This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Hovnanian Enterprises Reports Fiscal 2012 Results

Fourth Quarter Net Income, Excluding Debt Extinguishment Charge, Exceeds Consensus Estimate

Reports First Quarterly Pre-Tax Profit, Excluding Gains or Losses on Extinguishment of Debt, Since the Industry Downturn Began in 2006

RED BANK, N.J., Dec. 13, 2012 (GLOBE NEWSWIRE) -- Hovnanian Enterprises, Inc. (NYSE:HOV), a leading national homebuilder, reported results for its fourth quarter and year ended October 31, 2012.

RESULTS FOR THREE AND TWELVE MONTH PERIODS ENDED OCTOBER 31, 2012:

  • Total revenues were $487.0 million in the fiscal 2012 fourth quarter up 42.6% compared with $341.6 million in the prior year's fourth quarter. For all of fiscal 2012, total revenues were $1.5 billion, up 30.9%, compared with $1.1 billion during all of fiscal 2011.  
  • The dollar value of net contracts, including unconsolidated joint ventures, for the fourth quarter ended October 31, 2012 increased 46.3% to $513.4 million compared with $350.9 million in the 2011 fourth quarter. The number of net contracts increased 22.8% to 1,443 homes for the three months ended October 31, 2012 from 1,175 homes in the fourth quarter of the prior year.  
  • In all of fiscal 2012, the dollar value of net contracts, including unconsolidated joint ventures, increased 43.9% to $1.9 billion compared with $1.3 billion in all of fiscal 2011 and the number of net contracts increased 30.1% to 5,838 homes compared with 4,488 homes of the previous year.  
  • Deliveries, including unconsolidated joint ventures, were 1,750 homes during the fourth quarter of 2012, up 40.6% compared with 1,245 homes in the same period of the prior year. During the twelve months ended October 31, 2012, deliveries, including unconsolidated joint ventures, were 5,356 homes compared with 4,216 homes during the twelve month period a year ago, an increase of 27.0%.  
  • Contract backlog, as of October 31, 2012, including unconsolidated joint ventures, was $742.2 million for 2,145 homes, which was an increase of 34.4% and 29.0%, respectively, compared to October 31, 2011.  
  • Homebuilding gross margin percentage, before interest expense included in cost of sales, increased 280 basis points to 18.3% for the fourth quarter ended October 31, 2012, compared to 15.5% in last year's fourth quarter. The fourth quarter of fiscal 2012 represented the sixth sequential increase in quarterly gross margin percentage. During all of 2012, homebuilding gross margin percentage, before interest expense included in cost of sales, was 17.8% compared with 15.6% in same period of the prior year.  
  • Total SG&A was $48.7 million, or 10.0% of total revenues, for the three months ended October 31, 2012 compared to $57.8 million, or 16.9% of total revenues, during the same quarter a year ago and $48.1 million, or 12.4% of total revenues, in the third quarter of 2012. During all of fiscal 2012, total SG&A was $190.3 million, or 12.8% of total revenues, compared with $211.4 million, or 18.6% of total revenues, last year.  
  • Consolidated pre-tax land-related charges in the fiscal 2012 fourth quarter were $5.3 million compared with $59.9 million in the prior year's fourth quarter. For all of fiscal 2012 consolidated pre-tax land-related charges were $12.5 million compared with $101.7 million during all of 2011.  
  • Excluding land-related charges and gains or losses on extinguishment of debt, the pre-tax income in the fiscal 2012 fourth quarter was $8.1 million compared with a pre-tax loss of $45.2 million in the previous year's fourth quarter. After $5.3 million in land-related charges, the pre-tax income, excluding gains or losses on extinguishment of debt, was $2.8 million for the fourth quarter of fiscal 2012. For the twelve months ended October 31, 2012, excluding land-related charges, expenses associated with the debt exchange offer and gains or losses on extinguishment of debt, the pre-tax loss was $55.0 million compared with $194.1 million last year.  
  • The pre-tax loss for the fourth quarter ended October 31, 2012, including an $87.0 million loss on extinguishment of debt, was $84.2 million compared with $97.8 million in the 2011 fourth quarter. For the twelve months ended October 31, 2012, the pre-tax loss, including gains or losses on extinguishment of debt, was $101.2 million compared with $291.6 million for all of the prior year.  
  • The net loss was $84.4 million during the fourth quarter of 2012, or $0.59 per common share, compared with a net loss of $98.3 million, or $0.90 per common share, in the 2011 fourth quarter. For all of fiscal 2012, the net loss was $66.2 million, or $0.52 per common share, compared with a net loss of $286.1 million, or $2.85 per common share, in the prior year. The net loss in the fiscal 2012 fourth quarter and for the full year included an $87.0 million loss on extinguishment of debt, associated with the 2012 fourth quarter $797 million debt refinancing.  
  • The contract cancellation rate, including unconsolidated joint ventures, for the fourth quarter ended October 31, 2012 was 23%, compared with 21% in last year's fourth quarter.  
  • During November of 2012, the dollar value of net contracts and the number of net contracts, including unconsolidated joint ventures, increased 38.1% and 18.5% respectively to $131.5 million compared with $95.2 million and to 385 homes from 325 homes in the same month last year.  
  • The valuation allowance was $937.9 million as of October 31, 2012. 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.

LIQUIDITY AND INVENTORY AS OF OCTOBER 31, 2012:

  • After spending $127.9 million during the fourth quarter of 2012 on land and land development, homebuilding cash increased $36.9 million from the third quarter to $289.0 million, as of October 31, 2012, including $30.7 million of restricted cash required to collateralize letters of credit.  
  • As of October 31, 2012, the land position, including unconsolidated joint ventures, was 29,619 lots, consisting of 11,418 lots under option and 18,201 owned lots.  
  • Refinanced $797 million of secured senior notes during the fourth quarter of fiscal 2012, which reduces annual cash interest payments by approximately $17 million and extends the maturity of the refinanced debt from 2016 until 2020.  
  • Announced an increase of our land banking arrangement with GSO Capital Partners LP, the credit arm of The Blackstone Group, for up to an additional $125 million of total acquisition and future development costs.

COMMENTS FROM MANAGEMENT:

"We are very happy to report a pre-tax profit before debt extinguishment gains or losses for the first time in 25 quarters. The fourth quarter marked the sixth sequential increase in our quarterly gross margin percentage, and our gross margin has improved 350 basis points over that period," said Ara K. Hovnanian, Chairman of the Board, President and Chief Executive Officer. "During fiscal 2012, we were able to generate significant operating leverage by holding our total SG&A and interest expenses at a fairly constant dollar amount, while growing our revenues by more than 30%. As a result, our SG&A as a percentage of total sales declined to 10.0% during the fourth quarter, which by historical standards we consider a normalized level. Furthermore, our sales growth continued with a 46% increase in dollar value of net contracts for the quarter and a 34% increase in dollar value of our backlog.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,279.74 +13.75 0.08%
S&P 500 2,010.40 -0.96 -0.05%
NASDAQ 4,579.7890 -13.6380 -0.30%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs