- The Washington Times - Thursday, February 22, 2007

PHILADELPHIA (AP) — Luxury-home builder Toll Brothers Inc. said yesterday its first-quarter profit dropped 67 percent because of hefty writedowns and other costs, and Chief Executive Robert Toll said many markets were still soft.

Quarterly earnings declined to $54.3 million, or 33 cents per share, from $163.9 million (98 cents) during the same period a year ago. Analysts surveyed by Thomson Financial were looking for net income of 29 cents per share.

Revenue slipped 19 percent to $1.09 billion from $1.34 billion in the previous year, meeting Wall Street’s expectations.

The latest quarter’s results include a goodwill impairment charge of $9 million related to Toll’s 1999 acquisition of the Silverman Cos. in Detroit. Earnings also were hurt by $96.9 million in costs to write down the value of land and housing stock the company no longer thinks it can sell at a profit, versus writedowns of $1.1 million in the prior-year period.

States in the North showed the biggest decline for Toll, down 32 percent, followed by the West and the Mid-Atlantic states. The South had the smallest dip.

First-quarter net signed contracts slid 34 percent to $748.7 million. The West had the weakest showing, down 59 percent, followed by the Southern states, the Mid-Atlantic and the North.

The company’s first-quarter cancellations totaled 436 units, down from 585 units in the 2006 fourth quarter. Toll said its cancellation rate of 29.8 percent was lower than the fourth-quarter’s 36.9 percent rate but still well above the company’s historical average of about 7 percent.

“There are too many soft markets at this stage of the selling season to call a general upturn in the new home market. Demand varies greatly from week to week in individual markets,” Mr. Toll said in a conference call with analysts.

“We’re a little more disappointed than two weeks ago” when the company gave its last update, he added. “For Presidents Day weekend we had good sales, but we didn’t have anywhere near the bump up that we normally see. That’s disappointing.”

Alex Barron, an analyst with JMP Securities in San Francisco, said he wasn’t surprised that Mr. Toll’s comments have taken a more sober tone.

“Now, he’s sounding a bit more concerned and depressed,” he said. “You can’t have five years of a good time and fix everything in a few quarters.”

Looking ahead, Toll expects to deliver between 6,000 to 7,000 homes this year, down from the prior projection of 6,300 to 7,300.

It expects homebuilding revenue of $4.2 billion to $4.96 billion and net income of $240 million to $305 million, or $1.46 to $1.85 per share. Analysts were expecting profit of $1.46 per share.

But the company cautions that the earnings projection is based on $60 million in estimated writedowns for the remaining three quarters; the final figure could be “significantly” higher or lower.

Shares of Toll Brothers fell by 84 cents, or 2.5 percent, to $32.02 in trading on the New York Stock Exchange.

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