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Hovnanian Enterprises Reports Fiscal 2014 Second Quarter Results

RED BANK, N.J., June 4, 2014 (GLOBE NEWSWIRE) -- Hovnanian Enterprises, Inc. (NYSE:HOV), a leading national homebuilder, reported results for its fiscal second quarter and six months ended April 30, 2014.

RESULTS FOR THE THREE AND SIX MONTH PERIODS ENDED APRIL 30, 2014:

  • Total revenues were $449.9 million for the second quarter ended April 30, 2014, an increase of 6.4% compared with $423.0 million in the fiscal 2013 second quarter. For the six months ended April 30, 2014, total revenues increased 4.2% to $814.0 million compared with $781.2 million in the first half of the prior year.  
  • Homebuilding gross margin percentage, before interest expense and land charges included in cost of sales, increased 130 basis points to 20.2% in the second quarter of fiscal 2014 compared with 18.9% in the fiscal 2013 second quarter. For the first six months of fiscal 2014, homebuilding gross margin percentage, before interest expense and land charges included in cost of sales, was 19.5% compared with 18.0% in the first six months of the prior year.  
  • Pre-tax loss, excluding land-related charges and loss on extinguishment of debt, for the second quarter ended April 30, 2014 was $5.6 million compared with pre-tax income of $0.9 million in last year's second quarter. During the first six months of fiscal 2014, the pre-tax loss, excluding land-related charges and loss on extinguishment of debt, was $28.8 million compared with a pre-tax loss of $19.2 million in the same period of the prior year.  
  • Net loss was $7.9 million, or $0.05 per common share, for the three months ended April 30, 2014, compared with net income of $1.3 million, or $0.01 per common share, which included $2.6 million of federal and state tax benefits, during the same quarter a year ago. During the first six months of fiscal 2014, the net loss was $32.4 million, or $0.22 per common share, compared with a net loss of $10.0 million, or $0.07 per common share, which included $12.1 million of federal and state tax benefits, in last year's first six months.  
  • Deliveries, including unconsolidated joint ventures, were 1,331 homes in the fiscal 2014 second quarter, a 6.5% decrease compared with 1,424 homes in the prior year's second quarter. For the six months ended April 30, 2014, deliveries, including unconsolidated joint ventures, were 2,469 homes compared with 2,612 homes in the first six months of fiscal 2013, a decrease of 5.5%.  
  • The dollar value of consolidated net contracts increased 15.5% to $669.3 million for the second quarter of fiscal 2014 compared with $579.6 million for the same quarter a year ago. The dollar value of net contracts, including unconsolidated joint ventures, for the three months ended April 30, 2014 increased 1.0% to $703.0 million compared with $696.1 million in the second quarter of the prior year.  
  • For the second quarter of fiscal 2014, the number of consolidated net contracts increased 6.7% to 1,809 homes compared with 1,695 homes in the second quarter of fiscal 2013. The number of net contracts, including unconsolidated joint ventures, decreased 2.2% to 1,907 homes in the second quarter of fiscal 2014 second quarter from 1,950 homes in the fiscal 2013 second quarter.  
  • During the first half of fiscal 2014, the dollar value of consolidated net contracts increased 10.3% to $1,077.3 million compared with $976.5 million in the same period a year ago. The dollar value of net contracts, including unconsolidated joint ventures, for the first six months of fiscal 2014 was $1,158.8 million compared with $1,159.3 million in the first six months of the prior year.  
  • In the first six months of fiscal 2014, the number of consolidated net contracts increased 0.4% to 2,901 homes from 2,890 homes in the first half of fiscal 2013. The number of net contracts, including unconsolidated joint ventures, decreased 5.6% to 3,109 homes for the six months ended April 30, 2014 from 3,294 homes in last year's first six months.  
  • As of April 30, 2014, the dollar value of consolidated contract backlog increased 21.0% to $1,046.3 million compared with $865.0 million at April 30, 2013. The dollar value of contract backlog, as of April 30, 2014, including unconsolidated joint ventures, was $1,135.7 million, which was an increase of 10.9%, compared with $1,024.6 million as of April 30, 2013.  
  • As of April 30, 2014, the number of homes in consolidated contract backlog increased 13.6% to 2,797 homes compared with 2,462 homes as of the end of the second quarter of fiscal 2013. Contract backlog, as of April 30, 2014, including unconsolidated joint ventures, increased of 7.3% to 3,032 homes compared with 2,827 homes as of April 30, 2013.  
  • Total interest expense as a percentage of total revenues was 8.0% during both the second quarter of fiscal 2014 and the second quarter of fiscal 2013. For the six months ended April 30, 2014, total interest expense as a percentage of total revenues declined 30 basis points to 8.4% compared with 8.7% during the first six months a year ago.  
  • Total SG&A was $62.4 million, or 13.9% of total revenues, during the fiscal 2014 second quarter compared to $51.5 million, or 12.2% of total revenues, in last year's second quarter. Total SG&A was $122.8 million, or 15.1% of total revenues, in the first six months of fiscal 2014 compared to $100.8 million, or 12.9% of total revenues, in the prior year's first six months.  
  • Adjusted EBITDA decreased to $32.2 million for fiscal 2014 second quarter compared to $37.1 million during the second quarter of fiscal 2013. Adjusted EBITDA decreased to $43.7 million for the six months ended April 30, 2014 compared to $53.6 million in the first six months of fiscal 2013.  
  • The contract cancellation rate, including unconsolidated joint ventures, for the three months ended April 30, 2014 was 17%, compared with 16% in the second quarter of the prior year.  
  • The valuation allowance was $936.3 million as of April 30, 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 APRIL 30, 2014:

  • During the second quarter of fiscal 2014, $105.3 million was spent on land and land development. For the six months ended April 30, 2014, the dollar amount spent on land and land development was $287.0 million.  
  • Homebuilding cash was $243.3 million as of April 30, 2014, including $5.2 million of restricted cash required to collateralize letters of credit, compared to $263.4 million at April 30, 2013. In addition to homebuilding cash, there was $55.0 million of availability under the revolving credit facility as of April 30, 2014, bringing total liquidity to $298.3 million. Total liquidity increased 13.2% from $263.4 million at April 30, 2013.  
  • As of April 30, 2014, the land position, including unconsolidated joint ventures, was 37,787 lots, consisting of 17,714 lots under option and 20,073 owned lots, an increase of 7,744 lots compared with a total of 30,043 lots as of April 30, 2013.  
  • During the second quarter of fiscal 2014, approximately 5,600 lots were put under option or acquired in 56 communities.

COMMENTS FROM MANAGEMENT:

"We launched our national sales campaign, Big Deal Days, in March and were encouraged by the 728 net contracts signed during the month of March 2014, the highest level of monthly net contracts since April 2008. In addition, the 3.6 net contracts per active selling community in March was the highest level of monthly net contracts per community since September 2007," stated Ara K. Hovnanian, Chairman of the Board, President and Chief Executive Officer. "However, our sales pace during April and May was choppy and the total monthly sales pace per active selling community in both months fell short of last year's levels."

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