Hovnanian’s 4Q Loss Jumps Fourfold
January 31st, 2008 by 
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(12-18) 22:11 PST Newark, N.J. (AP) —
Fallout from the housing downturn and an accounting charge helped Hovnanian Enterprises Inc.’s fiscal fourth-quarter loss nearly quadruple, but the homebuilder’s chief executive says there are some encouraging signs.
Despite the net loss of $469.3 million, the company generated $376 million of positive cash flow from operations in the quarter that ended Oct. 31 and projects that it will have more than $100 million in cash flow from operations in fiscal 2008.
“Considering the challenging market conditions that homebuilders 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,” President and Chief Executive Ara K. Hovnanian said in a statement.
The industry is in a slump, “However, after a very slow period for new sales contracts in October and November, we have experienced an improvement in sales pace during the first three weeks of December. This is encouraging given that December is historically a slower sales month,” he said.
Red Bank-based Hovnanian, which operates in 19 states, reported its fifth consecutive quarterly loss Tuesday. Its fourth-quarter net loss of $7.42 per share after paying preferred stock dividends compares with a loss of $117.9 million, or $1.88 per share, for the same period a year ago.
Hovnanian said an accounting determination resulted in a $54 million tax expense in the most recent quarter instead of an expected $162 million benefit, for a $216 million swing.
Quarterly revenue fell 20 percent to $1.39 billion from $1.75 billion in the same period last year.
Analysts surveyed by Thomson Financial, who apparently did not factor the accounting charge, expected Hovnanian to lose $1.49 per share in the quarter on revenues of $1.32 billion.
In addition to the accounting charge, Hovnanian incurred $383 million in quarterly pretax charges for land impairments and other items. It was not known if the analysts expected that amount, said Jeffrey T. O’Keefe, Hovnanian’s director of investor relations.
Hovnanian and other homebuilders have been struggling amid the subprime mortgage fallout, as a record number of foreclosures has made it harder to get loans, weakening the housing market. Earlier this month, Toll Brothers Inc., the nation’s largest builder of luxury homes, reported its first quarterly loss in 21 years.
The Commerce Department reported Tuesday that construction of single-family homes in November sank to the lowest level since April 1991.
Hovnanian shares rose 5 cents to $8.45 in after-hours trading, having closed earlier up 45 cents, or 5.7 percent, at $8.40. The stock has steadily declined from a high of $37.58 to a low of $6.75 over the past year.
The company will not pay dividends on its Series A preferred stock in fiscal 2008 because of indentures on senior and senior subordinated notes, J. Larry Sorsby, executive vice president and chief financial officer, said in a statement.
Hovnanian said its net contracts for the fourth quarter, excluding joint ventures, fell 10 percent to 2,781. The dollar value of net contracts decreased 13.6 percent to $875 million from $1.01 billion in the year-ago quarter. Hovnanian’s contract cancellation rate grew to 40 percent from 35 percent last quarter and in the fourth quarter a year ago.
For fiscal 2007, after paying preferred stock dividends, the company reported a loss of $637.8 million, or $10.11 per share, compared with a profit of $138.9 million, or $2.21 per share, for the prior fiscal year.
Annual revenue fell 22.4 percent to $4.58 billion from $5.9 billion in fiscal 2006.
Net contracts for fiscal 2007, excluding joint ventures, fell 20 percent to 11,006. The dollar value of net contracts decreased 22.6 percent to $3.84 billion from $4.97 billion last fiscal year
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On the Net:
Hovnanian Enterprises Inc.: «www.khov.com»
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