Market Overview

Hovnanian Enterprises Reports Fiscal 2018 Second Quarter Results

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Increases in Gross Margin Percentage, Contracts per Community and Lots Controlled
Lower Community Count Continues to Challenge Results
Solus Litigation Dismissed and Concluded Favorably for Hovnanian
Company Optimistic about Continued Growth in Controlled Lots and the Future

MATAWAN, N.J., June 07, 2018 (GLOBE NEWSWIRE) -- Hovnanian Enterprises, Inc. (NYSE:HOV), a leading national homebuilder, reported results for its fiscal second quarter and six months ended April 30, 2018.

"We are encouraged that the number of consolidated lots controlled increased year-over-year for the second consecutive quarter. In order to drive future growth in revenues and profitability, we continue to focus on growing our community count through increased investments in land and land development," stated Ara K. Hovnanian, Chairman of the Board, President and Chief Executive Officer. "As expected, our operating results for the second quarter of fiscal 2018 improved sequentially. Additionally, our gross margin percentage and contracts per community, including unconsolidated joint ventures, continued to exhibit signs of strength, which was evident in year-over-year improvements for both metrics. Throughout the spring selling season, most of our communities experienced solid traffic and robust demand for new homes. We reported 11.2 contracts per community for the second quarter of fiscal 2018, which is the highest level of contracts per community we have reported for any quarter since the fourth quarter of 2005."

Commenting on the successful resolution of the litigation matter involving Solus Alternative Asset Management LP ("Solus"), J. Larry Sorsby Executive Vice President and Chief Financial Officer, said, "We are pleased that last week the lawsuit filed by Solus with respect to our financing transaction with GSO was dismissed, which concludes this matter on favorable terms for us. All of the benefits to our company provided in our GSO financing commitments remain completely intact."

"Provided there are no adverse changes in current market conditions, we expect further improvements in our operations resulting in solid profitability during the fourth quarter of fiscal 2018. Revenue growth from continued investments in new communities will allow us to leverage our total SG&A and interest costs, which we expect will lead to higher levels of profitability in future years. Furthermore, an improving economic backdrop, coupled with positive demographic trends, should result in more normalized levels of activity in the national housing market," concluded Mr. Hovnanian.

RESULTS FOR THE THREE-MONTH AND SIX-MONTH PERIODS ENDED APRIL 30, 2018:

  • Total revenues decreased 14.2% to $502.5 million in the second quarter of fiscal 2018, compared with $585.9 million in the second quarter of fiscal 2017. For the six months ended April 30, 2018, total revenues decreased 19.2% to $919.7 million compared with $1.14 billion in the first half of the prior year.
     
  • Homebuilding revenues for unconsolidated joint ventures increased 12.0% to $96.9 million for the second quarter ended April 30, 2018, compared with $86.6 million in last year's second quarter. During the first six months of fiscal 2018, homebuilding revenues for unconsolidated joint ventures increased 2.6% to $155.5 million compared with $151.5 million in the same period of the previous year.
     
  • Homebuilding gross margin percentage, after cost of sales interest expense and land charges, was 13.8% for the second quarter of fiscal 2018 compared with 12.6% in the prior year's second quarter. For the six months ended April 30, 2018, homebuilding gross margin percentage, after cost of sales interest expense and land charges, improved to 14.3% compared with 13.0% in the first half of last year.
     
  • Homebuilding gross margin percentage, before cost of sales interest expense and land charges, improved 120 basis points to 17.7% for the second quarter of fiscal 2018 compared with 16.5% in the same quarter one year ago. During the first six months of fiscal 2018, homebuilding gross margin percentage, before cost of sales interest expense and land charges, improved 100 basis points to 17.8% compared with 16.8% in the same period of the previous year.
     
  • Total SG&A was $61.7 million, or 12.3% of total revenues, in the second quarter of fiscal 2018 compared with $61.5 million, or 10.5% of total revenues, in the second quarter of fiscal 2017. For the first half of fiscal 2018, total SG&A was $124.1 million, or 13.5% of total revenues, compared with $121.6 million, or 10.7% of total revenues, in the first half of the prior fiscal year.
     
  • Interest incurred (some of which was expensed and some of which was capitalized) was $40.0 million for the second quarter of fiscal 2018 compared with $39.2 million in the same quarter one year ago. For the six months ended April 30, 2018, interest incurred (some of which was expensed and some of which was capitalized) was $81.2 million compared with $77.9 million during the same six-month period last year.
     
  • Total interest expense was $45.5 million in the second quarter of fiscal 2018 compared with $42.6 million in the second quarter of fiscal 2017. Total interest expense was $86.9 million for the first half of fiscal 2018 compared with $83.6 million for the same period of the prior year.
     
  • Loss before income taxes for the quarter ended April 30, 2018 was $9.6 million compared to loss before income taxes of $7.7 million during the second quarter of fiscal 2017. For the first half of fiscal 2018, the loss before income taxes was $40.0 million compared with loss of $7.4 million during the first six months of fiscal 2017.
     
  • Loss before income taxes, excluding land-related charges, joint venture write-downs and loss (gain) on extinguishment of debt, was $5.5 million during the second quarter of both fiscal 2018 and fiscal 2017. For the first half of fiscal 2018, the loss before income taxes, excluding land-related charges, joint venture write-downs and loss (gain) on extinguishment of debt, was $34.9 million compared with $9.6 million during the first six months of fiscal 2017.
     
  • Net loss was $9.8 million, or $0.07 per common share, in the second quarter of fiscal 2018 compared with a net loss of $6.7 million, or $0.05 per common share, during the same quarter a year ago. For the six months ended April 30, 2018, the net loss was $40.6 million, or $0.27 per common share, compared with a net loss of $6.8 million, or $0.05 per common share, in the first half of fiscal 2017.
     
  • Contracts per community, including unconsolidated joint ventures, increased 8.7% to 11.2 contracts per community for the quarter ended April 30, 2018 compared with 10.3 contracts per community, including unconsolidated joint ventures, in last year's second quarter. Consolidated contracts per community decreased 2.8% to 10.6 contracts per community for the second quarter of fiscal 2018 compared with 10.9 contracts per community in the second quarter of fiscal 2017.
     
  • For May 2018, contracts per community, including unconsolidated joint ventures, increased 5.9% to 3.6 contracts per community compared to 3.4 contracts per community for the same month one year ago.
     
  • As of the end of the second quarter of fiscal 2018, community count, including unconsolidated joint ventures, was 153 communities, a 10.0% year-over-year decrease from 170 communities at April 30, 2017. Consolidated community count decreased 9.6% to 132 communities as of April 30, 2018 from 146 communities at the end of the prior year's second quarter.
     
  • The number of contracts, including unconsolidated joint ventures, for the second quarter ended April 30, 2018, decreased 2.4% to 1,706 homes from 1,748 homes for the same quarter last year. The number of consolidated contracts decreased 11.7% to 1,404 homes, during the second quarter of fiscal 2018, compared with 1,590 homes during the second quarter of 2017.
     
  • During the first half of fiscal 2018, the number of contracts, including unconsolidated joint ventures, was 2,956 homes, a decrease of 3.4% from 3,060 homes during the first six months of fiscal 2017. The number of consolidated contracts decreased 12.0% to 2,431 homes, during the six-month period ended April 30, 2018, compared with 2,763 homes in the same period of the previous year.
     
  • The dollar value of contract backlog, including unconsolidated joint ventures, as of April 30, 2018, was $1.34 billion, an increase of 5.6% compared with $1.27 billion as of April 30, 2017. The dollar value of consolidated contract backlog, as of April 30, 2018, decreased 17.6% to $900.7 million compared with $1.09 billion as of April 30, 2017.
     
  • For the quarter ended April 30, 2018, deliveries, including unconsolidated joint ventures, decreased 4.9% to 1,423 homes compared with 1,497 homes during the second quarter of fiscal 2017. Consolidated deliveries were 1,215 homes for the second quarter of fiscal 2018, a 10.5% decrease compared with 1,358 homes during the same quarter a year ago.
     
  • For the six months ended April 30, 2018, deliveries, including unconsolidated joint ventures, decreased 11.4% to 2,564, homes compared with 2,895 homes in the first half of the prior year. Consolidated deliveries were 2,240 homes in the first half of fiscal 2018, a 15.4% decrease compared with 2,648 homes in the same period in fiscal 2017.
     
  • The contract cancellation rate, including unconsolidated joint ventures, was 17% in the second quarter of fiscal 2018 compared with 19% during the second quarter of fiscal 2017. The consolidated contract cancellation rate for the three months ended April 30, 2018 was 17%, compared with 18% in the second quarter of the prior year. 
  • The valuation allowance was $661.8 million as of April 30, 2018. The valuation allowance is a non-cash reserve against the Company's 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 APRIL 30, 2018:

  • Total liquidity at the end of the second quarter of fiscal 2018 was $274.0 million.
     
  • In the second quarter of fiscal 2018, approximately 2,000 lots were put under option or acquired in 27 communities, including unconsolidated joint ventures.
     
  • Consolidated lots controlled increased year-over-year to 26,537, as of April 30, 2018, from 26,103 lots at April 30, 2017. The total consolidated land position, as of April 30, 2018, was 26,537 lots, consisting of 13,949 lots under option and 12,588 owned lots.

RECENT FINANCING TRANSACTION:

  • On May 31, 2018, the lawsuit filed by Solus with respect to our financing transactions with GSO Capital Partners LP, Blackstone's credit platform, and certain funds managed or advised by it (collectively the "GSO Entities") was dismissed. As part of the case resolution, K. Hovnanian paid the overdue interest on the 8.0% Senior Notes due 2019 held by a subsidiary. The case resolution does not involve any settlement payment or admission of wrongdoing by any of the Hovnanian-related parties. 
     
  • In May 2018, the Company drew down approximately $70.0 million on the delayed draw portion of the 5% unsecured term loan maturing in 2027 from the GSO Entities to redeem all outstanding 8% senior notes due 2019 other than the $26 million held by a Hovnanian subsidiary. The aggregate principal amount of the 8% senior notes redeemed was approximately $65.7 million.
     
  • The financing commitments agreed upon previously with GSO, which include a $125 million senior secured revolver/term loan and a $25 million tack-on to our 10.5% senior secured notes due 2024, all remain intact.

WEBCAST INFORMATION:

Hovnanian Enterprises will webcast its fiscal 2018 second quarter financial results conference call at 11:00 a.m. E.T. on Thursday, June 7, 2018. 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 Matawan, New Jersey and, through its subsidiaries, 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. Additionally, the Company's subsidiaries, as developers of K. Hovnanian's® Four Seasons communities, make the Company 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 2017 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 (gain) 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 (loss). The reconciliation for historical periods of EBIT, EBITDA and Adjusted EBITDA to net (loss) is presented in a table attached to this earnings release.

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. The reconciliation for historical periods of 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, to homebuilding gross margin and homebuilding gross margin percentage, respectively, is presented in a table attached to this earnings release. 

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

Total liquidity is comprised of $248.8 million of cash and cash equivalents, $13.8 million of restricted cash required to collateralize a performance bond and letters of credit and $11.4 million of availability under the unsecured revolving credit facility as of April 30, 2018.

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, 2017 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.              
April 30, 2018              
Statements of Consolidated Operations              
(Dollars in Thousands, Except Per Share Data)              
        Three Months Ended   Six Months Ended
        April 30,   April 30,
          2018       2017       2018       2017  
        (Unaudited)   (Unaudited)
Total Revenues $502,544     $585,935     $919,710     $1,137,944  
Costs and Expenses (a)    512,025        588,830        954,486         1,146,496  
(Loss) Gain on Extinguishment of Debt     (1,440 )     (242 )     (1,440 )      7,404  
Income (Loss) from Unconsolidated Joint Ventures     1,343        (4,562 )     (3,833 )     (6,228 )
Loss Before Income Taxes     (9,578 )      (7,699 )       (40,049 )     (7,376 )
Income Tax Provision (Benefit)     245        (1,017 )     583         (551 )
Net (Loss) $(9,823 )   $(6,682 )   $(40,632 )   $(6,825 )
                     
Per Share Data:              
Basic:                
  Net (Loss) Per Common Share $(0.07 )   $(0.05 )   $(0.27 )   $(0.05 )
  Weighted Average Number of              
    Common Shares Outstanding (b)    148,435        147,558        148,228        147,556  
Assuming Dilution:              
  Net (Loss) Per Common Share $(0.07 )   $(0.05 )   $(0.27 )   $(0.05 )
  Weighted Average Number of              
    Common Shares Outstanding (b)   148,435        147,558        148,228        147,556  
                     
(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.              
April 30, 2018              
Reconciliation of (Loss) Before Income Taxes Excluding Land-Related Charges, Joint Venture Write-Downs and Loss (Gain) on Extinguishment of Debt to (Loss) Before Income Taxes
                     
(Dollars in Thousands)              
                     
        Three Months Ended   Six Months Ended
        April 30,   April 30,
          2018       2017       2018       2017  
        (Unaudited)   (Unaudited)
(Loss) Before Income Taxes $(9,578 )   $(7,699 )   $(40,049 )   $(7,376 )
Inventory Impairment Loss and Land Option Write-Offs     2,673         1,953        3,087        5,137  
Unconsolidated Joint Venture Investment Write-Downs     -         -       660        -  
Loss (Gain) on Extinguishment of Debt     1,440       242       1,440        (7,404 )
(Loss) Before Income Taxes Excluding Land-Related Charges, Joint Venture Write-Downs and Loss (Gain) on Extinguishment of Debt (a) $(5,465 )   $(5,504 )   $(34,862 )   $(9,643 )
                     
(a) (Loss) Before Income Taxes Excluding Land-Related Charges, Joint Venture Write-Downs and Loss (Gain) on Extinguishment of Debt is a non-GAAP financial measure. The most directly comparable GAAP financial measure is (Loss) Before Income Taxes.




Hovnanian Enterprises, Inc.                
April 30, 2018                
Gross Margin                
(Dollars in Thousands)                
    Homebuilding Gross Margin Homebuilding Gross Margin
    Three Months Ended   Six Months Ended
    April 30,   April 30,
      2018       2017       2018       2017  
    (Unaudited)   (Unaudited)
Sale of Homes   $468,117     $567,553     $869,694     $1,098,968  
Cost of Sales, Excluding Interest Expense (a)     385,302         473,980        714,829         913,897  
Homebuilding Gross Margin, Before Cost of Sales Interest Expense and
   Land Charges (b)
    82,815       93,573        154,865         185,071  
Cost of Sales Interest Expense, Excluding Land Sales Interest Expense     15,309       20,313         27,601       36,887  
Homebuilding Gross Margin, After Cost of Sales Interest Expense, Before
   Land Charges (b)
    67,506       73,260        127,264         148,184  
Land Charges     2,673         1,953        3,087         5,137  
Homebuilding Gross Margin   $64,833     $71,307     $124,177     $143,047  
                 
Gross Margin Percentage     13.8 %     12.6 %     14.3 %     13.0 %
Gross Margin Percentage, Before Cost of Sales Interest Expense and Land
   Charges (b)
  17.7 %     16.5 %     17.8 %     16.8 %
Gross Margin Percentage, After Cost of Sales Interest Expense, Before Land
   Charges (b)
  14.4 %     12.9 %     14.6 %     13.5 %
                 
    Land Sales Gross Margin Land Sales Gross Margin
    Three Months Ended   Six Months Ended
    April 30,   April 30,
      2018       2017       2018       2017  
    (Unaudited)   (Unaudited)
Land and Lot Sales   $20,505     $2,711     $20,505     $9,712  
Cost of Sales, Excluding Interest and Land Charges (a)     7,710         1,460        7,710         6,570  
Land and Lot Sales Gross Margin, Excluding Interest and Land Charges     12,795         1,251         12,795         3,142  
Land and Lot Sales Interest     4,055         24        4,055         1,772  
Land and Lot Sales Gross Margin, Including Interest and Excluding Land
   Charges
$8,740     $1,227     $8,740     $1,370  
                 
                 
(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 Condensed 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.              
April 30, 2018              
Reconciliation of Adjusted EBITDA to Net (Loss)              
(Dollars in Thousands)              
  Three Months Ended   Six Months Ended
  April 30,   April 30,
    2018       2017       2018       2017  
  (Unaudited)   (Unaudited)
Net (Loss) $(9,823 )   $(6,682 )   $(40,632 )   $(6,825 )
Income Tax Provision (Benefit)   245       (1,017 )     583       (551 )
Interest Expense   45,452       42,634       86,875       83,583  
EBIT (a)   35,874       34,935       46,826       76,207  
Depreciation   719       1,071       1,509       2,083  
Amortization of Debt Costs     -       -         -         1,632  
EBITDA (b)   36,593       36,006       48,335       79,922  
Inventory Impairment Loss and Land Option Write-offs   2,673       1,953       3,087       5,137  
Loss (Gain) on Extinguishment of Debt    1,440         242         1,440         (7,404 )
Adjusted EBITDA (c) $40,706     $38,201     $52,862     $77,655  
               
Interest Incurred $40,014     $39,156     $81,179     $77,855  
               
Adjusted EBITDA to Interest Incurred   1.02       0.98       0.65       1.00  
               
               
               
(a)  EBIT is a non-GAAP financial measure. The most directly comparable GAAP financial measure is net (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 (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 (loss). Adjusted EBITDA represents earnings before interest expense, income taxes, depreciation, amortization, inventory impairment loss and land option write-offs and loss (gain) on extinguishment of debt.
               
               
Hovnanian Enterprises, Inc.              
April 30, 2018              
Interest Incurred, Expensed and Capitalized              
(Dollars in Thousands)              
  Three Months Ended   Six Months Ended
  April 30,   April 30,
    2018       2017       2018       2017  
  (Unaudited)   (Unaudited)
Interest Capitalized at Beginning of Period $70,793     $94,438     $71,051     $96,688  
Plus Interest Incurred    40,014         39,156         81,179       77,855  
Less Interest Expensed    45,452         42,634         86,875       83,583  
Interest Capitalized at End of Period (a) $65,355     $90,960     $65,355     $90,960  
               
(a) Capitalized interest amounts are shown gross before allocating any portion of impairments, if any, to capitalized interest.


             
HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
             
    April 30,
2018
    October 31,
2017
 
    (Unaudited)     (1)  
ASSETS                
Homebuilding:                
Cash and cash equivalents     $248,815       $463,697  
Restricted cash and cash equivalents       13,957         2,077  
Inventories:                
Sold and unsold homes and lots under development       856,620         744,119  
Land and land options held for future development or sale       104,518         140,924  
Consolidated inventory not owned       78,907         124,784  
   Total inventories       1,040,045         1,009,827  
Investments in and advances to unconsolidated joint ventures       88,344         115,090  
Receivables, deposits and notes, net       70,168         58,149  
Property, plant and equipment, net       19,944         52,919  
Prepaid expenses and other assets       40,529         37,026  
   Total homebuilding       1,521,802         1,738,785  
                 
Financial services cash and cash equivalents       4,960         5,623  
Financial services other assets       115,729         156,490  
Total assets     $1,642,491       $1,900,898  
                 
LIABILITIES AND EQUITY                
Homebuilding:                
Nonrecourse mortgages secured by inventory, net of debt issuance costs     $70,644       $64,512  
Accounts payable and other liabilities       288,120         335,057  
Customers' deposits       30,997         33,772  
Nonrecourse mortgages secured by operating properties       -         13,012  
Liabilities from inventory not owned, net of debt issuance costs       53,515         91,101  
Revolving and term loan credit facilities, net of debt issuance costs       257,129         124,987  
Notes payable (net of discount, premium and debt issuance costs) and accrued interest       1,340,246         1,554,687  
   Total homebuilding       2,040,651         2,217,128  
                 
Financial services       99,914         141,914  
Income taxes payable       1,902         2,227  
Total liabilities       2,142,467         2,361,269  
                 
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 April 30, 2018 and at October 31, 2017
      135,299         135,299  
Common stock, Class A, $0.01 par value – authorized 400,000,000 shares; issued
144,403,778 shares at April 30, 2018 and 144,046,073 shares at October 31, 2017
      1,444         1,440  
Common stock, Class B, $0.01 par value (convertible to Class A at time of sale) –
authorized 60,000,000 shares; issued 16,162,230 shares at April 30, 2018 and 15,999,355
shares at October 31, 2017
      162         160  
Paid in capital – common stock       707,487         706,466  
Accumulated deficit       (1,229,008 )       (1,188,376 )
Treasury stock – at cost – 11,760,763 shares of Class A common stock and 691,748 shares of
Class B common stock at April 30, 2018 and October 31, 2017
      (115,360 )       (115,360 )
   Total stockholders' equity deficit       (499,976 )       (460,371 )
Total liabilities and equity     $1,642,491       $1,900,898  

(1) Derived from the audited balance sheet as of October 31, 2017


             
HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands Except Per Share Data)
(Unaudited)
             
    Three Months Ended April 30,     Six Months Ended April 30,  
    2018     2017     2018     2017  
Revenues:                                
Homebuilding:                                
Sale of homes     $468,117       $567,553       $869,694       $1,098,968  
Land sales and other revenues       21,373         3,888         26,074         11,633  
  Total homebuilding       489,490         571,441         895,768         1,110,601  
Financial services       13,054         14,494         23,942         27,343  
  Total revenues       502,544         585,935         919,710         1,137,944  
                                 
Expenses:                                
Homebuilding:                                
Cost of sales, excluding interest       393,012         475,440         722,539         920,467  
Cost of sales interest       19,364         20,337         31,656         38,659  
Inventory impairment loss and land option write-offs       2,673         1,953         3,087         5,137  
  Total cost of sales       415,049         497,730         757,282         964,263  
Selling, general and administrative       45,544         45,467         88,775         89,875  
  Total homebuilding expenses       460,593         543,197         846,057         1,054,138  
                                 
Financial services       8,798         7,360         17,139         14,215  
Corporate general and administrative       16,144         16,071         35,279         31,727  
Other interest       26,088         22,297         55,219         44,924  
Other operations       402         (95 )       792         1,492  
  Total expenses       512,025         588,830         954,486         1,146,496  
(Loss) gain on extinguishment of debt       (1,440 )       (242 )       (1,440 )       7,404  
Income (loss) from unconsolidated joint ventures       1,343         (4,562 )       (3,833 )       (6,228 )
Loss before income taxes       (9,578 )       (7,699 )       (40,049 )       (7,376 )
State and federal income tax provision (benefit):                                
State       245         2,292         583         2,274  
Federal       -         (3,309 )       -         (2,825 )
  Total income taxes       245         (1,017 )       583         (551 )
Net (loss)     $(9,823 )     $(6,682 )     $(40,632 )     $(6,825 )
                                 
Per share data:                                
Basic:                                
Net (loss) per common share     $(0.07 )     $(0.05 )     $(0.27 )     $(0.05 )
Weighted-average number of common shares outstanding       148,435         147,558         148,228         147,556  
Assuming dilution:                                
Net (loss) per common share     $(0.07 )     $(0.05 )     $(0.27 )     $(0.05 )
Weighted-average number of common shares outstanding       148,435         147,558         148,228         147,556  



HOVNANIAN ENTERPRISES, INC.
(DOLLARS IN THOUSANDS EXCEPT AVG. PRICE)
(SEGMENT DATA EXCLUDES UNCONSOLIDATED JOINT VENTURES)
(UNAUDITED)
          Three Months - April 30, 2018      
    Contracts (1) Deliveries Contract
    Three Months Ended Three Months Ended Backlog
    April 30, April 30, April 30,
      2018   2017 % Change   2018   2017 % Change   2018   2017 % Change
 Northeast                     
 (NJ, PA)  Home   26   66 (60.6 )%   47   99 (52.5 )%   83   150 (44.7 )%
   Dollars $15,278 $29,918 (48.9 )% $23,513 $45,917 (48.8 )% $48,715 $68,650 (29.0 )%
   Avg. Price $587,615 $453,300 29.6 % $500,277 $463,805 7.9 % $586,928 $457,667 28.2 %
 Mid-Atlantic                     
 (DE, MD, VA, WV)  Home   212   226 (6.2 )%   206   202 2.0 %   324   440 (26.4 )%
   Dollars $117,399 $123,045 (4.6 )% $104,058 $100,120 3.9 % $199,279 $273,986 (27.3 )%
   Avg. Price $553,766 $544,445 1.7 % $505,139 $495,647 1.9 % $615,059 $622,696 (1.2 )%
 Midwest                    
 (IL, OH)  Home   220   196 12.2 %   143   134 6.7 %   484   431 12.3 %
   Dollars $67,308 $61,489 9.5 % $42,816 $41,794 2.4 % $132,360 $126,138 4.9 %
   Avg. Price $305,943 $313,721 (2.5 )% $299,415 $311,896 (4.0 )% $273,472 $292,663 (6.6 )%
 Southeast                    
 (FL, GA, SC)  Home   154   141 9.2 %   158   127 24.4 %   276   316 (12.7 )%
   Dollars $62,741 $55,577 12.9 % $60,974 $54,005 12.9 % $115,930 $136,807 (15.3 )%
   Avg. Price $407,404 $394,159 3.4 % $385,908 $425,235 (9.2 )% $420,037 $432,935 (3.0 )%
 Southwest                     
 (AZ, TX)  Home   587   671 (12.5 )%   466   639 (27.1 )%   657   749 (12.3 )%
   Dollars $198,487 $227,500 (12.8 )% $158,958 $224,898 (29.3 )% $230,600 $275,870 (16.4 )%
   Avg. Price $338,137 $339,047 (0.3 )% $341,112 $351,954 (3.1 )% $350,989 $368,317 (4.7 )%
 West                    
 (CA)  Home   205   290 (29.3 )%   195   157 24.2 %   369   418 (11.7 )%
   Dollars $93,213 $142,522 (34.6 )% $77,798 $100,819 (22.8 )% $173,794 $211,215 (17.7 )%
   Avg. Price $454,697 $491,454 (7.5 )% $398,962 $642,158 (37.9 )% $470,986 $505,299 (6.8 )%
 Consolidated                    
 Segment Total  Home   1,404   1,590 (11.7 )%   1,215   1,358 (10.5 )%   2,193   2,504 (12.4 )%
   Dollars $554,426 $640,051 (13.4 )% $468,117 $567,553 (17.5 )% $900,678 $1,092,666 (17.6 )%
   Avg. Price $394,889 $402,547 (1.9 )% $385,281 $417,933 (7.8 )% $410,706 $436,368 (5.9 )%
 Unconsolidated                    
 Joint Ventures (2)  Home   302   158 91.1 %   208   139 49.6 %   636   310 105.2 %
   Dollars $178,973 $87,317 105.0 % $96,296 $86,215 11.7 % $436,715 $174,325 150.5 %
   Avg. Price $592,630 $552,641 7.2 % $462,964 $620,248 (25.4 )% $686,659 $562,337 22.1 %
 Grand                    
 Total  Home   1,706   1,748 (2.4 )%   1,423   1,497 (4.9 )%   2,829   2,814 0.5 %
   Dollars $733,399 $727,368 0.8 % $564,413 $653,768 (13.7 )% $1,337,393 $1,266,991 5.6 %
   Avg. Price $429,894 $416,114 3.3 % $396,636 $436,719 (9.2 )% $472,744 $450,246 5.0 %
                     
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 EXCLUDES UNCONSOLIDATED JOINT VENTURES)
(UNAUDITED)
          Six Months - April 30, 2018      
    Contracts (1) Deliveries Contract
    Six Months Ended Six Months Ending Backlog
    April 30, April 30, April 30,
      2018   2017 % Change   2018   2017 % Change   2018   2017 % Change
 Northeast                     
 (NJ, PA)  Home   72   149 (51.7 )%   87   203 (57.1 )%   83   150 (44.7 )%
   Dollars $40,641 $67,963 (40.2 )% $43,705 $98,824 (55.8 )% $48,715 $68,650 (29.0 )%
   Avg. Price $564,459 $456,124 23.8 % $502,354 $486,819 3.2 % $586,928 $457,667 28.2 %
 Mid-Atlantic                     
 (DE, MD, VA, WV)  Home   337   416 (19.0 )%   341   406 (16.0 )%   324   440 (26.4 )%
   Dollars $180,612 $225,291 (19.8 )% $175,067 $200,279 (12.6 )% $199,279 $273,986 (27.3 )%
   Avg. Price $535,939 $541,564 (1.0 )% $513,393 $493,297 4.1 % $615,059 $622,696 (1.2 )%
 Midwest                    
 (IL, OH)  Home   385   341 12.9 %   283   284 (0.4 )%   484   431 12.3 %
   Dollars $116,724 $107,055 9.0 % $83,333 $85,445 (2.5 )% $132,360 $126,138 4.9 %
   Avg. Price $303,179 $313,946 (3.4 )% $294,463 $300,863 (2.1 )% $273,472 $292,663 (6.6 )%
 Southeast                    
 (FL, GA, SC)  Home   281   249 12.9 %   290   265 9.4 %   276   316 (12.7 )%
   Dollars $113,196 $102,028 10.9 % $117,648 $110,391 6.6 % $115,930 $136,807 (15.3 )%
   Avg. Price $402,831 $409,750 (1.7 )% $405,682 $416,569 (2.6 )% $420,037 $432,935 (3.0 )%
 Southwest                     
 (AZ, TX)  Home   998   1,156 (13.7 )%   850   1,170 (27.4 )%   657   749 (12.3 )%
   Dollars $339,945 $398,384 (14.7 )% $287,162 $408,158 (29.6 )% $230,600 $275,870 (16.4 )%
   Avg. Price $340,626 $344,623 (1.2 )% $337,838 $348,854 (3.2 )% $350,989 $368,317 (4.7 )%
 West                    
 (CA)  Home   358   452 (20.8 )%   389   320 21.6 %   369   418 (11.7 )%
   Dollars $162,610 $226,945 (28.3 )% $162,779 $195,871 (16.9 )% $173,794 $211,215 (17.7 )%
   Avg. Price $454,218 $502,090 (9.5 )% $418,454 $612,096 (31.6 )% $470,986 $505,299 (6.8 )%
 Consolidated                    
 Segment Total  Home   2,431   2,763 (12.0 )%   2,240   2,648 (15.4 )%   2,193   2,504 (12.4 )%
   Dollars $953,728 $1,127,666 (15.4 )% $869,694 $1,098,968 (20.9 )% $900,678 $1,092,666 (17.6 )%
   Avg. Price $392,319 $408,131 (3.9 )% $388,256 $415,018 (6.4 )% $410,706 $436,368 (5.9 )%
 Unconsolidated                    
 Joint Ventures (2)  Home   525   297 76.8 %   324   247 31.2 %   636   310 105.2 %
   Dollars $316,194 $167,617 88.6 % $154,395 $150,856 2.3 % $436,715 $174,325 150.5 %
   Avg. Price $602,276 $564,368 6.7 % $476,529 $610,753 (22.0 )% $686,659 $562,337 22.1 %
 Grand                    
 Total  Home   2,956   3,060 (3.4 )%   2,564   2,895 (11.4 )%   2,829   2,814 0.5 %
   Dollars $1,269,922 $1,295,283 (2.0 )% $1,024,089 $1,249,824 (18.1 )% $1,337,393 $1,266,991 5.6 %
   Avg. Price $429,608 $423,295 1.5 % $399,411 $431,718 (7.5 )% $472,744 $450,246 5.0 %
                     
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 ONLY)
(UNAUDITED)
          Three Months - April 30, 2018      
    Contracts (1) Deliveries Contract
    Three Months Ended Three Months Ended Backlog
    April 30, April 30, April 30,
      2018   2017 % Change   2018   2017 % Change   2018   2017 % Change
 Northeast                    
 (unconsolidated joint ventures)  Home   137   27 407.4 %   76   6 1,166.7 %   302   67 350.7 %
 (NJ, PA)  Dollars $82,865 $16,379 405.9 % $29,891 $2,945 914.9 % $239,418 $34,032 603.5 %
   Avg. Price $604,854 $606,630 (0.3 )% $393,298 $490,833 (19.9 )% $792,774 $507,940 56.1 %
 Mid-Atlantic                    
 (unconsolidated joint ventures)  Home   25   13 92.3 %   5   18 (72.2 )%   52   42 23.8 %
 (DE, MD, VA, WV)  Dollars $20,337 $6,337 220.9 % $4,830 $11,411 (57.7 )% $42,350 $29,252 44.8 %
   Avg. Price $813,480 $487,462 66.9 % $966,000 $633,944 52.4 % $814,422 $696,478 16.9 %
 Midwest                    
 (unconsolidated joint ventures)  Home   15   17 (11.8 )%   14   4 250.0 %   31   28 10.7 %
 (IL, OH)  Dollars $10,532 $12,765 (17.5 )% $8,905 $2,978 199.1 % $23,413 $20,986 11.6 %
   Avg. Price $702,215 $750,882 (6.5 )% $636,071 $744,514 (14.6 )% $755,280 $749,500 0.8 %
 Southeast                    
 (unconsolidated joint ventures)  Home   39   40 (2.5 )%   48   42 14.3 %   95   97 (2.1 )%
 (FL, GA, SC)  Dollars $19,635 $16,866 16.4 % $21,217 $19,551 8.5 % $45,834 $48,077 (4.7 )%
   Avg. Price $503,456 $421,650 19.4 % $442,020 $465,497 (5.0 )% $482,465 $495,640 (2.7 )%
 Southwest                    
 (unconsolidated joint ventures)  Home   44   10 340.0 %   29   2 1,350.0 %   106   27 292.6 %
 (AZ, TX)  Dollars $26,990 $7,124 278.9 % $16,357 $1,353 1,109.0 % $63,429 $18,914 235.3 %
   Avg. Price $613,412 $712,400 (13.9 )% $564,034 $676,282 (16.6 )% $598,385 $700,519 (14.6 )%
 West                    
 (unconsolidated joint ventures)  Home   42   51 (17.6 )%   36   67 (46.3 )%   50   49 2.0 %
 (CA)  Dollars $18,614 $27,846 (33.2 )% $15,096 $47,977 (68.5 )% $22,271 $23,064 (3.4 )%
   Avg. Price $443,190 $546,000 (18.8 )% $419,333 $716,060 (41.4 )% $445,418 $470,694 (5.4 )%
 Unconsolidated Joint Ventures (2)                    
   Home   302   158 91.1 %   208   139 49.6 %   636   310 105.2 %
   Dollars $178,973 $87,317 105.0 % $96,296 $86,215 11.7 % $436,715 $174,325 150.5 %
   Avg. Price $592,630 $552,641 7.2 % $462,964 $620,248 (25.4 )% $686,659 $562,337 22.1 %
                     
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 ONLY)
(UNAUDITED)
          Six Months - April 30, 2018      
    Contracts (1) Deliveries Contract
    Six Months Ended Six Months Ended Backlog
    April 30, April 30, April 30,
      2018   2017 % Change   2018   2017 % Change   2018   2017 % Change
 Northeast                    
 (unconsolidated joint ventures)  Home   191   52 267.3 %   106   12 783.3 %   302   67 350.7 %
 (NJ, PA)  Dollars $127,529 $28,454 348.2 % $44,791 $4,685 856.1 % $239,418 $34,032 603.5 %
   Avg. Price $667,689 $547,192 22.0 % $422,555 $390,378 8.2 % $792,774 $507,940 56.1 %
 Mid-Atlantic                    
 (unconsolidated joint ventures)  Home   50   30 66.7 %   9   28 (67.9 )%   52   42 23.8 %
 (DE, MD, VA, WV)  Dollars $40,038 $15,764 154.0 % $8,798 $16,601 (47.0 )% $42,350 $29,252 44.8 %
   Avg. Price $800,760 $525,470 52.4 % $977,555 $592,893 64.9 % $814,422 $696,478 16.9 %
 Midwest                    
 (unconsolidated joint ventures)  Home   24   27 (11.1 )%   20   11 81.8 %   31   28 10.7 %
 (IL, OH)  Dollars $16,970 $19,992 (15.1 )% $12,275 $8,594 42.8 % $23,413 $20,986 11.6 %
   Avg. Price $707,083 $740,444 (4.5 )% $613,750 $781,272 (21.4 )% $755,280 $749,500 0.8 %
 Southeast                    
 (unconsolidated joint ventures)  Home   97   75 29.3 %   80   66 21.2 %   95   97 (2.1 )%
 (FL, GA, SC)  Dollars $45,706 $33,745 35.4 % $36,682 $29,390 24.8 % $45,834 $48,077 (4.7 )%
   Avg. Price $471,191 $449,934 4.7 % $458,524 $445,303 3.0 % $482,465 $495,640 (2.7 )%
 Southwest                    
 (unconsolidated joint ventures)  Home   93   22 322.7 %   44   2 2,100.0 %   106   27 292.6 %
 (AZ, TX)  Dollars $55,347 $15,790 250.5 % $25,170 $1,353 1,760.3 % $63,429 $18,914 235.3 %
   Avg. Price $595,130 $717,723 (17.1 )% $572,042 $676,500 (15.4 )% $598,385 $700,519 (14.6 )%
 West                    
 (unconsolidated joint ventures)  Home   70   91 (23.1 )%   65   128 (49.2 )%   50   49 2.0 %
 (CA)  Dollars $30,604 $53,872 (43.2 )% $26,679 $90,233 (70.4 )% $22,271 $23,064 (3.4 )%
   Avg. Price $437,200 $592,004 (26.1 )% $410,446 $704,941 (41.8 )% $445,418 $470,694 (5.4 )%
 Unconsolidated Joint Ventures (2)                    
   Home   525   297 76.8 %   324   247 31.2 %   636   310 105.2 %
   Dollars $316,194 $167,617 88.6 % $154,395 $150,856 2.3 % $436,715 $174,325 150.5 %
   Avg. Price $602,276 $564,368 6.7 % $476,529 $610,753 (22.0 )% $686,659 $562,337 22.1 %
                     
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 Jeffrey T. O'Keefe
  Executive Vice President & CFO Vice President, Investor Relations
  732-747-7800 732-747-7800
     

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