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Toll Bros. warns of decline in revenue

February 09, 2007|From the Associated Press

PHILADELPHIA — Toll Bros. Inc., the nation's largest builder of luxury homes, said Thursday that it expected its first-quarter home-building revenue to fall 19%, signaling that the housing market would probably remain feeble in early 2007.

The Horsham, Pa.-based builder also warned that write-downs are expected to balloon to between $60 million and $160 million or more for the quarter. In December, Toll Bros. projected a $60-million, land-related write-down for the whole 2007 fiscal year.

"The [housing] market has just continued to deteriorate over the last few months," said Alex Barron, senior housing analyst for JMP Securities in San Francisco. "When a builder starts to cut prices or offer discounts where they no longer make money in the community, accounting rules say they have to recognize all the future expected losses."

Write-downs also include charges that Toll Bros. would incur from walking away from land it had optioned for possible purchase.

Investors sold off shares of the luxury home builder, sending the stock down $1.04, or 3%, to $33.39.

Toll Bros. said it was expecting home-building revenue of $1.09 billion in the quarter, compared with $1.34 billion in the same period last year. Contracts signed -- an indicator of the strength of new business -- totaled 1,027, valued at $749 million. Each fell a third from the same period a year earlier.

The number and value of contracts signed were weakest in the West, down as much as two-thirds, followed by the South, the mid-Atlantic and Northern states, the company said.

Chief Executive Robert Toll said the first-quarter's cancellation rate, however, fell to 29.8% from 36.9% in the prior quarter. The pace of cancellations still far exceeded the builder's historical average of about 7%.

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