RED BANK, N.J., Feb 26, 2002 /PRNewswire-FirstCall via COMTEX/ -- Hovnanian Enterprises, Inc. (HOV) , a leading national homebuilder, reported net income of $18.2 million, or $0.60 per fully diluted share, on $454.3 million in total revenue for the first quarter ended January 31, 2002. Net income was $6.9 million on revenue of $293.2 million in last year's first quarter. Pretax earnings from Financial Services were $3.6 million in the first quarter compared with $1.8 million in the prior year's first quarter.
The Company's pretax margin rose to 6.6% from 3.9% in the prior year's first quarter. Earnings before interest, taxes, depreciation and amortization (EBITDA) for the first quarter rose 92% to $46.3 million from $24.1 million in the first quarter of 2001. EBITDA covered the amount of interest incurred in the quarter by 4.0 times.
On January 10, 2002, Hovnanian completed the acquisition of the California homebuilding operations of The Forecast Group, L.P., a privately held, single-family homebuilder headquartered in Rancho Cucamonga, California. Thus, twenty-one days worth of contracts, deliveries, revenues, and earnings from the former Forecast Homes operations were included in the results for the first quarter of 2002.
Net contracts rose to a first-quarter record 1,510 homes valued at $381.8 million, an increase of 20.8% in number of homes and 24.6% in dollar value from last year's first quarter results. Deliveries in 2002's first quarter were up 56.0% to 1,750 homes or $443.1 million compared to 1,122 homes or $283.4 million in the first quarter of fiscal 2001. Contract backlog as of January 31, 2002 is also a record for any first quarter-end in the Company's history. The backlog of 3,328 homes with a sales value of $853.0 million represents an increase of 7.3% in sales value compared with last year's 3,230 homes with a sales value of $795.2 million.
The Company's consolidated homebuilding gross margin for the first quarter, excluding land sales, was 20.7%, down 20 basis points from the fourth quarter of fiscal 2001. Homebuilding gross margins were in line with the gross margin of 20.6% achieved for the full year in fiscal 2001 and in line with the Company's projections for fiscal 2002. Total selling, general and administrative expense, including corporate expense, as a percentage of total revenues was 10.7% in the first quarter of 2002, a significant improvement from 13.0% in last year's first quarter and a reflection of the Company's improved operating efficiency.
Comments from Management
"We are extremely pleased to start off fiscal 2002 with a strong quarter -- continuing our momentum and outstanding performance from fiscal 2001," said Ara K. Hovnanian, President and Chief Executive Officer of the Company. "We exceeded the market's expectations for both earnings and ongoing sales activity in our first quarter and doubled our prior year first quarter earnings per share for the second year in a row," he added. "We are also pleased to have completed the acquisition of Forecast Homes, which furthers our strategy of becoming a dominant builder in each of our markets. With the addition of Forecast's operations, Hovnanian is now the second largest homebuilder in the Inland Empire region in Southern California, as well as the second largest in the combined market of Sacramento and the Central Valley in Northern California," said Mr. Hovnanian.
"We were able to acquire Forecast at an attractive price, giving us confidence that the operation, after the effects of purchase accounting, will add roughly $0.50 to our earnings per share in fiscal 2002," Mr. Hovnanian continued. "The addition of Forecast Homes was an excellent strategic fit for Hovnanian, and the product lines and geographic markets in California complement Hovnanian's existing operations. Led by an impressive and experienced management team, Forecast has continued to have very strong sales activity since the acquisition closed, an indication of continued robust demand for entry-level homes in the Sacramento and Inland Empire markets in California where they are most active," he stated. "Our Coastal Division in California is also experiencing healthy demand. In many parts of California, like New Jersey and the Washington D.C. market, demand for housing continues to outpace supply due to tight government regulation, which limits the supply of available lots, making our strong lot position even more of a competitive advantage," he added.
In conjunction with the acquisition of Forecast Homes, the Company issued 2.21 million Class A Hovnanian common shares, increasing shareholders' equity by $45.5 million. Shareholders' equity grew 17% to $439.7 million, or $14.61 a share, as of January 31, 2002 from $375.6 million at the end of fiscal 2001. Hovnanian also paid $151.0 million in cash as part of the merger consideration and refinanced the outstanding debt of Forecast Homes, net of Forecast's cash balance at closing. As anticipated, Hovnanian obtained a five-year, $165 million term loan arranged by Bank of America and Fleet National Bank to finance the acquisition.
"The term loan facility will allow us to maintain ample liquidity under our $440 million unsecured revolving credit line to fund ongoing operations and continued growth objectives," said J. Larry Sorsby, Executive Vice President and Chief Financial Officer. "Only $35.6 million was outstanding under the Company's unsecured revolving credit agreement at the end of the quarter. The acquisition of Forecast resulted in an increase in debt and the issuance of new equity with the net effect having no significant impact on the Company's leverage," he added. "The Company's ratio of debt-to-equity was only 1.3 to 1.0 at January 31, 2002 after taking into account approximately $30.0 million of excess cash on the balance sheet. This compares with a ratio of nearly 1.6 to 1.0 at the end of the first quarter in 2001," Mr. Sorsby said. "We anticipate that the Company's average leverage ratio for fiscal 2002 will be equal to or lower than the average ratio of 1.41 to 1.0 in fiscal 2001. We are on track to achieve our target of a 1.0 to 1.0 ratio of debt-to-equity by fiscal 2004," he concluded.
"Our strong first quarter, combined with our healthy backlog and robust sales pace, have given us the confidence to increase our projections for the current fiscal year to a range of earnings between $3.00 and $3.10 per fully diluted share," Mr. Hovnanian stated. "This equates to net income between $95.0 and $98.0 million, which would represent a 49% to 54% improvement from last year's record earnings of $63.7 million. That is on top of the 47% compounded growth in operating earnings that we have achieved over the past five years. Fiscal 2002 revenue is expected to climb more than 26% into a range between $2.20 and $2.23 billion, and deliveries are anticipated to exceed 8,850 homes," he said.
The Company has updated it's summary projections for the fiscal year ending October 31, 2002, which are available on the Company Projection page of the Investors section of the Company's Web site at khov.com.
In Closing
"This was another excellent first quarter for Hovnanian Enterprises," commented Mr. Hovnanian. "We have added another strong homebuilding operation to our Company and are continuing to make significant strides toward becoming a better and more efficient homebuilding company. Our strong financial performance continues to substantiate our efforts, as we continue to demonstrate our ability to execute on our strategy," Mr. Hovnanian added. "We are very excited about our new community openings in fiscal 2002, particularly in our active adult segment," he continued. "We are seeing strong sales results in our K. Hovnanian's Four Seasons communities in the Northeast and in Temecula, California, and we are anxious to get underway with similar communities in Virginia, Maryland, and Texas which are slated for openings later this year and in early 2003," he said.
Hovnanian Enterprises will hold its first quarter earnings conference call at 11:00 am (EST) this morning, hosted by Ara K. Hovnanian, President and Chief Executive Officer of the Company. The call can be accessed live through the Investors page of Hovnanian Enterprises' Web site at khov.com and via streetevents.com. For those who are not available to listen to the live broadcast, a replay of the call will be available on both Web sites.
Hovnanian Enterprises, Inc. was founded in 1959 and is one of the nation's largest homebuilders. Headquartered in Red Bank, New Jersey, the Company designs, constructs and markets single-family homes, townhomes and condominiums in planned residential communities in Alabama, California, Maryland, Mississippi, New Jersey, New York, North Carolina, Pennsylvania, South Carolina, Tennessee, Texas, and Virginia. The Company's homes are marketed and sold under the trade names K. Hovnanian, Washington Homes, Goodman Homes, Matzel & Mumford, Diamond Homes, Westminster Homes, Fortis Homes, and Forecast Homes. The Company is also one of the nation's largest developers of active adult communities, under the name of K. Hovnanian's Four Seasons.
Note: All statements in this Press Release that are not historical facts
should be considered as "forward-looking statements" within the
meaning of the Private Securities Litigation Act of 1995. Such
statements involve known and unknown risks, uncertainties and other
factors that may cause actual results to differ materially. Such
risks, uncertainties and other factors include, but are not limited
to, changes in general economic conditions, fluctuations in interest
rates, increases in raw materials and labor costs, levels of
competition and other factors described in detail in the Company's
Form 10-K for the year ended October 31, 2001.
Hovnanian Enterprises, Inc.
January 31, 2002
Statements of Consolidated Income
(Dollars in Thousands, Except Per Share)
(Unaudited)
Three Months Ended,
January 31,
2002 2001
Total Revenues $454,252 $293,188
Costs and Expenses 424,455 281,628
Income Before Income Taxes &
Extraordinary Item 29,797 11,560
Provision for Taxes 11,636 4,637
Net Income $18,161 $6,923
Per Share Data:
Basic:
Income per common share $0.63 $0.31
Weighted Average Number of
Common Shares Outstanding 28,965 22,286
Assuming Dilution:
Income per common share $0.60 $0.30
Weighted Average Number of
Common Shares Outstanding 30,456 22,732
Hovnanian Enterprises, Inc.
January 31, 2002
Gross Margin Report
(Dollars in Thousands)
(Unaudited)
Housing Gross Margin
Three Months Ended
January 31,
2002 2001
Sale of Homes $443,098 $283,405
Cost of Sales 351,391 222,834
Housing Gross Margin $91,707 $60,571
Gross Margin Percentage 20.7% 21.4%
Land Sales Gross Margin
Three Months Ended
January 31,
2002 2001
Land and Lot Sales $421 $3,166
Cost of Sales 282 2,901
Land and Lot Gross Margin $139 $265
Hovnanian Enterprises, Inc.
January 31, 2002
EBITDA Calculation
(Dollars in Thousands)
(Unaudited)
Three Months Ended
January 31,
2002 2001
Pretax 29,797 11,560
Interest Expense 13,702 9,505
Other interest
EBIT 43,499 21,065
Depreciation 1,658 1,965
Amortization Debt Fees 247 230
Goodwill 669
Writedowns 905 174
EBIT 46,309 24,103
INTEREST INCURRED 11,477 11,572
EBITDA TO INTEREST INCURRED 4.03 2.08
DEBT 612,464 536,224
TOTAL DEBT TO EBITDA NA NA
EQUITY 439,741 318,991
SHARES OUTSTANDING - A AND B 30,094 27,670
BOOK VALUE PER SHARE $14.61 $11.53
Hovnanian Enterprises, Inc.
January 31, 2002
Interest Incurred, Expensed and Capitalized
(Dollars in Thousands)
(Unaudited)
Three Months Ended,
January 31,
2002 2001
Interest Capitalized at Beginning of Period $25,124 $25,694
Plus Acquired Entity Interest 3,604
Plus Interest Incurred 11,477 11,572
Less Interest Expensed 13,702 9,505
Interest Capitalized at End of Period $22,899 $31,365
HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
(unaudited)
January 31, October 31,
ASSETS 2002 2001
Homebuilding:
Cash and cash equivalents $37,646 $10,173
Inventories - At the lower of cost or fair
value:
Sold and unsold homes and lots under
development 798,403 593,149
Land and land options held for future
development or sale 141,427 146,965
Total Inventories 939,830 740,114
Receivables, deposits, and notes 51,925 75,802
Property, plant, and equipment - net 30,864 30,756
Senior Residential rental properties - net 9,794 9,890
Prepaid expenses and other assets 85,448 46,178
Goodwill 81,725 32,618
Total Homebuilding 1,237,232 945,531
Financial Services:
Cash and cash equivalents 4,243 5,976
Mortgage loans held for sale 82,155 105,567
Other assets 6,686 6,465
Total Financial Services 93,084 118,008
Income Taxes Receivable - Including deferred tax
benefits 719
Total Assets $1,330,316 $1,064,258
HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
(unaudited)
January 31, October 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 2002 2001
Homebuilding:
Nonrecourse land mortgages $11,862 $10,086
Accounts payable and other liabilities 149,630 124,125
Customers' deposits 42,805 39,114
Nonrecourse mortgages secured by operating
properties 3,360 3,404
Total Homebuilding 207,657 176,729
Financial Services:
Accounts payable and other liabilities 5,052 5,264
Mortgage warehouse line of credit 68,468 98,305
Total Financial Services 73,520 103,569
Notes Payable:
Revolving and term credit agreements 200,600
Senior notes 296,895 296,797
Subordinated notes 99,747 99,747
Accrued interest 10,639 11,770
Total Notes Payable 607,881 408,314
Income Taxes Payable 1,517
Total Liabilities 890,575 688,612
Stockholders' Equity:
Preferred Stock, $.01 par value-authorized
100,000 shares; none issued
Common Stock, Class A, $.01 par value-authorized
87,000,000 shares; issued 26,925,569 shares
at January 2002 and 24,599,379 shares at
October 2001 (including 4,295,621 shares
at January 2002 and 4,195,621 shares at
October 2001 held in Treasury) 268 246
Common Stock, Class B, $.01 par value-authorized
13,000,000 shares; issued 7,810,100 shares at
January 2002 and 7,818,927 shares at October
2001 (including 345,874 shares held in Treasury) 78 78
Paid in Capital 147,921 100,957
Retained Earnings 328,267 310,106
Deferred Compensation (90) (127)
Treasury Stock - at cost (36,703) (35,614)
Total Stockholders' Equity 439,741 375,646
Total Liabilities and Stockholders' Equity $1,330,316 $1,064,258
HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands Except Per Share Data)
(unaudited)
Three Months Ended
January 31,
2002 2001
Revenues:
Homebuilding:
Sale of homes $443,098 $283,405
Land sales and other revenues 2,167 4,245
Total Homebuilding 445,265 287,650
Financial Services 8,987 5,538
Total Revenues 454,252 293,188
Expenses:
Homebuilding:
Cost of sales 351,673 225,735
Selling, general and administrative 37,649 28,225
Inventory impairment loss 905 174
Total Homebuilding 390,227 254,134
Financial Services 5,359 3,780
Corporate General and Administration 10,876 9,878
Interest 13,702 9,505
Other Operations 4,291 1,851
Restructuring Charges 2,480
Total Expenses 424,455 281,628
Income Before Income Taxes 29,797 11,560
State and Federal Income Taxes:
State 1,873 399
Federal 9,763 4,238
Total Taxes 11,636 4,637
Net Income $18,161 $6,923
Per Share Data:
Basic:
Income per common share $0.63 $0.31
Weighted average number of common
shares outstanding 28,965 22,286
Assuming dilution:
Income per common share $0.60 $0.30
Weighted average number of common
shares outstanding 30,456 22,732
HOVNANIAN ENTERPRISES, INC.
(DOLLARS IN THOUSANDS EXCEPT AVE. PRICE)
Communities Under Development
Three Months - 1/31/02
Net Contracts
Three Months Ended
31-Jan-02
2002 2001 % Change
NE Region
Homes 393 479 (18.0%)
Dollars 109,689 125,433 (12.6%)
Avg. Price 279,107 261,864 6.6%
N. Carolina
Homes 286 233 22.7%
Dollars 53,794 41,651 29.2%
Avg. Price 188,091 178,760 5.2%
Metro D.C.
Homes 263 130 102.3%
Dollars 78,993 32,009 146.8%
Avg. Price 300,355 246,223 22.0%
Mid-South
Homes 71 29 144.8%
Dollars 11,025 3,806 189.7%
Avg. Price 155,286 131,241 18.3%
California
Homes 301 182 65.4%
Dollars 84,122 65,547 28.3%
Avg. Price 279,475 360,148 (22.4%)
Texas
Homes 193 175 10.3%
Dollars 43,827 37,177 17.9%
Avg. Price 227,083 212,440 6.9%
Other
Homes 3 22 (86.4%)
Dollars 340 857 (60.3%)
Avg. Price 113,303 38,955 190.9%
Total
Homes 1,510 1,250 20.8%
Dollars 381,790 306,480 24.6%
Avg. Price 252,841 245,184 3.1%
Deliveries
Three Months Ended
31-Jan-02
2002 2001 % Change
NE Region
Homes 421 427 (1.4%)
Dollars 132,769 123,626 7.4%
Avg. Price 315,366 289,522 8.9%
N. Carolina
Homes 298 180 65.6%
Dollars 56,681 31,798 78.3%
Avg. Price 190,205 176,656 7.7%
Metro D.C.
Homes 263 162 62.3%
Dollars 70,392 36,691 91.9%
Avg. Price 267,650 226,488 18.2%
Mid-South
Homes 85 22 286.4%
Dollars 13,635 3,077 343.1%
Avg. Price 160,412 139,864 14.7%
California
Homes 440 106 315.1%
Dollars 114,642 44,314 158.7%
Avg. Price 260,550 418,057 (37.7%)
Texas
Homes 237 177 33.9%
Dollars 54,526 37,810 44.2%
Avg. Price 230,068 213,616 7.7%
Other
Homes 6 48 (87.5%)
Dollars 453 6,089 (92.6%)
Avg. Price 75,500 126,854 (40.5%)
Total
Homes 1,750 1,122 56.0%
Dollars 443,098 283,405 56.3%
Avg. Price 253,199 252,589 0.2%
Contract Backlog
31-Jan-02
2002 2001 % Change
NE Region
Homes 1,132 1,201 (5.7%)
Dollars 317,189 327,437 (3.1%)
Avg. Price 280,202 272,637 2.8%
N. Carolina
Homes 522 570 (8.4%)
Dollars 100,708 102,786 (2.0%)
Avg. Price 192,926 180,326 7.0%
Metro D.C.
Homes 779 786 (0.9%)
Dollars 217,487 193,098 12.6%
Avg. Price 279,187 245,672 13.6%
Mid-South
Homes 108 106 1.9%
Dollars 17,120 17,037 0.5%
Avg. Price 158,521 160,726 (1.4%)
California
Homes 568 227 150.2%
Dollars 144,061 82,106 75.5%
Avg. Price 253,628 361,700 (29.9%)
Texas
Homes 219 280 (21.8%)
Dollars 56,471 62,754 (10.0%)
Avg. Price 257,859 224,121 15.1%
Other
Homes 0 60 N/A
Dollars 0 10,011 N/A
Avg. Price N/A 166,850 N/A
Total
Homes 3,328 3,230 3.0%
Dollars 853,036 795,229 7.3%
Avg. Price 256,321 246,201 4.1%
DELIVERIES INCLUDE EXTRAS
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SOURCE Hovnanian Enterprises, Inc.
CONTACT: Kevin C. Hake, Vice President and Treasurer of Hovnanian
Enterprises, Inc., +1-732-747-7800; Amy F. Glynn, CFA of FRB|Weber Shandwick,
+1-212-445-8470, for Hovnanian Enterprises, Inc.
URL: khov.com
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