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Hovnanian Enterprises Reports Fiscal 2016 Second Quarter Results

/EIN News/ -- RED BANK, N.J., June 02, 2016 (GLOBE NEWSWIRE) -- Hovnanian Enterprises, Inc. (NYSE:HOV), a leading national homebuilder, reported results for its fiscal second quarter and six months ended April 30, 2016. 

RESULTS FOR THE THREE MONTH AND SIX MONTH PERIODS ENDED APRIL 30, 2016: 

  • Total revenues were $654.7 million in the second quarter of fiscal 2016, an increase of 39.6% compared with $468.9 million in the second quarter of fiscal 2015. For the six months ended April 30, 2016, total revenues increased 34.5% to $1.23 billion compared with $914.7 million in the first half of the prior year.
     
  • Total interest expense as a percentage of total revenues was 7.0% during the second quarter of fiscal 2016, a decrease of 50 basis points, compared with 7.5% in the same period of the previous year. For the six months ended April 30, 2016, total interest expense as a percentage of total revenues declined 100 basis points to 6.8% compared with 7.8% during the same period a year ago.
     
  • Total SG&A was $69.0 million, or 10.5% of total revenues, a 420 basis point improvement during the second quarter of fiscal 2016 compared with $69.1 million, or 14.7% of total revenues, in last year’s second quarter. Total SG&A was $132.8 million, or 10.8% of total revenues, a 380 basis point improvement for the first six months of fiscal 2016 compared with $133.7 million, or 14.6% of total revenues, in the first half of the prior year.
     
  • Homebuilding gross margin percentage, before interest expense and land charges included in cost of sales, was 16.1% for both the second quarter ended April 30, 2016 and 2015. During the first six months of fiscal 2016, homebuilding gross margin percentage, before interest expense and land charges included in cost of sales, was 16.3% compared with 17.1% in the same period of the previous year.
     
  • The loss before income taxes in the second quarter of fiscal 2016 was $17.6 million compared with a loss before income taxes of $29.5 million in the prior year’s second quarter. For the first half of fiscal 2016, the loss before income taxes was $30.8 million compared with a loss before income taxes of $49.2 million during the first six months of fiscal 2015.
     
  • The loss before income taxes, excluding land-related charges, in the second quarter of fiscal 2016 was $7.9 million compared with the loss before income taxes, excluding land-related charges, of $25.2 million in the prior year’s second quarter. For the first half of fiscal 2016, the loss before income taxes, excluding land-related charges, was $9.4 million compared with a loss before income taxes, excluding land-related charges, of $42.6 million during the first six months of fiscal 2015.
     
  • Net loss was $8.5 million, or $0.06 per common share, for the second quarter of fiscal 2016, compared with a net loss of $19.6 million, or $0.13 per common share, in the second quarter of the previous year. For the six months ended April 30, 2016, the net loss was $24.6 million, or $0.17 per common share, compared with a net loss of $33.9 million, or $0.23 per common share, in the first half of fiscal 2015.
     
  • For the second quarter of fiscal 2016, Adjusted EBITDA was $39.7 million compared with $12.2 million during the second quarter of 2015, a 224.4% increase. For the first half of fiscal 2016, Adjusted EBITDA increased 134.3% to $78.5 million compared with $33.5 million during the first six months of fiscal 2015.
     
  • As of April 30, 2016, consolidated active selling communities decreased 5.3% to 196 communities compared with 207 communities at the end of the prior year’s second quarter. As of end of the second quarter of fiscal 2016, active selling communities, including unconsolidated joint ventures, decreased 3.7% to 208 communities compared with 216 communities at April 30, 2015.
     
  • The dollar value of consolidated net contracts increased 9.6% to $768.1 million for the three months ended April 30, 2016 compared with $700.7 million during the same quarter a year ago. The dollar value of net contracts, including unconsolidated joint ventures, during the second quarter of fiscal 2016 increased 5.1% to $789.3 million compared with $750.9 million in last year’s second quarter.
     
  • The dollar value of consolidated net contracts increased 16.0% to $1.40 billion for the first six months of fiscal 2016 compared with $1.20 billion in the first half of the previous year. The dollar value of net contracts, including unconsolidated joint ventures, for the six months ended April 30, 2016 increased 14.6% to $1.46 billion compared with $1.27 billion in the first six months of fiscal 2015.
     
  • The number of consolidated net contracts, during the second quarter of fiscal 2016, increased 0.9% to 1,812 homes compared with 1,796 homes in the prior year’s second quarter. In the second quarter of fiscal 2016, the number of net contracts, including unconsolidated joint ventures, decreased 1.7% to 1,862 homes from 1,894 homes during the second quarter of fiscal 2015.
     
  • The number of consolidated net contracts, during the six month period ended April 30, 2016, increased 7.3% to 3,343 homes compared with 3,115 homes in the same period of the previous year. During the first half of fiscal 2016, the number of net contracts, including unconsolidated joint ventures, was 3,454 homes, an increase of 6.0% from 3,260 homes during the first six months of fiscal 2015.
     
  • Consolidated net contracts per active selling community increased 5.7% to 9.2 net contracts per active selling community for the second quarter of fiscal 2016 compared with 8.7 net contracts per active selling community in the second quarter of fiscal 2015. Net contracts per active selling community, including unconsolidated joint ventures, increased 2.3% to 9.0 net contracts per active selling community for the quarter ended April 30, 2016 compared with 8.8 net contracts, including unconsolidated joint ventures, per active selling community in the second quarter of fiscal 2015.
     
  • As of April 30, 2016, the dollar value of contract backlog, including unconsolidated joint ventures, was $1.58 billion, an increase of 27.8% compared with $1.23 billion as of April 30, 2015. The dollar value of consolidated contract backlog, as of April 30, 2016, increased 22.1% to $1.43 billion compared with $1.17 billion as of April 30, 2015.
     
  • As of April 30, 2016, the number of homes in contract backlog, including unconsolidated joint ventures, increased 11.7% to 3,453 homes compared with 3,092 homes as of April 30, 2015. The number of homes in consolidated contract backlog, as of April 30, 2016, increased 8.6% to 3,228 homes compared with 2,972 homes as of the end of the second quarter of fiscal 2015.
     
  • Consolidated deliveries were 1,598 homes in the second quarter of fiscal 2016, a 30.7% increase compared with 1,223 homes in the second quarter of fiscal 2015. For the three months ended April 30, 2016, deliveries, including unconsolidated joint ventures, increased 27.8% to 1,647 homes compared with 1,289 homes in the second quarter of the prior year.
     
  • Consolidated deliveries were 3,020 homes in the first half of fiscal 2016, a 27.3% increase compared with 2,372 homes in the same period in fiscal 2015. For the six months ended April 30, 2016, deliveries, including unconsolidated joint ventures, increased 24.1% to 3,113 homes compared with 2,509 homes in the first half of the prior year.
     
  • The contract cancellation rate, including unconsolidated joint ventures, for the second quarter of fiscal 2016 was 20%, compared with 17% in the second quarter of fiscal 2015.
     
  • The valuation allowance was $635.4 million as of April 30, 2016. The valuation allowance is a non-cash reserve against the tax assets for GAAP purposes. For tax purposes, the tax deductions associated with the tax assets may be carried forward for 20 years from the date the deductions were incurred.
     
  • During May 2016, the dollar value of consolidated net contracts increased 0.9% to $214.8 million compared with $212.8 million for May of 2015, and the number of consolidated net contracts decreased 3.2% to 512 homes in May 2016 from 529 homes in May 2015.


LIQUIDITY AND INVENTORY AS OF APRIL 30, 2016: 

  • After paying off $233.5 million of debt that matured in October 2015 and January 2016, total liquidity at the end of the second quarter of fiscal 2016 was $125.6 million.
     
  • During the second quarter of fiscal 2016, land and land development spending was $186.7 million compared with $108.1 million in last year’s second quarter and $116.6 million during the first quarter of fiscal 2016.
     
  • As of April 30, 2016, the land position, including unconsolidated joint ventures, was 34,997 lots, consisting of 15,622 lots under option and 19,375 owned lots, compared with a total of 37,140 lots as of April 30, 2015.
     
  • During the second quarter of fiscal 2016, approximately 800 lots, including unconsolidated joint ventures, were put under option or acquired in 22 communities.
     
  • Subsequent To The End Of The Second Quarter
     
    • Closed on land sale transactions to exit the Minneapolis, MN and Raleigh, NC markets.
       
    • Closed on seven communities in the first tranche of a new joint venture with funds managed by GTIS Partners LP.
       
    • Due to the above actions, total liquidity increased by an aggregate of $75.1 million.

    • Paid $86.5 million principal amount of debt that matured in May 2016.


FINANCIAL GUIDANCE: 

  • Assuming no changes in current market conditions and after the impact from exiting two markets, our guidance for all of fiscal 2016 for total revenues is expected to be between $2.7 billion and $2.9 billion. Adjusted EBITDA is expected to be between $200 million and $225 million and income before income taxes, excluding land related charges, gains or losses on extinguishment of debt and other non-recurring items such as legal settlements, is expected to be between $25 million and $50 million for all of fiscal 2016.

COMMENTS FROM MANAGEMENT: 

“While our revenue grew 40% and Adjusted EBITDA increased over 220%, as we said last quarter, we remain focused on deleveraging our balance sheet and maximizing our profitability rather than on additional growth,” stated Ara K. Hovnanian, Chairman of the Board, President and Chief Executive Officer. “Along with increasing our land and land development spend during the second quarter to $187 million, we have taken the steps we outlined in March to increase our cash position and paid off the $87 million principal amount of debt that matured on May 15, 2016. Since October 15, 2015, we have paid off $320 million of debt. More importantly, we continue to believe that we will have the liquidity to pay off the remaining debt maturities through the end of 2017. We are certain that we are taking the correct steps that will best position our company for future success. While it is discouraging to report a loss for the first half of fiscal 2016, it is nevertheless a significantly reduced loss, and we anticipate our profitability in the second half of the year will more than offset this loss.” 

WEBCAST INFORMATION: 

Hovnanian Enterprises will webcast its fiscal 2016 second quarter financial results conference call at 11:00 a.m. E.T. on Thursday, June 2, 2016. The webcast can be accessed live through the “Investor Relations” section of Hovnanian Enterprises’ website at http://www.khov.com. For those who are not available to listen to the live webcast, an archive of the broadcast will be available under the “Past Events” section of the Investor Relations page on the Hovnanian website at http://www.khov.com. The archive will be available for 12 months. 

ABOUT HOVNANIAN ENTERPRISES®, INC.: 

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

Additional information on Hovnanian Enterprises, Inc., including a summary investment profile and the Company’s 2015 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 (“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. 

Loss Before Income Taxes Excluding Land-Related Charges is a non-GAAP financial measure. The most directly comparable GAAP financial measure is Loss Before Income Taxes. The reconciliation for historical periods of Loss Before Income Taxes Excluding Land-Related Charges to Loss Before Income Taxes is presented in a table attached to this earnings release. 

With respect to our expectations under “Financial Guidance” above, for Adjusted EBITDA and Income Before Income Taxes Excluding Land-Related Charges a reconiciliation to the closest corresponding GAAP financial measures is not available without unreasonable efforts on a forward-looking basis due to the high variability, complexity and low visibility with respect to land-related charges excluded from these non-GAAP financial measures. We expect the variability of these charges to have a potentially unpredictable, and potentially significant, impact on our future GAAP financial results. 

Total liquidity is comprised of $120.7 million of cash and cash equivalents, $2.3 million of restricted cash required to collateralize letters of credit and $2.6 million of availability under the unsecured revolving credit facility as of April 30, 2016. 

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 the current or future financial periods, including total revenues, Adjusted EBITDA and adjusted income before income taxes. 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 the 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, 2015 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, 2016
Statements of Consolidated Operations
(In Thousands, Except Per Share Data) 
        Three Months Ended   Six Months Ended
        April 30,   April 30,
          2016       2015       2016       2015  
        (Unaudited)   (Unaudited)
Total Revenues $ 654,723     $ 468,949     $ 1,230,328     $ 914,663  
Costs and Expenses (a)   670,981       499,896       1,258,300       966,742  
(Loss) Income from Unconsolidated Joint Ventures   (1,346 )     1,466       (2,826 )     2,918  
Loss Before Income Taxes   (17,604 )     (29,481 )     (30,798 )     (49,161 )
Income Tax Benefit   (9,143 )     (9,922 )     (6,164 )     (15,226 )
Net Loss $ (8,461 )   $ (19,559 )   $ (24,634 )   $ (33,935 )
                     
Per Share Data:              
Basic:                
  Loss Per Common Share $ (0.06 )   $ (0.13 )   $ (0.17 )   $ (0.23 )
  Weighted Average Number of              
    Common Shares Outstanding (b)   147,334       146,946       147,301       146,762  
Assuming Dilution:              
  Loss Per Common Share $ (0.06 )   $ (0.13 )   $ (0.17 )   $ (0.23 )
  Weighted Average Number of              
    Common Shares Outstanding (b)   147,334       146,946       147,301       146,762  
                     
(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, 2016
Reconciliation of Loss Before Income Taxes Excluding Land-Related Charges to Loss Before Income Taxes
(Dollars in Thousands)
                     
        Three Months Ended Six Months Ended
        April 30,   April 30,
          2016       2015       2016       2015  
        (Unaudited)   (Unaudited)
Loss Before Income Taxes $ (17,604 )   $ (29,481 )   $ (30,798 )   $ (49,161 )
Inventory Impairment Loss and Land Option Write-Offs   9,669       4,311       21,350       6,541  
Loss Before Income Taxes Excluding Land-Related Charges(a) $ (7,935 )   $ (25,170 )   $ (9,448 )   $ (42,620 )
                     
(a) Loss Before Income Taxes Excluding Land-Related Charges is a non-GAAP Financial measure. The most directly comparable GAAP financial measure is Loss Before Income Taxes.
 

 

Hovnanian Enterprises, Inc.
April 30, 2016
Gross Margin
(Dollars in Thousands)
    Homebuilding Gross Margin   Homebuilding Gross Margin
    Three Months Ended   Six Months Ended
    April 30,   April 30,
      2016       2015       2016       2015  
    (Unaudited)   (Unaudited)
Sale of Homes   $ 626,157     $ 455,172     $ 1,182,932     $ 888,643  
Cost of Sales, Excluding Interest and Land Charges (a)     525,442       381,870       989,588       736,249  
Homebuilding Gross Margin, Excluding Interest and Land Charges     100,715       73,302       193,344       152,394  
Homebuilding Cost of Sales Interest     21,340       11,993       38,183       23,292  
Homebuilding Gross Margin, Including Interest and              
Excluding Land Charges $ 79,375     $ 61,309     $ 155,161     $ 129,102  
                 
Gross Margin Percentage, Excluding Interest and Land Charges     16.1 %     16.1 %     16.3 %     17.1 %
Gross Margin Percentage, Including Interest and              
Excluding Land Charges   12.7 %     13.5 %     13.1 %     14.5 %
                 
    Land Sales Gross Margin   Land Sales Gross Margin
    Three Months Ended   Six Months Ended
    April 30,   April 30,
      2016       2015       2016       2015  
    (Unaudited)   (Unaudited)
Land and Lot Sales   $ 11,154     $ 336     $ 11,154     $ 850  
Cost of Sales, Excluding Interest and Land Charges (a)     10,608       269       10,608       702  
Land and Lot Sales Gross Margin, Excluding Interest              
and Land Charges   546       67       546       148  
Land and Lot Sales Interest     104       20       104       39  
Land and Lot Sales Gross Margin, Including Interest              
and Excluding Land Charges $ 442     $ 47     $ 442     $ 109  
                 
                 
(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.
 

 

Hovnanian Enterprises, Inc.  
April 30, 2016  
Reconciliation of Adjusted EBITDA to Net Loss 
(Dollars in Thousands) 
  Three Months Ended   Six Months Ended
  April 30,   April 30,
    2016       2015       2016       2015  
  (Unaudited)   (Unaudited)
Net Loss $ (8,461 )   $ (19,559 )   $ (24,634 )   $ (33,935 )
Income Tax Benefit   (9,143 )     (9,922 )     (6,164 )     (15,226 )
Interest Expense   45,528       35,043       83,596       71,432  
EBIT (a)   27,924       5,562       52,798       22,271  
Depreciation   864       870       1,729       1,719  
Amortization of Debt Costs   1,227       1,489       2,610       2,961  
EBITDA (b)   30,015       7,921       57,137       26,951  
Inventory Impairment Loss and Land Option Write-offs   9,669       4,311       21,350       6,541  
Adjusted EBITDA (c) $ 39,684     $ 12,232     $ 78,487     $ 33,492  
               
Interest Incurred $ 44,224     $ 40,703     $ 86,183     $ 82,175  
               
Adjusted EBITDA to Interest Incurred   0.90       0.30       0.91       0.41  
               
               
               
(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 and inventory impairment loss and land option write-offs.
               
               
               
Hovnanian Enterprises, Inc. 
April 30, 2016
Interest Incurred, Expensed and Capitalized 
(Dollars in Thousands) 
  Three Months Ended   Six Months Ended
  April 30,   April 30,
    2016       2015       2016       2015  
  (Unaudited)   (Unaudited)
Interest Capitalized at Beginning of Period $ 117,113     $ 114,241     $ 123,898     $ 109,158  
Plus Interest Incurred    44,224        40,703        86,183         82,175  
Less Interest Expensed (a)    45,528        35,043        83,596         71,432  
Less Interest Contributed to Unconsolidated Joint Venture (a)    -         -        10,676       -  
Interest Capitalized at End of Period (b) $ 115,809     $ 119,901     $ 115,809     $ 119,901  
               
(a) Represents capitalized interest which was included as part of the assets contributed to the joint venture the Company entered into in November 2015. There was no impact to the Condensed Consolidated Statement of Operations as a result of this transaction
(b) Capitalized interest amounts are shown gross before allocating any portion of impairments to capitalized interest.  
   

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

    April 30,
2016
(Unaudited)
    October 31,
2015
 (1)
 
                 
ASSETS            
             
Homebuilding:            
Cash and cash equivalents   $ 120,661       $ 245,398    
Restricted cash and cash equivalents     6,259         7,299    
Inventories:            
Sold and unsold homes and lots under development     1,171,668         1,307,850    
Land and land options held for future development or sale     191,627         214,503    
Consolidated inventory not owned     312,841         122,225    
Total inventories     1,676,136         1,644,578    
Investments in and advances to unconsolidated joint ventures     70,061         61,209    
Receivables, deposits and notes, net     65,055         70,349    
Property, plant and equipment, net     45,670         45,534    
Prepaid expenses and other assets     80,004         77,671    
Total homebuilding     2,063,846         2,152,038    
             
Financial services:            
Cash and cash equivalents     8,993         8,347    
Restricted cash and cash equivalents     19,134         19,223    
Mortgage loans held for sale at fair value     129,999         130,320    
Other assets     2,586         2,091    
Total financial services     160,712         159,981    
Income taxes receivable – including net deferred tax benefits     294,069         290,279    
Total assets   $ 2,518,627       $ 2,602,298    
                     
(1) Derived from the audited balance sheet as of October 31, 2015.  
                     

 HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands Except Share and Per Share Amounts) 

    April 30,
2016
(Unaudited)
    October 31,
2015
(1)
 
                 
LIABILITIES AND EQUITY            
             
Homebuilding:            
Nonrecourse mortgages secured by inventory   $ 125,076       $ 143,863    
Accounts payable and other liabilities     360,946         348,516    
Customers’ deposits     47,976         44,218    
Nonrecourse mortgages secured by operating properties     14,924         15,511    
Liabilities from inventory not owned     220,348         105,856    
Total homebuilding     769,270         657,964    
             
Financial services:            
Accounts payable and other liabilities     27,574         27,908    
Mortgage warehouse lines of credit     109,132         108,875    
Total financial services     136,706         136,783    
             
Notes payable:            
Revolving credit agreement     50,000         47,000    
Senior secured notes, net of discount     982,086         981,346    
Senior notes, net of discount     607,575         780,319    
Senior amortizing notes     10,516         12,811    
Senior exchangeable notes     75,677         73,771    
Accrued interest     39,119         40,388    
Total notes payable     1,764,973         1,935,635    
Total liabilities     2,670,949         2,730,382    
             
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, 2016 and at October 31, 2015     135,299         135,299    
Common stock, Class A, $0.01 par value – authorized 400,000,000 shares; issued 143,563,023 shares at April 30, 2016 and 143,292,881 shares at October 31, 2015 (including 11,760,763 shares at April 30, 2016 and October 31, 2015 held in treasury)     1,436         1,433    
Common stock, Class B, $0.01 par value (convertible to Class A at time of sale) – authorized 60,000,000 shares; issued 16,009,617 shares at April 30, 2016 and 15,676,829 shares at October 31, 2015 (including 691,748 shares at April 30, 2016 and October 31, 2015 held in treasury)     160         157    
Paid in capital – common stock     704,141         703,751    
Accumulated deficit     (877,998 )       (853,364  
Treasury stock – at cost     (115,360       (115,360  
Total stockholders’ equity deficit     (152,322       (128,084  
Total liabilities and equity   $ 2,518,627       $ 2,602,298    
                     
(1) Derived from the audited balance sheet as of October 31, 2015.  
 
                     

 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,
 
      2016         2015         2016         2015    
Revenues:                        
Homebuilding:                        
Sale of homes   $ 626,157       $ 455,172       $ 1,182,932       $ 888,643    
Land sales and other revenues     11,563         1,320         12,167         2,441    
Total homebuilding     637,720         456,492         1,195,099         891,084    
Financial services     17,003         12,457         35,229         23,579    
Total revenues     654,723         468,949         1,230,328         914,663    
                         
Expenses:                        
Homebuilding:                        
Cost of sales, excluding interest     536,050         382,139         1,000,196         736,951    
Cost of sales interest     21,444         12,013         38,287         23,331    
Inventory impairment loss and land option write-offs     9,669         4,311         21,350         6,541    
Total cost of sales     567,163         398,463         1,059,833         766,823    
Selling, general and administrative     56,371         52,614         103,875         100,260    
Total homebuilding expenses     623,534         451,077         1,163,708         867,083    
                         
Financial services     9,618         7,508         17,833         14,825    
Corporate general and administrative     12,598         16,493         28,919         33,401    
Other interest     24,084         23,030         45,309         48,101    
Other operations     1,147         1,788         2,531         3,332    
Total expenses     670,981         499,896         1,258,300         966,742    
(Loss) income from unconsolidated joint ventures     (1,346       1,466         (2,826       2,918    
Loss before income taxes     (17,604       (29,481       (30,798       (49,161  
State and federal income tax (benefit) provision:                        
State     (758       (414       3,561         2,718    
Federal     (8,385       (9,508       (9,725       (17,944  
Total income taxes     (9,143       (9,922       (6,164       (15,226  
Net loss   $ (8,461     $ (19,559     $ (24,634     $ (33,935  
                         
Per share data:                        
Basic:                        
Loss per common share   $ (0.06     $ (0.13     $ (0.17     $ (0.23  
Weighted-average number of common shares outstanding     147,334         146,946         147,301         146,762    
Assuming dilution:                        
Loss per common share   $ (0.06     $ (0.13     $ (0.17     $ (0.23  
Weighted-average number of common shares outstanding     147,334         146,946         147,301         146,762    
                                         

 

HOVNANIAN ENTERPRISES, INC.
(DOLLARS IN THOUSANDS EXCEPT AVG. PRICE)
(SEGMENT DATA EXCLUDES UNCONSOLIDATED JOINT VENTURES)
(UNAUDITED)
          Communities Under Development      
          Three Months - April 30, 2016      
    Net Contracts Deliveries Contract
    Three Months Ended Three Months Ended Backlog
    Apr 30, Apr 30, Apr 30,
      2016     2015   % Change   2016     2015   % Change   2016     2015   % Change
Northeast                     
(NJ, PA) Homes   142     140     1.4 %   108     70     54.3 %   268     227     18.1 %
  Dollars $ 74,727   $ 69,717     7.2 % $ 53,913   $ 39,123     37.8 % $ 135,164   $ 110,032     22.8 %
  Avg. Price $ 526,248   $ 497,975     5.7 % $ 499,194   $ 558,897     (10.7 )% $ 504,343   $ 484,720     4.0 %
Mid-Atlantic                     
(DE, MD, VA, WV) Homes   285     247     15.4 %   194     164     18.3 %   598     474     26.2 %
  Dollars $ 150,369   $ 116,843     28.7 % $ 89,873   $ 76,102     18.1 % $ 336,358   $ 250,862     34.1 %
  Avg. Price $ 527,609   $ 473,047     11.5 % $ 463,262   $ 464,035     (0.2 )% $ 562,472   $ 529,245     6.3 %
Midwest                     
(IL, MN, OH) Homes   216     311     (30.5 )%   239     218     9.6 %   554     763     (27.4 )%
  Dollars $ 69,445   $ 101,807     (31.8 )% $ 76,793   $ 73,214     4.9 % $ 162,671   $ 223,759     (27.3 )%
  Avg. Price $ 321,503   $ 327,353     (1.8 )% $ 321,312   $ 335,847     (4.3 )% $ 293,630   $ 293,262     0.1 %
Southeast                     
(FL, GA, NC, SC) Homes   205     205     0.0 %   156     158     (1.3 )%   425     331     28.4 %
  Dollars $ 84,665   $ 66,824     26.7 % $ 51,230   $ 49,255     4.0 % $ 190,435   $ 113,146     68.3 %
  Avg. Price $ 412,996   $ 325,971     26.7 % $ 328,396   $ 311,740     5.3 % $ 448,083   $ 341,832     31.1 %
Southwest                     
(AZ, TX) Homes   731     761     (3.9 )%   733     532     37.8 %   1,041     1,060     (1.8 )%
  Dollars $ 262,344   $ 290,901     (9.8 )% $ 273,304   $ 189,974     43.9 % $ 416,205   $ 423,221     (1.7 )%
  Avg. Price $ 358,884   $ 382,262     (6.1 )% $ 372,857   $ 357,095     4.4 % $ 399,812   $ 399,265     0.1 %
West                     
(CA) Homes   233     132     76.5 %   168     81     107.4 %   342     117     192.3 %
  Dollars $ 126,505   $ 54,648     131.5 % $ 81,044   $ 27,504     194.7 % $ 188,859   $ 50,081     277.1 %
  Avg. Price $ 542,944   $ 414,000     31.1 % $ 482,404   $ 339,552     42.1 % $ 552,218   $ 428,047     29.0 %
Consolidated Total                    
  Homes   1,812     1,796     0.9 %   1,598     1,223     30.7 %   3,228     2,972     8.6 %
  Dollars $ 768,055   $ 700,740     9.6 % $ 626,157   $ 455,172     37.6 % $ 1,429,692   $ 1,171,101     22.1 %
  Avg. Price $ 423,871   $ 390,167     8.6 % $ 391,838   $ 372,177     5.3 % $ 442,903   $ 394,045     12.4 %
Unconsolidated Joint Ventures                    
  Homes   50     98     (49.0 )%   49     66     (25.8 )%   225     120     87.5 %
  Dollars $ 21,236   $ 50,132     (57.6 )% $ 25,576   $ 27,325     (6.4 )% $ 147,376   $ 62,433     136.1 %
  Avg. Price $ 424,720   $ 511,551     (17.0 )% $ 521,959   $ 414,015     26.1 % $ 655,004   $ 520,271     25.9 %
Grand Total                    
  Homes   1,862     1,894     (1.7 )%   1,647     1,289     27.8 %   3,453     3,092     11.7 %
  Dollars $ 789,291   $ 750,872     5.1 % $ 651,733   $ 482,497     35.1 % $ 1,577,068   $ 1,233,534     27.8 %
  Avg. Price $ 423,894   $ 396,448     6.9 % $ 395,709   $ 374,319     5.7 % $ 456,724   $ 398,944     14.5 %
                     
DELIVERIES INCLUDE EXTRAS
Notes:
(1) Net contracts are defined as new contracts signed during the period for the purchase of homes, less cancellations of prior contracts.
 

 

HOVNANIAN ENTERPRISES, INC.
(DOLLARS IN THOUSANDS EXCEPT AVG. PRICE)
(SEGMENT DATA INCLUDES UNCONSOLIDATED JOINT VENTURES)
(UNAUDITED)
          Communities Under Development      
          Three Months - April 30, 2016      
    Net Contracts Deliveries Contract
    Three Months Ended Three Months Ended Backlog
    Apr 30, Apr 30, Apr 30,
      2016     2015   % Change   2016     2015   % Change   2016     2015   % Change
Northeast                     
(includes unconsolidated joint ventures) Homes   139     150     (7.3 )%   114     73     56.2 %   294     243     21.0 %
(NJ, PA) Dollars $ 71,044   $ 72,656     (2.2 )% $ 55,554   $ 39,885     39.3 % $ 144,767   $ 114,853     26.0 %
  Avg. Price $ 511,110   $ 484,368     5.5 % $ 487,315   $ 546,354     (10.8 )% $ 492,406   $ 472,647     4.2 %
Mid-Atlantic                     
(includes unconsolidated joint ventures) Homes   303     275     10.2 %   203     187     8.6 %   624     512     21.9 %
(DE, MD, VA, WV) Dollars $ 158,359   $ 131,083     20.8 % $ 95,339   $ 88,164     8.1 % $ 347,444   $ 272,944     27.3 %
  Avg. Price $ 522,637   $ 476,666     9.6 % $ 469,649   $ 471,468     (0.4 )% $ 556,802   $ 533,094     4.4 %
Midwest                     
(includes unconsolidated joint ventures) Homes   216     311     (30.5 )%   239     224     6.7 %   554     763     (27.4 )%
(IL, MN, OH) Dollars $ 69,445   $ 101,571     (31.6 )% $ 76,793   $ 74,969     2.4 % $ 162,671   $ 223,759     (27.3 )%
  Avg. Price $ 321,503   $ 326,594     (1.6 )% $ 321,312   $ 334,684     (4.0 )% $ 293,630   $ 293,262     0.1 %
Southeast                     
(includes unconsolidated joint ventures) Homes   221     222     (0.5 )%   156     178     (12.4 )%   456     353     29.2 %
(FL, GA, NC, SC) Dollars $ 94,422   $ 74,030     27.5 % $ 51,230   $ 57,538     (11.0 )% $ 209,558   $ 122,444     71.1 %
  Avg. Price $ 427,247   $ 333,469     28.1 % $ 328,396   $ 323,248     1.6 % $ 459,558   $ 346,867     32.5 %
Southwest                     
(includes unconsolidated joint ventures) Homes   731     761     (3.9 )%   733     532     37.8 %   1,041     1,060     (1.8 )%
(AZ, TX) Dollars $ 262,344   $ 290,901     (9.8 )% $ 273,304   $ 189,974     43.9 % $ 416,205   $ 423,221     (1.7 )%
  Avg. Price $ 358,884   $ 382,262     (6.1 )% $ 372,857   $ 357,095     4.4 % $ 399,812   $ 399,265     0.1 %
West                     
(includes unconsolidated joint ventures) Homes   252     175     44.0 %   202     95     112.6 %   484     161     200.6 %
(CA) Dollars $ 133,676   $ 80,631     65.8 % $ 99,513   $ 31,967     211.3 % $ 296,423   $ 76,313     288.4 %
  Avg. Price $ 530,462   $ 460,750     15.1 % $ 492,640   $ 336,493     46.4 % $ 612,443   $ 473,992     29.2 %
Grand Total                    
  Homes   1,862     1,894     (1.7 )%   1,647     1,289     27.8 %   3,453     3,092     11.7 %
  Dollars $ 789,291   $ 750,872     5.1 % $ 651,733   $ 482,497     35.1 % $ 1,577,068   $ 1,233,534     27.8 %
  Avg. Price $ 423,894   $ 396,448     6.9 % $ 395,709   $ 374,319     5.7 % $ 456,724   $ 398,944     14.5 %
Consolidated Total                    
  Homes   1,812     1,796     0.9 %   1,598     1,223     30.7 %   3,228     2,972     8.6 %
  Dollars $ 768,055   $ 700,740     9.6 % $ 626,157   $ 455,172     37.6 % $ 1,429,692   $ 1,171,101     22.1 %
  Avg. Price $ 423,871   $ 390,167     8.6 % $ 391,838   $ 372,177     5.3 % $ 442,903   $ 394,045     12.4 %
Unconsolidated Joint Ventures                    
  Homes   50     98     (49.0 )%   49     66     (25.8 )%   225     120     87.5 %
  Dollars $ 21,236   $ 50,132     (57.6 )% $ 25,576   $ 27,325     (6.4 )% $ 147,376   $ 62,433     136.1 %
  Avg. Price $ 424,720   $ 511,551     (17.0 )% $ 521,959   $ 414,015     26.1 % $ 655,004   $ 520,271     25.9 %
                     
DELIVERIES INCLUDE EXTRAS
Notes:
(1) Net contracts are defined as new contracts signed during the period for the purchase of homes, less cancellations of prior contracts.
         

 

HOVNANIAN ENTERPRISES, INC.
(DOLLARS IN THOUSANDS EXCEPT AVG. PRICE)
(SEGMENT DATA EXCLUDES UNCONSOLIDATED JOINT VENTURES)
(UNAUDITED)
          Communities Under Development      
          Six Months - April 30, 2016      
    Net Contracts Deliveries Contract
    Six Months Ended Six Months Ending Backlog
    Apr 30, Apr 30, Apr 30,
      2016     2015   % Change   2016     2015   % Change   2016     2015   % Change
Northeast                     
(NJ, PA) Homes   234     247     (5.3 )%   259     166     56.0 %   268     227     18.1 %
  Dollars $ 114,511   $ 126,470     (9.5 )% $ 126,351   $ 89,764     40.8 % $ 135,164   $ 110,032     22.8 %
  Avg. Price $ 489,363   $ 512,024     (4.4 )% $ 487,841   $ 540,748     (9.8 )% $ 504,343   $ 484,720     4.0 %
Mid-Atlantic                       
(DE, MD, VA, WV) Homes   545     458     19.0 %   400     355     12.7 %   598     474     26.2 %
  Dollars $ 280,685   $ 218,952     28.2 % $ 183,425   $ 157,013     16.8 % $ 336,358   $ 250,862     34.1 %
  Avg. Price $ 515,017   $ 478,061     7.7 % $ 458,562   $ 442,290     3.7 % $ 562,472   $ 529,245     6.3 %
Midwest                     
(IL, MN, OH) Homes   423     519     (18.5 )%   513     421     21.9 %   554     763     (27.4 )%
  Dollars $ 137,014   $ 172,788     (20.7 )% $ 168,633   $ 137,624     22.5 % $ 162,671   $ 223,759     (27.3 )%
  Avg. Price $ 323,911   $ 332,926     (2.7 )% $ 328,720   $ 326,899     0.6 % $ 293,630   $ 293,262     0.1 %
Southeast                     
(FL, GA, NC, SC) Homes   418     378     10.6 %   272     279     (2.5 )%   425     331     28.4 %
  Dollars $ 174,924   $ 119,114     46.9 % $ 90,424   $ 87,039     3.9 % $ 190,435   $ 113,146     68.3 %
  Avg. Price $ 418,478   $ 315,118     32.8 % $ 332,443   $ 311,967     6.6 % $ 448,083   $ 341,832     31.1 %
Southwest                     
(AZ, TX) Homes   1,291     1,299     (0.6 )%   1,283     1,009     27.2 %   1,041     1,060     (1.8 )%
  Dollars $ 470,986   $ 484,485     (2.8 )% $ 477,493   $ 356,584     33.9 % $ 416,205   $ 423,221     (1.7 )%
  Avg. Price $ 364,823   $ 372,968     (2.2 )% $ 372,169   $ 353,403     5.3 % $ 399,812   $ 399,265     0.1 %
West                     
(CA) Homes   432     214     101.9 %   293     142     106.3 %   342     117     192.3 %
  Dollars $ 218,578   $ 82,088     166.3 % $ 136,606   $ 60,619     125.4 % $ 188,859   $ 50,081     277.1 %
  Avg. Price $ 505,969   $ 383,591     31.9 % $ 466,231   $ 426,891     9.2 % $ 552,218   $ 428,047     29.0 %
Consolidated Total                    
  Homes   3,343     3,115     7.3 %   3,020     2,372     27.3 %   3,228     2,972     8.6 %
  Dollars $ 1,396,698   $ 1,203,897     16.0 % $ 1,182,932   $ 888,643     33.1 % $ 1,429,692   $ 1,171,101     22.1 %
  Avg. Price $ 417,798   $ 386,484     8.1 % $ 391,699   $ 374,639     4.6 % $ 442,903   $ 394,045     12.4 %
Unconsolidated Joint Ventures                    
  Homes   111     145     (23.4 )%   93     137     (32.1 )%   225     120     87.5 %
  Dollars $ 61,057   $ 68,213     (10.5 )% $ 45,763   $ 54,904     (16.6 )% $ 147,376   $ 62,433     136.1 %
  Avg. Price $ 550,061   $ 470,436     16.9 % $ 492,074   $ 400,758     22.8 % $ 655,004   $ 520,271     25.9 %
Grand Total                    
  Homes   3,454     3,260     6.0 %   3,113     2,509     24.1 %   3,453     3,092     11.7 %
  Dollars $ 1,457,755   $ 1,272,110     14.6 % $ 1,228,695   $ 943,547     30.2 % $ 1,577,068   $ 1,233,534     27.8 %
  Avg. Price $ 422,048   $ 390,218     8.2 % $ 394,698   $ 376,065     5.0 % $ 456,724   $ 398,944     14.5 %
                     
DELIVERIES INCLUDE EXTRAS
Notes:
(1) Net contracts are defined as new contracts signed during the period for the purchase of homes, less cancellations of prior contracts.
 

 

HOVNANIAN ENTERPRISES, INC.
(DOLLARS IN THOUSANDS EXCEPT AVG. PRICE)
(SEGMENT DATA INCLUDES UNCONSOLIDATED JOINT VENTURES)
(UNAUDITED)
          Communities Under Development      
          Six Months - April 30, 2016      
    Net Contracts Deliveries Contract
    Six Months Ended Six Months Ended Backlog
    Apr 30, Apr 30, Apr 30,
      2016     2015   % Change   2016     2015   % Change   2016     2015   % Change
Northeast                     
(includes unconsolidated joint ventures) Homes   226     258     (12.4 )%   273     181     50.8 %   294     243     21.0 %
(NJ, PA) Dollars $ 106,538   $ 127,257     (16.3 )% $ 130,247   $ 93,984     38.6 % $ 144,767   $ 114,853     26.0 %
  Avg. Price $ 471,407   $ 493,244     (4.4 )% $ 477,094   $ 519,249     (8.1 )% $ 492,406   $ 472,647     4.2 %
Mid-Atlantic                     
(includes unconsolidated joint ventures) Homes   576     503     14.5 %   419     397     5.5 %   624     512     21.9 %
(DE, MD, VA, WV) Dollars $ 295,098   $ 242,645     21.6 % $ 194,560   $ 179,662     8.3 % $ 347,444   $ 272,944     27.3 %
  Avg. Price $ 512,322   $ 482,396     6.2 % $ 464,343   $ 452,550     2.6 % $ 556,802   $ 533,094     4.4 %
Midwest                     
(includes unconsolidated joint ventures) Homes   423     519     (18.5 )%   513     438     17.1 %   554     763     (27.4 )%
(IL, MN, OH) Dollars $ 137,014   $ 172,805     (20.7 )% $ 168,633   $ 142,306     18.5 % $ 162,671   $ 223,759     (27.3 )%
  Avg. Price $ 323,911   $ 332,957     (2.7 )% $ 328,720   $ 324,899     1.2 % $ 293,630   $ 293,262     0.1 %
Southeast                     
(includes unconsolidated joint ventures) Homes   441     411     7.3 %   273     319     (14.4 )%   456     353     29.2 %
(FL, GA, NC, SC) Dollars $ 189,508   $ 132,824     42.7 % $ 90,809   $ 103,373     (12.2 )% $ 209,558   $ 122,444     71.1 %
  Avg. Price $ 429,723   $ 323,173     33.0 % $ 332,635   $ 324,052     2.6 % $ 459,558   $ 346,867     32.5 %
Southwest                     
(includes unconsolidated joint ventures) Homes   1,291     1,299     (0.6 )%   1,283     1,009     27.2 %   1,041     1,060     (1.8 )%
(AZ, TX) Dollars $ 470,986   $ 484,485     (2.8 )% $ 477,493   $ 356,584     33.9 % $ 416,205   $ 423,221     (1.7 )%
  Avg. Price $ 364,823   $ 372,968     (2.2 )% $ 372,169   $ 353,403     5.3 % $ 399,812   $ 399,265     0.1 %
West                       
(includes unconsolidated joint ventures) Homes   497     270     84.1 %   352     165     113.3 %   484     161     200.6 %
(CA) Dollars $ 258,611   $ 112,094     130.7 % $ 166,953   $ 67,638     146.8 % $ 296,423   $ 76,313     288.4 %
  Avg. Price $ 520,344   $ 415,163     25.3 % $ 474,298   $ 409,929     15.7 % $ 612,443   $ 473,992     29.2 %
Grand Total                    
  Homes   3,454     3,260     6.0 %   3,113     2,509     24.1 %   3,453     3,092     11.7 %
  Dollars $ 1,457,755   $ 1,272,110     14.6 % $ 1,228,695   $ 943,547     30.2 % $ 1,577,068   $ 1,233,534     27.8 %
  Avg. Price $ 422,048   $ 390,218     8.2 % $ 394,698   $ 376,065     5.0 % $ 456,724   $ 398,944     14.5 %
Consolidated Total                    
  Homes   3,343     3,115     7.3 %   3,020     2,372     27.3 %   3,228     2,972     8.6 %
  Dollars $ 1,396,698   $ 1,203,897     16.0 % $ 1,182,932   $ 888,643     33.1 % $ 1,429,692   $ 1,171,101     22.1 %
  Avg. Price $ 417,798   $ 386,484     8.1 % $ 391,699   $ 374,639     4.6 % $ 442,903   $ 394,045     12.4 %
Unconsolidated Joint Ventures                    
  Homes   111     145     (23.4 )%   93     137     (32.1 )%   225     120     87.5 %
  Dollars $ 61,057   $ 68,213     (10.5 )% $ 45,763   $ 54,904     (16.6 )% $ 147,376   $ 62,433     136.1 %
  Avg. Price $ 550,061   $ 470,436     16.9 % $ 492,074   $ 400,758     22.8 % $ 655,004   $ 520,271     25.9 %
                     
DELIVERIES INCLUDE EXTRAS 
Notes:
(1) Net contracts are defined as new contracts signed during the period for the purchase of homes, less cancellations of prior contracts.
         
Contact:
J. Larry Sorsby
Executive Vice President & CFO
732-747-7800

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

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