Despite an uptick in homebuilding and favorable financing rates, Hovnanian Enterprises' latest earnings results remained in the red due to a charge the company took to reposition debt.
The company took a loss of $1.8 million for its fiscal fourth quarter ending Oct. 31. That compares to a $7.6 million loss during the previous quarter, and $4.5 million in earnings in the fiscal fourth quarter of 2018. Hovnanian also took a loss of $42.1 million for the fiscal year, down from $46.2 million in FY 2018.
But the company's results for the three months ending Oct. 31 were up compared to the fiscal third quarter's loss of $7.6 million.
The benefits of extinguishing debt in order to extend maturities and free up funds for business use outweighed the $42 million charge taken during the quarter, according to Chief Financial Officer J. Larry Sorsby.
"It helps maintain our liquidity," he said during the company’s earnings call.
During the quarter, the company exchanged or refinanced over $800 million in debt, eliminated all debt maturing prior to 2022 and extended the maturities of half of all debt maturing in 2002 and 2024.
Total revenue for the quarter increased 16.1% year-over-year to $716.6 million. The total revenue for the full fiscal year increased more marginally at $2.02 billion compared to $1.99 billion in FY 2018.
Executives had no formal guidance for the upcoming year, but noted that the housing and mortgage conditions appear largely favorable.
"Mortgage rates are very attractive at these levels," Ara K. Hovnanian, chairman, CEO and president of the company, said during the call.
While
"We still remain far from the ninth inning," he said.
