Toll Brothers 3Q Loss Widens; Sees Signs For Optimism

Toll Brothers Inc.'s (TOL) fiscal third-quarter loss widened sharply on tax charges and write-downs, but the nation's largest luxury-home builder said it sees signs that the housing market is stabilizing.

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 $115.0 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.

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.

Toll Brothers said Wednesday 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."

The company said that four weeks into its 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.

The company expects to deliver between 475 and 725 homes in the fourth quarter at an average delivered price of $550,000 and $575,000 apiece.

Toll Brothers previously forecast an average delivered price of $590,000 to $600,000 for the fiscal year.

Toll Brothers shares closed at $23.14 Wednesday, up 3.7%. Having risen 70% since a five-year low in November, the stock is trading slightly above prior-year levels.

-By Joan E. Solsman and Colin Kellaher, Dow Jones Newswires; 212-416-2291; [e-mail]