RED BANK, N.J., March 09, 2016 (GLOBE NEWSWIRE) -- Hovnanian Enterprises, Inc. (NYSE:HOV), reported a net loss of $16.2 million, including $11.7 million of land related charges, primarily related to land held for sale in Minnesota, a market it is exiting, or $0.11 per common share, for the first quarter of fiscal 2016, compared with a net loss of $14.4 million, including $2.2 million of land related charges, or $0.10 per common share, in the first quarter of the previous year.

Total revenues were $575.6 million in the first quarter of fiscal 2016, an increase of 29.1% compared with $445.7 million in the first quarter of fiscal 2015.

Homebuilding gross margin percentage, before interest expense and land charges included in cost of sales, was 16.6% for the first quarter ended January 31, 2016, compared with 18.2% in last year’s first quarter.

For the first quarter of fiscal 2016, Adjusted EBITDA was $38.8 million compared with $21.3 million during the first quarter of 2015, an 82.5% increase.

The pre-tax loss, excluding land related charges, in the first quarter of fiscal 2016 was $1.5 million compared with a pre-tax loss, excluding land related charges, of $17.5 million in the prior year’s first quarter.

asbury park townhomes
Hovnanian's South Grand townhomes in Asbury Park, N.J.

The dollar value of net contracts, including unconsolidated joint ventures, during the first quarter of fiscal 2016 increased 28.2% to $668.5 million compared with $521.2 million in last year’s first quarter. The dollar value of consolidated net contracts increased 24.9% to $628.6 million for the three months ended January 31, 2016 compared with $503.2 million during the same quarter a year ago.

In the first quarter of fiscal 2016, the number of net contracts, including unconsolidated joint ventures, increased 16.5% to 1,592 homes from 1,366 homes during the first quarter of fiscal 2015. The number of consolidated net contracts, during the first quarter of fiscal 2016, increased 16.1% to 1,531 homes compared with 1,319 homes in the prior year’s first quarter.

Consolidated net contracts per active selling community increased 7.6% to 7.1 net contracts per active selling community for the first quarter of fiscal 2016 compared with 6.6 net contracts per active selling community in the first quarter of fiscal 2015. Net contracts per active selling community, including unconsolidated joint ventures, increased 6.1% to 7.0 net contracts per active selling community for the quarter ended January 31, 2016 compared with 6.6 net contracts, including unconsolidated joint ventures, per active selling community in the first quarter of fiscal 2015.

As of January 31, 2016, the dollar value of contract backlog, including unconsolidated joint ventures, was $1.44 billion, an increase of 49.1% compared with $965.2 million as of January 31, 2015. The dollar value of consolidated contract backlog, as of January 31, 2016, increased 39.1% to $1.29 billion compared with $925.5 million as of January 31, 2015.

As of January 31, 2016, the number of homes in contract backlog, including unconsolidated joint ventures, increased 30.2% to 3,238 homes compared with 2,487 homes as of January 31, 2015. The number of homes in consolidated contract backlog, as of January 31, 2016, increased 25.6% to 3,014 homes compared with 2,399 homes as of the end of the first quarter of fiscal 2015.

Consolidated deliveries were 1,422 homes in the first quarter of fiscal 2016, a 23.8% increase compared with 1,149 homes in the first quarter of fiscal 2015. For the three months ended January 31, 2016, deliveries, including unconsolidated joint ventures, increased 20.2% to 1,466 homes compared with 1,220 homes in the first quarter of the prior year.

As of end of the first quarter of fiscal 2016, active selling communities, including unconsolidated joint ventures, increased 9.6% to 228 communities compared with 208 communities at January 31, 2015. As of January 31, 2016, consolidated active selling communities increased 9.0% to 217 communities compared with 199 communities at the end of the prior year’s first quarter.

Total interest expense as a percentage of total revenues was 6.6% during the first quarter of fiscal 2016, a decrease of 160 basis points, compared with 8.2% in the same period of the previous year.

Total SG&A was $63.8 million, or 11.1% of total revenues, during the first quarter of fiscal 2016 compared with $64.6 million, or 14.5% of total revenues, in last year’s first quarter.

The contract cancellation rate, including unconsolidated joint ventures, for the first quarter of fiscal 2016 was 21%, compared with 18% in the first quarter of fiscal 2015.

The valuation allowance was $635.3 million as of January 31, 2016. The valuation allowance is a non-cash reserve against the tax assets for GAAP purposes. For tax purposes, the tax deductions associated with the tax assets may be carried forward for 20 years from the date the deductions were incurred.

During February 2016, the dollar value of consolidated net contracts increased 27.5% to $262.4 million compared with $205.8 million for February of 2015, and the number of consolidated net contracts increased 11.3% to 600 homes in February 2016 from 539 homes in February 2015.
LIQUIDITY AND INVENTORY AS OF JANUARY 31, 2016:

After paying off $233.5 million of debt that matured in October 2015 and January 2016, total liquidity at the end of the first quarter of fiscal 2016 was $152.1 million.

During the first quarter of fiscal 2016, land and land development spending was $116.6 million.

As of January 31, 2016, the land position, including unconsolidated joint ventures, was 38,070 lots, consisting of 18,732 lots under option and 19,338 owned lots, compared with a total of 36,767 lots as of January 31, 2015.

During the first quarter of fiscal 2016, approximately 3,300 lots, including unconsolidated joint ventures, were put under option or acquired in 39 communities.
FINANCIAL GUIDANCE:

Assuming no changes in current market conditions, we reiterate our prior guidance that total revenues for all of fiscal 2016 are expected to be between $2.7 billion and $3.1 billion and pretax profit excluding land related charges, gains or losses on extinguishment of debt and other non-recurring items such as legal settlements are expected to be between $40 million and $100 million for all of fiscal 2016.
COMMENTS FROM MANAGEMENT/UPDATED STRATEGIC FOCUS:

“We are pleased by our strong start to the fiscal year, which was highlighted by an 83% increase in adjusted EBITDA and a 49% increase in contract backlog dollars,” stated Ara K. Hovnanian, Chairman of the Board, President and Chief Executive Officer. “During our first quarter, our 29% total revenue growth resulted in a 500 basis point improvement in our total SG&A and total interest ratios in the aggregate. Rather than focusing on additional revenue growth beyond 2016, we now plan to focus on deleveraging our balance sheet and maximizing our profitability. As part of this strategy we have decided to exit the Minneapolis, MN and Raleigh, NC markets. Additionally, we plan to wind down our operations in Tampa, FL and the San Francisco Bay Area in Northern California by delivering the remaining homes in our existing communities. We are confident these decisions will lead to continued efficiencies and ultimately improved financial performance,” concluded Mr. Hovnanian.

Read more >