Hovnanian Enterprises, Red Bank, N.J. (NYSE:HOV) after market close Wednesday reported a net loss of $250.8 million (-$3.21 per share) for the fiscal fourth quarter ended Oct. 31, compared with a net loss of $450.5 million (-$5.79 per share) in the fourth quarter of 2008.
The loss included impairments and write-offs of $146.4 million, including land charges of $122.7 million, write-offs of predevelopment costs and deposits of $15.3 million and an $8.4 million write down against joint ventures. The loss also included a non-cash $113.7 million charge to deferred tax assets.
Excluding land-related charges and costs associated with the retirement of $52.9 million in near-maturity debt, the pre-tax loss was $84.8 million for the quarter.
The net loss exceeded analyst estimates of a loss of $1.73 per share. Hovnanian shares fell 6.3% to $3.96 on Thursday.
For fiscal 2009, the company lost $716.7 million (-$9.16 per share, compared with a net loss of $1.1 billion (-$16.04 per share) for fiscal 2008. The loss for the fiscal year included impairments and write-downs totaling$703.1 million.
Revenues fell to $437.4 million for quarter compared with $721.4 million in the prior year quarter. Deliveries, excluding unconsolidated joint ventures, fell 37% to 1,444 homes worth $414.6 million, down 38.8% from the same quarter in fiscal 2008. Average price fell 2.8% to $287,105. Joint venture deliveries fell 557% to 82 homes worth $40.5 million, down 38.8% year-over-year, but average prices increased 38.1% to 494,171.
Net contracts rose 1.1% to 1,238 worth an aggregate $368.6 million, a 15.7% increase over last year's fiscal fourth quarter. The average price rose 14.4% from the same quarter last year to $297,725. The contract cancellation rate, minus joint ventures, was 24%, compared with 42% in the fourth quarter of the prior year. Joint venture contracts were down 76.2% to 29 worth a negative $8.5 million, down 119.1% from the prior year quarter, with average prices dropping from $366,959 to a loss of $294,862 per home.
Backlog at quarter's end was down 7.1% in units to 1,772 and down 13.4% in dollars to $559.6 million as average price fell 6.8% to $315,774. Joint venture backlog was down 39.5% to 159, down 43.8% in dollars to $88.2 million and average price down 7.1% to $555,119.
During the second half of fiscal 2009, approximately 4,000 consolidated and joint venture lots were purchased or optioned, putting Hovnanian's total lot count at 27,820, 11,343 optioned and 16,477 owned. That is a 77% decline from peak in April, 2006.
Home building gross margin, before interest expense , increased for the fourth consecutive quarter to 13.2% for the quarter of 2009, compared to 4.7% in the fiscal 2008 fourth quarter and 9.1% in the 2009 third quarter.SG&A fell to $52.5 million from $89.2 million in the prior year quarter.
Hovnanian ended the quarter with home building cash of $555.2 million, including restricted cash required to collateralize letters of credit. Cash flow was a positive $83.9 million.
Looking ahead to 2010, the company said it expected an income tax benefit that will increase cash, net income and stockholders' equity by $275 million to $295 million is expected in the first half of fiscal 2010. It also said it has tax write-downs available in the future to shield $2 billion in income.
"For our fourth quarter we reported a year-over-year increase in net contracts, and for the fourth consecutive quarter we reported improvements in net contracts per active selling community, with an impressive 60% year-over-year increase during our fourth quarter," said Ara K. Hovnanian, chairman, president and CEO, in the earnings statement. "A trend of improvements in sales pace is yet another sign that the housing market is at or approaching a bottom."
However, he added, "Despite the initiatives we have undertaken and the positive trends we are witnessing in the market, several factors continue to warrant attention, including continued job losses, the possibility of more foreclosures, the prospects of rising mortgage rates, anticipated tightening of FHA guidelines, and the expiration of the federal homebuyers tax credit.In view of these risks, we believe a cautious approach is prudent and therefore remain equally focused on profitable growth and liquidity."