Although analysts expected Hovnanian Enterprises' fiscal 1Q2009 results to be bad--most of Hovnanian's peers also struggled tremendously in November and December--results were worse than they anticipated. The company lost $178.4 million, or $2.29 per share, during the quarter ended Jan. 31, marking an acceleration of losses from the same period last year.

Of primary concern to company stakeholders is the company's growing liquidity crisis. At quarter end, the company had a total debt-to-capitalization ration of roughly 93.5%.

During an earnings call Wednesday morning, CFO Larry Sorsby tried to calm liquidity concerns, fueled by the company's negative cash flow during the quarter, by saying that management was "laser focused" on generating more cash. He added that boosting the company's cash position "drives virtually every decision we make."

In addition, the company reduced its total debt by $94.7 million thanks to the repurchase of $53.2 million in notes and an exchange of $71.4 million of existing unsecured notes for $29.3 of new secured notes maturing in 2017. However, when analysts asked if management would use some of the $842.6 million in cash the company has stockpiled to make additional debt repurchases, Sorsby said the company had "a very limited" amount of cash earmarked for that kind of activity.

Management's unwavering focus on cash preservation came at the expense of profitability. Revenues slid roughly 66% year over year to $373.8 million, exactly in line with the fall-off in unit closings. And if the top-line was under pressure, the bottom line was under siege. A higher-than-expected $132 million in land-related charges coupled with a bloated SG&A figure--19% of revenues--crushed margins.

Moreover, the company's year-over-year plunge in backlog added to existing concerns over the company's ability to sustain positive cash flow going forward. The company counted 1,891 homes in backlog, down 55.2% from fiscal 1Q2008.

The bright spot during the call was that despite a year-over-year 38% decline in new orders, attributed in part to a 39% decline in actively selling communities, the company saw a year-over-year increase in net contracts per community. For September, November, and December, the company netted 1.1, 1.1, and 1.5 contracts per community, respectively, compared to net new orders per community of 0.9, 1.4, and 1.3 during fiscal 1Q2008. And that trend continued in February. The company reported 2.2 net contracts per community during the month versus 1.8 new orders per community a year ago.

"This is hardly a cause for celebration," said CEO Ara Hovnanian, noting some of the uptick was seasonal. "But it's definitely a shift in the right direction."