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It’s not easy building houses during the worst housing crisis since the 1930s.
Company: Toll Brothers
Year Named CEO: 1986
Number of Employees: 3,160
2008 Stock Performance: 6.8 percent
Annual Compensation: $8.8 million
Stock Options: $7.4 million
Its not easy building houses during the worst housing crisis since the 1930s. For Toll Brothers it has meant coming up with creative ways to entice would-be buyers, eliminating 1,000 jobs during the fiscal year that ended in October and spending a lot of time reassuring remaining employees and shareholders.
Robert Toll, CEO of the luxury homebuilder, impressed investors last year by maintaining a strong balance sheet despite the pain that overtook the industry. They cite Tolls tight grip on cash. The company had $1.32 billion in cash at the close of the first fiscal quarter, ended January 31, up from $956 million a year earlier. They were particularly encouraged in early March when he announced the company was planning to make acquisitions of bargain-priced property. "With this capital we hope to take advantage of opportunities we believe will arise from the current downturn," Toll said in the companys first-quarter earnings statement.
"He knows what his company is all about a high-end homebuilder and he runs it accordingly," says one pension plan manager. "His company has been consistent in the way it buys and develops land, protects its brand and sets the pricing for its products. His focus is on the bottom line and not on risking the companys balance sheet to drive value," the manager adds.
The company reduced its land holdings over the past year. That led to smaller write-downs and a smaller loss for the first quarter. The latest loss was $88.9 million, including pretax write-downs totaling $156.6 million. That was down from a loss of $96 million, including pretax write-downs of $245.5 million, in the same quarter of 2008. The Horsham, Pennsylvaniabased company reported that its cash position was "down slightly" from $1.63 billion at the end of its fiscal 2008 fourth quarter, because of taxes and debt retirement.
Toll is keeping a close watch on the government for indications that its plans will spur demand. So far, he hasnt been overly impressed. "Theres an $8,000 tax credit for first-time home buyers, but I think its foolish because it misses a big portion of the housing daisy chain," he says, referring to existing homeowners who might be in the position to trade up.