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HORSHAM, PA-Citing “continuing malaise” in the housing market, Robert Toll, chairman and CEO of locally based Toll Brothers Inc., reported a 19% decline in fiscal third-quarter profits to $174.6 million, down from a record $215.5 million for the same quarter of 2005. As of this July 31, signed contracts fell approximately 46% to 1,473, nearly half of the number signed during the same quarter a year ago.

As a result, the luxury homebuilder “is in a substantial cutback mode,” Toll said during a conference call. “Before the obvious doldrums, we were hiring and training for continued expansion. Now, it is obvious we will not see expansion for a year, two at most.” The hardest hit areas are in the Mid-Atlantic, Midwest and California markets. Revenue rose in the Northeast, Southeast and Southwest.

The company anticipates delivering between 8,600 and 8,900 homes this year at an average price range of $685,000 to $690,000. For 2007, it projects from 7,000 to 8,000 home deliveries at prices of between $635,000 and $645,000. The price reduction is attributed to more sales of lower-priced and smaller multifamily, active adult and single-family units.

Toll conceded that the bottom of the market is not yet in sight, but reiterated a belief that “when buyers become confident that home prices have hit bottom, the market will return to a firm footing.” He blamed the downturn largely on an oversupply of inventory and steep discounts by builders, conditions that cause consumers to sit on the sidelines.

Meanwhile, the company reduced the number of lots it controls to about 82,900, down from 91,200 at the end of the previous quarter. Yet, it does not plan to reduce its community count. “Once you put your juggernaut in place for improvements and start ripping up the ground and building your roads, then you’re going to complete that,” Toll said. “You have to finish and stabilize it.”

Despite the down-turned arrows on its balance sheet, analysts noted that the company’s latest performance beat Wall Street’s expectations. After the Aug. 22 conference call, shares of TOL lifted 1.7% for the day, but fell back by about 3% the following day to reach $22.50 a share by noon. This is less than half the 52-week high of $51.72, which occurred nearly a year ago on Aug. 25, 2005, and just shy of the 52-week low of $22.22 a share on July 18 this year.

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