Market Overview

Hovnanian Enterprises Reports Fiscal 2017 Results

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Gross Margin Percentage Improved for Both Fourth Quarter and Full Year
Ended Year with $464 Million of Cash and Cash Equivalents
Contracts per Community Including Unconsolidated Joint Ventures Increased 16% for the Quarter

RED BANK, N.J., Dec. 21, 2017 (GLOBE NEWSWIRE) -- Hovnanian Enterprises, Inc. (NYSE:HOV), a leading national homebuilder, reported results for its fiscal fourth quarter and year ended October 31, 2017.  

"We focused on enhancing our operating results throughout fiscal 2017 and this is reflected in improvements in our gross margin percentage and our contracts per community, both of which increased during the fourth quarter and the full year," stated Ara K. Hovnanian, Chairman of the Board, President and Chief Executive Officer. "We ended fiscal 2017 with $464 million of cash, which is $219 million in excess of the high end of our target range and the highest level at a quarter's end since July 31, 2010. As we move forward, we remain focused on controlling more lots, further operational improvements and returning to consistent profitability. Given our renewed efforts to expand our land position, we believe we should be well positioned for growing our deliveries, revenues and profitability in 2019 and beyond."

"Although we are taking steps to increase our future community count, our 2017 deliveries and revenues were impacted by a decrease in our community count, which resulted from the decisions we made in fiscal 2016 to exit four underperforming markets, convert a number of wholly owned communities to joint ventures and temporarily reduce land spend, in order to pay off $320 million of maturing debt," concluded Mr. Hovnanian.

RESULTS FOR THE THREE-MONTHS AND YEAR ENDED OCTOBER 31, 2017: 

  • Total revenues decreased 10.4% to $721.7 million in the fourth quarter of fiscal 2017, compared with $805.1 million in the fourth quarter of fiscal 2016. For the fiscal year ended October 31, 2017, total revenues decreased 10.9% to $2.45 billion compared with $2.75 billion in the prior year.
     
  • Homebuilding revenues for unconsolidated joint ventures increased 52.6% to $98.1 million in the fourth quarter of fiscal 2017, compared with $64.2 million in the fourth quarter of fiscal 2016. For the fiscal year ended October 31, 2017, homebuilding revenues for unconsolidated joint ventures increased 120.7% to $312.2 million compared with $141.4 million in the prior year.
     
  • Total SG&A was $72.9 million, including a $12.5 million adjustment to construction defect reserves related to litigation for two closed communities, or 10.1% of total revenues, for the fourth quarter ended October 31, 2017 compared with $53.7 million, or 6.7% of total revenues, in last year's fourth quarter. Excluding the $12.5 million adjustment to construction defect reserves, total SG&A would have been $60.4 million, or 8.4% of total revenues, for the fiscal 2017 fourth quarter. For fiscal 2017, total SG&A was $255.7 million, including a $12.5 million adjustment to construction defect reserves in the fiscal 2017 fourth quarter related to litigation for two closed communities, or 10.4% of total revenues, compared with $253.1 million, or 9.2% of total revenues, in the prior fiscal year. Excluding the $12.5 million adjustment to construction defect reserves, total SG&A would have been $243.2 million, or 9.9 % of total revenues, for the fiscal year ended October 31, 2017.
     
  • Interest incurred (some of which was expensed and some of which was capitalized) was $43.3 million for the fourth quarter of fiscal 2017 compared with $40.3 million in the same quarter one year ago. For the fiscal year ended October 31, 2017, interest incurred decreased 4.0% to $160.2 million compared with $166.8 million during last year.
     
  • Total interest expense was $59.3 million in the fourth quarter of fiscal 2017, which includes $8.9 million of land and lot sales interest, compared with $48.2 million in the fourth quarter of fiscal 2016. Total interest expense increased 1.4% to $185.8 million for all of fiscal 2017 compared with $183.4 million in fiscal 2016.
     
  • Homebuilding gross margin percentage, after interest expense and land charges included in cost of sales, was 13.7% for the fourth quarter of fiscal 2017 compared with 13.0% in the prior year's fourth quarter. During all of fiscal 2017, this homebuilding gross margin percentage was 13.2% compared with 12.2% in the same period of the previous year.
     
  • Homebuilding gross margin percentage, before interest expense and land charges included in cost of sales, was 18.2% for the fourth quarter of fiscal 2017 compared with 17.6% in the prior year's fourth quarter. During fiscal 2017, this homebuilding gross margin percentage was 17.2% compared with 16.9% in the same period one year ago.
     
  • Income before income taxes for the quarter ended October 31, 2017 was $12.3 million compared to income before income taxes of $32.1 million during the fourth quarter of 2016. For fiscal 2017, the loss before income taxes was $45.2 million, which included a $34.9 million loss on extinguishment of debt, compared to income before income taxes of $2.4 million during fiscal 2016.
     
  • Income before income taxes, excluding land-related charges and loss on extinguishment of debt, for the quarter ended October 31, 2017 was $20.8 million compared to $45.8 million during the fourth quarter of fiscal 2016. For fiscal 2017, income before income taxes, excluding land-related charges, joint venture write-downs and loss on extinguishment of debt, was $10.2 million compared to $39.0 million during fiscal 2016.
     
  • Net income was $11.8 million, or $0.08 per common share, in the fourth quarter of fiscal 2017 compared with net income of $22.3 million, or $0.14 per common share, during the same quarter a year ago. For the fiscal year ended October 31, 2017, the net loss was $332.2 million, or $2.25 per common share, including the $294.0 million increase in the valuation allowance for our deferred tax assets and a $34.9 million loss on extinguishment of debt, compared with a net loss of $2.8 million, or $0.02 per common share, in fiscal 2016.
     
  • Contracts per community, including unconsolidated joint ventures, increased 16.2% to 8.6 contracts per community for the quarter ended October 31, 2017 compared with 7.4 contracts, including unconsolidated joint ventures, per community in last year's fourth quarter. Consolidated contracts per community increased 10.3% to 8.6 contracts per community for the fourth quarter of fiscal 2017 compared with 7.8 contracts per community in the fourth quarter of fiscal 2016.
     
  • For November 2017, contracts per community, including unconsolidated joint ventures, increased 27.3% to 2.8 contracts per community compared to 2.2 contracts per community for the same month one year ago. During November 2017, the number of contracts, including unconsolidated joint ventures, increased 10.8% to 443 homes from 400 homes in November 2016 and the dollar value of contracts, including unconsolidated joint ventures, increased 5.8% to $183.9 million in November 2017 compared with $173.8 million for November 2016.
     
  • As of the end of the fourth quarter of fiscal 2017, community count, including unconsolidated joint ventures, decreased 16.5% to 157 communities compared with 188 communities at October 31, 2016. Consolidated community count decreased 22.2% to 130 communities as of October 31, 2017 from 167 communities at the end of the prior year's fourth quarter.
     
  • Despite the significant drop in community count, the number of contracts, including unconsolidated joint ventures, for the fourth quarter ended October 31, 2017, decreased 3.2% to 1,344 homes from 1,389 homes for the same quarter last year. The number of consolidated contracts, during the fourth quarter of fiscal 2017, decreased 14.4% to 1,112 homes compared with 1,299 homes during the fourth quarter of 2016.
     
  • During fiscal 2017, the number of contracts, including unconsolidated joint ventures, was 5,937 homes, a decrease of 6.9% from 6,380 homes during fiscal 2016. The number of consolidated contracts, during the year ended October 31, 2017, decreased 14.9% to 5,196 homes compared with 6,109 homes in the previous year.
     
  • The dollar value of contract backlog, including unconsolidated joint ventures, as of October 31, 2017, was $1.09 billion, a decrease of 10.6% compared with $1.22 billion as of October 31, 2016. The dollar value of consolidated contract backlog, as of October 31, 2017, decreased 24.4% to $808.0 million compared with $1.07 billion as of October 31, 2016.
     
  • For the quarter ended October 31, 2017, deliveries, including unconsolidated joint ventures, decreased 9.4% to 1,787 homes compared with 1,972 homes during the fourth quarter of fiscal 2016. Consolidated deliveries were 1,604 homes for the fourth quarter of fiscal 2017, a 14.2% decrease compared with 1,870 homes during the same quarter a year ago.
     
  • For the year ended October 31, 2017, deliveries, including unconsolidated joint ventures, decreased 8.4% to 6,149, homes compared with 6,712 homes in the prior fiscal year. Consolidated deliveries were 5,602 homes in fiscal 2017, a 13.3% decrease compared with 6,464 homes in fiscal 2016.
     
  • The consolidated contract cancellation rate for the three months ended October 31, 2017 was 22%, compared with 20% in the fourth quarter of the prior year. The contract cancellation rate, including unconsolidated joint ventures, was 22% in the fourth quarter of fiscal 2017 compared with 21% in the fourth quarter of fiscal 2016.
     
  • The valuation allowance was $918.2 million as of October 31, 2017. The valuation allowance is a non-cash reserve against the tax assets for GAAP purposes. For tax purposes, the tax deductions associated with the tax assets may be carried forward for 20 years from the date the deductions were incurred.

LIQUIDITY AND INVENTORY AS OF OCTOBER 31, 2017: 

  • Total liquidity at the end of the fourth quarter of fiscal 2017 was $473.8 million, which includes $463.7 million of cash and cash equivalents.
     
  • For the year ended October 31, 2017, net new option lots increased by 5,565 lots to 6,597 lots compared with 1,032 lots for all of fiscal 2016. Total lots purchased were 5,825 lots in fiscal 2017 compared with 5,123 lots in the previous year.
     
  • In the fourth quarter of fiscal 2017, approximately 3,100 lots were put under option or acquired in 35 communities, including unconsolidated joint ventures.
     
  • Subsequent to the end of the fiscal year, paid off $56.0 million principal amount of debt that matured on December 1, 2017.

WEBCAST INFORMATION: 

Hovnanian Enterprises will webcast its fiscal 2017 fourth quarter financial results conference call at 11:00 a.m. E.T. on Thursday, December 21, 2017. The webcast can be accessed live through the "Investor Relations" section of Hovnanian Enterprises' website at http://www.khov.com. For those who are not available to listen to the live webcast, an archive of the broadcast will be available under the "Past Events" section of the Investor Relations page on the Hovnanian website at http://www.khov.com. The archive will be available for 12 months.

ABOUT HOVNANIAN ENTERPRISES®, INC.: 

Hovnanian Enterprises, Inc., founded in 1959 by Kevork S. Hovnanian, is headquartered in Red Bank, New Jersey. The Company is one of the nation's largest homebuilders with operations in Arizona, California, Delaware, Florida, Georgia, Illinois, Maryland, New Jersey, Ohio, Pennsylvania, South Carolina, Texas, Virginia, Washington, D.C. and West Virginia. The Company's homes are marketed and sold under the trade names K. Hovnanian® Homes, Brighton Homes® and Parkwood Builders. As the developer of K. Hovnanian's® Four Seasons communities, the Company is also one of the nation's largest builders of active lifestyle communities.

Additional information on Hovnanian Enterprises, Inc., including a summary investment profile and the Company's 2016 annual report, can be accessed through the "Investor Relations" section of the Hovnanian Enterprises' website at http://www.khov.com. To be added to Hovnanian's investor e-mail list, please send an e-mail to IR@khov.com or sign up at http://www.khov.com.

NON-GAAP FINANCIAL MEASURES: 

Consolidated earnings before interest expense and income taxes ("EBIT") and before depreciation and amortization ("EBITDA") and before inventory impairment loss and land option write-offs and loss on extinguishment of debt ("Adjusted EBITDA") are not U.S. generally accepted accounting principles (GAAP) financial measures. The most directly comparable GAAP financial measure is net income (loss). The reconciliation for historical periods of EBIT, EBITDA and Adjusted EBITDA to net income (loss) is presented in a table attached to this earnings release.

Homebuilding gross margin, before costs of sales interest expense and land charges, and homebuilding gross margin percentage, before costs of sales interest expense and land charges, are non-GAAP financial measures. The most directly comparable GAAP financial measures are homebuilding gross margin and homebuilding gross margin percentage, respectively. The reconciliation for historical periods of homebuilding gross margin, before costs of sales interest expense and land charges, and homebuilding gross margin percentage, before costs of sales interest expense and land charges, to homebuilding gross margin and homebuilding gross margin percentage, respectively, is presented in a table attached to this earnings release. 

Income Before Income Taxes Excluding Land-Related Charges, Joint Venture Write-Downs and Loss on Extinguishment of Debt is a non-GAAP financial measure. The most directly comparable GAAP financial measure is Income (Loss) Before Income Taxes. The reconciliation for historical periods of Income Before Income Taxes Excluding Land-Related Charges, Joint Venture Write-Downs and Loss on Extinguishment of Debt to Income (Loss) Before Income Taxes is presented in a table attached to this earnings release.

Total liquidity is comprised of $463.7 million of cash and cash equivalents, $1.7 million of restricted cash required to collateralize letters of credit and $8.4 million of availability under the unsecured revolving credit facility as of October 31, 2017.

FORWARD-LOOKING STATEMENTS

All statements in this press release that are not historical facts should be considered as "Forward-Looking Statements" within the meaning of the "Safe Harbor" provisions of the Private Securities Litigation Reform Act of 1995. 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. Such forward-looking statements include but are not limited to statements related to the Company's goals and expectations with respect to its financial results for future financial periods. 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. By their nature, forward-looking statements: (i) speak only as of the date they are made, (ii) are not guarantees of future performance or results and (iii) are subject to risks, uncertainties and assumptions that are difficult to predict or quantify. Therefore, actual results could differ materially and adversely from those forward-looking statements as a result of a variety of factors. Such risks, uncertainties and other factors include, but are not limited to, (1) changes in general and local economic, industry and business conditions and impacts of a sustained homebuilding downturn; (2) adverse weather and other environmental conditions and natural disasters; (3) levels of indebtedness and restrictions on the Company's operations and activities imposed by the agreements governing the Company's outstanding indebtedness; (4) the Company's sources of liquidity; (5) changes in credit ratings; (6) changes in market conditions and seasonality of the Company's business; (7) the availability and cost of suitable land and improved lots; (8) shortages in, and price fluctuations of, raw materials and labor; (9) regional and local economic factors, including dependency on certain sectors of the economy, and employment levels affecting home prices and sales activity in the markets where the Company builds homes; (10) fluctuations in interest rates and the availability of mortgage financing; (11) changes in tax laws affecting the after-tax costs of owning a home; (12) operations through joint ventures with third parties; (13) government regulation, including regulations concerning development of land, the home building, sales and customer financing processes, tax laws and the environment; (14) product liability litigation, warranty claims and claims made by mortgage investors; (15) levels of competition; (16) availability and terms of financing to the Company; (17) successful identification and integration of acquisitions; (18) significant influence of the Company's controlling stockholders; (19) availability of net operating loss carryforwards; (20) utility shortages and outages or rate fluctuations; (21) geopolitical risks, terrorist acts and other acts of war; (22) increases in cancellations of agreements of sale; (23) loss of key management personnel or failure to attract qualified personnel; (24) information technology failures and data security breaches; (25) legal claims brought against us and not resolved in our favor; and (26) certain risks, uncertainties and other factors described in detail in the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 2016 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.

(Financial Tables Follow)

               
Hovnanian Enterprises, Inc.              
October 31, 2017              
Statements of Consolidated Operations              
(Dollars in Thousands, Except Per Share Data)              


        Three Months Ended Twelve Months Ended
        October 31,   October 31,
          2017     2016       2017       2016  
        (Unaudited)   (Unaudited)
Total Revenues $721,686   $805,069     $2,451,665     $2,752,247  
Costs and Expenses (a)   712,443     770,609       2,455,008       2,742,265  
Loss on Extinguishment of Debt   -       (3,200 )       (34,854 )      (3,200 )
Income (Loss) from Unconsolidated Joint Ventures     3,062     881        (7,047 )      (4,346 )
Income (Loss) Before Income Taxes   12,305      32,141         (45,244 )     2,436  
Income Tax Provision     464     9,852         286,949       5,255  
Net Income (Loss) $11,841   $22,289     $(332,193 )   $(2,819 )
                     
Per Share Data:              
Basic:                
  Income (Loss) Per Common Share $0.08   $0.14     $(2.25 )   $(0.02 )
  Weighted Average Number of              
    Common Shares Outstanding (b)    147,905      147,521         147,703         147,451  
Assuming Dilution:              
  Income (Loss) Per Common Share $0.08   $0.14     $(2.25 )   $(0.02 )
  Weighted Average Number of              
    Common Shares Outstanding (b)    160,548      160,590         147,703         147,451  
                     
(a)  Includes inventory impairment loss and land option write-offs.
(b)  For periods with a net loss, basic shares are used in accordance with GAAP rules.
                     
                     
Hovnanian Enterprises, Inc.              
October 31, 2017              
Reconciliation of Income Before Income Taxes Excluding Land-Related Charges, Joint Venture Write-Downs and Loss on Extinguishment of Debt to Income (Loss) Before Income Taxes
                     
(Dollars in Thousands)              
                     
        Three Months Ended   Twelve Months Ended
        October 31,   October 31,
          2017     2016       2017       2016  
        (Unaudited)   (Unaudited)
Income (Loss) Before Income Taxes $12,305   $32,141     $(45,244 )   $2,436  
Inventory Impairment Loss and Land Option Write-Offs     8,479      10,438        17,813        33,353  
Unconsolidated Joint Venture Investment Write Downs   -       -       2,763        -  
Loss on Extinguishment of Debt   -       (3,200 )       (34,854 )      (3,200 )
Income Before Income Taxes Excluding Land-Related Charges, Joint Venture Write-Downs and Loss on Extinguishment of Debt (a) $20,784   $45,779     $10,186     $38,989  
                     
(a) Income Before Income Taxes Excluding Land-Related Charges, Joint Venture Write-Downs and Loss on Extinguishment of Debt is a non-GAAP financial measure. The most directly comparable GAAP financial measure is Income (Loss) Before Income Taxes.
 


                 
Hovnanian Enterprises, Inc.                
October 31, 2017                
Gross Margin                
(Dollars in Thousands)                
                 
    Homebuilding Gross Margin Homebuilding Gross Margin
    Three Months Ended   Twelve Months Ended
    October 31,   October 31,
      2017       2016       2017       2016  
    (Unaudited)   (Unaudited)
Sale of Homes   $666,783     $777,472     $2,340,033     $2,600,790  
Cost of Sales, Excluding Interest Expense (a)      545,150         640,580         1,937,116         2,162,284  
Homebuilding Gross Margin, Before Cost of Sales Interest Expense and Land Charges (b)   121,633         136,892       402,917       438,506  
Cost of Sales Interest Expense, Excluding Land Sales Interest Expense     21,618         25,302         76,902         86,593  
Homebuilding Gross Margin, After Cost of Sales Interest Expense, Before Land Charges (b)   100,015         111,590       326,015       351,913  
Land Charges       8,479         10,438         17,813         33,353  
Homebuilding Gross Margin   $91,536     $101,152     $308,202     $318,560  
                 
Gross Margin Percentage     13.7 %     13.0 %     13.2 %     12.2 %
Gross Margin Percentage, Before Cost of Sales Interest Expense and Land Charges (b)   18.2 %     17.6 %     17.2 %     16.9 %
Gross Margin Percentage, After Cost of Sales Interest Expense, Before Land Charges (b)   15.0 %     14.4 %     13.9 %     13.5 %
                 
    Land Sales Gross Margin Land Sales Gross Margin
    Three Months Ended   Twelve Months Ended
    October 31,   October 31,
      2017       2016       2017       2016  
    (Unaudited)   (Unaudited)
Land and Lot Sales   $37,099     $5,990     $48,596     $76,041  
Cost of Sales, Excluding Interest and Land Charges (a)       17,301       5,898         24,688         68,173  
Land and Lot Sales Gross Margin, Excluding Interest and Land Charges   19,798       92       23,908       7,868  
Land and Lot Sales Interest       8,888         396         11,634         5,798  
Land and Lot Sales Gross Margin, Including Interest and Excluding Land Charges $10,910     $(304 )   $12,274     $2,070  
                 
                 
(a) Does not include cost associated with walking away from land options or inventory impairment losses which are recorded as Inventory impairment loss and land option write-offs in the Consolidated Statements of Operations.
(b) Homebuilding Gross Margin, Before Cost of Sales Interest Expense and Land Charges, and Homebuilding Gross Margin Percentage, before Cost of Sales Interest Expense and Land Charges, are non-GAAP financial measures. The most directly comparable GAAP financial measures are Homebuilding Gross Margin and Homebuilding Gross Margin Percentage, respectively.
 


               
Hovnanian Enterprises, Inc.              
October 31, 2017              
Reconciliation of Adjusted EBITDA to Net Income (Loss)
(Dollars in Thousands)              
  Three Months Ended   Twelve Months Ended
  October 31,   October 31,
    2017     2016       2017       2016  
  (Unaudited)    
Net Income (Loss) $11,841   $22,289     $(332,193 )   $(2,819 )
Income Tax Provision   464     9,852       286,949       5,255  
Interest Expense   59,327     48,197       185,840       183,358  
EBIT (a)   71,632     80,338       140,596       185,794  
Depreciation   1,037     957       4,249       3,565  
Amortization of Debt Costs    -     1,446       1,632       5,261  
EBITDA (b)   72,669     82,741       146,477       194,620  
Inventory Impairment Loss and Land Option Write-offs   8,479     10,438       17,813       33,353  
Loss on Extinguishment of Debt    -      (3,200 )       (34,854 )     (3,200 )
Adjusted EBITDA (c) $81,148   $96,379     $199,144     $231,173  
               
Interest Incurred $43,259   $40,341     $160,203     $166,824  
               
Adjusted EBITDA to Interest Incurred   1.88     2.39       1.24       1.39  
               
               
(a)  EBIT is a non-GAAP financial measure. The most directly comparable GAAP financial measure is net income (loss). EBIT represents earnings before interest expense and income taxes.
(b)  EBITDA is a non-GAAP financial measure. The most directly comparable GAAP financial measure is net income (loss). EBITDA represents earnings before interest expense, income taxes, depreciation and amortization.
(c)  Adjusted EBITDA is a non-GAAP financial measure. The most directly comparable GAAP financial measure is net income (loss). Adjusted EBITDA represents earnings before interest expense, income taxes, depreciation, amortization, inventory impairment loss and land option write-offs and loss on extinguishment of debt.
               
               
Hovnanian Enterprises, Inc.              
October 31, 2017              
Interest Incurred, Expensed and Capitalized              
(Dollars in Thousands)              
               
  Three Months Ended   Twelve Months Ended
  October 31,   October 31,
    2017     2016       2017       2016  
  (Unaudited)   (Unaudited)
Interest Capitalized at Beginning of Period $87,119   $104,544     $96,688     $123,898  
Plus Interest Incurred    43,259      40,341         160,203       166,824  
Less Interest Expensed (a)    59,327      48,197         185,840       183,358  
Less Interest Contributed to Unconsolidated Joint Venture (a)    -       -         -         10,676  
Interest Capitalized at End of Period (b) $71,051   $96,688     $71,051     $96,688  
               
(a) Represents capitalized interest which was included as part of the assets contributed to the joint venture the Company entered into in November 2015. There was no impact to the Consolidated Statement of Operations as a result of this transaction.
(b) Capitalized interest amounts are shown gross before allocating any portion of impairments to capitalized interest.
 


 
HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
 
    October 31,
2017
    October 31,
2016
    (Unaudited)       (1)  
ASSETS          
Homebuilding:          
Cash and cash equivalents   $463,697     $339,773  
Restricted cash and cash equivalents     2,077       3,914  
Inventories:          
Sold and unsold homes and lots under development     744,119       899,082  
Land and land options held for future development or sale     140,924       175,301  
Consolidated inventory not owned     124,784       208,701  
Total inventories     1,009,827       1,283,084  
Investments in and advances to unconsolidated joint ventures     115,090       100,502  
Receivables, deposits and notes, net     58,149       49,726  
Property, plant and equipment, net     52,919       50,332  
Prepaid expenses and other assets     37,026       46,762  
Total homebuilding     1,738,785       1,874,093  
Financial services cash and cash equivalents     5,623        6,992  
Financial services other assets     156,490       190,238  
Income taxes receivable – including net deferred tax benefits     -       283,633  
Total assets   $1,900,898     $2,354,956  
LIABILITIES AND EQUITY          
Homebuilding:          
Nonrecourse mortgages secured by inventory, net of debt issuance costs   $64,512     $82,115  
Accounts payable and other liabilities     335,057       369,228  
Customers' deposits     33,772       37,429  
Nonrecourse mortgages secured by operating properties     13,012       14,312  
Liabilities from inventory not owned, net of debt issuance costs     91,101       150,179  
Revolving credit facility     52,000       52,000  
Notes payable and term loan, net of discount and debt issuance costs     1,627,674       1,605,758  
Total homebuilding     2,217,128       2,311,021  
Financial services     141,914       172,445  
Income taxes payable     2,227       -  
Total liabilities     2,361,269       2,483,466  
Stockholders' equity deficit:          
Preferred stock, $0.01 par value - authorized 100,000 shares; issued and outstanding
5,600 shares with a liquidation preference of $140,000 at October 31, 2017 and 2016
    135,299       135,299  
Common stock, Class A, $0.01 par value - authorized 400,000,000 shares; issued
144,046,073 shares at October 31, 2017 and 143,806,775 shares at October 31, 2016
    1,440       1,438  
Common stock, Class B, $0.01 par value (convertible to Class A at time of sale) -
authorized 60,000,000 shares; issued 15,999,355 shares at October 31, 2017 and
15,942,809 shares at October 31, 2016
    160       159  
Paid in capital - common stock     706,466       706,137  
Accumulated deficit     (1,188,376 )     (856,183 )
Treasury stock - at cost – 11,760,763 shares of Class A common stock and 691,748 shares of
Class B common stock at October 31, 2017 and 2016
    (115,360 )     (115,360 )
Total stockholders' equity deficit     (460,371 )     (128,510 )
Total liabilities and equity   $1,900,898     $2,354,956  
             
(1) Derived from the audited balance sheet as of October 31, 2016
 


 
HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands Except Per Share Data)
(Unaudited)
 
  Three Months Ended October 31,   Twelve Months Ended October 31,
    2017     2016       2017       2016  
Revenues:              
Homebuilding:              
Sale of homes $666,783   $777,472     $2,340,033     $2,600,790  
Land sales and other revenues   38,496     6,694       52,889       78,840  
               
Total homebuilding   705,279     784,166       2,392,922       2,679,630  
Financial services   16,407     20,903       58,743       72,617  
               
Total revenues   721,686     805,069       2,451,665       2,752,247  
               
Expenses:              
Homebuilding:              
Cost of sales, excluding interest   562,451     646,478       1,961,804       2,230,457  
Cost of sales interest   30,506     25,698       88,536       92,391  
Inventory impairment loss and land option write-offs   8,479     10,438       17,813       33,353  
               
   Total cost of sales   601,436     682,614       2,068,153       2,356,201  
               
Selling, general and administrative   60,928     37,378       196,320       192,938  
               
Total homebuilding expenses   662,364     719,992       2,264,473       2,549,139  
               
Financial services   9,264     10,395       32,346       37,144  
               
Corporate general and administrative   11,942     16,337       59,367       60,141  
               
Other interest   28,821     22,499       97,304       90,967  
               
Other operations   52     1,386         1,518         4,874  
               
 Total expenses   712,443     770,609       2,455,008       2,742,265  
               
Loss on extinguishment of debt   -     (3,200 )       (34,854 )       (3,200 )
               
Income (loss) from unconsolidated joint ventures   3,062     881         (7,047 )       (4,346 )
               
Income (loss) before income taxes   12,305     32,141       (45,244 )     2,436  
               
State and federal income tax provision (benefit):              
 State   464     (2,538 )     11,261       2,457  
 Federal   -     12,390         275,688         2,798  
               
 Total income taxes   464     9,852       286,949         5,255  
               
Net income (loss) $11,841   $22,289     $(332,193 )   $(2,819 )
               
Per share data:              
Basic:              
 Income (loss) per common share $0.08   $0.14     $(2.25 )   $(0.02 )
 Weighted-average number of common              
 shares outstanding   147,905     147,521       147,703       147,451  
               
Assuming dilution:              
 Income (loss) per common share $0.08   $0.14     $(2.25 )   $(0.02 )
 Weighted-average number of common              
 shares outstanding   160,548     160,590       147,703       147,451  
                             


                   
HOVNANIAN ENTERPRISES, INC.
(DOLLARS IN THOUSANDS EXCEPT AVG. PRICE)
(SEGMENT DATA EXCLUDES UNCONSOLIDATED JOINT VENTURES)
(UNAUDITED) 
                     
          Three Months - October 31, 2017      
    Contracts (1) Deliveries Contract
    Three Months Ended Three Months Ended Backlog
    Oct 31, Oct 31, Oct 31,
      2017   2016 % Change   2017   2016 % Change   2017   2016 % Change
Northeast                     
(NJ, PA) Home   44   106 (58.5 )%   62   162 (61.7 )%   98   204 (52.0 )%
  Dollars $24,407 $50,179 (51.4 )% $27,913 $81,467 (65.7 )% $51,778 $99,512 (48.0 )%
  Avg. Price $554,708 $473,383 17.2 % $450,208 $502,884 (10.5 )% $528,349 $487,803 8.3 %
Mid-Atlantic                     
(DE, MD, VA, WV) Home   146   196 (25.5 )%   256   332 (22.9 )%   309   430 (28.1 )%
  Dollars $77,112 $99,179 (22.2 )% $149,881 $162,902 (8.0 )% $185,123 $248,974 (25.6 )%
  Avg. Price $528,168 $506,012 4.4 % $585,473 $490,668 19.3 % $599,104 $579,009 3.5 %
Midwest (2)                    
(IL, MN, OH) Home   137   125 9.6 %   229   215 6.5 %   382   374 2.1 %
  Dollars $38,139 $38,339 (0.5 )% $72,944 $62,193 17.3 % $98,969 $104,527 (5.3 )%
  Avg. Price $278,383 $306,712 (9.2 )% $318,533 $289,271 10.1 % $259,082 $279,485 (7.3 )%
Southeast (3)                    
(FL, GA, NC, SC) Home   146   141 3.5 %   183   164 11.6 %   285   332 (14.2 )%
  Dollars $56,354 $53,372 5.6 % $78,267 $67,690 15.6 % $120,382 $145,171 (17.1 )%
  Avg. Price $385,986 $378,522 2.0 % $427,691 $412,744 3.6 % $422,394 $437,261 (3.4 )%
Southwest                     
(AZ, TX) Home   425   551 (22.9 )%   606   796 (23.9 )%   509   763 (33.3 )%
  Dollars $142,926 $190,426 (24.9 )% $209,223 $298,689 (30.0 )% $177,818 $285,644 (37.7 )%
  Avg. Price $336,298 $345,601 (2.7 )% $345,252 $375,237 (8.0 )% $349,347 $374,370 (6.7 )%
West                     
(CA) Home   214   180 18.9 %   268   201 33.3 %   400   295 35.6 %
  Dollars $91,048 $102,819 (11.4 )% $128,555 $104,531 23.0 % $173,963 $185,274 (6.1 )%
  Avg. Price $425,457 $571,218 (25.5 )% $479,683 $520,055 (7.8 )% $434,906 $628,047 (30.8 )%
Consolidated Segment Total                    
  Home   1,112   1,299 (14.4 )%   1,604   1,870 (14.2 )%   1,983   2,398 (17.3 )%
  Dollars $429,986 $534,314 (19.5 )% $666,783 $777,472 (14.2 )% $808,033 $1,069,102 (24.4 )%
  Avg. Price $386,678 $411,327 (6.0 )% $415,700 $415,761 (0.0 )% $407,480 $445,831 (8.6 )%
Unconsolidated Joint Ventures (4)                    
  Home   232   90 157.8 %   183   102 79.4 %   454   251 80.9 %
  Dollars $136,884 $48,394 182.9 % $97,590 $64,099 52.2 % $283,528 $152,430 86.0 %
  Avg. Price $590,017 $537,706 9.7 % $533,275 $628,417 (15.1 )% $624,510 $607,292 2.8 %
Grand Total                    
  Home   1,344   1,389 (3.2 )%   1,787   1,972 (9.4 )%   2,437   2,649 (8.0 )%
  Dollars $566,870 $582,708 (2.7 )% $764,373 $841,571 (9.2 )% $1,091,561 $1,221,532 (10.6 )%
  Avg. Price $421,778 $419,516 0.5 % $427,741 $426,760 0.2 % $447,912 $461,130 (2.9 )%
                     
DELIVERIES INCLUDE EXTRAS                    
Notes:                    
(1) Contracts are defined as new contracts signed during the period for the purchase of homes, less cancellations of prior contracts.
(2) Contract backlog as of October 31, 2016 reflects the reduction of 64 homes and $24.1 million, related to the sale of our land portfolio in Minneapolis, MN.
(3) Contract backlog as of October 31, 2016 reflects the reduction of 67 homes and $33.7 million, related to the sale of our land portfolio in Raleigh, NC.
(4) Represents home deliveries, home revenues and average prices for our unconsolidated homebuilding joint ventures for the period.  We provide this data as a supplement to our consolidated results as an indicator of the volume managed in our unconsolidated homebuilding joint ventures.  Our proportionate share of the income or loss of unconsolidated homebuilding and land development joint ventures is reflected as a separate line item in our consolidated financial statements under "Income (loss) from unconsolidated joint ventures".
 


                   
HOVNANIAN ENTERPRISES, INC.
(DOLLARS IN THOUSANDS EXCEPT AVG. PRICE)
(SEGMENT DATA EXCLUDES UNCONSOLIDATED JOINT VENTURES)
(UNAUDITED)
                     
          Twelve Months - October 31, 2017      
    Contracts (1) Deliveries Contract
    Twelve Months Ended Twelve Months Ended Backlog
    Oct 31, Oct 31, Oct 31,
      2017   2016 % Change   2017   2016 % Change   2017   2016 % Change
Northeast                     
(NJ, PA) Home   245   468 (47.6 )%   351   557 (37.0 )%   98   204 (52.0 )%
  Dollars $119,018 $226,635 (47.5 )% $166,752 $274,126 (39.2 )% $51,778 $99,512 (48.0 )%
  Avg. Price $485,789 $484,261 0.3 % $475,077 $492,147 (3.5 )% $528,349 $487,803 8.3 %
Mid-Atlantic                     
(DE, MD, VA, WV) Home   735   949 (22.6 )%   856   960 (10.8 )%   309   430 (28.1 )%
  Dollars $399,420 $467,782 (14.6 )% $463,271 $457,906 1.2 % $185,123 $248,974 (25.6 )%
  Avg. Price $543,429 $492,920 10.2 % $541,205 $476,985 13.5 % $599,104 $579,009 3.5 %
Midwest (2)                    
(IL, MN, OH) Home   648   724 (10.5 )%   640   921 (30.5 )%   382   374 2.1 %
  Dollars $193,451 $229,671 (15.8 )% $199,009 $287,469 (30.8 )% $98,969 $104,527 (5.3 )%
  Avg. Price $298,535 $317,225 (5.9 )% $310,951 $312,127 (0.4 )% $259,082 $279,485 (7.3 )%
Southeast (3)                    
(FL, GA, NC, SC) Home   567   701 (19.1 )%   614   581 5.7 %   285   332 (14.2 )%
  Dollars $232,278 $287,538 (19.2 )% $257,066 $214,585 19.8 % $120,382 $145,171 (17.1 )%
  Avg. Price $409,662 $410,183 (0.1 )% $418,675 $369,339 13.4 % $422,394 $437,261 (3.4 )%
Southwest                     
(AZ, TX) Home   2,103   2,480 (15.2 )%   2,357   2,750 (14.3 )%   509   763 (33.3 )%
  Dollars $718,595 $887,341 (19.0 )% $826,422 $1,024,410 (19.3 )% $177,818 $285,644 (37.7 )%
  Avg. Price $341,700 $357,799 (4.5 )% $350,624 $372,512 (5.9 )% $349,347 $374,370 (6.7 )%
West                     
(CA) Home   898   787 14.1 %   784   695 12.8 %   400   295 35.6 %
  Dollars $421,335 $420,681 0.2 % $427,513 $342,294 24.9 % $173,963 $185,274 (6.1 )%
  Avg. Price $469,192 $534,539 (12.2 )% $545,297 $492,509 10.7 % $434,906 $628,047 (30.8 )%
Consolidated Segment Total                    
  Home   5,196   6,109 (14.9 )%   5,602   6,464 (13.3 )%   1,983   2,398 (17.3 )%
  Dollars $2,084,097 $2,519,648 (17.3 )% $2,340,033 $2,600,790 (10.0 )% $808,033 $1,069,102 (24.4 )%
  Avg. Price $401,096 $412,449 (2.8 )% $417,714 $402,350 3.8 % $407,480 $445,831 (8.6 )%
Unconsolidated Joint Ventures (4)                    
  Home   741   271 173.4 %   547   248 120.6 %   454   251 80.9 %
  Dollars $436,538 $154,088 183.3 % $310,573 $140,576 120.9 % $283,528 $152,430 86.0 %
  Avg. Price $589,120 $568,590 3.6 % $567,774 $566,836 0.2 % $624,510 $607,292 2.8 %
Grand Total                    
  Home   5,937   6,380 (6.9 )%   6,149   6,712 (8.4 )%   2,437   2,649 (8.0 )%
  Dollars $2,520,635 $2,673,736 (5.7 )% $2,650,606 $2,741,366 (3.3 )% $1,091,561 $1,221,532 (10.6 )%
  Avg. Price $424,564 $419,081 1.3 % $431,063 $408,427 5.5 % $447,912 $461,130 (2.9 )%
                     
DELIVERIES INCLUDE EXTRAS                    
Notes:                    
(1) Contracts are defined as new contracts signed during the period for the purchase of homes, less cancellations of prior contracts.
(2) The Midwest net contracts include 65 homes and $27.4 million in 2016 from Minneapolis, MN. Contract backlog as of October 31, 2016 reflects the reduction of 64 homes and $24.1 million, related to the sale of our land portfolio in Minneapolis, MN.
(3) The Southeast net contracts include 70 homes and $31.6 in 2016 from Raleigh, NC. Contract backlog as of October 31, 2016 reflects the reduction of 67 homes and $33.7 million, related to the sale of our land portfolio in Raleigh, NC.
(4) Represents home deliveries, home revenues and average prices for our unconsolidated homebuilding joint ventures for the period.  We provide this data as a supplement to our consolidated results as an indicator of the volume managed in our unconsolidated homebuilding joint ventures.  Our proportionate share of the income or loss of unconsolidated homebuilding and land development joint ventures is reflected as a separate line item in our consolidated financial statements under "Income (loss) from unconsolidated joint ventures".
 


                     
HOVNANIAN ENTERPRISES, INC.  
(DOLLARS IN THOUSANDS EXCEPT AVG. PRICE)
(SEGMENT DATA UNCONSOLIDATED JOINT VENTURES)
(UNAUDITED)
                     
          Three Months - October 31, 2017      
    Contracts (1) Deliveries Contract
    Three Months Ended Three Months Ended Backlog
    Oct 31, Oct 31, Oct 31,
      2017   2016 % Change   2017   2016 % Change   2017   2016 % Change
Northeast                    
(unconsolidated joint ventures) Home   105   10 950.0 %   41   7 485.7 %   217   27 703.7 %
(NJ, PA) Dollars $70,821 $3,994 1,673.2 % $19,498 $2,323 739.3 % $156,679 $10,263 1,426.6 %
  Avg. Price $674,490 $399,400 68.9 % $475,561 $331,857 43.3 % $722,027 $380,111 90.0 %
Mid-Atlantic                    
(unconsolidated joint ventures) Home   12   12 0.0 %   20   16 25.0 %   30   40 (25.0 )%
(DE, MD, VA, WV) Dollars $8,282 $8,819 (6.1 )% $13,699 $8,230 66.5 % $19,721 $30,089 (34.5 )%
  Avg. Price $690,167 $734,917 (6.1 )% $684,950 $514,375 33.2 % $657,365 $752,225 (12.6 )%
Midwest                    
(unconsolidated joint ventures) Home   9   1 800.0 %   17   3 466.7 %   27   12 125.0 %
(IL, MN, OH) Dollars $5,561 $404 1,276.5 % $12,286 $2,042 501.7 % $18,718 $9,589 95.2 %
  Avg. Price $617,889 $404,000 52.9 % $722,706 $680,667 6.2 % $693,259 $799,083 (13.2 )%
Southeast                    
(unconsolidated joint ventures) Home   25   32 (21.9 )%   49   2 2,350.0 %   78   88 (11.4 )%
(FL, GA, NC, SC) Dollars $9,356 $14,383 (35.0 )% $22,243 $657 3,285.5 % $36,811 $43,722 (15.8 )%
  Avg. Price $374,240 $449,469 (16.7 )% $453,937 $328,500 38.2 % $471,936 $496,841 (5.0 )%
Southwest                    
(unconsolidated joint ventures) Home   50   7 614.3 %   20   0 0.0 %   57   7 714.3 %
(AZ, TX) Dollars $29,267 $4,477 553.7 % $13,835 $0 0.0 % $33,252 $4,477 642.7 %
  Avg. Price $585,340 $639,571 (8.5 )% $691,750 $0 0.0 % $583,368 $639,571 (8.8 )%
West                    
(unconsolidated joint ventures) Home   31   28 10.7 %   36   74 (51.4 )%   45   77 (41.6 )%
(CA) Dollars $13,597 $16,317 (16.7 )% $16,029 $50,847 (68.5 )% $18,347 $54,290 (66.2 )%
  Avg. Price $438,613 $582,750 (24.7 )% $445,252 $687,117 (35.2 )% $407,711 $705,067 (42.2 )%
Unconsolidated Joint Ventures (2)                    
  Home   232   90 157.8 %   183   102 79.4 %   454   251 80.9 %
  Dollars $136,884 $48,394 182.9 % $97,590 $64,099 52.2 % $283,528 $152,430 86.0 %
  Avg. Price $590,017 $537,711 9.7 % $533,275 $628,417 (15.1 )% $624,510 $607,292 2.8 %
                     
DELIVERIES INCLUDE EXTRAS                    
Notes:                    
(1) Contracts are defined as new contracts signed during the period for the purchase of homes, less cancellations of prior contracts.
(2) Represents home deliveries, home revenues and average prices for our unconsolidated homebuilding joint ventures for the period.  We provide this data as a supplement to our consolidated results as an indicator of the volume managed in our unconsolidated homebuilding joint ventures.  Our proportionate share of the income or loss of unconsolidated homebuilding and land development joint ventures is reflected as a separate line item in our consolidated financial statements under "Income (loss) from unconsolidated joint ventures".
 


                     
HOVNANIAN ENTERPRISES, INC.   
(DOLLARS IN THOUSANDS EXCEPT AVG. PRICE) 
(SEGMENT DATA UNCONSOLIDATED JOINT VENTURES) 
(UNAUDITED) 
                     
          Twelve Months - October 31, 2017      
    Contracts (1) Deliveries Contract
    Twelve Months Ended Twelve Months Ended Backlog
    Oct 31, Oct 31, Oct 31,
      2017   2016   % Change   2017   2016 % Change   2017   2016 % Change
Northeast                    
(unconsolidated joint ventures) Home   262   4   6,450.0 %   72   25 188.0 %   217   27 703.7 %
(NJ, PA) Dollars $177,791 $(3,585 ) (5,059.3 )% $31,374 $7,625 311.5 % $156,679 $10,263 1,426.6 %
  Avg. Price $678,592 $(896,250 ) (175.7 )% $435,748 $305,000 42.9 % $722,027 $380,111 90.0 %
Mid-Atlantic                    
(unconsolidated joint ventures) Home   55   61   (9.8 )%   65   47 38.3 %   30   40 (25.0 )%
(DE, MD, VA, WV) Dollars $30,866 $46,811   (34.1 )% $41,233 $24,530 68.1 % $19,721 $30,089 (34.5 )%
  Avg. Price $561,200 $767,393   (26.9 )% $634,354 $521,889 21.5 % $657,365 $752,225 (12.6 )%
Midwest                    
(unconsolidated joint ventures) Home   49   6   716.7 %   34   3 1,033.3 %   27   12 125.0 %
(IL, MN, OH) Dollars $34,833 $4,795   626.4 % $25,704 $2,042 1,158.8 % $18,718 $9,589 95.2 %
  Avg. Price $710,882 $799,167   (11.0 )% $756,004 $680,667 11.1 % $693,259 $799,083 (13.2 )%
Southeast                    
(unconsolidated joint ventures) Home   139   82   69.5 %   149   3 4,866.7 %   78   88 (11.4 )%
(FL, GA, NC, SC) Dollars $60,451 $39,841   51.7 % $67,364 $1,042 6,364.9 % $36,811 $43,722 (15.8 )%
  Avg. Price $434,903 $485,868   (10.5 )% $452,106 $347,355 30.2 % $471,936 $496,841 (5.0 )%
Southwest                    
(unconsolidated joint ventures) Home   82   7   1,071.4 %   32   0 0.0 %   57   7 714.3 %
(AZ, TX) Dollars $50,888 $4,477   1,036.7 % $22,113 $0 0.0 % $33,252 $4,477 642.7 %
  Avg. Price $620,585 $639,571   (3.0 )% $691,030 $0 0.0 % $583,368 $639,571 (8.8 )%
West                    
(unconsolidated joint ventures) Home   154   111   38.7 %   195   170 14.7 %   45   77 (41.6 )%
(CA) Dollars $81,709 $61,749   32.3 % $122,785 $105,337 16.6 % $18,347 $54,290 (66.2 )%
  Avg. Price $530,578 $556,299   (4.6 )% $629,669 $619,631 1.6 % $407,711 $705,067 (42.2 )%
Unconsolidated Joint Ventures (2)                    
  Home   741   271   173.4 %   547   248 120.6 %   454   251 80.9 %
  Dollars $436,538 $154,088   183.3 % $310,573 $140,576 120.9 % $283,528 $152,430 86.0 %
  Avg. Price $589,120 $568,590   3.6 % $567,774 $566,836 0.2 % $624,510 $607,292 2.8 %
                     
DELIVERIES INCLUDE EXTRAS                    
Notes:                    
(1) Contracts are defined as new contracts signed during the period for the purchase of homes, less cancellations of prior contracts.
(2) Represents home deliveries, home revenues and average prices for our unconsolidated homebuilding joint ventures for the period.  We provide this data as a supplement to our consolidated results as an indicator of the volume managed in our unconsolidated homebuilding joint ventures.  Our proportionate share of the income or loss of unconsolidated homebuilding and land development joint ventures is reflected as a separate line item in our consolidated financial statements under "Income (loss) from unconsolidated joint ventures".
 

Contact:

J. Larry Sorsby
Executive Vice President & CFO
732-747-7800

Jeffrey T. O'Keefe
Vice President, Investor Relations
732-747-7800

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