Hovnanian Enterprises (NYSE:HOV) on Wednesday after market close reported a net loss of $168.9 million (-$2.16 per share) for its fiscal third quarter ended July 31, compared with a net loss of $202.5 million (-$2.67 per share) in the same period last year. The shortfall significantly exceeded the consensus analyst expectation of a loss of $1.52 per share. Still, new sales per community were up sharply.

Shares of Hovnanaian, which had fallen during a broad market selloff Tuesday and closed down 7.4% on Wednesday, were down another 5.6% to $4.39 in aftermarket trading shortly after earnings were released. Over the two trading days, including the after-hours activity, Hovnanian shares lost 21.5%.

The loss including pretax land-related charges of $105.7 million, including land impairments of $94.6 million, write-offs of predevelopment costs and land deposits of $6.5 million and $4.6 million in joint-venture write-downs.It also included a FAS 109 current and deferred tax valuation allowance charge to earnings of $76.7 million.

Revenues were down 46% to $387.1 million for the quarter as deliveries fell 39% to 1,322 homes and the average price fell 12.4% to $277,716. Net contracts declined 9% to 1,442 homes compared with the prior year's third quarter, and the average price was off 5.7% to $268,097. The cancellation rate was 23%, down from 32% in the comparable quarter last year.

The good news was that performance came from far fewer selling communities.Hovnanian cut its community count by 44% from last year's fiscal third quarter to 198 active selling communities, which meant that net contracts per active selling community increased 62% from 4.5 in last year's third quarter to 7.3 this year.

Homes in backlog declined 33.5% to 1,978 with an aggregate value of $614.2 million, down 38.3%.

"The trend of improved contracts per active selling community continued for the third consecutive quarter, with the most significant year-over-year increase of 62% occurring in our third quarter," said Ara K. Hovnanian, president and CEO. "This progress in sales pace has come despite additional job losses, another dip in consumer confidence and rising mortgage rates."

The company ended the quarter with $546.6 million in cash and no borrowings on its revolver. The company spent $80.5 million retiring approximately$119.2 million in unsecured senior and senior subordinated notes and $100 million to pay down the balance on the revolving credit facility. That resulted in a cash flow for the quarter of negative $48.5 million.

Hovnanian also continued to shed lots, with total lots down 29% to 32,936,13,395 optioned and 19,541 owned. That represents a 73% decline from the peak total land position at April 30, 2006. Started unsold homes, excluding models, declined 42%, to 793 at quarter's end.

Homebuilding gross margin, before interest expense included in cost of sales, increased for the third consecutive quarter to 9.1% for the third quarter of 2009, compared to 8.5% in the fiscal 2008 third quarter and 8.3% in the 2009 second quarter.

Home deliveries through unconsolidated joint ventures were 69 homes, compared with 168 homes in the third quarter of the prior year.

Said J. Larry Sorsby, CFO, "Since the beginning of our fiscal year, we have reduced our outstanding debt and future annual interest payments by approximately $740 million and $50 million, respectively. We further reduced our near-term maturities through these recent actions and now have only $11 million in face value that comes due in January 2010, with another $113 million that matures in April 2012" He added, however, that the company's debt covenants will "limit our ability to repurchase more debt" going forward.

Said CEO Hovnanian, "While we are encouraged by some of these developing positive trends, stiff headwinds remain--most notably, the expiration of the $8,000 federal tax credit and the $10,000 state tax credit in California for homebuyers, the likelihood of higher mortgage rates, persistently high levels of unemployment and the potential threat of foreclosures that could further increase the supply of existing homes. Accordingly, we continue to make all of our decisions with cash flow as the main guiding principal."

Hovnanian will hold a conference call with analysts on the results Thursday at 11 a.m.