Hovnanian Enterprises Reports First Quarter Fiscal 2011 Results

RED BANK, N.J., March 1, 2011 (GLOBE NEWSWIRE) -- Hovnanian Enterprises, Inc. (NYSE:HOV), a leading national homebuilder, reported results for its first quarter ended January 31, 2011.

RESULTS FOR THE THREE MONTH PERIOD ENDED JANUARY 31, 2011:

• Total revenues were $252.6 million for the first quarter of fiscal 2011 compared with $319.6 million in the fiscal 2010 first quarter.  
• Homebuilding gross margin percentage, before interest expense included in cost of sales, increased year-over-year for the eighth consecutive quarter to 16.9% during the first quarter of 2011, compared to 16.0% in the same quarter a year ago.  
• Consolidated pre-tax land-related charges in the first quarter of fiscal 2011 were $13.5 million, compared with $5.0 million in last year's first quarter.  
• Excluding land-related charges, the pre-tax loss for the first quarter of 2011 was $51.0 million compared with $52.6 million in the fiscal 2010 first quarter.  
• The total pre-tax loss during the first quarter of fiscal 2011 was $64.6 million compared to $55.0 million during the same period of the prior year.  
• For the first quarter ended January 31, 2011, the after-tax net loss was $64.1 million, or $0.82 per common share, compared with net income of $236.2 million, or $2.97 per fully diluted common share, in the first quarter of the prior year, which as a result of tax legislation changes included a federal income tax benefit of $291.3 million.  
• Net contracts during the first quarter of fiscal 2011, excluding unconsolidated joint ventures, decreased 13% to 792 homes compared to the first quarter of fiscal 2010.  
• The contract cancellation rate, excluding unconsolidated joint ventures, for the first quarter of fiscal 2011 was 22%, compared with 21% in the prior year's first quarter.  
• At January 31, 2011, there were 188 active selling communities, excluding unconsolidated joint ventures, compared with 179 active selling communities at January 31, 2010.  
• Deliveries, excluding unconsolidated joint ventures, were 845 homes in the first quarter of fiscal 2011, compared with 1,091 homes in last year's first quarter.  
• During the first quarter, the tax asset valuation allowance charge to earnings was $22.0 million. The valuation allowance was $833.0 million as of January 31, 2011. 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 JANUARY 31, 2011:

• As of January 31, 2011, homebuilding cash was $399.3 million, including restricted cash required to collateralize letters of credit.  
• Cash flow in the first quarter of fiscal 2011 was negative $47.8 million, after spending approximately $75 million of cash to purchase approximately 1,300 lots and to develop land across the Company.  
• As of January 31, 2011, the consolidated land position was 30,864 lots, consisting of 12,153 lots under option and 18,711 owned lots.  
• For the fiscal 2011 first quarter, approximately 550 of the lots purchased were within 60 newly identified communities (defined as communities controlled subsequent to January 31, 2009).  
• Approximately 1,850 lots were put under option in 38 newly identified communities during the first quarter of fiscal 2011.

OTHER KEY OPERATING DATA:

• Contract backlog, as of January 31, 2011, excluding unconsolidated joint ventures, was 1,196 homes with a sales value of $367.6 million, a decrease of 25% and 27%, respectively, compared to January 31, 2010.  
• In the first quarter of fiscal 2011, home deliveries through unconsolidated joint ventures were 47 homes, compared with 38 homes during the first quarter of 2010.

COMMENTS FROM MANAGEMENT:  

"While we were encouraged by the typical seasonal increase in both traffic and net contracts during January, it is still too early to tell how this spring selling season will compare to last spring's net contracts when the federal homebuyer tax credit was still available," commented Ara K. Hovnanian, Chairman of the Board, President and Chief Executive Officer.