Shares of Hovnanian Enterprises (NYSE:HOV) were getting hammered in after hours trading Tuesday after the company announced a wider-than-expected net loss of $72.7 million, $(0.69) per share, for its fiscal second quarter ended April 30. The loss compared with a loss of $28.6 million ($0.36) per share for the same period last year. Analysts were expecting a loss of 51 cents a share. Shares were down 5.5% at $2.21 at 5:30 p.m.

The loss included impairments and write-downs of $16.9 million, up from $1.2 million in last year's quarter.

Revenues declined 19.9% to $255.1 million for the quarter as closings fell 19.6% to 899 and the average price fell 1.1% to $274,721. Unconsolidated joint venture closings dropped 13.9% to 68 with the average price up 2.8% to $430,750.

New orders declined 20.4% to 1,046, but the average new order price rose 9.6% to $280,657. JV new orders were up 41.2% to 120 with the average price up 14.5% to $446,000. The cancellation rate was 20%, up from 17% in last year's quarter.

Backlog at quarter's end was down 27.7% to 1,293 homes; backlog dollar value was down 24.2% to $405 million. JV backlog rose 46.6% to 258 homes; dollar value rose 28.5% to $108.2 million.

At the close of the quarter, Hovnanian had 206 active selling communities, including unconsolidated joint ventures, up from 188 a year earlier.

Home building gross margin percentage, before interest expense included in cost of sales, was 14.8% for the quarter, compared to 17.3% during the same quarter a year ago. Including interest, it was 9.1%, down from 11.3%.SG&A fell to $39.8 million from $42.35 in the year-earlier quarter.

During the quarter, the company spent roughly $125 million to purchase approximately 1,440 lots, brining its lot count up to 32,546, 10,542 lots under option and 22,004 owned. Approximately 1,650 lots were put under option in 41 newly identified communities during the second quarter.

At quarter's end, the company had $415.2 million in cash, including $85.3 million in restricted cash, and listed $1.65 billion in long-term debt. The company also reported a negative shareholder equity of $349.8 million.

The company also reported that for the month of May 2011, net contracts, including unconsolidated joint ventures, were up 28% to 501 homes compared with 390 homes last May and 392 homes during April 2011.

"While the spring selling season has been disappointing, there were a couple of bright spots, including a 28% year-over-year increase in net contracts in May, an increase in our community count during the second quarter and a sequential increase in backlog at April 30, 2011," said Ara K. Hovnanian, chairman, president and CEO. "On a per-community basis, our net contracts, including unconsolidated joint ventures, held steady at 1.9 contracts per community per month throughout the quarter, but were still well below the elevated levels of a year ago that benefited from the federal homebuyer tax credit."

He continued, "Based on our backlog, current sales paces and prices and new community openings, we believe our loss will be less in the next two quarters and that cash flow will improve. We remain confident that we have the liquidity to weather the remainder of this downturn, and will continue to position ourselves in preparation for the inevitable housing recovery."

Adam Rudiger at Wells Fargo Securities was skeptical after the earnings call. In a research note, he wrote, "HOV outlined its strategy to spend significantly on land through 2012 in order to grow community count and future revenues. We believe the company then plans slowing land growth and harvesting cash flow in order to shore up its balance sheet ahead of anticipated debt maturities in 2015 and 2016. We believe the company is largely dependent on a macro improvement in demand in order to restore profitability and improve liquidity. With no signs yet that 2011 will be a recovery year for the industry, we reiterate our Underperform rating given high leverage, poor margins, and negative book value."