New Jersey-based home builder Hovnanian Enterprises is reporting a fourth quarter net loss (from the period ending Oct. 31) of $469 million, or $7.42 a share, compared to a loss of $117.93 million in the same quarter last year. Tuesday night's report is the builder's fifth consecutive quarterly loss.
Hovnanian, No. 6 in the 2006 BUILDER 100, said an accounting determination resulted in a $54 million tax expense in the quarter instead of an expected $162 million benefit, for a $216 million swing. In addition, the builder's quarterly revenue fell 20 percent to $1.39 billion from $1.75 billion in the same period last year.
Hovnanian's cancellation rate, which the builder cites as a factor in the quarter's abysmal numbers, swelled to 40 percent in the fourth quarter, up 35 percent from the third quarter and prior-year period. The builder delivered 3,969 homes in the quarter and disclosed that its contract backlog as of Oct. 31 was 5,938 homes with a value of $2 billion, which is down 31 percent from $2.9 billion a year earlier.
In a prepared statement, company CEO Ara K. Hovnanian managed to find a silver lining in the quarter's otherwise grim results.
"Considering the challenging market conditions that home builders are continuing to face, we are pleased to have exceeded our expectations for cash generation in the fourth quarter and to have paid down our debt levels more than we projected," Hovnanian said.
As for 2008, Hovnanian says the builder is "focused on generating cash and strengthening [its] balance sheet by reducing both our debt and inventory levels."
Hovnanian also issued a bold projection for 2008: "The company continues to project positive cash flow from operations in excess of $100 million for fiscal 2008."
The builder will comment further on the fourth quarter, as well as fiscal 2008, during an 11 a.m. investor conference call on Wednesday morning.