RED BANK, N.J., Sept. 1, 2010 (GLOBE NEWSWIRE) -- Hovnanian Enterprises, Inc. (NYSE:HOV), a leading national homebuilder, reported results for its third quarter and nine months ended July 31, 2010.
RESULTS FOR THE THREE AND NINE MONTH PERIODS ENDED JULY 31, 2010:
- Total revenues were $380.6 million for the third quarter of fiscal 2010 compared with $387.1 million in the same quarter a year ago. For the first nine months of fiscal 2010, total revenues were $1.0 billion compared with $1.2 billion in the first nine months of the prior year.
- Homebuilding gross margin, before interest expense included in cost of sales, increased year-over-year for the sixth consecutive quarter to 17.1% during the third quarter of 2010, compared to 9.1% in last year's third quarter.
- The pre-tax loss in the third quarter of fiscal 2010 was $79.8 million compared to $148.0 million in the third quarter of the prior year.
- For the third quarter ended July 31, 2010, the after-tax net loss was $72.9 million, or $0.92 per common share, compared with a net loss of $168.9 million, or $2.16 per common share, in the third quarter of fiscal 2009. The after-tax net income for the first nine months of 2010 was $134.7 million, or $1.69 per fully diluted common share, compared with a net loss of $465.9 million, or $5.96 per common share, in the same period of the prior year. As a result of tax legislation changes, the after-tax net income for the first nine months of fiscal 2010 included a federal income tax benefit of $291.3 million.
- Pre-tax land-related charges for the third quarter of fiscal 2010 were $49.0 million compared with $101.1 million in the fiscal 2009 third quarter. More than 75% of the land-related charges in the third quarter of fiscal 2010 were related to four communities in California and one community in New Jersey.
- Net contracts for the third quarter of fiscal 2010, excluding unconsolidated joint ventures, decreased 37% to 902 homes compared with last year's third quarter. For the first nine months of fiscal 2010, net contracts, excluding unconsolidated joint ventures, decreased 22% to 3,128 compared with 3,989 net contracts in the first nine months of the prior year.
- At July 31, 2010, there were 183 active selling communities, excluding unconsolidated joint ventures, compared with 178 active selling communities at April 30, 2010. This is the first sequential increase in active selling communities in twelve quarters. There were 198 active selling communities at July 31, 2009.
- Deliveries, excluding unconsolidated joint ventures, were 1,316 homes for the third quarter of fiscal 2010, compared with 1,322 homes in the prior year's third quarter. For the nine months ended July 31, 2010, deliveries, excluding unconsolidated joint ventures, declined 10% to 3,525 compared with 3,918 home deliveries in the same period of the prior year.
- The contract cancellation rate, excluding unconsolidated joint ventures, for the third quarter of fiscal 2010 was 23%, unchanged versus the fiscal 2009 third quarter.
- During the third quarter, the tax asset valuation allowance charge to earnings was $33.0 million. The valuation allowance was $746.6 million as of July 31, 2010. The valuation allowance is a non-cash reserve against the tax assets for GAAP purposes. For tax purposes, the tax deductions associated with the tax assets may be carried forward for 20 years from the date the deductions were incurred.
CASH AND INVENTORY AS OF JULY 31, 2010:
- As of July 31, 2010, homebuilding cash was $492.4 million, including restricted cash required to collateralize letters of credit.
- Cash flow during the third quarter of fiscal 2010 was negative $29.8 million. During the quarter, $19.3 million of cash was used to repurchase debt and $70.3 million of cash was spent to purchase approximately 1,300 lots.
- As of July 31, 2010, the consolidated land position was 32,485 lots, consisting of 14,793 lots under option and 17,692 owned lots.
- During the third quarter, approximately 850 lots were purchased within 45 newly identified communities (communities that were controlled subsequent to January 31, 2009).
- Approximately 4,700 lots were optioned in 62 newly identified communities during the third quarter.
- Started unsold homes, excluding models, increased 6%, to 837 at July 31, 2010 compared with 793 at the end of the third quarter a year ago.
OTHER KEY OPERATING DATA:
- Contract backlog, as of July 31, 2010, excluding unconsolidated joint ventures, was 1,375 homes with a sales value of $419.5 million, a decrease of 30% and 32%, respectively, compared to July 31, 2009.
- During the third quarter of fiscal 2010, home deliveries through unconsolidated joint ventures were 80 homes, compared with 69 homes in the fiscal 2009 third quarter. For the first nine months of fiscal 2010, 197 homes were delivered through unconsolidated joint ventures, compared with 215 homes in the same period of the prior year.
COMMENTS FROM MANAGEMENT
"We anticipated that our third quarter net contracts would decline as some sales were pulled forward into the second quarter due to the expiration of the $8,000 federal homebuyers' tax credit," commented Ara K. Hovnanian, Chairman of the Board, President and Chief Executive Officer. "Concurrent with the expiration of the tax credit, we saw consumer confidence take a step backward, as the lack of job creation, volatile stock market prices, the oil spill in the Gulf of Mexico and general concerns about the health of the economy moved to the forefront. These factors combined to produce slower than expected sales throughout our third quarter."
"On the positive side, July sales were modestly better than June and we saw August sales improve even more significantly compared to June. However, we still did not reach the sales pace we saw in July and August of the prior year," continued Mr. Hovnanian. "While far from a normal sales pace, we are hopeful that the stronger selling environment will continue into September and October."
"Long-term demographic trends of household formation point to housing starts eventually bouncing off of 60-year lows. Nevertheless, job creation is the key to a housing recovery, which makes it difficult to predict how improvements in the economy and housing market play out over the short term. However, we are confident that we are taking appropriate steps at the bottom of this housing cycle to replenish our land supply and optimize our cost structure so that we are well positioned to participate in the inevitable housing rebound," concluded Mr. Hovnanian.
Hovnanian Enterprises will webcast its fiscal 2010 third quarter financial results conference call at 11:00 a.m. E.T. on Thursday, September 2, 2010. The webcast can be accessed live through the "Investor Relations" section of Hovnanian Enterprises' Website at . For those who are not available to listen to the live webcast, an archive of the broadcast will be available under the "Audio Archives" section of the Investor Relations page on the Hovnanian Website at . The archive will be available for 12 months.
ABOUT HOVNANIAN ENTERPRISES®, INC.:
Hovnanian Enterprises, Inc., founded in 1959 by Kevork S. Hovnanian, is headquartered in Red Bank, New Jersey. The Company is one of the nation's largest homebuilders with operations in Arizona, California, Delaware, Florida, Georgia, Illinois, Kentucky, Maryland, Minnesota, New Jersey, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Texas, Virginia and West Virginia. The Company's homes are marketed and sold under the trade names K. Hovnanian® Homes®, Matzel & Mumford, Brighton Homes, Parkwood Builders, Town & Country Homes and Oster Homes. As the developer of K. Hovnanian's® Four Seasons communities, the Company is also one of the nation's largest builders of active adult homes.
Additional information on Hovnanian Enterprises, Inc., including a summary investment profile and the Company's 2009 annual report, can be accessed through the "Investor Relations" section of the Hovnanian Enterprises' website at . To be added to Hovnanian's investor e-mail or fax lists, please send an e-mail to IR@khov.com or sign up at .
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NON-GAAP FINANCIAL MEASURES:
Consolidated earnings before interest expense, income taxes, depreciation and amortization ("EBITDA") and before inventory impairment loss and land option write-offs and gain on extinguishment of debt ("Adjusted EBITDA") are not U.S. generally accepted accounting principles (GAAP) financial measures. The most directly comparable GAAP financial measure is net (loss) income. The reconciliation of EBITDA and Adjusted EBITDA to net (loss) income is presented in a table attached to this earnings release.
Cash flow is a non-GAAP financial measure. The most directly comparable GAAP financial measure is Net Cash provided by (or used in) Operating Activities. The Company uses cash flow to mean the amount of Net Cash provided by (or used in) Operating Activities for the period, as reported on the Condensed Consolidated Statement of Cash Flows, excluding changes in mortgage notes receivable at the mortgage company, plus (or minus) the amount of Net Cash provided by (or used in) Investing Activities. For the third quarter of 2010, cash flow was negative $29.8 million, which was derived from $34.6 million from net cash used in operating activities plus the change in mortgage notes receivable of $3.4 million plus $1.4 million of net cash provided by investing activities.
Loss Before Income Taxes Excluding Land-Related Charges and Gain on Extinguishment of Debt is a non-GAAP financial measure. The most directly comparable GAAP financial measure is Loss Before Income Taxes. The reconciliation of Loss Before Income Taxes Excluding Land-Related Charges and Gain on Extinguishment of Debt to Loss Before Income Taxes is presented in a table attached to this earnings release.
Note: All statements in this Press Release that are not historical facts should be considered as "forward-looking statements" within the meaning of the "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such risks, uncertainties and other factors include, but are not limited to, (1) changes in general and local economic and industry and business conditions, (2) adverse weather conditions and natural disasters, (3) changes in market conditions and seasonality of the Company's business, (4) changes in home prices and sales activity in the markets where the Company builds homes, (5) government regulation, including regulations concerning development of land, the home building, sales and customer financing processes, and the environment, (6) fluctuations in interest rates and the availability of mortgage financing, (7) shortages in, and price fluctuations of, raw materials and labor, (8) the availability and cost of suitable land and improved lots, (9) levels of competition, (10) availability of financing to the Company, (11) utility shortages and outages or rate fluctuations, (12) levels of indebtedness and restrictions on the Company's operations and activities imposed by the agreements governing the Company's outstanding indebtedness, (13) operations through joint ventures with third parties, (14) product liability litigation and warranty claims, (15) successful identification and integration of acquisitions, (16) significant influence of the Company's controlling stockholders, (17) geopolitical risks, terrorist acts and other acts of war and (18) other factors described in detail in the Company's Form 10-K for the year ended October 31, 2009.
CONTACT: Hovnanian Enterprises, Inc. J. Larry Sorsby, Executive Vice President & CFO Jeffrey T. O'Keefe, Director of Investor Relations 732-747-7800