Good morning and thank you for joining us today for the Hovnanian Enterprises Fiscal 2014 First Quarter Earnings Conference Call. An archive of the webcast will be available after the completion of the call and run for 12 months. This conference is being recorded for rebroadcast and all participants are currently in a listen-only mode. Management will make some opening remarks about the first quarter's results and then open the line 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 onto the website at this time. Before we begin, I would like to turn the call over to your host for today, Jeff O'Keefe, Vice President, Investor Relations. Jeff, please go ahead.

Thank you. Before we get started, I would like to quickly read through our forward-looking statements. All statements in this conference call that are not historical facts should be considered as forward-looking statements. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of the company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Although we believe that our plans, intentions and expectations reflected in or suggested by such forward-looking statements are reasonable, we can give no assurance that such plans, intentions or expectations will be achieved. Such risks, uncertainties and other factors include but are not limited to changes in general and local economic, industry and business conditions and impacts of the sustained homebuilding downturn; adverse weather and other environmental conditions and natural disasters; changes in market conditions and seasonality of the company's business; changes in home prices and sales activity in the markets where the company builds homes; government regulation, including regulations concerning development of land, the homebuilding, sales and customer financing processes, tax laws and the environment; fluctuations in interest rates and the availability of mortgage financing; shortages in and price fluctuations of raw materials and labor; the availability and cost of suitable land and improved lots; levels of competition; availability of financing to the company; utility shortages and outages or rate fluctuations; levels of indebtedness and restrictions on the company's operations and activities imposed by the agreements governing the company's outstanding indebtedness; the company's sources of liquidity; changes in credit ratings; availability of net operating loss carryforwards; operations through joint ventures with third parties; product liability litigation, warranty claims and claims made by mortgage investors; successful identification and integration of acquisitions; significant influence of the company's controlling stockholders; changes in tax laws affecting the after-tax costs of owning a home; geopolitical risks, terrorist acts and other acts of war; and other factors described in detail on the company's annual report on the Form 10-K for the fiscal year ended October 31, 2013 and subsequent filings with the Securities and Exchange Commission. Except as otherwise required by applicable securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason. Now I'll turn the call over to Ara Hovnanian, our Chairman, President and Chief Executive Officer.

Thanks Jeff and thank you all for participating in this morning's call, to review the results of our first quarter ended January 14. Joining me today from the company are Larry Sorsby, Executive Vice President and CFO; Brad O'Connor, Vice President, Chief Accounting Officer and Corporate Controller; David Valiaveedan, Vice President of Finance and Treasurer; and Jeff O'Keefe, Vice President of Investor Relations. Let's start with Slide number 3; this slide, highlighting our key operating metrics, shows the results for our first quarter were mixed. In the upper left hand quadrant, you can see that we had slightly higher revenues during the first quarter 2014 than we did last year, but due to a shortfall in our deliveries, revenues did not grow as much as we had anticipated. The shortfall in deliveries was caused by numerous factors. First, we were impacted by a slower than anticipated sales pace that continued through the fall and early winter. Second, extreme cold weather, including ice and snowstorms across many of our operations delayed construction. Third, construction labor shortages in many of our markets have extended the construction cycles, and that caused us to miss certain first quarter deliveries; and finally, with only 60 days notice, our primary national cabinet supplier shut down distribution in Houston, Dallas and Phoenix, markets that represented about a third of our deliveries. The cabinet supplier also served numerous other builders, which caused replacement cabinets from other distributors to be late as well, especially in Houston, our largest market. This interruption of cabinet supply caused us a few further delays and deliveries; clearly, it was a challenging beginning of the new year. Moving to the upper right hand quadrant, our homebuilding gross margin improved a 180 basis points from last year's first quarter. Looking at the lower left hand…

Thanks Ara. Let me start with a discussion about our gross margin trends. Slide 14 shows that we have reported year-over-year improvements in gross margin for the past eight quarters, including reporting 18.8% for the first quarter this year, up 180 basis points compared to the 17% gross margin reported during last year's first quarter. However, our first quarter gross margin percentage has declined sequentially from 22.6% in the fourth quarter of 2013. A similar sequential decline occurred in the first quarter of 2013 as well. These sequential declines are primarily the result of spreading certain fixed overhead costs over lower seasonal revenues that typically occur during our first quarter. On Slide 15, we show the breakout for the components of our gross margin for both the fourth quarter of 2013 and the first quarter of 2014. Sequential quarterly deliveries excluding unconsolidated joint ventures fell by 36% from 1,608 deliveries during our fourth quarter to 1,036 in our first quarter. Although our direct margin declined by 140 basis points, the largest driver of the 380 basis points sequential decline in our gross margin, is that we are spreading certain fixed and direct overhead costs, primarily consistent of fixed period costs, such as construction overheads, service costs and property taxes, over lower delivery volumes. This increase in indirect overheads as a percent of revenues caused our gross margins to decline by approximately 240 basis points. As our delivery volume increases in the remaining quarters of 2014, indirect overheads as a percentage of homebuilding revenue should come down, and our gross margin percentage should increase. Even though our gross margin increased year-over-year during the first quarter of fiscal 2014, assuming no changes in current market conditions, we expect our gross margin for our full fiscal 2014 year to be similar to the…

(Operator Instructions). And your first question comes from the line of Nishu Sood with Deutsche Bank. Please proceed.

Thanks, and thanks for the details in the presentation. I wanted to ask about the incentives that you have rolled out here recently in March. I was just thinking about your approach here. You are doing it just on homes, which are already under construction, as opposed to more broadly. I was just wondering, given your generally decentralized operating structure, and since you are just targeting homes that are already under construction, why go with a national approach as opposed to something more local, and especially also, considering the weather would have affected some parts of the country more than others? What were you seeing in the market that led you to go with a national overall approach, as to a more targeted approach?

Well, first of all, it was a little bit of a combination; because, while it’s a national campaign, each local market really determined what was appropriate and where incentives were appropriate. So for example, in Houston, which has been an extremely strong market, and we've been slightly below our level of ready-to-deliver homes, there wasn't much and very few homes had any selective incentives, and other markets where we had more opportunities, they were more aggressive. So it was really left to the local markets. The reason we decided just to make it a national campaign is, it just creates a little bit more energy and excitement, and we thought it would be a better thing to do. It's limited in time, it's only for a month. It's limited on the number of homes and locations, but we still feel like its creating a little extra excitement, and should give us a little catalyst for extra sales energy.

In addition to that, it's going to generate traffic. That excitement will generate traffic and bring people in, that may not have otherwise come into the community, and if they don't like one of our homes that already started and unsold, or the other selected lots that we are doing extra incentives on, they will likely buy a To-Be-Built, which will increase sales activity as well.

Got it. That's helpful. And thinking about the margin impact, I mean, I obviously wanted to get your thoughts on what impact you think this might have on gross margins going forward. I was also curious on the gross margins, in the first quarter, and you have that very helpful slide, I think it was number 15, where you factored out the indirect overheads. There seemed to be some erosion in the margin, even factoring out the indirect overhead. So given that the incentives that you are discussing here, only really begin to take hold after the quarter, I was also wondering what led to the erosion in margins in the quarter, factoring out indirect overheads?

Factoring out indirects, the direct margin did decline -- I think that's more of a fact of mix, both geographic mix and product mix that happened to occur on the quarter. We tried to give you some guidance for the full year that we thought that, based on current market conditions, which includes the incentives that we are offering and big deal days that margins for the full year are going to be very similar to last year's levels. So I don't have to give you much better guidance than that.

So you are assuming that, in other words, that there will be a pretty substantial pickup in gross margins as the year goes on?

Pick up over the first quarter actual, yes.

Got it. Okay. Great. Thanks a lot.

And your next question comes from the line of Michael Rehaut with JP Morgan. Please proceed.

Good morning. This is actually Jason Marcus in for Mike. First question is, I was wondering if you could talk about the progression during the quarter, and kind of what you saw across the different buyer segments. How did the trends in the move up segment compared to active adult and second home? And if you could discuss that with regards to the pricing and incentives that you saw during the quarter, that would be helpful?

Overall, I can't say that we saw any pronounced trend or differentiation between the segments. In general though, the theme we and other builders have been talking about for the last couple of years that the first time homebuyer has not been as present as in the past. That theme really continues, just given the qualification challenges, they have not jumped into the market as much as they have in the past. Other than that, I don't think, we have seen any discernible shifts.

Okay. And then next question is that, you talked about December, January and February orders being below what the company was expecting. Can you talk about what the expectations were for that period?

We would have expected that the trajectory that the industry recovery was having on contracts per community being better year-over-year would have continued; and in fact, since last July, we have seen contracts per community for ourselves and for our peers, on average, to show slight declines. So what has been a little bit surprising since late last summer.

Okay. Thanks.

If you look at our historical contracts per community on an annual basis, you'd see we're still -- although last year was -- and the early part of 2013 was a good solid improvement, we are still well below historical averages. So if you look at, I believe it was Slide number 8, we were expecting each month to continue to improve to get as closer to the historical norms.

And your next question comes from the line of Dan Oppenheim with Credit Suisse. Please proceed.

Thanks very much. Is there any chance you can talk about the -- you could talk away walking from 1,500 nearly identified lots? I am wondering if that -- any region in terms of where those were occurring, and if so, just what you're seeing in the markets in terms of just driving that?

Well first, I just want to clarify, because it is often confused, the difference between walking away in due diligence and walking away from options that have been around and in place for a long period of time. The ladder occurred in the depths of the downturn in the 2009, 2010, 2011 that was not the case here. These were just properties that were put into contract, and kicked out during the due diligence phase. So very different kind of environment, and really kicked out for all kinds of reasons, either estimates that changed, regarding land development costs, as we dug deeper into due diligence or permit issues or other issues like that. I can't say off the top of my head, any one particular geography, I am not sure Jeff, do you happen to have any of that data in front of you?

We just took a quick peek, and it's fairly evenly spread. We saw it in most segments, with the exception of maybe the west, where we really didn't have a lot of land purchase activity in the quarters leading up to our first quarter. So I don't think you could point a finger at any particular geography and say it was worse or better than the others.

Okay. So presumably, some of it was just based on the change in terms of what you are saying, in terms of the expectations though, correct?

Some was may be based on the change, some as I said, was just based on information that we learned during the due diligence investigations.

Okay. And then secondly, wondering in terms of the cabinets, has that been resolved now? Have you switched suppliers?

It has been resolved. Ironically again, Houston was the largest market affected. We moved first to a second manufacturer, only to find out, believe it or not, a month later, they also discontinued distribution in that area. So that caused a mad scramble from [indiscernible] for another time. But at this point, the single sources supplier has been substituted with three different suppliers. So we think we have that under control.

I'd say Houston probably still -- is just causing delays in the construction cycle times. Cabinets are still challenged here I think on the other two markets, we have got it well under control.

Any reason for this distribution leaving the market?

I really, I am not certain of their rationale.

Rest of the [Indiscernible], you can ask them.

Thanks.

And your next question comes from the line of Ivy Zelman with Zelman & Associates. Please proceed. Ivy Zelman - Zelman & Associates: Thank you. Good afternoon guys. I am just trying to square a few of the other builders' commentary with the strength that they are seeing with respect to traffic and a pick up in sales activity, predominantly in the cultural markets. We are hearing that Texas remains very strong, and Houston particularly and also South Florida. So can you help us walk around your markets? I know the mid-Atlantic had been hit hard by the winter. But maybe just take us through the different markets and where you are seeing may be, better activity versus others, because it does seem like a bit of a dichotomy from what most of the other builders reported with their fourth quarter earnings when they talked about January and into February?

Okay. Sure. Well, we concur Houston in particular, is probably one of the strongest markets in the country that we are seeing. Just super strong demand, enough sales ahead, our challenge there is more on the production side, and labor and as we discussed a little bit of material shortages. In Florida, we also are experiencing, in South Florida, particularly Southeast Florida, very strong demand in pricing. Less so in Tampa, which has just been a little less robust and Orlando has been a little bit in between those two. The Northern climates are the one that were really been affected from DC, both Virginia-Maryland, Delaware, the Northeast, New Jersey, Pennsylvania, Chicago, Ohio, Minneapolis, those markets definitely felt the weather, both in terms of sales activity and production. The Phoenix market had no weather constraints. I just think that market we felt, that it shot ahead of itself and just taking a little bit of an adjustment, and many of the builders are having to adjust the big price increases that we enjoyed during the year, back just a little bit. And California is generally very strong depending on the area, it's just that we don't have enough communities out in that area and we are trying to rectify that.

And Ivy I'd also point out, looking at Slide 9 again, if we restacked our -- much for December quarter end, and on the net contract for community, we were right in the middle of the pack, down 9.2%. So I guess the intelligence you are talking about is January and February, and clearly we are seeing a typical kind of sequential improvement in January and February, and first week of March was good as well. We don't have an apples-to-apples comparison to our peers there, but we are seeing a sequential improvement. We just like to see it sequentially stronger. Ivy Zelman - Zelman & Associates: Okay guys. Thank you.

(Operator Instructions). And your next question comes from the line of David Goldberg with UBS. Please proceed.

Thanks. Good morning everybody. My first question, I want to make sure I kind of understand, I guess it’s a little bit of a theoretical question, but I look at Slide 22 and the credit quality of buyers, and some of the pause that may be seeing from buyers in the market and the comment about may be having to put some incentives on standing inventory? And I guess my question is a little bit of a theoretical one, which is, do you think that the pool of buyers -- is it that the pool of buyers? Is this just a sticker shock where prices have gone up, year-over-year rates are up, they want to come back a little bit? And so there is a bit of sticker shock for buyers that are going to communities today, or do you think the credit quality of the buyer pool is deteriorating, because it's not growing as quickly as sales are going out the door? I mean, I know it’s a little bit theoretical, but I look at average LTBs ticked up a little bit, and a fraction -- CLTV has picked up a little bit, [indiscernible] is just picking up a little bit. Is there something there with the credit quality, or its just sticker shock at this point?

I believe that it’s the former, not the latter. I don't think that the credit quality has deteriorated of our customers? I mean it’s a challenge to get through, but the underwriting criteria hadn't materially changed in the past year, one way or other, and I don't think people's credits all of a sudden worse. I think its just an impact of the U.S. economy is not as strong as perhaps it has been in periods of other recoveries, and you combine that with, may be the industry was too aggressive and pushing prices in 2013 too fast. So that there is some sticker shock out there. But I wouldn't draw the conclusion that its credit quality at the consumer.

Thank you. That's very helpful. Then just to follow-up, I wanted to ask about providing incentives and you guys have, obviously so much experience in the industry. I was wondering if you could give us an idea about, are you concerned at all that if you started doing limited incentives, then the builder X down the street has to kind of do incentives to compete with you when we get into a bit of a circular reference? Or is it, you guys are going to put some incentives, and again, very-very small incentives out there, and then if buyers come back and say, well builder X is going to do X times, 10% above X or whatever the number is, you say we are not going to do that, that's not interesting to us. Is it the potential circular reference, or is this --?

Remember on a localized basis, incentives are adjusted, added, etcetera, all the time; and we all adjust to what competitors do around the corner, across the street, etcetera all the time. It just doesn't rise to the attention, unless you talk about it or unless you make it a national campaign. Last month, Toll Brothers had their successful national sales campaign, and I don't think their campaign during and they have lasted the entire month of February. I don't think it made dramatic changes in how the competition reacted. There is, I believe was selective as well, and the market just adjusts to it, just like it does in the local market, when everybody doesn't hear about it.

That's very helpful. Thank you.

And your next question comes from the line of Brendan Lynch with Sidoti. Please proceed.

Hi. Good morning guys.

Good morning.

My question is on the labor constraints. In your press release, you suggested that some of the decline in deliveries was attributable to labor constraints, and I just wanted to get a little more color on that?

It varies from market to market, but I'd say in general, as the market has been recovering and starts have been rising year-over-year, the shortage in labor is just extending building cycle. So if we were on a schedule to build homes, let's say in 2013 or 2014 weeks, that might have extended by a few weeks, and in some cases, it obviously varies by product type and it varies by market. But a few week extension can cause you to miss deliveries for any given month, or certainly any given quarter. We'd expect the cycle times to gravitate back to normal. But in general, I'd say there is little stress still on the labor front.

And is there any particular region that is particularly constrained, or is it just kind of general throughout the country?

I'd say the hottest markets feel it more, and may be Houston feels it more than others, number one, it has been quite strong, and number two, on top of that, they have got a strong oil industry and they are paying some -- industry is paying some significant dollars for everything from truck drivers to different types of manual labor, and those are candidates that would have been potentials for the construction pool. So maybe, Houston is feeling it a little bit more, but it has been somewhat broad based around the country.

Okay great. Thanks for the color Ara.

And there are no further questions. I will now turn the call back over to Ara for further remarks.

Great. Well thank you very much. We are obviously not pleased that we didn't deliver better results, but look forward to the spring selling season unfolding, and delivering some better news in subsequent quarters. Thank you.