Hovnanian Enterprises, Red Bank, N.J. (NYSE:HOV) on Wednesday after market close reported a net loss of $50.9 million (-$0.47 per share) for its fiscal third quarter ended July 31. The loss compared with a loss of $72.9 million, (-$0.92 per share) for the comparable quarter in 2010.

The loss included impairments and charges of $11.4 million, compared with $49.0 million in last year's quarter. Analysts were expecting a loss of 51 cents per share, without impairments.

Revenues fell 25% to $285.6 million for the quarter from $380.6 million in the prior-year quarter as closings fell to 1,112 homes (119 through JVs) from 1,396 in the 2010 quarter. The average selling price slipped 0.5% to$278,428 for the company; the joint venture ASP rose 11.9% to $484,109.

Net contracts in the third quarter of 2011, including unconsolidated joint ventures, increased 33% to 1,297 homes (128 though JVs) compared with the 2010 third quarter and rose 11% from this year's second quarter. The average price for consolidated entities rose 3.5% to $284,266; for joint ventures, the ASP fell 18.9% to $4008,320. The cancellation rate was 18%, down from 23% in last year's third quarter and 20% for the second quarter of fiscal 2011.

Backlog at quarter's end, including unconsolidated joint ventures, was 1,736 homes with a sales value of $570.8 million, up 13% and 14%, respectively, compared to July 31, 2010. Compared to the second quarter backlog, including unconsolidated joint ventures, increased 12% on a units basis and 11% on a dollar basis.

At July's end, Hovnanian had 202 active selling communities, including unconsolidated joint ventures, compared with 194 at the end of last year's quarter and 206 at the close of the second fiscal quarter of 2011.

Home building gross margin percentage, before interest expense included in cost of sales, was 15.3% during the third quarter of 2011, compared to 17.1% during the same quarter a year earlier and 14.8% for the second quarter of fiscal 2011. SG&A fell to $34.9 million from $42.2 million in the prior-year quarter.

At quarter's end, the company's lot count was 32,058, 9,960 under option and22,098 owned lots, roughly flat with with the prior quarter. During the third quarter, Hovnanian spent approximately $105 million in cash to buy approximately 1,200 lots and to develop land across the Company.Approximately 900 of the lots new lots purchased were within 88 newly identified communities. Approximately 1,500 lots were put under option in 38 newly identified communities during the quarter.

Hovnanian ended the quarter with $334.2 million in cash, including $60.8 million of restricted cash, down from $415.2 million, including $67.1 million in restricted cash at April 30, 2011. Long-term debt was listed at$1.66 billion at quarter's end, up from $1.64 billion at the close of the 2010 fiscal year. The company was carrying a deferred tax asset valuation allowance of $858.8 million as of July 31, 2011. It reported a shareholder equity deficit of $399.3 million, up from $337.9 million at the end of fiscal 2010.

"The housing market remains challenging primarily due to uncertainty caused by general domestic economic and political concerns, stock market volatility and turbulent international economic conditions, all of which are taking their toll on consumer confidence," said Ara K. Hovnanian, chairman, president and CEO. "Despite this difficult backdrop, our deliveries, revenues, gross margin and cash flow for the third quarter were in line with our expectations. However, we see very few indicators that any recovery in the housing market has begun. As such, we are taking appropriate steps to run our business based on current market conditions, with a focus on maintaining adequate liquidity."

Adam Rudiger, home-building analyst at Wells Fargo, was impressed. "HOV beat our estimates on margins and orders, which we view positively," he wrote in a research note. "However, more so than any other builder, we believe investors are more focused on HOV's liquidity than on income statement metrics. Total cash of $353MM declined by $81MM sequentially while debt was roughly unchanged. Cash flow during the quarter was $29MM before land spend and ($76MM) after taking into account HOV's lot purchases and land development. With backlog up yr/yr for the first time since 2006, and increased closings due to seasonality in FQ4, cash flow should improve sequentially. Overall, however, we still believe HOV's goal of spending $100MM per quarter on land and development is an aggressive one that may prove difficult without impairing liquidity further. "

David Goldberg at UBS also zeroed in on the cash position. "Despite these improved results, we'd note that the company's unrestricted cash balance fell ~$75mn seq., as it spent $105mn to purchase ~1,200 lots + develop land. Further, our channel checks suggest that the supply of attractively priced, well located finished lots in smaller communities continues to decline. In turn, our concerns about mgmt's ability to execute its short term growth strategy persist."