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Toll Brothers posts profit for 4Q on tax benefit

HORSHAM, Pa. - Toll Brothers Inc. posted a surprise fiscal fourth-quarter profit on Thursday, helped by a large tax benefit. But revenue slipped and signed contracts declined 27 percent amid a weak housing market.

The nation's largest builder of luxury homes reported net income of $50.5 million, or 30 cents per share, for the three months ended Oct. 31. That compares with a loss of $111.4 million, or 68 cents a share, in the prior-year period.

Analysts expected a loss of 8 cents per share.

Toll Brothers had a $59.9 million tax benefit in the quarter versus a tax expense of $4.7 million a year ago.

Revenue dropped 17 percent to $402.6 million from $486.6 million, but still beat Wall Street's $393.8 million.

Toll Brothers signed contracts valued at a total of $315.3 million during the quarter, down 27 percent from a year earlier. Its cancellation rate was 8.8 percent, compared with 6.2 percent in the third quarter.

Several large homebuilders have reported sharp annual declines in new home orders for the most recent quarter.

Douglas C. Yearley Jr., Toll's CEO, said in a statement that the fiscal year was another challenging one for the company and the industry "as the persistent drag of high unemployment, reduced home equity, weak consumer confidence and frustration with the nation's economic and political climate outweighed the appeal of historic low interest rates and tremendous home affordability."

The company is monitoring whether demand is returning to the market. Yearley noted that "many of our clients remain on the sidelines waiting for clearer signs that the economy is on the road to recovery."

Toll's customers are typically buyers who already own a home and are generally looking to trade up to a property with more high-end amenities. Some are in the market for a second home or want to live in a community geared to seniors. They are generally more likely to feel better about buying a home as long as their investment portfolio is doing well.

Industrywide, sales of new homes in the U.S. fell 8.1 percent in October - the fourth time the sales rate has dropped in the past six months. Meanwhile, new home prices slid to the lowest point in seven years as many builders slashed prices to compete with the resale home market.

For the full year, Toll Brothers narrowed its loss to $3.4 million, or 2 cents a share, from $755.8 million, or $4.68 share, a year earlier. Revenue fell 15 percent to $1.49 billion.

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