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Hovnanian Enterprises Reports Fiscal 2013 Third Quarter Results

RED BANK, N.J., Sept. 9, 2013 (GLOBE NEWSWIRE) -- Hovnanian Enterprises, Inc. (NYSE:HOV), a leading national homebuilder, reported results for its third quarter and nine months ended July 31, 2013.

RESULTS FOR THE THREE AND NINE MONTH PERIODS ENDED JULY 31, 2013:

  • Total revenues were $478.4 million for the third quarter of fiscal 2013 up 23.6% compared with $387.0 million in the third quarter of the prior year. For the nine months ended July 31, 2013, total revenues increased 26.2% to $1.26 billion compared with $998.3 million in last year's first nine months.  
  • Homebuilding gross margin percentage, before interest expense and land charges included in cost of sales, increased 210 basis points to 20.3% during the third quarter of 2013 compared with 18.2% in the same period of the prior year, and was up 140 basis points compared to the 18.9% reported for the second quarter of 2013.  
  • For the nine months ended July 31, 2013, homebuilding gross margin percentage, before interest expense and land charges included in cost of sales, was 18.9% compared with 17.5% during the same period a year ago.  
  • Pre-tax income during the fiscal 2013 third quarter was $11.0 million, excluding land-related charges and gain on extinguishment of debt, compared with a pre-tax loss of $7.4 million in last year's third quarter.  
  • In the first nine months of fiscal 2013, the pre-tax loss, excluding land-related charges, expenses associated with the debt exchange offer and gain on extinguishment of debt, was $8.2 million compared with a pre-tax loss of $63.1 million in the prior year's first nine months.  
  • Net income was $8.5 million, or $0.06 per common share, during the third quarter of 2013, compared with $34.7 million, which included a $36.5 million income tax benefit and $6.2 million gain on extinguishment of debt, or $0.25 per common share, in the third quarter of fiscal 2012.  
  • For the nine months ended July 31, 2013, the net loss was $1.5 million, or $0.01 per common share, compared with net income of $18.2 million, which included a $35.3 million income tax benefit and $58.0 million gain on extinguishment of debt, or $0.15 per common share, in the first nine months of fiscal 2012.  
  • Deliveries, including unconsolidated joint ventures, were 1,502 homes for the fiscal 2013 third quarter, up 8.3% compared with 1,387 homes during the third quarter of 2012. For the nine months ended July 31, 2013, deliveries, including unconsolidated joint ventures, were 4,114 homes compared with 3,606 homes in the first nine months of 2012, an increase of 14.1%.  
  • The dollar value of net contracts, including unconsolidated joint ventures, for the three months ended July 31, 2013 increased 7.9% to $546.9 million compared with $507.0 million in the third quarter of the prior year. The number of net contracts increased 1.8% to 1,568 homes in the third quarter of 2013 from 1,541 homes in the 2012 third quarter.  
  • The dollar value of net contracts, including unconsolidated joint ventures, for the first nine months of fiscal 2013 increased 21.6% to $1.71 billion compared with $1.40 billion in first nine months of the prior year. The number of net contracts increased 10.6% to 4,862 homes for the nine months ended July 31, 2013 from 4,395 homes in the first nine months last year.  
  • Contract backlog, as of July 31, 2013, including unconsolidated joint ventures, was $1.03 billion for 2,893 homes, which was an increase of 26.8% and 18.0%, respectively, compared to July 31, 2012.  
  • Total SG&A was $56.4 million, or 11.8% of total revenues, during the fiscal 2013 third quarter compared to $48.1 million, or 12.4% of total revenues, in last year's third quarter. In the first nine months of fiscal 2013, total SG&A was $157.2 million, or 12.5% of total revenues, compared with $141.6 million or 14.2% of total revenues in first nine months of the prior year.  
  • Total interest expense as a percentage of total revenues declined 250 basis points to 7.5% in the third quarter of 2013 compared with 10.0% in the 2012 third quarter. For the nine months ended July 31, 2013, total interest expense as a percentage of total revenues declined 310 basis points to 8.2% compared with 11.3% in the first nine months of the prior year.  
  • Adjusted EBITDA increased to $48.6 million for the third quarter of fiscal 2013 compared to $33.9 million in the third quarter of the prior year. For the nine months ended July 31, 2013, Adjusted EBITDA was $102.2 million compared with $57.2 million in last year's first nine months.  
  • The contract cancellation rate, including unconsolidated joint ventures, during the third quarter of 2013 was 18%, compared with 21% in the same period of the prior year.  
  • The valuation allowance was $941.1 million as of July 31, 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 JULY 31, 2013:

  • During the third quarter of 2013, $147.7 million was spent on land and land development compared with an average quarterly land and land development spend of $115.0 million for each of the first two quarters of fiscal 2013. Homebuilding cash was $226.7 million as of July 31, 2013, including $5.2 million of restricted cash required to collateralize letters of credit.  
  • As of July 31, 2013, the land position, including unconsolidated joint ventures, was 32,523 lots, consisting of 14,224 lots under option and 18,299 owned lots, compared with a total of 29,089 lots as of July 31, 2012.

COMMENTS FROM MANAGEMENT:

"We were pleased that we were able to raise home prices, grow revenues and increase our gross margin during the third quarter of fiscal 2013," stated Ara K. Hovnanian, Chairman of the Board, President and Chief Executive Officer. "Our emphasis on raising home prices combined with concerns over rising mortgage rates and weakened consumer confidence dampened our home sales during July and August of 2013. We believe we are in a period where consumers are adjusting to current home prices and mortgage rates and remain confident that the combination of pent-up housing demand and the positive long-term demographic trends for housing will drive increased demand for new homes going forward. We continue to project profitability for the full fiscal 2013 year and strong results for our fourth quarter, excluding any expenses related to early retirement of debt," concluded Mr. Hovnanian.

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