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Hovnanian Enterprises Reports Fiscal 2014 First Quarter Results

RED BANK, N.J., March 5, 2014 (GLOBE NEWSWIRE) -- Hovnanian Enterprises, Inc. (NYSE:HOV), a leading national homebuilder, reported results for its fiscal first quarter ended January 31, 2014.

RESULTS FOR THE THREE MONTH PERIOD ENDED JANUARY 31, 2014:

  • Total revenues were $364.0 million for the fiscal 2014 first quarter, an increase of 1.6% compared with $358.2 million during the first quarter of fiscal 2013.  
  • Homebuilding gross margin percentage, before interest expense and land charges included in cost of sales, increased 180 basis points to 18.8% for the first quarter ended January 31, 2014 compared with 17.0% in the fiscal 2013 first quarter.  
  • Pre-tax loss, excluding land-related charges, in the first quarter of 2014 was $23.2 million compared with $20.1 million in the fiscal 2013 first quarter.  
  • Net loss was $24.5 million, or $0.17 per common share, for the first quarter ended January 31, 2014, compared with a net loss of $11.3 million, or $0.08 per common share, in the last year's first quarter, which included a $9.7 million federal tax benefit.  
  • Deliveries, including unconsolidated joint ventures, were 1,138 homes during the fiscal 2014 first quarter, a 4.2% decrease compared with 1,188 homes in last year's first quarter.  
  • The dollar value of net contracts, including unconsolidated joint ventures, in the fiscal 2014 first quarter decreased 1.6% to $455.8 million compared with $463.2 million in the prior year's first quarter. The number of net contracts decreased 10.6% to 1,202 homes for the fiscal 2014 first quarter from 1,344 homes during the first quarter of fiscal 2013.  
  • Contract backlog, as of January 31, 2014, including unconsolidated joint ventures, was $904.4 million for 2,456 homes, which was an increase of 11.4% and 6.7%, respectively, compared to January 31, 2013.  
  • Total interest expense as a percentage of total revenues declined 60 basis points to 9.0% for the first quarter ended January 31, 2014 compared with 9.6% in the 2013 first quarter.  
  • Total SG&A was $60.4 million, or 16.6% of total revenues, for the three months ended January 31, 2014 compared to $49.3 million, or 13.8% of total revenues, in the first quarter of the prior year.  
  • Adjusted EBITDA decreased to $11.5 million in the first quarter of fiscal 2014 compared to $16.5 million in the fiscal 2013 first quarter.  
  • The contract cancellation rate, including unconsolidated joint ventures, for the first quarter of fiscal 2014 was 18%, compared with 17% in the first quarter of the prior year.  
  • The valuation allowance was $933.8 million as of January 31, 2014. 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 JANUARY 31, 2014:

  • During the first quarter of fiscal 2014, $181.7 million was spent on land and land development. Homebuilding cash was $287.6 million as of January 31, 2014, including $5.1 million of restricted cash required to collateralize letters of credit, compared to $261.6 million at January 31, 2013. In addition to the homebuilding cash, there was $50.8 million of availability under the revolving credit facility as of January 31, 2014, bringing total liquidity to $338.4 million.  
  • As of January 31, 2014, the land position, including unconsolidated joint ventures, was 34,763 lots, consisting of 14,498 lots under option and 20,265 owned lots, an increase of 5,058 lots compared with a total of 29,705 lots as of January 31, 2013.  
  • $150.0 million of senior notes due 2019 were issued during the first quarter of fiscal 2014, a portion of the proceeds of which were used to fund the redemption in the second quarter of the remaining $21.4 million outstanding 6.25% senior notes due 2015.

COMMENTS FROM MANAGEMENT:

"While our first quarter is always the slowest seasonal period for net contracts, the strong recovery trajectory from the spring selling season of 2013 has softened on a year-over-year basis. Net contracts in the months of December, January and February have not met our expectations. In addition to the lull in sales momentum, both sales and deliveries were impacted by poor weather conditions and deliveries were further impacted by shortages in labor and certain materials in some markets that have extended cycle times," stated Ara K. Hovnanian, Chairman of the Board, President and Chief Executive Officer.

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