Toll Brothers, the largest U.S. luxury home builder, said on Wednesday it expected to report a 22 percent drop in fiscal first-quarter home-building revenue amid a dire housing market.
Toll said preliminary results for the quarter ended Jan. 31 showed home-building revenue of $842.7 million, down from $1.09 billion in the year-earlier quarter. It is scheduled to release final results for the quarter on Feb. 27.
The company said it also expects to take $150 million to $300 million in first-quarter pretax write-downs of land and land options.
The U.S. housing market has been in a tailspin for more than two years, with demand falling and builders cutting prices in the face of dwindling orders.
"The housing market remains very weak in most areas. Based on current traffic and deposits, we are not yet seeing much light at the end of the tunnel," Chief Executive Robert Toll said in a statement.
To navigate the downturn, U.S. builders have shifted their focus to survival, turning the excess land and inventory accumulated during the boom times of 2002 to 2006 into cash.
Investors have put their dollars in companies they believe will endure the downturn.
Toll's balance sheet is stronger than that of most other publicly traded home builders because it bought or optioned many of its lots earlier, when prices were lower, and in more expensive areas that tend to keep their value.
Meanwhile, investors have been judging the home builders on the viability instead of profitability, as most have been reporting losses rather than profits.
Toll said it ended the quarter with around $950 million in cash and more than $1.2 billion available under its multi-bank credit facility, which matures in March 2011.
"The cash balance was (up) $50 million sequentially, bucking typical seasonal trends, and again reflecting the company's disciplined approach," UBS analyst David Goldberg wrote in a research note. "We believe this will allow it to take advantage of opportunities generated from less liquid competitors."
The company said net signed contracts during the quarter, after cancellations, totaled 647 homes, down 37 percent from a year earlier. The fall was even more pronounced -- 50 percent -- in dollar terms, to $375.3 million.
The net contracts called for a home with an average price of $580,000, compared with $634,000 before cancellations. The company attributed the difference to canceled orders for pricier homes and more orders for apartments, which tend to be less expensive than single-family houses.
Shares of Toll Brothers on Tuesday closed at $21.87 on the New York Stock Exchange and were inactive in premarket trading Wednesday morning.