Hovnanian Enterprises (NYSE:HOV) reported late Tuesday a net loss of $118.6 million (-$1.50 per share) for the fiscal second quarter of 2009 ended April 30, a significant improvement from a loss of $340.7 million, (-$5.29 pershare) in the second quarter of last year. The loss included impairments and charges of $318.9 million, nearly triple Wall Street estimates, and a FAS109 charge to deferred tax assets of $42.2 million, a bit more than half of what some analysts were expecting.

Overall, the earnings per share missed the Wall Street consensus of -$1.26 by 16%, although UBS' David Goldberg was on the mark with his estimate.

The larger-than-expected land charges were due to price cutting, particularly in the West region, which reduced the value of land the company holds, said Ara K. Hovnanian, president and CEO. Of the $318.9 million,$301.1 million was land related, $9.1 million for write-offs of predevelopment costs and land deposits and $8.7 for write-downs of joint venture losses.

Revenues for the quarter plummeted 48.7% from the same quarter last year to $398.0 million as closings dropped 44% to 1,388 homes. Average prices of settlements were down 9.1% to $274,999 nationally, led by an 18.3% decline in the West to $254,816.

Net new contracts were down 29% to 1,586 homes, and the cancellation rate improved to 24% from 31% in the first quarter and 29% in the comparable quarter last year. The average price of orders was down 5.5% to $274,659 nationally, again led by a decline of 20.5% to $238,464 in the West.

Backlog, on April 30, 2009 was down 48.1% to 1,858 homes with a sales value of $592.8 million, a decrease of 52% compared to April 30, 2008. During the quarter, Hovnanian further reduced its community count to 215, down 43% from379 from the end of last year's second quarter.

Lot count decreased 33% to 35,132, 13,299 optioned and 21,853 owned, representing a decline of 71% from peak at the end of the second quarter, 2006.

During the quarter, home deliveries through unconsolidated joint ventures were 71 homes, compared with 196 homes in the second quarter of fiscal 2008.

Hovnanian ended the quarter with home building cash of $779.2 million and a $100 million balance on its revolving credit facility. During the quarter, the company spend $208.4 million on debt exchange and repurchases of debt that will reduce future principal payments and annual interest payments by $620 million and $41 million, respectively. It is still carrying more than$2 billion in debt on its books, however, though near-term maturities consist of $29 million due 2010 and $159 million that matures in 2012.

Cash flow during the second quarter of fiscal 2009, excluding the $208.4 million spent on debt repurchases, was $47.5 million, down from $56.1 million of cash flow in last year's second quarter.

Home building gross margin, before interest, was 8.3%, up from 6.8% in last year's second fiscal quarter and 5.7% in first quarter, 2009.

Said Ara Hovnanian, "Although the home sales environment remains challenging amid increasingly high levels of unemployment and uncertainty about the overall US economy, our monthly net contracts per community have increased in each of the past two quarters and in six of the past seven months. "We have seen more stability in home prices over the most recent six weeks."

He added, however, "In spite of these encouraging signs, we remain concerned that the combination of the expiration of the $8,000 federal tax credit in November of this year, the depletion of the state funds allocated for the $10,000 California state tax credit for new home buyers and the potential increase in existing home listings due to another wave of foreclosures as the recent moratoriums on foreclosures have ended could have a dampening effect on our future contract pace."

Noting the company's debt load, CFO J. Larry Sorsby said, "Going forward, we have debt covenants that limit the amount of additional debt we may repurchase. While we are pleased with the reduction in debt we have achieved to date, we are cognizant of our deteriorating stockholders' equity and the resulting increase to our already highly leveraged position."

Shares of Hovnanian, which closed up more than 8% on heavy volume at $3.02 during the regular session Tuesday, reversed and were down nearly 4% at $2.90 in after-hours trading shortly after 5:30 p.m.