Toll Brothers Posts a 79% Drop
In Net as Housing Market Weakens

Toll Brothers Inc. Thursday said fiscal second-quarter net income fell 79%, hurt by write-downs totaling $72.9 million.

The luxury-home builder's earnings fell to $36.7 million, or 22 cents a share, from $174.9 million, or $1.06 a share, a year earlier. Analysts polled by Thomson Financial expected, on average, earnings of 25 cents a share.

The company said earlier this month it expected a second-quarter profit, but said it wouldn't meet its prior outlook of 43 cents to 57 cents a share. Write-downs lowered earnings by 44 cents a share, compared with just four cents a share a year earlier.

Revenue for the quarter ended April 30 fell 23% to $1.17 billion from $1.44 billion a year earlier. Analysts were looking for $1.12 billion.

Fiscal second-quarter net signed contracts fell 25% to $1.17 billion from $1.56 billion a year earlier. The company signed 2,031 contracts before cancellations in the period, down 14%. Toll Brothers reported earlier in May that second-quarter net orders fell 24% to 1,647.

Toll said it wasn't comfortable updating its full-year earnings outlook. The company said earlier this month it doesn't expect to meet its most recent full-year profit outlook of $1.46 to $1.85 a share. Analysts expect earnings of $1.21 a share. Fiscal third-quarter homebuilding revenue is expected to be $990 million to $1.28 billion.

Toll said on May 9 that the housing market continues to deteriorate, with tighter lending standards brought on by problems with subprime mortgages lingering in the market. While subprime mortgages are typically used by buyers with risky credit history and are concentrated at the lower end of the housing market, Toll's preliminary results from earlier this month indicate that the fallout from subprime mortgages is spilling into high-end homes.

Toll Brothers came under fire earlier this year over its executive-pay practices, with large shareholders saying they would withhold votes from Carl B. Marbach, the chairman of the board's compensation committee. However, Mr. Marbach and three other directors were re-elected in March, and shareholders also approved the company's plan to issue 12 million new shares to directors and employees.

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