Red Bank, NJ, March 9, 2007--As expected, Hovnanian Enterprises Inc. after Thursday's closing bell said it swung to a quarterly loss after charges as home builders wrestle with a slumping market for residential housing.
The company posted a net loss of $54.6 million in its fiscal first quarter ended January 31. During the year-ago period, the company posted net earnings of $84.1 million.
The loss available to common shareholders was $57.3 million, or 91 cents a share. A year ago, earnings available to common shareholders were $81.4 million, or $1.25 a share.
Excluding $93 million of pretax charges related to the company's Fort Myers-Cape Coral, Fla., operations, earnings were $26.7 million, or 20 cents a share.
Revenue totaled $1.17 billion vs. $1.28 billion last year.
Analysts polled by Thomson Financial had forecast, on average, a quarterly loss of 65 cents a share.
In late February, Hovnanian released preliminary quarterly results and warned it expected to post a loss after charges. Before charges, it had forecast quarterly earnings of 20 cents a share. Hovnanian had said it expected to book about $90 million in charges related to operations in Fort Myers-Cape Coral, Fla., "due to a continued decline in sales pace and general market conditions, as well as increasing cancellation rates, during the quarter."
The charge was related to Hovnanian's August 2005 acquisition of First Home Builders, a move to position itself in the Fort Myers-Cape Coral market. Florida's once-booming market has been hit hard by the housing slowdown.
Hovnanian had said net contracts in its fiscal first quarter fell 23% from a year earlier.
The home builder said it expected fiscal 2007 pro forma per-share earnings of $1.10 to $1.50 on 16,000 to 17,200 home deliveries, including 1,000 to 1,400 deliveries from unconsolidated joint ventures. The outlook is before the effect of the charges from our Fort Myers-Cape Coral operations.
After charges, the company said it expects results to range from breakeven on a per-share basis to a profit of 40 cents a share.
For the second quarter, the net loss is expected to be between 5 cents and 20 cents a share, the company said.
"Our fiscal 2007 earnings will thus be significantly weighted to the fourth quarter," said President and Chief Executive Ara Hovnanian in a statement.
In December, Hovnanian said it expected 2007 profit in the range of $1.50 to $2 a share.
Home-builder shares have taken a recent knock on fears that the trouble in the subprime mortgage space could spread to other areas of the lending market.
"Once the housing market bottoms out, we are not expecting a rapid recovery. Instead we expect sales to hold at a steady pace for several quarters," Hovnanian said. In the current environment, our contract pace is difficult to predict and it will likely vary based on individual market and community characteristics."
Investors and analysts are closely watching how the key spring selling season unfolds to get a feel for whether the housing market can pull out of its doldrums this year.
