Hovnanian Enterprises, Inc. (HOV)
Q2 2009 Earnings Call Transcript
June 3, 2009 11:00 a.m. ET

Executives

Ara K. Hovnanian – Vice Chairman of the Board, President & Chief Executive Officer
J. Larry Sorsby – Executive Vice President, Chief Financial Officer, Treasurer & Director

Analysts

Ivy Zelman - Zelman & Associates
Mike - Credit Suisse
Joshua Pollard - Goldman Sachs
Ray Kwon - JPMorgan
Joel Locker – FBN Securities
Megan Talbott McGrath - Barclays Capital
David Goldberg - UBS
Nishu Sood - Deutsche Bank
Alex Barron – Agency Trading Group
Timothy Jones – Wasserman & Associates
James Wilson - JMP Securities

Presentation

Operator

Good morning and thank you for joining us today for the Hovnanian Enterprises fiscal 2009 second quarter earnings conference call. By now you should have all received a copy of the earnings press release, however, if anyone is missing a copy and would like one, please contact Donna Roberts at 732-383-2200. We will send you a copy of the release and ensure that you are on the company’s distribution list.

There will be a replay for today’s call. This telephone replay will be available after the completion of the call and will run for one week. The replay can be accessed by dialing 888-286-8010, pass code 17857471. Again, the replay number is 888-286-8010, pass code 17857471. An archive of the webcast slides will be available for 12 months. This conference is being recorded for rebroadcast and all participants are currently in listen-only mode.

Management will make opening remarks about the second quarter results and then open the line up for questions. The company will also be webcasting a slide presentation along with the opening comments from management. The slides are available on the Investor’s page of the company’s website at www.khov.com. Those listeners who would like to follow along should log on to the website at this time.

Before we begin, I would like to remind everyone that the cautionary language about the forward-looking statements contained in the press release also applies to any comments made during this conference call and to any information in the slide presentation.

I would now like to turn the presentation over to your host, Ara Hovnanian, President, and Chief Executive Officer of Hovnanian Enterprises. Ara, please go ahead.

Ara K. Hovnanian

Thank you. Good morning and thank you all for participating in today’s call to review the results of our second quarter and six months ended April of ’09.

Joining me from the company today are Larry Sorsby, Executive Vice President and CFO; Paul Buchanan, Senior Vice President and Chief Accounting Officer; Brad O’Connor, Vice President and Corporate Controller; David Valiaveedan, Vice President, Finance; and Jeff O’Keefe, Director of Investor Relations.

On slide three you’ll see a brief summary of our second quarter results. As usual we give all this data and more in our press release which we issued yesterday. There are three points on the slide that are worth highlighting. On the third line down, you see that our net contracts per community during the most recent quarter showed a 25% year-over-year increase for the quarter.

This is the second consecutive quarter we have achieved an increase in year-over-year contracts per community and is certainly encouraging considering the consistent-year-over year declines we saw for the past four years.

Another positive trend on the fourth line down you see that our cancellation rate decreased during the second quarter of ’09 to 24%. This is the lowest quarterly cancellation rate that we have reported since the third quarter of ’05. A cancellation rate in the mid-20s is close to more normalized levels.

Third and third from the bottom, you see that we purchased $525 million of face value of debt for $208 million in cash. These transactions resulted in $525 million reduction in our outstanding debt and $311 million of pre-tax gain from debt extinguishment.

During the first half of fiscal ’09 we’ve reduced our debt by $620 million as a result of the debt exchange and open market repurchases of our debt resulting in the $391 million pre-tax gain.