The largest U.S. luxury homebuilder Toll Brothers Inc. (TOL) on Thursday posted a wider loss for the fourth quarter, reflecting inventory write-downs and other charges. In addition, the company said it expects number of home deliveries in fiscal 2010 to be lower than 2009.
The Horsham, Pennsylvania-based company's fourth-quarter net loss was $111.4 million or $0.68 per share, compared to a loss of $78.8 million or $0.49 per share in the year-ago quarter.
The latest-quarter results included $85.5 million of non-cash pre-tax inventory write-downs, a pre-tax charge of $11.6 million due to early retirement of debt and a $14.6 million non-cash expense for deferred tax asset valuation allowances. The year-ago results comprised $175.9 million of non-cash pre-tax inventory and other write-downs and an $11.1 million non-cash expense for deferred tax asset valuation allowances.
Excluding write-downs and charges for early retirement of debt and taxes, fourth-quarter loss was $9.6 million. This compares to earnings of $69.9 million, excluding taxes, inventory and other write-downs.
On average, 17 analysts polled by Thomson Reuters expected the company to post a loss of $0.46 per share. Analysts' estimates typically exclude certain items.
Quarterly revenues totaled $486.6 million, lower than the previous year's $691.1 million. Fifteen Wall Street analysts had a consensus revenue estimate of $450.10 million for the quarter.
Toll Brothers operates in four geographic segments, North, Mid-Atlantic, South and West. Home building revenues for the third quarter from North decreased to $156.9 million from $235.9 million a year earlier, and revenues from Mid-Atlantic totaled $128.2 million, down from the prior-year's $210.3 million. Home building revenues from South declined to $76.2 million from $122.0 million in the previous year, while West reported revenues of $125.3 million, higher than $120.2 million reported in the same quarter of last year.
Cost of revenues decreased to $506.0 million from $670.4 million in the previous year. Selling, general and administrative expenses were $85.4 million, down from $96.8 million in the comparable quarter of the previous year.
Fourth-quarter home building deliveries fell 20% to 860 units from 1,079 units in the previous year. The company's contract cancellation rate was 6.9% in the fourth quarter of 2009, in line with its pre-downturn historical averages.
Robert Toll, chairman and chief executive officer, said, "Our declining cancellation rate and improved pace of contract signings provide some signs of recovery. From elevated levels ranging from 18% to 39% over the prior twelve quarters, our cancellation rate has improved dramatically -- to 8.5% in our third quarter, and down to 6.9%, our historical average, in our fourth quarter."
Toll added, "We are also encouraged by the improved pace of net contracts signed per community this fourth quarter, which, although well below our historical averages, exceeded fourth quarter paces dating back to FY 2006."
During the recent quarter, net signed contracts of 765 units and $430.8 million were higher year-on-year by about 42% in units and 62% in dollars, respectively. Fiscal 2009's average fourth-quarter net signed contracts of 3.56 units per community exceeded last year's average of 1.86 units per community by 91%.
The company further noted that it had raised $650 million in long-term debt in the public markets and retired $543 million of public debt with shorter term maturities, including, most recently, the remaining $48 million of its outstanding fiscal 2012 Senior Subordinated Notes on December 1, 2009.
For the fiscal year 2009, the company incurred a net loss of $755.8 million or $4.68 per share, compared to a loss of $297.8 million or $1.88 per share in the previous year. Analysts expected the company to report a loss of $4.44 per share for fiscal 2009.
Excluding inventory and other write-downs and charges for early retirement of debt, full-year pre-tax loss was $6.1 million, compared to pre-tax earnings of $341.9 million, excluding inventory and other write-downs and the condemnation proceeds.
Annual revenues for the twelve months ended October 31, 2009 declined to $1.76 billion from $3.15 billion reported in the year ended October 31, 2008. Fifteen Wall Street analysts had a consensus revenue estimate of $1.72 billion.
Looking ahead, the company said it expects number of home deliveries in 2010 to be lower than the 2,965 homes delivered in 2009. Toll Brothers currently estimates to deliver between 2,000 and 2,750 homes in fiscal 2010 at an average price of between $540,000 and $560,000 per home.
Furthermore, the company expects selling, general & administrative or SG&A expense, excluding interest, to be lower in absolute terms in 2010 than in 2009, but based on 2010's lower projected revenues, Toll Brothers estimate it will be higher as a percentage of revenues.
Among other homebuilders, DR Horton Inc. (DHI) reported a narrower loss for the fourth quarter, totaling $231.9 million or $0.73 per share, compared to $799.9 million or $2.53 per share in the year-ago quarter. Homebuilding revenue for the quarter fell 42% to $1.01 billion from $1.75 billion in the same quarter of the prior year.
Toll Brothers shares, which have been trading between $13.72 and $24.30 in the past 52 weeks, closed Wednesday's trading session at $19.49, up 4 cents or 0.21%, on a volume of 3.19 million shares.
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