Toll Brothers, Inc. (TOL)
Q4 2008 Earnings Call Transcript
December 4, 2008 2:00 p.m. ET

Executives

Robert Toll - Chairman and Chief Executive Officer
Joel Rassman – Chief Financial Officer
Donald Salmon - President and Chief Executive Officer of TBI Mortgage Co.

Analysts

David Goldberg – UBS Securities LLC
Robert Stevenson – Fox-Pitt Kelton
Ivy Zelman - Zelman & Associates
Daniel Oppenheim - Credit Suisse
Kenneth Zener - Macquarie Research Equities
Rob Hansen- Deutsche Bank
Josh Levin - Citigroup
Michael Rehaut - JPMorgan
Stephen East - Pali Capital, Inc.
Adam Rudiger – Wachovia Securities
Josh Hamby – Artemis Investment Partners
James McCanless – FTN Midwest Securities Corp.
Alex Barron - Agency Trading Group
Douglas Kass - Seabreeze Partners Management, Inc.
Lynn Savage – KBW Management
Daniel Greenberger – Gem Realty

Presentation

Operator

Good afternoon. My name is Vonda, and I will be your conference operator today. At this time, I would like to welcome everyone to the Toll Brothers fourth quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers'' remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press “*” then the number “1” on your telephone keypad. If you have already done so, please press the “#” sign now, then press “*1” again to ensure your question is registered. If you would like to withdraw your question, press the “#” key. Thank you. I would now like to turn the call over to Mr. Robert Toll, Chairman and CEO of Toll Brothers; please go ahead sir.

Robert Toll

Thank you Vonda. Welcome everybody and thank you for joining us. With me today are Joel Rassman, Chief Financial Officer; Fred Cooper, Senior Vice President of Finance and Investor Relations; Joe Sicree, Chief Accounting Officer; Kira McCarron, Chief Marketing Officer; Don Salmon, President of TBI Mortgage Co.; and Greg Zeigler, Vice President of Finance.

Before I begin, I ask you to read the statement on forward-looking information in today''s release and on our website. I caution you that many statements on this call are based on assumptions about the economy, world events, housing and financial markets, and many other factors beyond our control that could significantly affect future results. Those listening on the web can e-mail questions to rtoll@tollbrothersinc.com. We’ll try and answer as many as we can.

Today, we reported final results for our fourth quarter and fiscal year ended October 31, ’08. Since the release has been posted on our website I will just touch on the key results.

In fiscal year ’08’s fourth quarter we had a net loss of $78.8 million or $0.49 per share diluted which included pre-tax write-downs totaling $175.9 million. This compared to fiscal year ’07’s fourth quarter net loss of $81.8 million or $0.52 per share diluted which included pre-tax write-downs totaling $314.9 million.

Excluding write-downs, fiscal year ’08’s fourth quarter earnings were $38.5 million or $0.23 per share diluted compared to fiscal year ’07’s fourth quarter earnings of $118.2 million or $0.72 per share diluted.

For the full fiscal year 2008 we reported a net loss of $297.8 million or $1.88 per share diluted which included pre-tax write-downs totaling $848.9 million. This compared to fiscal year ’07’s full year net income of $35.7 million or $0.22 per share diluted which included pre-tax write-downs of $687.7 million.

Excluding write-downs, fiscal year ’08’s 12-month earnings were $232 million or $1.41 per share diluted compared to fiscal year ’07’s 12-month earnings of $464.6 million or $2.83 per share diluted.

Fiscal year ’08’s fourth quarter total revenues were $698.9 million compared to fiscal year ’07’s fourth quarter total revenues of $1.17 billion. Fiscal year ’08’s 12-month total revenues were $3.16 billion compared to fiscal year ’07’s 12-month total revenues of $4.65 billion.

Fiscal year ’08’s fourth quarter net signed contracts were $266.7 million compared to fiscal year ’07’s fourth quarter total of $365.3 million. Fiscal year ’08’s 12-month net signed contracts were $1.61 billion compared to fiscal year ’07’s 12-month total of $3.01 billion.

Fiscal year ’08’s year-end backlog was $1.33 billion compared to fiscal year ’07’s year-end backlog of $2.85 billion. Although we were one of just two public homebuilding companies in our industry to be profitable before write-downs and although we ended fiscal year ’08 with the highest market cap among the public homebuilders, these milestones were little consolation; they were little stones.

Obviously there are enormous challenges in our industry but the current turmoil will create opportunities. We are beginning to see some deals that are appealing in terms of quality but not price. We believe our strong capital position will give us an advantage in competing for them at the appropriate time when the price is right.