Hovnanian Enterprises reports Q4 net loss of US$84.4M from loss of US$93.3M a year earlier on revenues up 42.6% to US$487.0M; CEO cites modest homebuilding recovery, stable company expenses

Allison Oesterle

RED BANK, New Jersey , December 13, 2012 (press release) – Fourth Quarter Net Income, Excluding Debt Extinguishment Charge, Exceeds Consensus Estimate

Reports First Quarterly Pre-Tax Profit, Excluding Gains or Losses on Extinguishment of Debt, Since the Industry Downturn Began in 2006

Hovnanian Enterprises, Inc. (NYSE:HOV), a leading national homebuilder, reported results for its fourth quarter and year ended October 31, 2012.

RESULTS FOR THREE AND TWELVE MONTH PERIODS ENDED OCTOBER 31, 2012:

• Total revenues were $487.0 million in the fiscal 2012 fourth quarter up 42.6% compared with $341.6 million in the prior year's fourth quarter. For all of fiscal 2012, total revenues were $1.5 billion, up 30.9%, compared with $1.1 billion during all of fiscal 2011.

• The dollar value of net contracts, including unconsolidated joint ventures, for the fourth quarter ended October 31, 2012 increased 46.3% to $513.4 million compared with $350.9 million in the 2011 fourth quarter. The number of net contracts increased 22.8% to 1,443 homes for the three months ended October 31, 2012 from 1,175 homes in the fourth quarter of the prior year.

• In all of fiscal 2012, the dollar value of net contracts, including unconsolidated joint ventures, increased 43.9% to $1.9 billion compared with $1.3 billion in all of fiscal 2011 and the number of net contracts increased 30.1% to 5,838 homes compared with 4,488 homes of the previous year.

• Deliveries, including unconsolidated joint ventures, were 1,750 homes during the fourth quarter of 2012, up 40.6% compared with 1,245 homes in the same period of the prior year. During the twelve months ended October 31, 2012, deliveries, including unconsolidated joint ventures, were 5,356 homes compared with 4,216 homes during the twelve month period a year ago, an increase of 27.0%.

• Contract backlog, as of October 31, 2012, including unconsolidated joint ventures, was $742.2 million for 2,145 homes, which was an increase of 34.4% and 29.0%, respectively, compared to October 31, 2011.

• Homebuilding gross margin percentage, before interest expense included in cost of sales, increased 280 basis points to 18.3% for the fourth quarter ended October 31, 2012, compared to 15.5% in last year's fourth quarter. The fourth quarter of fiscal 2012 represented the sixth sequential increase in quarterly gross margin percentage. During all of 2012, homebuilding gross margin percentage, before interest expense included in cost of sales, was 17.8% compared with 15.6% in same period of the prior year.

• Total SG&A was $48.7 million, or 10.0% of total revenues, for the three months ended October 31, 2012 compared to $57.8 million, or 16.9% of total revenues, during the same quarter a year ago and $48.1 million, or 12.4% of total revenues, in the third quarter of 2012. During all of fiscal 2012, total SG&A was $190.3 million, or 12.8% of total revenues, compared with $211.4 million, or 18.6% of total revenues, last year.

• Consolidated pre-tax land-related charges in the fiscal 2012 fourth quarter were $5.3 million compared with $59.9 million in the prior year's fourth quarter. For all of fiscal 2012 consolidated pre-tax land-related charges were $12.5 million compared with $101.7 million during all of 2011.

• Excluding land-related charges and gains or losses on extinguishment of debt, the pre-tax income in the fiscal 2012 fourth quarter was $8.1 million compared with a pre-tax loss of $45.2 million in the previous year's fourth quarter. After $5.3 million in land-related charges, the pre-tax income, excluding gains or losses on extinguishment of debt, was $2.8 million for the fourth quarter of fiscal 2012. For the twelve months ended October 31, 2012, excluding land-related charges, expenses associated with the debt exchange offer and gains or losses on extinguishment of debt, the pre-tax loss was $55.0 million compared with $194.1 million last year.

• The pre-tax loss for the fourth quarter ended October 31, 2012, including an $87.0 million loss on extinguishment of debt, was $84.2 million compared with $97.8 million in the 2011 fourth quarter. For the twelve months ended October 31, 2012, the pre-tax loss, including gains or losses on extinguishment of debt, was $101.2 million compared with $291.6 million for all of the prior year.

• The net loss was $84.4 million during the fourth quarter of 2012, or $0.59 per common share, compared with a net loss of $98.3 million, or $0.90 per common share, in the 2011 fourth quarter. For all of fiscal 2012, the net loss was $66.2 million, or $0.52 per common share, compared with a net loss of $286.1 million, or $2.85 per common share, in the prior year. The net loss in the fiscal 2012 fourth quarter and for the full year included an $87.0 million loss on extinguishment of debt, associated with the 2012 fourth quarter $797 million debt refinancing.

• The contract cancellation rate, including unconsolidated joint ventures, for the fourth quarter ended October 31, 2012 was 23%, compared with 21% in last year's fourth quarter.

• During November of 2012, the dollar value of net contracts and the number of net contracts, including unconsolidated joint ventures, increased 38.1% and 18.5% respectively to $131.5 million compared with $95.2 million and to 385 homes from 325 homes in the same month last year.

• The valuation allowance was $937.9 million as of October 31, 2012. 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.

• After spending $127.9 million during the fourth quarter of 2012 on land and land development, homebuilding cash increased $36.9 million from the third quarter to $289.0 million, as of October 31, 2012, including $30.7 million of restricted cash required to collateralize letters of credit.

• As of October 31, 2012, the land position, including unconsolidated joint ventures, was 29,619 lots, consisting of 11,418 lots under option and 18,201 owned lots.

• Refinanced $797 million of secured senior notes during the fourth quarter of fiscal 2012, which reduces annual cash interest payments by approximately $17 million and extends the maturity of the refinanced debt from 2016 until 2020.

• Announced an increase of our land banking arrangement with GSO Capital Partners LP, the credit arm of The Blackstone Group, for up to an additional $125 million of total acquisition and future development costs.

 (Financial Tables Follow)

* All content is copyrighted by Industry Intelligence, or the original respective author or source. You may not recirculate, redistrubte or publish the analysis and presentation included in the service without Industry Intelligence's prior written consent. Please review our terms of use.