Market Overview

Hovnanian Enterprises Reports Fiscal 2018 Third Quarter Results

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Gross Margin Percentage Increased Significantly Year Over Year
Contracts per Community Improved Year Over Year for 13th Consecutive Quarter
Consolidated Lots Controlled Grew 20% Year-over-Year and 17% Sequentially

MATAWAN, N.J., Sept. 10, 2018 (GLOBE NEWSWIRE) -- Hovnanian Enterprises, Inc. (NYSE:HOV), a leading national homebuilder, reported results for its fiscal third quarter and nine months ended July 31, 2018.

"We are pleased to report another quarter with year-over-year improvements in contracts per community, a significant increase in gross margin percentage and increases in pretax profits for our third quarter of fiscal 2018," stated Ara K. Hovnanian, Chairman of the Board, President and Chief Executive Officer. "Our total consolidated lots controlled at the end of the third quarter expanded 20% year over year and 17% sequentially. As we move forward, we remain laser focused on further growing our land position, which should ultimately lead to increases in our community count."

"Assuming no adverse changes in current market conditions, we continue to expect solid profitability during the fourth quarter of fiscal 2018. Similar to what we have experienced in past cycles, our planned community count growth should lead to improved operating results and sustainable levels of profitability," concluded Mr. Hovnanian.

RESULTS FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED JULY 31, 2018:

  • Total revenues decreased to $456.7 million in the third quarter of fiscal 2018, compared with $592.0 million in the third quarter of fiscal 2017. For the nine months ended July 31, 2018, total revenues decreased to $1.38 billion compared with $1.73 billion in the first nine months of the prior year.
  • While total revenues decreased $135.3 million, homebuilding revenues for unconsolidated joint ventures increased $131.9 million to $194.5 million for the third quarter ended July 31, 2018, compared with $62.6 million in last year's third quarter. During the first nine months of fiscal 2018, homebuilding revenues for unconsolidated joint ventures increased to $350.0 million compared with $214.1 million in the same period of the previous year.
     
  • Homebuilding gross margin percentage, after cost of sales interest expense and land charges, was 15.4% for the third quarter of fiscal 2018 compared with 12.8% in the prior year's third quarter. For the nine months ended July 31, 2018, homebuilding gross margin percentage, after cost of sales interest expense and land charges, improved to 14.6% compared with 12.9% in the first nine months of last year.
     
  • Homebuilding gross margin percentage, before cost of sales interest expense and land charges, improved 160 basis points to 18.4% for the third quarter of fiscal 2018 compared with 16.8% in the same quarter one year ago. During the first nine months of fiscal 2018, homebuilding gross margin percentage, before cost of sales interest expense and land charges, improved 120 basis points to 18.0% compared with 16.8% in the same period of the previous year.
     
  • For the third quarter of 2018, total SG&A decreased by $7.3 million, or 11.9%, year over year. Total SG&A was $53.9 million, or 11.8% of total revenues, in the third quarter of fiscal 2018 compared with $61.2 million, or 10.3% of total revenues, in the third quarter of fiscal 2017. For the nine months ended July 31, 2018, total SG&A decreased by $4.8 million, or 2.6%, year over year. For the first nine months of fiscal 2018, total SG&A was $178.0 million, or 12.9% of total revenues, compared with $182.8 million, or 10.6% of total revenues, in the first nine months of the prior fiscal year.
     
  • Interest incurred (some of which was expensed and some of which was capitalized) was $40.4 million for the third quarter of fiscal 2018 compared with $39.1 million in the same quarter one year ago. For the nine months ended July 31, 2018, interest incurred (some of which was expensed and some of which was capitalized) was $121.6 million compared with $116.9 million during the same nine-month period last year.
     
  • Total interest expense was $38.3 million in the third quarter of fiscal 2018 compared with $42.9 million in the third quarter of fiscal 2017. Total interest expense was $125.2 million for the first nine months of fiscal 2018 compared with $126.5 million for the first nine months of fiscal 2017.
     
  • Income before income taxes for the quarter ended July 31, 2018 was $0.1 million compared with a loss before income taxes of $50.2 million during the third quarter of fiscal 2017. For the first nine months of fiscal 2018, the loss before income taxes was $40.0 million compared with loss of $57.5 million during the first nine months of fiscal 2017.
     
  • Income before income taxes excluding land-related charges, joint venture write-downs and loss on extinguishment of debt, was $4.4 million during the third quarter of fiscal 2018 compared with a loss of $3.7 million in the third quarter of fiscal 2017. For the first nine months of fiscal 2018, the loss before income taxes, excluding land-related charges, joint venture write-downs and loss on extinguishment of debt, was $30.4 million compared with $13.4 million during the first nine months of fiscal 2017.
     
  • Net loss was $1.0 million, or $0.01 per common share, in the third quarter of fiscal 2018 compared with a net loss of $337.2 million, or $2.28 per common share, including a $294.0 increase in the valuation allowance for our deferred tax assets, during the same quarter a year ago. For the nine months ended July 31, 2018, the net loss was $41.7 million, or $0.28 per common share, compared with a net loss of $344.0 million, or $2.33 per common share, including a $294.0 increase in the valuation allowance for our deferred tax assets, in the first nine months of fiscal 2017.
     
  • Contracts per community, including unconsolidated joint ventures, increased 9.8% to 10.1 contracts per community for the quarter ended July 31, 2018 compared with 9.2 contracts per community, including unconsolidated joint ventures, in last year's third quarter. Consolidated contracts per community increased 6.4% to 10.0 contracts per community for the third quarter of fiscal 2018 compared with 9.4 contracts per community in the third quarter of fiscal 2017.
     
  • As of the end of the third quarter of fiscal 2018, community count, including unconsolidated joint ventures, was 143 communities, a 14.4% year-over-year decrease from 167 communities at July 31, 2017. Consolidated community count decreased 12.8% to 123 communities as of July 31, 2018 from 141 communities at the end of the prior year's third quarter.
     
  • The number of contracts, including unconsolidated joint ventures, for the third quarter ended July 31, 2018, decreased 5.3% to 1,451 homes from 1,533 homes for the same quarter last year. The number of consolidated contracts decreased 6.4% to 1,236 homes, during the third quarter of fiscal 2018, compared with 1,321 homes during the third quarter of 2017.
     
  • During the first nine months of fiscal 2018, the number of contracts, including unconsolidated joint ventures, was 4,407 homes, a decrease of 4.0% from 4,593 homes during the first nine months of fiscal 2017. The number of consolidated contracts decreased 10.2% to 3,667 homes, during the nine month period ended July 31, 2018, compared with 4,084 homes in the same period of the previous year.
     
  • The dollar value of contract backlog, including unconsolidated joint ventures, as of July 31, 2018, was $1.32 billion, an increase of 2.1% compared with $1.29 billion as of July 31, 2017. The dollar value of consolidated contract backlog, as of July 31, 2018, decreased 9.4% to $946.5 million compared with $1.04 billion as of July 31, 2017.
     
  • For the quarter ended July 31, 2018, deliveries, including unconsolidated joint ventures, decreased 2.0% to 1,438 homes compared with 1,467 homes during the third quarter of fiscal 2017. Consolidated deliveries were 1,142 homes for the third quarter of fiscal 2018, a 15.4% decrease compared with 1,350 homes during the same quarter a year ago.
     
  • For the nine months ended July 31, 2018, deliveries, including unconsolidated joint ventures, decreased 8.3% to 4,002 homes compared with 4,362 homes in the first nine months of the prior year. Consolidated deliveries were 3,382 homes in the first nine months of fiscal 2018, a 15.4% decrease compared with 3,998 homes in the same period in fiscal 2017.
     
  • The contract cancellation rate, including unconsolidated joint ventures, was 19% in the third quarter of fiscal 2018 compared with 20% during the third quarter of fiscal 2017. The consolidated contract cancellation rate was 19% for both the three months ended July 31, 2018 and the three months ended July 31, 2017.
     
  • The valuation allowance was $659.9 million as of July 31, 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 JULY 31, 2018:

  • Total liquidity at the end of the third quarter of fiscal 2018 was $242.1 million.
     
  • In the third quarter of fiscal 2018, approximately 5,800 lots were put under option or acquired in 56 communities, including unconsolidated joint ventures.
     
  • As of July 31, 2018, consolidated lots controlled increased sequentially by 16.7% to 30,974 from 26,537 lots at April 30, 2018, and increased 19.9% year over year from 25,834 lots at July 31, 2017. The consolidated land position, as of July 31, 2018, was 30,974 lots, consisting of 18,416 lots under option and 12,558 owned lots.

WEBCAST INFORMATION:

Hovnanian Enterprises will webcast its fiscal 2018 third quarter financial results conference call at 11:00 a.m. E.T. on Monday, September 10, 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®. 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 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. 

Income (Loss) 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 (Loss) 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 $216.7 million of cash and cash equivalents, $25.2 million of restricted cash required to collateralize a performance bond and letters of credit and $0.2 million of availability under the unsecured revolving credit facility as of July 31, 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.
July 31, 2018
Statements of Consolidated Operations
(Dollars in Thousands, Except Per Share Data)
      Three Months Ended   Nine Months Ended
      July 31,   July 31,
        2018       2017       2018       2017  
      (Unaudited)   (Unaudited)
Total Revenues $456,712     $592,035     $1,376,422     $1,729,979  
Costs and Expenses (a)    463,100         596,069         1,417,586         1,742,565  
Loss on Extinguishment of Debt   (4,266 )       (42,258 )      (5,706 )       (34,854 )
Income (Loss) from Unconsolidated Joint Ventures   10,732        (3,881 )     6,899         (10,109 )
Income (Loss) Before Income Taxes    78         (50,173 )       (39,971 )       (57,549 )
Income Tax Provision     1,104         287,036       1,687         286,485  
Net (Loss) $(1,026 )   $(337,209 )   $(41,658 )   $(344,034 )
                   
Per Share Data:              
Basic:              
  Net (Loss) Per Common Share $(0.01 )   $(2.28 )   $(0.28 )   $(2.33 )
  Weighted Average Number of              
    Common Shares Outstanding (b)    148,669         147,748         148,377         147,628  
Assuming Dilution:              
  Net (Loss) Per Common Share $(0.01 )   $(2.28 )   $(0.28 )   $(2.33 )
  Weighted Average Number of              
    Common Shares Outstanding (b)    148,669         147,748         148,377         147,628  
                   
(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.
July 31, 2018
Reconciliation of Income (Loss) 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   Nine Months Ended
      July 31,   July 31,
        2018       2017       2018       2017  
      (Unaudited)   (Unaudited)
Income (Loss) Before Income Taxes $78     $(50,173 )   $(39,971 )   $(57,549 )
Inventory Impairment Loss and Land Option Write-Offs    96       4,197       3,183       9,334  
Unconsolidated Joint Venture Investment Write-Downs   -         -       660        -  
Loss on Extinguishment of Debt     4,266        42,258       5,706        34,854  
Income (Loss) Before Income Taxes Excluding Land-Related Charges,
   Joint Venture Write-Downs and Loss on Extinguishment of Debt (a)
$4,440     $(3,718 )   $(30,422 )   $(13,361 )
                   
(a) Income (Loss) 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.
July 31, 2018
Gross Margin
(Dollars in Thousands)
    Homebuilding Gross Margin   Homebuilding Gross Margin
    Three Months Ended   Nine Months Ended
    July 31,   July 31,
    2018   2017   2018
  2017 
    (Unaudited)   (Unaudited)
Sale of Homes   $442,859   $574,282   $1,312,553   $1,673,250
Cost of Sales, Excluding Interest Expense (a)   361,303   478,069   1,076,132   1,391,966
Homebuilding Gross Margin, Before Cost of Sales Interest Expense and Land Charges (b)   81,556   96,213   236,421   281,284
Cost of Sales Interest Expense, Excluding Land Sales Interest Expense   13,424   18,397   41,025   55,284
Homebuilding Gross Margin, After Cost of Sales Interest Expense, Before Land Charges (b)   68,132   77,816   195,396   226,000
Land Charges   96   4,197   3,183   9,334
Homebuilding Gross Margin   $68,036   $73,619   $192,213   $216,666
                 
Gross Margin Percentage   15.4%   12.8%   14.6%   12.9%
Gross Margin Percentage, Before Cost of Sales Interest Expense and Land Charges (b)   18.4%   16.8%   18.0%   16.8%
Gross Margin Percentage, After Cost of Sales Interest Expense, Before Land Charges (b)   15.4%   13.6%   14.9%   13.5%
                 
    Land Sales Gross Margin   Land Sales Gross Margin
    Three Months Ended   Nine Months Ended
    July 31,   July 31,
    2018   2017   2018
  2017
    (Unaudited)   (Unaudited)
Land and Lot Sales   $-   $1,785   $20,505   $11,497
Cost of Sales, Excluding Interest and Land Charges (a)   -   817   7,710   7,387
Land and Lot Sales Gross Margin, Excluding Interest and Land Charges   -   968   12,795   4,110
Land and Lot Sales Interest   -   974   4,055   2,746
Land and Lot Sales Gross Margin, Including Interest and Excluding Land Charges   $-   $(6)   $8,740   $1,364
                 
(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.
July 31, 2018
Reconciliation of Adjusted EBITDA to Net (Loss)
(Dollars in Thousands)
  Three Months Ended   Nine Months Ended
  July 31,   July 31,
    2018       2017       2018       2017  
  (Unaudited)   (Unaudited)
Net (Loss) $(1,026 )   $(337,209 )   $(41,658 )   $(344,034 )
Income Tax Provision   1,104       287,036       1,687       286,485  
Interest Expense   38,283       42,930       125,158       126,513  
EBIT (a)   38,361       (7,243 )     85,187       68,964  
Depreciation   811       1,129       2,320       3,212  
Amortization of Debt Costs    -       -       -       1,632  
EBITDA (b)   39,172       (6,114 )     87,507       73,808  
Inventory Impairment Loss and Land Option Write-offs   96       4,197       3,183       9,334  
Loss on Extinguishment of Debt     4,266         42,258         5,706        34,854  
Adjusted EBITDA (c) $43,534     $40,341     $96,396     $117,996  
               
Interest Incurred $40,438     $39,089     $121,617     $116,944  
               
Adjusted EBITDA to Interest Incurred   1.08       1.03       0.79       1.01  
               
(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 on extinguishment of debt.
               
               
               
Hovnanian Enterprises, Inc.
July 31, 2018
Interest Incurred, Expensed and Capitalized
(Dollars in Thousands)
  Three Months Ended   Nine Months Ended
  July 31,   July 31,
    2018       2017       2018       2017  
  (Unaudited)   (Unaudited)
Interest Capitalized at Beginning of Period $65,355     $90,960     $71,051     $96,688  
Plus Interest Incurred   40,438         39,089        121,617         116,944  
Less Interest Expensed   38,283         42,930        125,158         126,513  
Interest Capitalized at End of Period (a) $67,510     $87,119     $67,510     $87,119  
               
(a) Capitalized interest amounts are shown gross before allocating any portion of impairments to capitalized interest.
 



HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)

      July 31,
2018
    October 31,
2017
       (Unaudited)      (1)
ASSETS            
Homebuilding:            
Cash and cash equivalents     $216,707     $463,697  
Restricted cash and cash equivalents     25,345     2,077  
Inventories:            
Sold and unsold homes and lots under development     913,469     744,119  
Land and land options held for future development or sale     98,585     140,924  
Consolidated inventory not owned     96,989     124,784  
Total inventories     1,109,043     1,009,827  
Investments in and advances to unconsolidated joint ventures     104,752     115,090  
Receivables, deposits and notes, net     37,911     58,149  
Property, plant and equipment, net     20,138     52,919  
Prepaid expenses and other assets     41,470     37,026  
Total homebuilding     1,555,366     1,738,785  
             
Financial services cash and cash equivalents     5,232     5,623  
Financial services other assets     107,890     156,490  
Total assets     $1,668,488      $1,900,898  
             
LIABILITIES AND EQUITY            
Homebuilding:            
Nonrecourse mortgages secured by inventory, net of debt issuance costs     $95,368     $64,512  
Accounts payable and other liabilities     311,230     335,057  
Customers' deposits     38,052     33,772  
Nonrecourse mortgages secured by operating properties     -     13,012  
Liabilities from inventory not owned, net of debt issuance costs     72,416     91,101  
Revolving and term loan credit facilities, net of debt issuance costs     301,460     124,987  
Notes payable (net of discount, premium and debt issuance costs) and accrued interest     1,255,158     1,554,687  
Total homebuilding     2,073,684     2,217,128  
             
Financial services     93,195     141,914  
Income taxes payable     2,240     2,227  
Total liabilities     2,169,119     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 July 31, 2018 and at October 31, 2017     135,299     135,299  
Common stock, Class A, $0.01 par value - authorized 400,000,000 shares; issued 144,523,768 shares at July 31, 2018 and 144,046,073 shares at October 31, 2017     1,445     1,440  
Common stock, Class B, $0.01 par value (convertible to Class A at time of sale) - authorized 60,000,000 shares; issued 16,243,454 shares at July 31, 2018 and 15,999,355 shares at October 31, 2017     162     160  
Paid in capital - common stock     707,857     706,466  
Accumulated deficit     (1,230,034 )   (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 July 31, 2018 and October 31, 2017     (115,360 )   (115,360
Total stockholders' equity deficit     (500,631 )   (460,371
Total liabilities and equity     $1,668,488     $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 July 31,     Nine Months Ended July 31,  
    2018     2017     2018     2017  
                         
Revenues:                        
Homebuilding:                        
Sale of homes   $442,859     $574,282     $1,312,553     $1,673,250  
Land sales and other revenues   844     2,760     26,918     14,393  
Total homebuilding   443,703     577,042     1,339,471     1,687,643  
Financial services   13,009     14,993     36,951     42,336  
Total revenues   456,712     592,035     1,376,422     1,729,979  
                         
Expenses:                        
Homebuilding:                        
Cost of sales, excluding interest   361,303     478,886     1,083,842     1,399,353  
Cost of sales interest   13,424     19,371     45,080     58,030  
Inventory impairment loss and land option write-offs   96     4,197     3,183     9,334  
Total cost of sales   374,823     502,454     1,132,105     1,466,717  
Selling, general and administrative   37,544     45,517     126,319     135,392  
Total homebuilding expenses   412,367     547,971     1,258,424     1,602,109  
                         
Financial services   8,986     8,867     26,125     23,082  
Corporate general and administrative   16,393     15,698     51,672     47,425  
Other interest   24,859     23,559     80,078     68,483  
Other operations   495     (26 )   1,287     1,466  
Total expenses   463,100     596,069     1,417,586     1,742,565  
Loss on extinguishment of debt   (4,266 )   (42,258 )   (5,706 )   (34,854 )
Income (loss) from unconsolidated joint ventures   10,732     (3,881 )   6,899     (10,109 )
Income (loss) before income taxes   78     (50,173 )   (39,971 )   (57,549 )
State and federal income tax provision:                        
State   1,104     8,523     1,687     10,797  
Federal   -     278,513     -     275,688  
Total income taxes   1,104     287,036     1,687     286,485  
Net (loss)   $(1,026 )   $(337,209 )   $(41,658 )   $(344,034 )
                         
Per share data:                        
Basic:                        
Net (loss) per common share   $(0.01 )   $(2.28 )   $(0.28 )   $(2.33 )
Weighted-average number of common shares outstanding   148,669     147,748     148,377     147,628  
Assuming dilution:                        
Net (loss) per common share   $(0.01 )   $(2.28 )   $(0.28 )   $(2.33 )
Weighted-average number of common shares outstanding   148,669     147,748     148,377     147,628  
                         



HOVNANIAN ENTERPRISES, INC.
(DOLLARS IN THOUSANDS EXCEPT AVG. PRICE)
(SEGMENT DATA EXCLUDES UNCONSOLIDATED JOINT VENTURES)
(UNAUDITED)
          Three Months - July 31, 2018      
    Contracts (1) Deliveries Contract
    Three Months Ended Three Months Ended Backlog
    July 31, July 31, July 31,
      2018   2017 % Change   2018   2017 % Change   2018   2017 % Change
Northeast                    
(NJ, PA) Home   32   52 (38.5 )%   47   86 (45.3 )%   68   116 (41.4 )%
  Dollars $18,045 $26,648 (32.3 )% $26,701 $40,015 (33.3 )% $40,058 $55,284 (27.5 )%
  Avg. Price $563,909 $512,462 10.0 % $568,106 $465,289 22.1 % $589,089 $476,586 23.6 %
Mid-Atlantic                    
(DE, MD, VA, WV) Home   144   173 (16.8 )%   144   194 (25.8 )%   324   419 (22.7 )%
  Dollars $76,324 $97,017 (21.3 )% $79,593 $113,111 (29.6 )% $196,011 $257,891 (24.0 )%
  Avg. Price $530,032 $560,791 (5.5 )% $552,726 $583,050 (5.2 )% $604,973 $615,493 (1.7 )%
Midwest                    
(IL, OH) Home   143   170 (15.9 )%   157   127 23.6 %   470   474 (0.8 )%
  Dollars $43,596 $48,257 (9.7 )% $45,579 $40,620 12.2 % $130,377 $133,775 (2.5 )%
  Avg. Price $304,865 $283,864 7.4 % $290,313 $319,839 (9.2 )% $277,397 $282,226 (1.7 )%
Southeast                    
(FL, GA, SC) Home   175   172 1.7 %   121   166 (27.1 )%   330   322 2.5 %
  Dollars $71,381 $73,896 (3.4 )% $47,472 $68,408 (30.6 )% $139,840 $142,296 (1.7 )%
  Avg. Price $407,894 $429,632 (5.1 )% $392,330 $412,098 (4.8 )% $423,757 $441,912 (4.1 )%
Southwest                    
(AZ, TX) Home   518   522 (0.8 )%   469   581 (19.3 )%   706   690 2.3 %
  Dollars $177,174 $177,285 (0.1 )% $157,406 $209,041 (24.7 )% $250,369 $244,114 2.6 %
  Avg. Price $342,036 $339,625 0.7 % $335,620 $359,793 (6.7 )% $354,630 $353,788 0.2 %
West                     
(CA) Home   224   232 (3.4 )%   204   196 4.1 %   389   454 (14.3 )%
  Dollars $102,183 $103,342 (1.1 )% $86,108 $103,087 (16.5 )% $189,868 $211,470 (10.2 )%
  Avg. Price $456,173 $445,439 2.4 % $422,099 $525,956 (19.7 )% $488,094 $465,792 4.8 %
Consolidated                    
Total Home   1,236   1,321 (6.4 )%   1,142   1,350 (15.4 )%   2,287   2,475 (7.6 )%
  Dollars $488,703 $526,445 (7.2 )% $442,859 $574,282 (22.9 )% $946,523 $1,044,830 (9.4 )%
  Avg. Price $395,392 $398,520 (0.8 )% $387,793 $425,394 (8.8 )% $413,871 $422,154 (2.0 )%
Unconsolidated                    
Joint Ventures (2) Home   215   212 1.4 %   296   117 153.0 %   555   405 37.0 %
  Dollars $127,195 $132,037 (3.7 )% $193,796 $62,127 211.9 % $370,113 $244,234 51.5 %
  Avg. Price $591,603 $622,812 (5.0 )% $654,716 $531,001 23.3 % $666,872 $603,046 10.6 %
Grand                    
Total Home   1,451   1,533 (5.3 )%   1,438   1,467 (2.0 )%   2,842   2,880 (1.3 )%
  Dollars $615,898 $658,482 (6.5 )% $636,655 $636,409 0.0 % $1,316,636 $1,289,064 2.1 %
  Avg. Price $424,465 $429,538 (1.2 )% $442,736 $433,817 2.1 % $463,278 $447,592 3.5 %
                     
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)
          Nine Months - July 31, 2018      
    Contracts (1) Deliveries Contract
    Nine Months Ended Nine Months Ended Backlog
    July 31, July 31, July 31,
      2018   2017 % Change   2018   2017 % Change   2018   2017 % Change
Northeast                    
(NJ, PA) Home   104   201 (48.3 )%   134   289 (53.6 )%   68   116 (41.4 )%
  Dollars $58,686 $94,611 (38.0 )% $70,406 $138,839 (49.3 )% $40,058 $55,284 (27.5 )%
  Avg. Price $564,290 $470,703 19.9 % $525,421 $480,412 9.4 % $589,089 $476,586 23.6 %
Mid-Atlantic                    
(DE, MD, VA, WV) Home   481   589 (18.3 )%   485   600 (19.2 )%   324   419 (22.7 )%
  Dollars $256,936 $322,308 (20.3 )% $254,660 $313,390 (18.7 )% $196,011 $257,891 (24.0 )%
  Avg. Price $534,170 $547,212 (2.4 )% $525,071 $522,317 0.5 % $604,973 $615,493 (1.7 )%
Midwest                    
(IL, OH) Home   528   511 3.3 %   440   411 7.1 %   470   474 (0.8 )%
  Dollars $160,320 $155,312 3.2 % $128,912 $126,065 2.3 % $130,377 $133,775 (2.5 )%
  Avg. Price $303,636 $303,938 (0.1 )% $292,982 $306,727 (4.5 )% $277,397 $282,226 (1.7 )%
Southeast                    
(FL, GA, SC) Home   456   421 8.3 %   411   431 (4.6 )%   330   322 2.5 %
  Dollars $184,577 $175,924 4.9 % $165,120 $178,799 (7.7 )% $139,840 $142,296 (1.7 )%
  Avg. Price $404,774 $417,873 (3.1 )% $401,751 $414,847 (3.2 )% $423,757 $441,912 (4.1 )%
Southwest                    
(AZ, TX) Home   1,516   1,678 (9.7 )%   1,319   1,751 (24.7 )%   706   690 2.3 %
  Dollars $517,119 $575,669 (10.2 )% $444,568 $617,199 (28.0 )% $250,369 $244,114 2.6 %
  Avg. Price $341,108 $343,068 (0.6 )% $337,049 $352,484 (4.4 )% $354,630 $353,788 0.2 %
West                     
(CA) Home   582   684 (14.9 )%   593   516 14.9 %   389   454 (14.3 )%
  Dollars $264,793 $330,287 (19.8 )% $248,887 $298,958 (16.7 )% $189,868 $211,470 (10.2 )%
  Avg. Price $454,970 $482,875 (5.8 )% $419,708 $579,376 (27.6 )% $488,094 $465,792 4.8 %
Consolidated                    
Total Home   3,667   4,084 (10.2 )%   3,382   3,998 (15.4 )%   2,287   2,475 (7.6 )%
  Dollars $1,442,431 $1,654,111 (12.8 )% $1,312,553 $1,673,250 (21.6 )% $946,523 $1,044,830 (9.4 )%
  Avg. Price $393,354 $405,022 (2.9 )% $388,100 $418,522 (7.3 )% $413,871 $422,154 (2.0 )%
Unconsolidated                    
Joint Ventures (2) Home   740   509 45.4 %   620   364 70.3 %   555   405 37.0 %
  Dollars $443,389 $299,654 48.0 % $348,191 $212,983 63.5 % $370,113 $244,234 51.5 %
  Avg. Price $599,175 $588,712 1.8 % $561,599 $585,118 (4.0 )% $666,872 $603,046 10.6 %
Grand                    
Total Home   4,407   4,593 (4.0 )%   4,002   4,362 (8.3 )%   2,842   2,880 (1.3 )%
  Dollars $1,885,820 $1,953,765 (3.5 )% $1,660,744 $1,886,233 (12.0 )% $1,316,636 $1,289,064 2.1 %
  Avg. Price $427,915 $425,379 0.6 % $414,978 $432,424 (4.0 )% $463,278 $447,592 3.5 %
                     
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 - July 31, 2018      
    Contracts (1) Deliveries Contract
    Three Months Ended Three Months Ended Backlog
    July 31, July 31, July 31,
      2018   2017 % Change   2018   2017 % Change   2018   2017 % Change
Northeast                    
(unconsolidated joint ventures) Home   65   105 (38.1 )%   140   19 636.8 %   227   153 48.4 %
(NJ, PA) Dollars $49,065 $78,516 (37.5 )% $109,889 $7,191 1,428.1 % $178,593 $105,356 69.5 %
  Avg. Price $754,849 $747,767 0.9 % $784,924 $378,470 107.4 % $786,756 $688,602 14.3 %
Mid-Atlantic                    
(unconsolidated joint ventures) Home   12   13 (7.7 )%   17   17 0.0 %   47   38 23.7 %
(DE, MD, VA, WV) Dollars $10,626 $6,820 55.8 % $13,335 $10,933 22.0 % $39,640 $25,138 57.7 %
  Avg. Price $885,500 $524,591 68.8 % $784,471 $643,118 22.0 % $843,404 $661,527 27.5 %
Midwest                    
(unconsolidated joint ventures) Home   4   13 (69.2 )%   16   6 166.7 %   19   35 (45.7 )%
(IL, OH) Dollars $2,121 $9,281 (77.1 )% $10,978 $4,824 127.6 % $14,556 $25,443 (42.8 )%
  Avg. Price $530,000 $713,893 (25.8 )% $686,063 $804,000 (14.7 )% $766,105 $726,943 5.4 %
Southeast                    
(unconsolidated joint ventures) Home   66   39 69.2 %   38   34 11.8 %   123   102 20.6 %
(FL, GA, SC) Dollars $31,702 $17,350 82.7 % $15,619 $15,731 (0.7 )% $61,917 $49,697 24.6 %
  Avg. Price $480,333 $444,869 8.0 % $411,029 $462,676 (11.2 )% $503,394 $487,224 3.3 %
Southwest                    
(unconsolidated joint ventures) Home   38   10 280.0 %   45   10 350.0 %   99   27 266.7 %
(AZ, TX) Dollars $22,656 $5,831 288.5 % $25,236 $6,925 264.4 % $60,849 $17,821 241.4 %
  Avg. Price $596,211 $583,100 2.2 % $560,802 $692,504 (19.0 )% $614,637 $660,037 (6.9 )%
West                    
(unconsolidated joint ventures) Home   30   32 (6.3 )%   40   31 29.0 %   40   50 (20.0 )%
(CA) Dollars $11,025 $14,239 (22.6 )% $18,739 $16,523 13.4 % $14,558 $20,779 (29.9 )%
  Avg. Price $367,532 $444,969 (17.4 )% $468,475 $533,000 (12.1 )% $363,954 $415,580 (12.4 )%
Unconsolidated Joint Ventures (2)                    
  Home   215   212 1.4 %   296   117 153.0 %   555   405 37.0 %
  Dollars $127,195 $132,037 (3.7 )% $193,796 $62,127 211.9 % $370,113 $244,234 51.5 %
  Avg. Price $591,603 $622,812 (5.0 )% $654,716 $531,001 23.3 % $666,872 $603,046 10.6 %
                     
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)
          Nine Months - July 31, 2018      
    Contracts (1) Deliveries Contract
    Nine Months Ended Nine Months Ended Backlog
    July 31, July 31, July 31,
      2018   2017 % Change   2018   2017 % Change   2018   2017 % Change
Northeast                    
(unconsolidated joint ventures) Home   256   157 63.1 %   246   31 693.5 %   227   153 48.4 %
(NJ, PA) Dollars $176,594 $106,970 65.1 % $154,680 $11,876 1,202.4 % $178,593 $105,356 69.5 %
  Avg. Price $689,819 $681,335 1.2 % $628,781 $383,097 64.1 % $786,756 $688,602 14.3 %
Mid-Atlantic                    
(unconsolidated joint ventures) Home   62   43 44.2 %   26   45 (42.2 )%   47   38 23.7 %
(DE, MD, VA, WV) Dollars $50,664 $22,584 124.3 % $22,133 $27,534 (19.6 )% $39,640 $25,138 57.7 %
  Avg. Price $817,159 $525,204 55.6 % $851,272 $611,867 39.1 % $843,404 $661,527 27.5 %
Midwest                    
(unconsolidated joint ventures) Home   28   40 (30.0 )%   36   17 111.8 %   19   35 (45.7 )%
(IL, OH) Dollars $19,091 $29,272 (34.8 )% $23,253 $13,418 73.3 % $14,556 $25,443 (42.8 )%
  Avg. Price $681,820 $731,800 (6.8 )% $645,916 $789,294 (18.2 )% $766,105 $726,943 5.4 %
Southeast                    
(unconsolidated joint ventures) Home   163   114 43.0 %   118   100 18.0 %   123   102 20.6 %
(FL, GA, SC) Dollars $77,408 $51,095 51.5 % $52,301 $45,121 15.9 % $61,917 $49,697 24.6 %
  Avg. Price $474,895 $448,201 6.0 % $443,229 $451,209 (1.8 )% $503,394 $487,224 3.3 %
Southwest                    
(unconsolidated joint ventures) Home   131   32 309.4 %   89   12 641.7 %   99   27 266.7 %
(AZ, TX) Dollars $78,003 $21,621 260.8 % $50,406 $8,278 508.9 % $60,849 $17,821 241.4 %
  Avg. Price $595,445 $675,656 (11.9 )% $566,359 $689,833 (17.9 )% $614,637 $660,037 (6.9 )%
West                    
(unconsolidated joint ventures) Home   100   123 (18.7 )%   105   159 (34.0 )%   40   50 (20.0 )%
(CA) Dollars $41,629 $68,112 (38.9 )% $45,418 $106,756 (57.5 )% $14,558 $20,779 (29.9 )%
  Avg. Price $416,295 $553,754 (24.8 )% $432,553 $671,423 (35.6 )% $363,954 $415,580 (12.4 )%
Unconsolidated Joint Ventures (2)                    
  Home   740   509 45.4 %   620   364 70.3 %   555   405 37.0 %
  Dollars $443,389 $299,654 48.0 % $348,191 $212,983 63.5 % $370,113 $244,234 51.5 %
  Avg. Price $599,175 $588,712 1.8 % $561,599 $585,118 (4.0 )% $666,872 $603,046 10.6 %
                     
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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