Toll Bros. Inc., the nation's largest builder of luxury homes, said Wednesday that its fiscal third-quarter profit plunged nearly 85% as the housing downturn and credit worries triggered cancellations and hefty write-downs.
The company's chief executive said the quarterly cancellation rate, which rose to nearly 24%, was greater than at any point in the 21 years the company has been traded publicly.
Toll Bros. said earnings for the three months that ended in July sank to $26.5 million, or 16 cents a share, from $174.6 million, or $1.07, during the same period last year.
Revenue fell 21% to $1.21 billion.
The company was forced to write down property at a cost of $88.5 million, or 54 cents a share, compared with $14.6 million, or 9 cents, a year earlier.
Excluding write-downs, earnings were 70 cents a share.
The results beat Wall Street expectations. Analysts surveyed by Thomson Financial were looking for a loss of 2 cents a share, excluding write-downs, on revenue of $1.15 billion.
Toll Bros. shares rose $1.06, or 5%, to $22.15.
"We continue to wrestle with the interrelated challenges of softer demand and excess housing supply in most markets," Chief Executive Robert Toll said.
Nearly two years into the housing slump, which started with defaults by sub-prime borrowers, most markets remain weak, he said this month.
Analysts have said Toll Bros., which has a mortgage-lending business, is less affected by sub-prime borrower problems than it is by buyers with jumbo loans, which have become harder to get as credit markets constricted in the last month.
Horsham, Pa.-based Toll Bros. saw its steepest home-building revenue declines in Western states, including Arizona, California, Colorado and Nevada, followed by states in the North, mid-Atlantic and South.
Third-quarter net signed contracts plummeted to $727 million, down 31% from $1.05 billion in the year-earlier period.
Cancellations in the quarter dropped to 347 units from 384 units in the second quarter. However, the quarterly cancellation rate increased to 23.8%, compared with 18.9% in the previous quarter.