Housing Bellwether Toll Brothers Reduces Forecast, Posts Lower Earnings

Toll Brothers Inc., the largest U.S. builder of luxury homes, on Thursday said its quarterly net earnings fell sharply, after a goodwill impairment charge and a writedown for the lower value of land and as the housing market continued to flounder.

For the fiscal first quarter that ended January 31, Toll (TOL) said it earned $54.3 million, or 33 cents per share, down from $163.9 million, or 98 cents per share, in the year earlier quarter.

The latest quarter's results included writedowns of $96.9 million before taxes for the lower value of the land Toll owns or from forfeiting payments for land options Toll decided not to exercise as well as a $9.0 million goodwill impairment charge related to its 1999 acquisition of the Silverman Cos.

Excluding these items, the company said it earned 72 cents per share.

Earlier this month, Toll said first-quarter land charges could run as low as $60 million or as high as $160 million.

Total revenue for the quarter fell 19 percent to $1.09 billion while contracts for new homes fell 33 percent to 1,027 units. The value of the contracts fell 34 percent to $749.0 million.

Prospective buyers canceled their contracts at a rate of 33 percent during the quarter, Toll had said earlier this month.

Based on the company's current backlog, the impact of lower first-quarter contracts and the continuing higher-than-normal cancellation rate, Toll lowered its forecast for the full year, saying it expects to deliver between 6,000 and 7,000 homes in 2007. It had earlier forecast a range of 6,300 to 7,300 homes.

The company said it expects total home building revenue in the range of $4.20 billion to $4.96 billion for 2007 and net earnings per share of $1.46 to $1.85.

For about a year, home building has fallen off sharply as the U.S. housing demand dropped due to higher prices and interest rates. Investors, home builders and other industry watchers have been looking for signs of a trough, but Toll's chief executive expressed caution.

"There are too many soft markets at this stage of the selling season to call a general upturn in the new home market," said Chief Executive Robert Toll in a statement. "Demand varies greatly from week to week in individual markets."