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Homebuilder Toll Brothers Loss Narrows

The homebuilder said fewer writedowns on land values helped, but that 2009 looks difficult. By ALEX VEIGA from The Associated Press

Toll Brothers Inc. said Thursday its fiscal fourth-quarter loss narrowed slightly as it took fewer write-downs on land values, but warned that fiscal 2009 revenue will fall significantly below 2008 levels.

The Horsham, Pa.-based luxury home builder said the economic environment is too uncertain to be able to further forecast fiscal 2009 results.

For the quarter ended Oct. 31, losses totaled $78.8 million, or 49 cents per share, including $175.9 million worth of pretax write-downs. That's slightly better than the year-ago loss of $81.8 million, or 52 cents, on $314.9 million writedowns.

Excluding items, profit totaled 23 cents per share.

Revenue fell to $698.9 million from $1.17 billion a year ago, slightly above the preliminary sales results of $691 million Toll issued last month.

Analysts surveyed by Thomson Reuters expected a loss of 46 cents per share on revenue of $681.4 million.

The company said it ended fiscal 2008 with more than $1.63 billion in cash and over $1.32 billion available under its 32-bank credit facility, which matures in March 2011. Toll said it has no public debt due until its 2011 second quarter.

Net signed contracts for the quarter slid 27% to $266.7 million from $365.3 million, while backlog dropped 54% to $1.33 billion from $2.85 billion. The cancellation rate dipped to 30.2% from 38.9% last year, but rose from 19.4% in the third quarter.

Looking ahead, Toll Brothers said it expects revenue next year will be "significantly below" fiscal 2008's $3.16 billion, but declined to issue earnings guidance.

"Given the numerous uncertainties related to sales paces, sales prices, mortgage markets, cancellations, market direction and the potential for and size of future impairments, in the current climate, it is particularly difficult to provide guidance for FY 2009," Chief Financial Office Joel H. Rassman said in a statement.

Toll estimates it will deliver between 2,000 and 3,000 homes in 2009 at an average price between $600,000 and $625,000 each. It expects costs to rise, due to continuing incentives and slower sales.

"As we look to the future, we see reduced competition from the small and mid-sized private builders who are our primary competitors in the luxury market," said Robert I. Toll, chairman and chief executive, in a statement. "Their access to capital already appears to be severely constrained. We believe a less-crowded playing field, combined with attractive long-term demographics, will reward those well-capitalized builders who can persevere through the current challenging environment."

Financial industry lobbyists are urging the Treasury Department to take steps to lower mortgage rates and help stabilize the battered U.S. housing market. Under one proposal, the Treasury would seek to lower the rate on a 30-year mortgage to 4.5% by purchasing mortgage-backed securities from Fannie Mae and Freddie Mac , Scott Talbott, chief lobbyist at the Financial Services Roundtable, said Wednesday.

Such a plan could jumpstart home sales for builders, which have been struggling to weather the housing slump, now in its third year, as well as mounting foreclosures, credit market woes and a deepening U.S. recession.

Another major homebuilder, Beazer Homes , reported a quarterly loss earlier this week. The Atlanta-based company lost $473.9 million, or $12.29 a share, in its fiscal fourth quarter, which ended Sept. 30. Beazer lost $155.2 million, or $4.03 a share, in the same period last year.

In recent weeks, builders have stepped up calls for the government to enact legislation to help shore up the housing market.

For the full fiscal year, Toll posted a loss of $297.8 million, or $1.88 a share, compared with year-ago profit of $35.7 million, or 22 cents a share. Excluding write-downs, the builder earned $232 million, or $1.41 a share.

Revenue for the same period totaled $3.16 billion, down 32% from $4.65 billion last year.

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AP Business Writer Jennifer Malloy Zonnas contributed to this report.

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