"As a result of management's continued focus and progress inreducing inventory investment levels and generating cash flow, thecompany is increasing its projection for positive cash flow infiscal 2008…," says a statement issued by the company. "The companyachieved positive cash flow in the second quarter, one quarterearlier than previously anticipated. Net debt was reduced byapproximately $30 million in the second quarter."

The preliminary results follow several quarters in which thecompany posted operating losses, including a $469-millionlossin 2007's Q4. And the latest results, despite the positive news,remain mixed. While the cancellation rate improved slightly from32% of gross contracts, it was still 29%, company officialsreport.

And Hovnanian's home deliveries were off 21% year-over-year.Company officials also reported that Hovnanian would take between$225 million and $275 million of land-related pretax changes, anincrease from Q1's $94 million.