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Hovnanian Enterprises Reports Fiscal 2013 Second Quarter Results

RED BANK, N.J., June 5, 2013 (GLOBE NEWSWIRE) -- Hovnanian Enterprises, Inc. (NYSE:HOV), a leading national homebuilder, reported results for its second quarter and six months ended April 30, 2013.

RESULTS FOR THE THREE AND SIX MONTH PERIODS ENDED APRIL 30, 2013:

  • Total revenues were $423.0 million in the second quarter of fiscal 2013 up 23.8% compared with $341.7 million in the fiscal 2012 second quarter. For the six months ended April 30, 2013, total revenues increased 27.8% to $781.2 million compared with $611.3 million in the first half of the prior year.  
  • Net income was $1.3 million for the three months ended April 30, 2013, or $0.01 per common share. Including a $27.0 million gain on extinguishment of debt in the second quarter of the prior year, net income was $1.8 million, or $0.02 per common share.  
  • In the first six months of fiscal 2013, net loss was $10.0 million, or $0.07 per common share, compared with a net loss of $16.5 million, or $0.15 per common share, in the first half of last year.  
  • Pre-tax income for the fiscal 2013 second quarter was $0.9 million, excluding land-related charges, expenses associated with the debt exchange offer and gain on extinguishment of debt, compared with a pre-tax loss of $21.4 million during the second quarter of fiscal 2012.  
  • For the six months ended April 30, 2013, the pre-tax loss, excluding land-related charges, expenses associated with the debt exchange offer and gain on extinguishment of debt, was $19.2 million compared with a pre-tax loss of $55.7 million in the first half of fiscal 2012.  
  • Deliveries, including unconsolidated joint ventures, were 1,424 homes for the second quarter of fiscal 2013, up 18.0% compared with 1,207 homes in the second quarter of the prior year. For the six months ended April 30, 2013, deliveries, including unconsolidated joint ventures, were 2,612 homes compared with 2,219 homes in last year's second quarter, an increase of 17.7%.  
  • The dollar value of net contracts, including unconsolidated joint ventures, for the second quarter of fiscal 2013 increased 22.2% to $696.1 million compared with $569.8 million in the same period of the prior year.  The number of net contracts increased 9.9% to 1,950 homes for the three months ended April 30, 2013 from 1,775 homes during the same quarter a year ago.  
  • The dollar value of net contracts, including unconsolidated joint ventures, for the first six months of fiscal 2013 increased 29.4% to $1,159.3 million compared with $895.7 million in first half of last year. The number of net contracts increased 15.4% to 3,294 homes in the first half of fiscal 2013 from 2,854 homes in the prior year's first half.  
  • Contract backlog, as of April 30, 2013, including unconsolidated joint ventures, was $1,024.6 million for 2,827 homes, which was an increase of 34.3% and 23.0%, respectively, compared to April 30, 2012.  
  • Homebuilding gross margin percentage, before interest expense and land charges included in cost of sales, increased 150 basis points to 18.9% for the fiscal 2013 second quarter, compared with 17.4% during the second quarter of fiscal 2012 and was up 190 basis points compared to the 17.0% reported during the first quarter of 2013. For the six months ended April 30, 2013, homebuilding gross margin percentage, before interest expense and land charges included in cost of sales, was 18.0% compared with 17.0% in the first six months of fiscal 2012.  
  • Total SG&A was $51.5 million, or 12.2% of total revenues, for the three months ended April 30, 2013 compared to $47.4 million, or 13.9% of total revenues, in the second quarter of the prior year. In the first half of fiscal 2013, total SG&A was $100.8 million, or 12.9% of total revenues, compared with $93.4 million or 15.3% of total revenues in first half of fiscal 2012.  
  • Consolidated pre-tax land-related charges for the second quarter of fiscal 2013 were $2.2 million compared with $3.2 million in the second quarter of the previous year. During the six months ended April 30, 2013, the consolidated pre-tax land-related charges were $2.9 million compared with $6.5 million in last year's first half.  
  • Total interest expense as a percentage of total revenues declined 350 basis points to 8.0% during the second quarter of fiscal 2013 compared with 11.5% in the same period of the prior year. For the six months ended April 30, 2013, total interest expense as a percentage of total revenues declined 340 basis points to 8.7% compared with 12.1% during the first half a year ago.  
  • Adjusted EBITDA increased to $37.1 million during the fiscal 2013 second quarter compared to $20.5 million in last year's second quarter. In the first half of fiscal 2013, Adjusted EBITDA was $53.6 million compared with $23.2 million in the prior year's first half.  
  • The contract cancellation rate, including unconsolidated joint ventures, for the second quarter of fiscal 2013 was 16%, compared with 17% in the second quarter of the prior year.  
  • During May of 2013, the dollar value of net contracts and the number of net contracts, including unconsolidated joint ventures, increased 12.7% and 5.5%, respectively, to $185.0 million compared with $164.1 million and to 534 homes from 506 homes in May of 2012.  
  • The valuation allowance was $941.8 million as of April 30, 2013. 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 APRIL 30, 2013:

  • After spending $118.2 million during the second quarter of 2013 on land and land development, homebuilding cash was $263.4 million as of April 30, 2013, including $27.0 million of restricted cash required to collateralize letters of credit.  
  • As of April 30, 2013, the land position, including unconsolidated joint ventures, was 30,043 lots, consisting of 12,795 lots under option and 17,248 owned lots.

COMMENTS FROM MANAGEMENT:

"Throughout the spring selling season, our communities experienced strong demand for new homes. We reported 10.3 net contracts per active selling community for the second quarter of fiscal 2013, which is the highest net contracts per community we have reported for any quarter since the fourth quarter of 2005," said Ara K. Hovnanian, Chairman of the Board, President and Chief Executive Officer.  "We raised home prices in many of our communities across the country, which have more than offset any increases in labor or material costs we have experienced to date. The combination of our improved homebuilding gross margin, improving sales pace and the resultant operating leverage that we have gained on our interest and SG&A costs, further increases our confidence that we should be profitable for fiscal 2013, assuming that market conditions remain stable and excluding any expenses related to early retirement of debt," concluded Mr. Hovnanian.

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