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HORSHAM, PA-Toll Brothers Inc.’s preliminary fiscal fourth-quarter report portrays continuing softness in the housing market with little light on the horizon. Revenues dropped 10% to $1.8 billion, compared with $2 billion for the same quarter of 2005.

The backlog at the end of fourth quarter was almost $4.5 billion, down 25% compared with just north of $6 billion for the parallel 2005 time frame. Signed contracts plunged 55% to $709.6 million in the most recent quarter, compared with nearly $1.6 billion in the same quarter a year ago.

Furthermore, the quarterly contract total was negatively impacted by higher-than-normal cancellations. Cancellations represented 37% of contracts signed in this fourth quarter, compared with 18% of those signed in this year’s third quarter. Nearly 25% of the cancelled contracts in fourth quarter occurred in two markets: Orlando and Northern California.

In light of these slides, the company has reduced its land position by approximately 6,500 lots. It ended the quarter with approximately 74,000 lots, down 19% from the approximately 91,200 lots it owned in mid-year.

Full year 2006 “has certainly been a very tough and challenging year,” says Robert Toll, chairman and CEO, in a statement. “Atypically,” he notes, the current weakness in the housing market is taking place during low interest rates and low unemployment. “We believe weak buyer confidence is keeping many customers on the sidelines.”

He remains hopeful that a market recovery is imminent. “The market should improve more rapidly than is generally anticipated,” he predicts, once the inventory overhang is absorbed and consumer sentiment turns positive.

The earnings report is preliminary and unaudited. Final data will be presented on Dec. 5. Shares of TOL stock traded between $27.36 and $28.24 a share on the NYSE on Nov. 7, the day the report was released. This compares with a 52-week high of $39.98 a share on Jan. 11, 2006 and a 52-week low of $22.22 a share on July 18, 2006.

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