Toll Bros. profit off 67%; revenue, backlogs drop

Luxury-home-builder Toll Bros. Inc. posted sharp first-quarter declines yesterday in revenue and backlogs as the slumping housing industry showed little sign of turning the corner.

The steepest decline was in profit, down 67 percent, due to hefty write-downs and other costs for the Horsham-based company.

First-quarter net income was $54.3 million, or 33 cents a share, compared with $163.9 million, or 98 cents a share, for the same period a year earlier.

First-quarter revenue was down 19 percent, from a record $1.34 billion a year earlier to $1.09 billion - but still meeting Wall Street's expectations.

But the company's first-quarter-end backlog was $4.15 billion, a decline of 30 percent compared with $5.95 billion.

First-quarter net signed contracts slid 34 percent to $748.7 million.

"There are too many soft markets at this stage of the selling season to call a general upturn in the new-home market," Toll chairman and chief executive officer Robert I. Toll said in a statement. "Demand varies greatly from week to week in individual markets."

The latest quarter includes a goodwill impairment charge of $9 million related to Toll Bros.' 1999 acquisition of the Silverman Cos., of Detroit.

Results also were hurt by $96.9 million in costs to write down the value of land or housing stock the company no longer expects to sell at a profit, vs. write-downs of just $1.1 million in the prior-year period.

Excluding write-downs and the impairment charge, the company's first-quarter earnings per share were 72 cents, down 27 percent from the same period a year earlier.

"We still have a way to go before we hit bottom," said Joel Naroff, chief economist for Commerce Bancorp Inc. "The reality, though we've come further than we have to go, we're more than halfway with the slowdown.

"With Toll Bros., since it is a top-end seller, there is a ton of inventory out there, and they are doing their best to maintain prices with things such as throw-ins," he said. "But the fact is, we have to get back to sales levels that are sustainable over an extended amount of time.

"We were so above normal selling rates and construction levels over the past three years that until we get to that more typical trend level, we're going to continue to see weakness," he said.

Toll Bros.' first-quarter cancellations totaled 436 units, down from 585 units in fourth-quarter 2006. CEO Toll said the company's 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.

For Toll Bros.' complete first-quarter financial report, go to http://go.philly.com/TollEndText