WCI Communities'

(WCI)

third-quarter earnings will be "significantly below" what the company initially forecast, sending shares lower in the after-hours session.

WCI shares sunk 5.3%, or 90 cents, to $16.26 in recent extended trading.

"The company's write-off of approximately $13 million of costs associated with land options which were terminated during the quarter is the largest factor behind our expected shortfall, costing the company about 18 cents per share,'' said Jerry Starkey, president and CEO of WCI Communities, in a press release Tuesday.

WCI had projected an EPS of 52 cents a share. Thomson First Call analysts were looking for even more at 55 cents a share.

In addition, the homebuilder was hit by a larger-than-expected spate of defaults. About 80 homes valued at $48 million failed to close during the quarter.

WCI also raised its tower default rate to 4%, about double its usual average, after experiencing higher-than-normal defaults at one of its towers in northwest Florida.

New orders for homes and condos are projected to plummet 80% below the total reported in the same quarter a year ago. The 60%-to-65% drop "in the value and number of traditional home new orders" reflects the summer sales slump compared to the 40.5% to 43.5% year-over-year new order shortfall from the second quarter of this year.

WCI said the third-quarter decline in new orders for condos was more significant because the company has only converted one tower from reservation to firm contract through the third quarter, compared with nine towers through last year's quarter. The company said it had received "very few new" tower orders in the third quarter, compared with 333 new orders in same period last year.

"With the current slowdown in demand, we believe we own sufficient land to support our operations through the foreseeable future. We have concluded that it is more prudent at this juncture to apply our cash flow from operations primarily towards debt reduction and stock repurchases,'' Starkey added.

The company will post its third-quarter earnings in early November.