Hovnanian Enterprises (NYSE:HOV) on Tuesday after market close reported a net loss for its fiscal first quarter of $178.4 million (-$2.29 per share), compared with a net loss of $130.9 million (-$2.07 per share) in the prior year's first quarter.
The loss included pre-tax land-related charges of $132.0 million, including land impairments of $95.7 million, write-offs of predevelopment costs and land deposits of $14.5 million and $21.8 million representing the write down of investments in unconsolidated joint ventures. There also was a FAS 109 current and deferred tax valuation allowance charge to earnings of $79.4 million.
Revenues skidded to $373.8 million the quarter, compared to $1.1 billion in the first quarter of the prior year. Deliveries, excluding unconsolidated joint ventures, were 1,208 homes for the 2009 first quarter, a 66% decline from 3,604 homes in the 2008 first quarter, which included 1,345 homes in Fort Myers-Cape Coral during the first quarter of fiscal 2008. Excluding the Fort Myers-Cape Coral deliveries, deliveries were down 47%. The average price of delivered homes was actually up slightly, by 1.8% to $297,228, compared to a year earlier.
Net contracts, also excluding unconsolidated joint ventures, declined 36% to961 homes compared with last year's first quarter. The average price was $247,158, down 18.4% from the same period last year. The cancellation rate was 31%, compared with the cancellation rate of 38% in the previous year's first quarter and 42% in the fourth quarter of fiscal 2008.
Backlog as of January 31, 2009, excluding unconsolidated joint ventures, was 1,660 homes with a sales value of $531.0 million, a decrease of 61% compared to January 31, 2008.
At January 31, 2009, there were 245 active selling communities, excluding unconsolidated joint ventures, a decline of 159 active communities, or 39%, from January 31, 2008. Home building gross margin, before interest expense included in cost of sales, was 5.7% for the first quarter of 2009, compared to 6.7% in the fiscal 2008 first quarter and 4.7% in the 2008 fourth quarter.
Pretax income from financial services declined 49% compared to the same period last year to $1.6 million in the first quarter of fiscal 2009.
During the first quarter of fiscal 2009, home deliveries through unconsolidated joint ventures were 75 homes, compared with 155 homes in the first quarter of fiscal 2008.
The company's lot count as of January 31, 2009 decreased by 21,501 lots compared to January 31, 2008, reflecting decreases of 4,414 owned lots and17,087 optioned lots. As of January 31, 2009, lots controlled under option contracts totaled 14,642 and owned lots totaled 22,958. The total land position of 37,600 lots represents a 69% decline from the peak total land position at April 30, 2006.
Started unsold homes and models declined 38%, to 1,445 at January 31, 2009 compared to 2,321 at January 31, 2008.
Hovnanian ended the quarter with $842.6 million in home building cash and no balance on its revolving credit facility was zero. Cash flow during the first quarter of fiscal 2009 included a federal tax refund of $145.2 million.
The company said total debt was reduced by $94.7 million during the quarter, net of discount amortization. Repurchases amounted to $53.2 million of notes at an average price of 27.6%. Exchanges amounted to $71.4 million of existing unsecured notes for $29.3 million of new secured notes maturing in 2017. As a result, a $79.5 million gain on extinguishment of debt was recorded during the first quarter of fiscal 2009. The company is carrying nearly $2.5 billion in long-term debt and faces a $100 million redemption in 2010 but no further redemptions until 2012.
At quarter's end, there were 245 active selling communities, excluding unconsolidated joint ventures, a decline of 159 active communities, or 39%, from January 31, 2008.
Homebuilding gross margin, before interest expense was 5.7%, down from 6.7% in the fiscal 2008 first quarter but up from 4.7% in the 2008 fourth quarter.
"The sales environment remained persistently challenging throughout the first quarter," said Ara K. Hovnanian, president and CEO. "While we have experienced a typical, seasonal pickup in traffic and sales since the middle of January, this increase is coming off of extremely low levels that have prevailed since mid-September."
Hovnanian took a swipe at Washington is his prepared comments, stating, "Much to our disappointment, there were no significant provisions designed to stimulate housing demand in the stimulus bill signed into law last month or the subsequent plan to stem foreclosures. Given the lack of steps taken by the federal government to address housing demand, prospective homebuyers are still faced with making the decision to buy a home against an exceedingly difficult economic backdrop and we expect demand for all homes, both new and existing, to remain far below normalized levels."
Hovnanian also said the company had purchased approximately $240 million of face value of unsecured senior notes and $75 million of face value of unsecured senior subordinated notes for approximately $105 million in cash, resulting in approximately a $210 million gain and a corresponding increase in stockholders' equity since the end of the first quarter.
Shares of Hovnanian were up a penny to 63 cents in after-market trading shortly after 5 p.m.