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Toll Brothers Q4 loss narrows; sees lower FY09 revenues - Update 1

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Luxury home builder Toll Brothers Inc. (TOL) Thursday reported a narrower net loss in its fourth quarter, helped by lower write-downs. Otherwise, excluding write-downs, the company's profit dipped 67.4%. In addition, Toll Brothers said it sees significantly lower revenues in fiscal 2009 and that it will not provide earnings forecast due to the market uncertainties.

Fourth-quarter net loss was $78.82 million or $0.49 per share, compared to a net loss of $81.84 million or $0.52 per share in the same quarter of last year.

On average, 15 analysts polled by First Call/Thomson Financial expected the company to report a net loss of $0.47 per share for the quarter. Analysts' estimates typically exclude special items.

The latest quarter results included write-downs and goodwill impairment charges of $117.3 million or $0.73 per share, lower than write-downs of $200.0 million or $1.22 per share a year ago.

Excluding write-downs, fourth-quarter earnings were $38.5 million or $0.23 per share, compared with $118.2 million or $0.72 per share in the year ago quarter.

Fourth-quarter total revenues fell 40% to $698.90 million from $1.17 billion in the year ago quarter, yet managed to beat analysts' consensus revenue estimate of $681.36 million for the quarter. Home building revenues fell 41% to $691.1 million from last year's $1.17 billion, while revenues from land sales grew to $7.8 million from $2.0 million a year earlier.

In the quarter, net signed contracts were $266.7 million, compared to $365.3 million in the previous year. The company's fourth-quarter-end backlog was approximately $1.33 billion or 2,046 units, down 54% from last year's backlog of $2.85 billion or 3,950 units.

Looking ahead, Toll Brothers said it is not providing earnings guidance for the fiscal year 2009, citing the prevailing uncertainties related to sales paces, sales prices, mortgage markets, cancellations, market direction and the potential for and size of future impairments.

Meanwhile, fiscal 2009 revenues are expected to be significantly below fiscal 2008 results, reflecting a year-over-year decline of 47% and 54% in 2008 contracts and year-end backlog, respectively. In the year 2008, the company generated revenues of $3.16 billion.

For the year, the company expects to deliver between 2,000 and 3,000 homes at an average delivered price of between $600,000 and $625,000 per home.

Robert Toll, chairman and chief executive officer, stated, "Two days before Thanksgiving 2008, the U.S. Government announced a plan to aid the housing market by pumping hundreds of billions of dollars into the mortgage market, an action that significantly lowered mortgage rates immediately. Perhaps this initiative, which is a positive first step, combined with already dramatically improved affordability, will be a catalyst to stimulate customer demand, stop the decline in house prices and restore confidence in the new home market."

Toll continued, "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."

TOL closed Wednesday's regular trading session at $19.23, up $0.99, on a volume of 7.2 million shares. In the past 52 weeks, shares have been trading in a range of $13.55 - $28.00.

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