Hovnanian Enterprises Reports Fiscal 2010 Results

RED BANK, N.J., Dec. 21, 2010 (GLOBE NEWSWIRE) -- Hovnanian Enterprises, Inc. (NYSE:HOV), a leading national homebuilder, reported results for its fourth quarter and fiscal year ended October 31, 2010.

Results for the Three and Twelve Month Periods Ended October 31, 2010:

• Total revenues were $353.0 million for the fourth quarter of fiscal 2010 compared with $437.4 million in the same quarter a year ago. For fiscal 2010, total revenues were $1.4 billion compared with $1.6 billion in the prior year.  
• Homebuilding gross margin percentage, before interest expense included in cost of sales, increased year-over-year for the seventh consecutive quarter to 16.9% during the fourth quarter of 2010, compared to 13.2% in last year's fourth quarter. For fiscal 2010, the homebuilding gross margin percentage, before interest expense included in cost of sales, increased year-over-year to 16.8% compared to 9.2% for fiscal 2009.  
• Consolidated pre-tax land-related charges for the fourth quarter of fiscal 2010 were $80.6 million, compared with $138.0 million in the fiscal 2009 fourth quarter. 78% of the land-related charges in the fourth quarter were related to five communities. Four of the communities are in New Jersey, two of which where we now intended to sell the remaining land in bulk. For the other community, in Maryland, we decided not to develop and wrote off our investment. For the full year, consolidated pre-tax land related charges totaled $135.7 million compared with $659.5 million in fiscal 2009.  
• Excluding land-related charges and gain from extinguishment of debt, the pre-tax loss for the fourth quarter of 2010 was $51.9 million compared with $84.8 million during the same period of the prior year. For the full year, the pre-tax loss excluding land related charges and gain from extinguishment of debt was $184.6 million compared with $379.1 million last year.  
• The total pre-tax loss in the fourth quarter of fiscal 2010 was $132.5 million compared to $248.8 million in the fourth quarter of the prior year. For fiscal 2010, the total pre-tax loss was $295.3 million compared with $672.0 million in the previous year.  
• For the fourth quarter ended October 31, 2010, the after-tax net loss was $132.1 million, or $1.68 per common share, compared with a net loss of $250.8 million, or $3.21 per common share, in the fourth quarter of fiscal 2009. The after-tax net income for fiscal 2010 was $2.6 million, or $0.03 per fully diluted common share, compared with a net loss of $716.7 million, or $9.16 per common share, in the prior year. As a result of tax legislation changes, the after-tax net income for fiscal 2010 included a federal income tax benefit of $291.3 million.  
• Net contracts for the fourth quarter of fiscal 2010, excluding unconsolidated joint ventures, decreased 13% to 1,078 homes compared with last year's fourth quarter. For fiscal 2010, net contracts, excluding unconsolidated joint ventures, decreased 20% to 4,206 compared with 5,227 net contracts in the prior year.   
• At October 31, 2010, there were 192 active selling communities, excluding unconsolidated joint ventures, compared with 179 active selling communities at October 31, 2009. This is the first year-over-year increase in active selling communities in 11 quarters.  
• Deliveries, excluding unconsolidated joint ventures, were 1,204 homes for the fourth quarter of fiscal 2010, compared with 1,444 homes in the prior year's fourth quarter. For the year ended October 31, 2010, deliveries, excluding unconsolidated joint ventures, declined 12% to 4,729 compared with 5,362 home deliveries in the prior year.  
• The contract cancellation rate, excluding unconsolidated joint ventures, for the fourth quarter of fiscal 2010 was 24%, unchanged versus the fiscal 2009 fourth quarter.  
• During the fourth quarter, the tax asset valuation allowance charge to earnings was $64.4 million. The valuation allowance was $811.0 million as of October 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 October 31, 2010:

• As of October 31, 2010, homebuilding cash was $451.4 million, including restricted cash required to collateralize letters of credit.  
• Cash flow during the fourth quarter of fiscal 2010 was negative $35.6 million, after spending approximately $100 million of cash to purchase approximately 1,200 lots and to develop land across the Company.  
• As of October 31, 2010, the consolidated land position was 32,055 lots, consisting of 14,379 lots under option and 17,676 owned lots.  
• During the fourth quarter, approximately 960 of the lots purchased were within 73 newly identified communities (defined as communities controlled subsequent to January 31, 2009).  
• Approximately 3,300 lots were put under option in 37 newly identified communities during the fourth quarter.   
• In fiscal 2010, approximately 10,800 lots were purchased or optioned within 169 communities identified during fiscal 2010.

Other Key Operating Data:

• Contract backlog, as of October 31, 2010, excluding unconsolidated joint ventures, was 1,249 homes with a sales value of $370.8 million, a decrease of 30% and 34%, respectively, compared to October 31, 2009.  
• During the fourth quarter of fiscal 2010, home deliveries through unconsolidated joint ventures were 83 homes, compared with 82 homes in the fiscal 2009 fourth quarter. For fiscal 2010, 280 homes were delivered through unconsolidated joint ventures, compared with 297 homes in the prior year.

Comments from Management

"In spite of strong long-term demographics, the current housing market remains quite challenging. The combination of a lackluster job market and high foreclosure activity is clearly having a dampening effect on the housing market. The only silver lining is that we continue to find land acquisition opportunities which we believe will yield appropriate returns at today's home prices and sales paces," commented Ara K. Hovnanian, Chairman of the Board, President and Chief Executive Officer. "Even without a general housing recovery, we are optimistic that as the percentage of deliveries from newly identified communities increases, our overall performance should continue to improve."