no recession right now, I'd probably think that we're going to have a recession," he said in a conference call with investors. Toll said Bush's plan should have capped all adjustable mortgages, not just those likely to foreclose.

The executive was optimistic that recent nationwide price declines and relatively low interest rates have created a buyer's market.

"It's not a matter of if, but a matter of when, this oversupply is absorbed," Toll said.

For its fiscal year, the company posted net income of $35.7 million, or 22 cents a share, compared with profits of $687.2 million, or $4.17 a share, in 2006. Revenue fell 24 percent to $4.65 billion. Net signed contracts dipped 33 percent to $3.01 billion.

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