K.Hovnanian projected that it will beat its own first-quarter estimates handily when it announced Tuesday that it expects to report earnings of $0.20 per share for the fiscal first quarter ended January 31. That could double the company's guidance of $0.05 to $0.10 per share.

But the Red Bank, N.J.-based builder exempted a $90 million charge it attributed to lower sales and higher cancellation rates in the Fort Myers-Cape Coral market on Florida's West Coast. Net of these charges, the company expects to post a loss for the first quarter.

The company said it delivered 3,266 homes in the first quarter, excluding 289 homes in unconsolidated joint ventures. Net contracts for the quarter were 2,570, a decrease of 23% from last year's first quarter, excluding 43 homes in unconsolidated joint ventures.

Analysts said this may only be the first of write downs by many builders in Florida, reflecting high inventory and buyer hesitancy to buy right now.. "Florida is the worst market in the country," said JMP's housing analyst Alex Barron.

Barron says Florida is facing multiple problems, including a large inventory that he estimates at between an 18-24 month supply and buyers waiting for a better price.

Barron expects the market conditions to get worse before they get better. He expects other big builders to take write offs in Florida, too. Builders are in the process of cutting prices in Florida, he says.

Despite K. Hovnanian's problems, UBS Investment Research says the builder's results are encouraging despite the Florida market. In a report, UBS analyst Margaret Whelan said signs point to improving conditions for K. Hovnanian in 2007. Her report says operating metrics "will likely remain above historical averages, leading to improved pricing power."

K. Hovnanian released its preliminary results for the first quarter early because it is expected to be speaking at a number of analyst sessions in the next couple of weeks, according to Wachovia housing analyst Carl Reichardt . The actual results will be released after the market close on March 8.

The company said the $90 million charge, which at this point is an esimate, will be comprised of a pretax impairment charge of approximately $50 million and $40 million in inventory charges in the market. In addition, the company estimates it will incur $8 million in charges related to land impairments and writeoffs of predevelopment costs and land deposts in other markets during the first quarter. The $8 million charge was figured into the $0.20 per-share earnings estimate.

"Florida was one of the last of the big state markets to go into a downturn, and one of the last to recover," says Robert Curran, a home building analyst at Fitch Ratings in New York.