This summary is based on the first quarter fiscal 2008 earnings call conducted by Hovnanian Enterprises Inc. (HOV: chart) on March 11, 2008.

Management:
- President and CEO Ara Hovnanian
- EVP and CFO: Larry Sorsby
- SVP and Treasurer: Kevin Hake

Key Investors Issues

- The loss position deteriorated to $130.9 million or $2.09 a share, down 129% from the prior year.
- Sales were down 6.1% to $1.09 billion from $1.17 billion in 2007.
- The contract backlog, excluding unconsolidated joint ventures, were 3,845 homes with a dollar value of $1.3 billion.

First Quarter Highlights

Sales were down 6.1% to $1.09 billion from $1.17 billion in the prior year as the housing market remains challenging, with no evidence of any improvement.

- The drop in sales was largely due to a fall off in contracts per community as the number of open communities was down about 7% from a year ago.
- The pace of new contracts was definitely weak; however, the 37% falloff in the pace of sales per community is a bit distorted due to the slow contract pace in the month of November, partly as a result of the ""Deal of the Century"" promotion.
- The promotion captured a significant amount of sales in September but led to a dead period of sales in October and November.
- Over a three-day period in September, the firm sold a lot of homes it pulled some amount of these sales forward from October and November which leads to some distortion for the first quarter.

The firm also cannibalized some sales contracts from buyers that would otherwise have signed in the subsequent months of October or November.

- Although sales are down year-over-year, the pace over the past several weeks has been at the internally seasonally adjusted budget, meaning if the firm stays on or close to budget, it will sell enough homes to meet or exceed budgeted deliveries.
- The loss position deteriorated to $130.9 million or $2.09 a share, down 129% from a loss of $57.3 million or 91 cents in the prior year.
- The firm generated $376 million of cash flow which was used to reduce debt.
- Going forward, cash flow will come by way of reducing inventories, mainly by taking down significantly fewer lots.

Land related charges amounted to $16.3 million related to land option walkaways on 1,600 lots, representing the amount invested in these options including option deposits and predevelopment cost.

- In the more challenging operations, land option positions have come down dramatically; in Florida, California, Minnesota, Arizona, and Chicago, the firm only has slightly more than 4,000 lots under option down from 32,000 lots.
- For those options still in place today, the price terms or both have been re-negotiated, so that they continue to make economic sense going forward even in this tough housing environment.
- The net recourse debt to capital was 64.6% and prior to the affect of the deferred tax assets valuation allowance, was 60.3%.

Mortgage Financing Operations:

- Recent data indicates that the average credit quality of the mortgage customer remained higher than national averages, at 729.
- The improvement in the FICO scores is likely linked to tighter underwriting criteria and the fall-off in subprime and Alt-A originations this year.
- Similar to the national pattern, clients also continued to use more fixed rate products as the percentage of buyers using adjustable rate mortgages originated through mortgage company declined to only 6%.

The conventional prime loan business has increased 52.3% to 60.3% in the period uner review as FHA/VA loans also increased to 13.5% from 8.1% of total originations.

- The amount of subprime mortgages generated by the mortgage company declined from 3.7% in 2007 to less than 1% of the total loan volume.
- The volume of Alt-A loans has also decreased to 19.7% compared to 27.3% in the prior year.
- Pre-tax earnings from Financial Services was $3.1 million compared with $8.5 million in the prior year, largely related to the decline in originations from the homebuilding operation as sales and closing volume have declined.
- The contract backlog, excluding unconsolidated joint ventures, were 3,845 homes with the dollar value of the $1.3 billion.
- The firm reported the closing of 1,345 homes in the Fort Myers market on which it earned only a 2% gross margin due to the unique nature of these closings.

Joint Ventures:

- Investments in unconsolidated joint ventures declined to a $162 million compared to a $176 million at the end of last year.
- The firm continues to maintain modest leverage in joint ventures and have financed them solely on a non-recourse basis.
- The debt-to-cap of all of the joint ventures is in the aggregate 46% and the firm does not have any debt arrangements at any of the joint ventures that will require it to provide additional equity capital to joint ventures in the future.

Inventory Growth Initiatives:

- In 2006, the firm began to pull back heavily in the inventory growth plans such that the inventory investment dollars and the number of owned lots began to decline to 27,372 a 25% reduction from the peak levels of owned lots in July of 2006.
- Further reductions in the owned lot position will lead to continued cash flow.
- The option lot position also came down, with only 31,729 lots under option and the firm terminated and walked away from land contracts, totalling about 1600 lots.
- Remaining investments in option lots, options deposits has dropped dramatically from a peak of about $466 million in 2006 to $143 million.

The land position now stands at a two-year owned land supply and the 2.3-year supply of option lots.