This summary is based on the fourth quarter fiscal 2007 earnings call conducted by Hovnanian Enterprises Inc. (HOV: chart) on December 19, 2007.

Management:

President, Chief Executive Officer: Ara K. Hovnanian
Senior Vice President, Corporate Controller: Paul W. Buchanan
Senior Vice President, Finance and Treasurer: Kevin C. Hake
Executive Vice President, Chief Financial Officer: J. Larry Sorsby
Vice President, Associate Corporate Controller: Brad O’Connor
Director of Investor Relations: Jeff O’Keefe

Key Investors Issues

- The company delivered 3,969 homes with an aggregate sales value of $1.3 billion, a decline of 22.0% in sales value.
- Revenues were $1.4 billion, down 20.3% from the prior year.
- The loss position deteriorated to $461 million or $7.42 a share.

Full Year Highlights:

- The firm realised a pre-tax loss of $21 million as the housing market remained challenging.
- Total revenues were $4.8 billion, a decrease of 21.9% compared to last year
- The company delivered 13,564 homes with an aggregate sales value of $4.6 billion down 24.4% from 17,940 home deliveries with an aggregate sales value of $5.9 billion in 2006.

Fourth Quarter Highlights

Revenues were $1.4 billion, down 20.3% from $1.75 billion the prior year, as the housing market continued to weaken.

- The loss position deteriorated to $461 million or $7.42 a share from $118 million or $1.88 a share in the prior year.
- The company wrote off $78 million of definite life intangibles associated with the various company acquisitions over the last seven or eight years.
- Only $4.2 million remained in definite life intangibles hence the firm has very little definite life intangible balance left for any further potential impairments and will no longer have the expenses associated with amortizing these assets.
- In addition, there is $32 million of good wil remaining, the majority of which is associated with the acquisition of Goodman Homes in Dallas, which is remaining solidly profitable throughout the industry’s current cyclical correction.

The company was significantly ahead of the previous cash flow guidance of $175 million to $250 million as it generated $376 million of cash flow.

- The cash was used to reduce debt, retiring the remaining $140 million of the 10.5% senior notes and reduced the amount drawn under the $1.5 billion unsecured revolving line of credit by $250 million to $207 million.
- If cash flows are not meeting targets or if liquidity becomes more of a concern, the firm plans to reduce the remaining land takedowns even further or eliminate them entirely.
- At this stage, the company is primarily taking down lots that will generate a good margin and already have a home contract on them.

Although the firm has been working to generate positive cash flow by reducing inventories, EBIDTA has been declining in line with profits.

- The company is now working to bring inventory investment into alignment with lower revenues and profits so that the interest coverage begins to improve and ratio of debt EBIDTA returns to a healthier level.
- The firm has a covenant in its public debt indentures that now prevents it from paying dividends on the $140 million non-cumulative perpetual preferred stocks, so it is not going to pay those dividends in 2008.
- Net contracts were down 10% compared to the prior year, but sales for the period were helped by the national sales promotion in September partially offset by significantly slower sales after the promotion.

Land Option Walkaways:

- Charges related to land option walkaways amounted to $105 million, representing the amount invested in these options, primarily the option deposits.
- In addition, there were $77 million of impairments that were indirectly associated with the land option walkaways.
- These additional walk-away costs resulted from the shift to an even greater focus on cash flow versus profits, as well as a continued softening of the market.

The firm terminated and walked away from land contracts totaling about 9,000 lots as remaining investments in option deposits dropped to $148 million.

- In Florida, California, Minnesota and Chicago the firm only has 4,200 options remaining out of a total option position company-wide of about 36,000 options.
- Most of the price or terms or both have been renegotiated on these remaining options so they make economic sense going forward even in this environment.
- In Texas and North Carolina, the firm is generally taking down lots on a rolling option basis from developers and thus has a very short position in owned lots.
- In some markets, the resale listings have started to level off.

Update on the National Sales Promotion:

- The firm reported 2,100 sales, comprised of 1,700 contracts and 400 sales deposits during the sales.
- A total of 206 of those deposits were converted into contracts and the firm ended up with 1,920 gross contracts from that sales promotion and 22% have been cancelled.
- Another 451 homes have delivered and the firm still has a little over 1,000 homes to deliver over the next few quarters.

Inventory Management:.