Toll Brothers of Horsham, Pa. (NYSE:TOL) today reported preliminary results for the fiscal second quarter of 2008 that included a 30% drop in revenues to $817.9 million as net sales fell 44% to 929 and the average price of a Toll home declined 17% to $590,000.

Deliveries were off 39.1% to 1,212 homes. Backlog at the end of the quarter was down 47.2% to 3,035 with a value of $2.1 billion, down 50% from the same time last year. The cancellation rate fell to 24.9% from 28.4% in the first quarter but was up from 18.9% in the comparable quarter last year.

The average price per unit of gross contracts signed in FY 2008¹s second quarter was $590,000, down 17% from $711,000 in 2007¹s second quarter. The company said the lower average price was due to higher incentives; a product mix which skewed more toward active adult and other lower priced Communities and fewer sales in high-priced markets such as California, and Manhattan where the Company is temporarily sold out. The average price of the second-quarter FY 2008 cancellations was $760,000 per unit, which brought the average price of net contracts in the quarter to down to $534,000 per unit.

Toll ended the second quarter with approximately 51,800 lots owned and optioned, down from 91,200 at peak at the end of the fiscal second quarter of 2006. Toll had 300 selling communities at quarter's end, compared to 315 at the end of the first quarter and a peak of 325 at this time last year.The company said it expects to be selling from approximately 290 communities by fiscal-year-end 2008.

Toll CFO Joel Rassman warned of write-downs for the quarter of between $225 million and $375 million, which will be announced with the company's earnings on June 3.

Said Robert I. Toll, chairman and CEO: "The just-completed spring selling season was quite weak in most markets as buyers remained on the sidelines.We believe there is significant pent-up demand which is growing. sidelines.We believe there is significant pent-up demand which is growing. When we have held promotions, buyers have come out to play and put down deposits.Often, however, a lack of confidence in the direction of home prices overcomes their enthusiasm and they don¹t take the next step of going to contract."

He added, "We ended 2008¹s second quarter with approximately $1.23 billion in cash and another $1.27 billion available under our bank credit facility, which matures in 2011. With over $2.5 billion of available capital we hope to be able to take advantage of opportunities that we expect will arise from today¹s distress. We are looking for deals in most markets but have yet to see any opportunities that fit our parameters of high-end communities at bargain prices."

David Goldberg, home building analyst at UBS, cited the company's "disciplined approch" to the down market in a research note to investors. Regarding Rassman's warning of write-downs, Goldberg wrote, "We expect after tax impairments relative to tangible [book value] of 33% through the trough, vs. the 43% group avg. This reflects our belief that the company's land is better positioned and will retain more of its value through the downturn." He concluded, "We continue to believe the company is well positioned for this downturn, reflecting its unique land and liquid [balance sheet]. In turn, TOL remains our top pick among the HBs [home builders].

Toll shares were down 2.1% at $22.88 in midday trading on the New York Stock Exchange amid a down day for the Dow Jones Industrial Average and nearly the entire home building group.