On December 5th Toll Brothers reported 4th Quarter Earnings and the results...

On December 5th Toll Brothers reported 4th Quarter Earnings and the results were not exactly pretty. Highlights BEA 4th Quarter GDP 1st Estimate 0.7% Q&A: Why Did GDPNow Rise After Durable Goods? When are Construction Revisions Coming? 'In tough times, our team produced our fifteenth consecutive year of record revenues and our second highest annual profits. These accomplishments are exceptional, considering the significant rise in cancellations, and are a tribute to our associates' commitment and hard work. Fifteen months into the current slowdown, we may be seeing a floor in some markets where deposits and traffic, although erratic from week to week, seem to be dancing on the bottom or slightly above. As we previously announced, this quarter's results were negatively impacted by our higher than normal 585 cancellations. With these cancellations creating unintended specs, we could face increasing margin pressure as we seek to move these homes. Right now is a great time to buy a new luxury home. Builders are motivated to sell their specs and the fundamentals that typically lead our industry out of a slowdown are already in place. Interest rates are near historic lows, unemployment is near an all-time low and the stock market is setting records.' was even more interesting (and entertaining) than the earnings report. Here are the highlights with Ivy Zellman at Credit Suisse questioning Robert Toll. Ivy Zellman: 'Which Kool-Aid are you drinking because I want some... It's not what we are hearing from a lot of the other builders. ...What do you see in the data because your numbers certainly don't show it today and there is clearly a lot of risk that 2007 won't bring the optimism to reality that you are seeing, so why put your neck out Bob?' Robert Toll: 'I don't think I put my neck out. I think I made a statement in regard to what I witnessed. ... But I don't think I've made a statement with respect to the future... I've just told what I have witnessed.' Robert Toll: 'I think the pent up demand statement falls logically..... Taking the DC market as an example.... It would logically follow that demand is increasing in the DC market' Ivy Zellman: 'Ok well let's just say that you read a report that stocks will continue to surge why only buy 12 thousand shares of your stock why not buy a boatload of your stock if you really believe stocks were headed north here?' Robert Toll: (cutting off Ivy at one point but she finishes anyway this time) 'Well I referred to somebody else's belief but let us say that I believe, which I am unwilling to make a statement on, to assume your proposition that I believe, which I don't necessarily, but let us assume that I do, your question why wouldn't I buy stock... and the answer is I believe I can make more money with my powder cash buying land and expanding the business than I believe I could make by buying my stock' [Mish note: Yes as silly as it might look in print, that is what Toll said.] Ivy Zellman: 'I think a lot of people if they ever follow you Bob, in your buying and selling personally, they made a lot of money, and I'll leave it at that'. [Mish note: This is clearly in reference to insider sales.] Seriously, when questioned, Bob Toll is pretty admitting that he was just pumping. NO areas are improving. He based his entire dancing at bottom on a couple of refundable deposits. OK, I listened to the recorded call. I've been on both sides of calls, and these guys seemed very unprofessional to me. 'I didn't mean to project optimism.' Quick Delivery Homes are new homes in Toll Brothers communities that are already under construction and are ready to move into in a matter of weeks or months. Our Quick Delivery Homes (often called Inventory Homes or Spec Homes) reduce the time it takes to build a custom luxury home while still allowing you to select many of the custom features available from our extensive 500+ catalog of possibilities. Ignoring the current cancellation rate, ignoring the spec homes, and assuming the optimistic projection of 7,300 home sales comes in, Toll is still sitting on a 10 year's supply of land with 74,000 lots. That makes his comment to Ivy about buying more land seem more than a bit disingenuous. All things considered, the odds of Toll ' The content on this site is provided as general information only and should not be taken as investment advice. All site content, including advertisements, shall not be construed as a recommendation to buy or sell any security or financial instrument, or to participate in any particular trading or investment strategy. The ideas expressed on this site are solely the opinions of the author(s) and do not necessarily represent the opinions of sponsors or firms affiliated with the author(s). The author may or may not have a position in any company or advertiser referenced above. Any action that you take as a result of information, analysis, or advertisement on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.