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UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): May 28, 2003 HOVNANIAN ENTERPRISES, INC. (Exact Name of Registrant as Specified in Charter) Delaware 1-8551 22-1851059 (State or Other Jurisdiction of Incorporation) (Commission File Number) (I.R.S. Employer Identification No.) 10 Highway 35, P.O. Box 500 Red Bank, New Jersey 07701 (Address of Principal Executive Offices) (Zip Code) (732) 747-7800 (Registrant's telephone number, including area code) Not Applicable (Former Name or Former Address, if Changed Since Last Report) Item 7. Financial Statements, Pro Forma Financial Information and Exhibits (c) Exhibits. Exhibit 99.1 Earnings Press Release - Second Quarter Ended April 30, 2003. Item 9. Regulation FD Disclosure The information contained in this Item 9 is being furnished pursuant to Item 12. "Results of Operations and Financial Condition" in accordance with SEC Release 33-8216; 34-47583; IC-25983; March 27, 2003. The information in this Current Report is being furnished and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that Section. The information in this Current Report shall not be deemed incorporated by reference into any registration statement or other filing under the Securities Act of 1933, as amended, or the Exchange Act. On May 28, 2003, the Company issued a press release announcing its preliminary financial results for the second quarter ended April 30, 2003. A copy of the Earnings Press Release is attached as Exhibit 99.1. The Earnings Press Release contains information about EBITDA, a non-GAAP financial measure. The most directly comparable GAAP financial measure to EBITDA is income before income taxes. A reconciliation of EBITDA to income before income taxes is contained in the Earnings Press Release. Management believes EBITDA to be relevant and useful information as EBITDA is a standard measure commonly reported and widely used by analysts, investors and others to measure our financial performance and our ability to service our debt obligation. EBITDA is also one of several metrics used by our management to measure the cash generated from our operations. EBITDA does not take into account substantial costs of doing business, such as income taxes and interest expense. While many in the financial community consider EBITDA to be an important measure of comparative operating performance, it should be considered in addition to, but not as a substitute for, income before income taxes, net income, cash flow provided by operating activities and other measures of financial performance prepared in accordance with accounting principles generally accepted in the United States that are presented on the financial statements included in the Company's reports filed with the SEC. Additionally, our calculation of EBITDA may be different than the calculation used by other companies and, therefore, comparability may be affected. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. HOVNANIAN ENTERPRISES, INC. (Registrant) By: /S/J. LARRY SORSBY Name: J. Larry Sorsby Title: Executive Vice President and Chief Financial Officer Date: May 28, 2003 INDEX TO EXHIBITS Exhibit Number Exhibit Exhibit 99.1 Earnings Press Release - Second Quarter Ended April 30, 2003. 2 2 3 4
Hovnanian Enterprises Reports 100% Increase in Second Quarter EPS, With
Record Second Quarter Revenues, Earnings, Net Contracts and Backlog;
Raises Fiscal 2003 Earnings Projection and Issues 2004 EPS Projection
Highlights for the Quarter Ended April 30, 2003
- - Net earnings totaled $52.6 million for the quarter, a 103%
increase in earnings from the record level achieved in last
year's second quarter. Revenues increased 21% to $679.8
million. The Company's pretax margin rose to 12.4% from 7.4% in
the prior year's second quarter.
- - The Company reported earnings of $1.60 per fully diluted share,
significantly ahead of analyst estimates and double the $0.80
per share earned in last year's second quarter. These results
reflect healthy consumer demand and the Company's focus on
profitability improvements.
- - Management is increasing its projection for fiscal 2003 earnings
to the range of $6.50 to $6.75 per share from $5.25 to $5.50 per
share and is providing an initial projection of $7.50 in
earnings per share for fiscal 2004. The revised 2003 estimate
represents a range of net income from $211 million to $219
million, a 53% to 59% increase from fiscal 2002.
- - Hovnanian closed the acquisition of Summit Homes, a "build-on-
your-lot" homebuilding company with operations in Ohio, Western
Pennsylvania and West Virginia. This acquisition provides a
successful and profitable platform for growth, and is an
excellent fit with the Company's strategy of diversifying
further into wider segments of the housing market.
- - The Company's consolidated homebuilding gross margin for the
second quarter, excluding land sales, was 25.6%, an increase of
490 basis points from the second quarter of fiscal 2002.
- - Deliveries increased to 2,496 homes, an all-time record for the
Company in the second quarter, eclipsing 2002's record second
quarter by 16%. Net contracts climbed 16% from last year's
results to 3,389 homes valued at $909.7 million.
- - Contract backlog at April 30, 2003 was an all-time record 5,300
homes with a sales value of $1.4 billion, an increase of 18%
from the same period last year. The number of homes in contract
backlog, combined with the number of home deliveries year-to-
date, is equal to more than 90% of aggregate forecasted
deliveries for fiscal 2003.
- - The Company's total number of active selling communities
increased 24% to 244 at April 30, 2003 from 196 communities at
October 31, 2002.
RED BANK, N.J., May 28 /PRNewswire-FirstCall/ -- Hovnanian Enterprises,
Inc. (NYSE: HOV), a leading national homebuilder, reported net income of
$52.6 million, or $1.60 per fully diluted share, on $679.8 million in total
revenue for the second quarter ended April 30, 2003. Analysts who cover the
Company's stock had published earnings estimates ranging from $1.15 to $1.27
per diluted share for Hovnanian's fiscal second quarter. Last year's second
quarter net income was $25.9 million, or $0.80 per fully diluted share, on
revenue of $561.0 million. Pretax earnings from Financial Services
increased to $4.7 million, up 32% from last year's second quarter.
During the quarter, Hovnanian completed the acquisition of Summit Homes,
a privately held homebuilder headquartered in Canton, Ohio. This
acquisition marks Hovnanian's entry into the Ohio market and expands the
Company's "build-on-your-lot" homebuilding operations. The contracts,
deliveries, revenues, and earnings from the Summit Homes operation from the
date of closing were included in the results for the second quarter of 2003.
For the six months ended April 30, 2002, revenue reached $1.31 billion,
up 29% compared to $1.02 billion in the year earlier period. Net income for
the first six months of fiscal 2002 increased 121% to $97.3 million, or
$2.95 per fully diluted share compared to $44.1 million or $1.40 per share
in 2002. The dollar value of year-to-year net contracts during the six-
month period increased by 24.8% and the number of home deliveries rose by
22.3%.
Comments from Management
"Fiscal 2003 continues to be a strong year, and we are very proud of our
exceptional financial and operating performance in the second quarter," said
Ara K. Hovnanian, President and Chief Executive Officer of the Company.
"Our ability to consistently deliver a solid financial performance is
testimony to our strategy and growth objectives. While acquisitions
continue to play a role in the growth and diversification of our business,
over 96% of our earnings this quarter, or $1.54 per diluted share, were
generated from growth in our organic operations, excluding the acquisitions
of Summit Homes, Brighton Homes and Parkside Homes, which occurred during
this fiscal year. Healthy consumer demand for new homes and our ability to
increase home prices in certain communities have contributed to our strong
results. In addition, our process improvement initiatives continue to gain
momentum and we remain focused on applying best practices throughout our
organization. The result is a 490 basis point improvement in our
homebuilding margin for the quarter, compared with last year's second
quarter. Once again we have exceeded our internal forecast and the market's
expectations for earnings, and doubled our prior year's second quarter
earnings per share," he added.
"Our strong second quarter results and a record sales backlog with
improved margins allow us to increase our projections for the current fiscal
year to a range of earnings between $6.50 and $6.75 per fully diluted
share," Mr. Hovnanian stated. "This revised earnings projection represents
a 52% to 58% increase from last year's record earnings of $4.28 per share.
Fiscal 2003 revenue is expected to climb to nearly $3.0 billion, and
deliveries are anticipated to exceed 10,500 homes," he said. "Assuming
economic conditions remain similar to those we are currently experiencing,
we are projecting that our fiscal 2004 earnings will increase to $7.50 per
diluted share," he said. "Despite weakness in the economy, we continue to
experience solid demand for new homes in most of our markets. We will be
announcing our new home orders for the month of May next week, and month-to-
date results indicate that it has been another strong month for the Company.
We are encouraged by the depth of our backlog as we head into the second
half of fiscal 2003," Mr. Hovnanian concluded.
In the first week following the end of the second quarter, Hovnanian
issued $150 million of 7.75% senior subordinated notes due in 2013. Net
proceeds were used to pay off the outstanding balance of the Company's
unsecured revolving credit facility, to fund ongoing operations and to
finance the Company's continued growth. The outstanding balance on the
revolving credit facility at the end of the quarter was $29.8 million.
"Favorable conditions in the public debt markets provided an opportunity to
lock in long-term subordinated debt at a very attractive rate," said J.
Larry Sorsby, Executive Vice President and Chief Financial Officer. "This
long-term debt allows us to maintain ample liquidity under our $513 million
unsecured revolving credit facility," he added.
"Hovnanian's improved financial strength was recognized by two major
rating agencies in the second quarter, with Standard & Poor's upgrading the
Company's senior debt rating to `BB' and Moody's Investors Service
increasing their ratings outlook to positive. Earnings before interest,
taxes, depreciation and amortization ("EBITDA") for the second quarter rose
74% to $104.1 million from $59.9 million in the second quarter of 2002," Mr.
Sorsby said. The most directly comparable GAAP financial measure is income
before income taxes. The reconciliation of EBITDA to income before income
taxes is presented in a table attached to this earnings release. "EBITDA
covered the amount of interest incurred in the quarter by 6.8 times. The
Company's ratio of net recourse debt-to-equity was 1.05 to 1.0 at April 30,
2003. This compares with a net recourse debt-to-equity ratio of 1.36 to 1.0
at the end of the second quarter in 2002, after taking $25 million of excess
cash into consideration. The Summit Homes acquisition had no significant
impact on the Company's leverage, and we continue to anticipate that the
Company's average net leverage ratio for fiscal 2003 will be approximately
1.0 to 1.0," he concluded.
Shareholders' equity grew 8% during the quarter to $655.8 million, or
$21.94 a share, as of April 30, 2003 from $607.3 million at the end of
January 2003. The Company repurchased 250,000 shares of Hovnanian Class A
common stock during the second quarter at an average price of $29.02. The
Company also retired 750,000 shares of Hovnanian Class A common stock during
the quarter, at no cost, under the terms of the Company's agreement to
acquire Forecast Homes which closed in January 2002.
As of April 30th, Hovnanian adopted FASB Interpretation No. 46, commonly
referred to as FIN 46, with respect to variable interest entities created
after January 31, 2003. The application of FIN 46 significantly alters the
method for evaluating whether certain entities should be consolidated on the
Company's balance sheet, if such entities are deemed to be variable interest
entities (VIEs). The FIN 46 evaluation extends to VIEs in which the Company
has no ownership, but with which the Company has executed lot option
contracts. The application of FIN 46 as of April 30, 2003 led to the
consolidation of three VIEs in which the Company has no ownership, and
resulted in the consolidation of $40.9 million in land inventory in those
entities, on which the Company holds a lot option contract for the majority
of the lots, and $35.8 million of minority interest ownership in those
entities. In accordance with the requirements of FIN 46, the Company
expects to apply the consolidation provisions of FIN 46 to all of the
Company's VIEs no later than October 31, 2003.
In Closing
"We have achieved significant growth, both organically and through
strategic acquisitions, and once again we expanded and diversified our
Company's operations while simultaneously maintaining our strong balance
sheet," commented Mr. Hovnanian. "Our financial achievements are an
indication of the significant progress we are making in our efforts to
become a better and more efficient homebuilding company," he said.
Hovnanian Enterprises will webcast its second quarter earnings
conference call at 11:00 a.m. EDT tomorrow morning, May 29th, hosted by Ara
K. Hovnanian, President and Chief Executive Officer of the Company. The
webcast can be accessed live through the Investor Relations section of
Hovnanian Enterprises' Web site at www.khov.com and via
www.streetevents.com. For those who are not available to listen to the live
webcast, a replay will be available on both websites.
Hovnanian Enterprises, Inc., founded in 1959 by Kevork S. Hovnanian,
Chairman, is headquartered in Red Bank, New Jersey. The Company is one of
the nation's largest homebuilders with operations in California, Maryland,
New Jersey, New York, North Carolina, Ohio, Pennsylvania, South Carolina,
Texas, Virginia and West Virginia. The Company's homes are marketed and
sold under the trade names K. Hovnanian, Washington Homes, Goodman Homes,
Matzel & Mumford, Diamond Homes, Westminster Homes, Fortis Homes, Forecast
Homes, Parkside Homes, Brighton Homes, Parkwood Builders and Summit Homes.
As the developer of K. Hovnanian's Four Seasons communities, the Company is
also one of the nation's largest builders of active adult homes.
Additional information on Hovnanian Enterprises, Inc., including a
summary investment profile and the Company's 2002 annual report, can be
accessed through the Investors page of the Hovnanian Web site at
http://www.khov.com. To be added to Hovnanian's investor e-mail or fax
lists, please send an email to IR@khov.com or sign up at
http://www.khov.com.
Note: All statements in this Press Release that are not historical
facts should be considered as "forward-looking statements" within the
meaning of the Private Securities Litigation 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 risks,
uncertainties and other factors include, but are not limited to, (1) changes
in general and local economic and business conditions, (2) weather
conditions, (3) changes in market conditions, (4) changes in home prices and
sales activity in the markets where the Company builds homes, (5) government
regulation, including regulations concerning development of land, the
homebuilding process and the environment, (6) fluctuations in interest rates
and the availability of mortgage financing, (7) increases in raw materials
and labor costs, (8) the availability and cost of suitable land and improved
lots, (9) levels of competition, (10) availability of financing to the
Company, (11) terrorist acts and other acts of war and (12) other factors
described in detail in the Company's Form 10-K for the year ended October
31, 2002.
Hovnanian Enterprises, Inc.
April 30, 2003
Statements of Consolidated Income
(Dollars in Thousands, Except Per Share)
Three Months Ended, Six Months Ended,
April 30, April 30,
2003 2002 2003 2002
--------- -------- ---------- ----------
(Unaudited)
Total Revenues $679,817 $560,998 $1,307,452 $1,015,060
Costs and Expenses 595,389 519,425 1,151,888 943,690
--------- -------- ---------- ----------
Income Before Income
Taxes 84,428 41,573 155,564 71,370
Provision for Taxes 31,860 15,663 58,235 27,299
--------- -------- ---------- ----------
Net Income $52,568 $25,910 $97,329 $44,071
========= ======== ========== ==========
Per Share Data:
Basic:
Income per common
share $1.69 $0.84 $3.11 $1.48
Weighted Average
Number of
Common Shares
Outstanding 31,143 30,736 31,256 29,836
Assuming Dilution:
Income per common
share $1.60 $0.80 $2.95 $1.40
Weighted Average
Number of
Common Shares
Outstanding 32,761 32,570 32,944 31,511
Hovnanian Enterprises, Inc.
April 30, 2003
Homebuilding Gross Margin
(Dollars in Thousands)
Homebuilding Gross Homebuilding Gross
Margin Margin
Three Months Ended Six Months Ended
April 30, April 30,
2003 2002 2003 2002
-------- -------- ---------- ---------
(Unaudited)
Sale of Homes $666,553 $532,386 $1,274,054 $975,484
Cost of Sales 496,130 422,256 953,656 773,457
-------- -------- ---------- ---------
Homebuilding Gross Margin $170,423 $110,130 $320,398 $202,027
======== ======== ========== =========
Gross Margin Percentage 25.6% 20.7% 25.1% 20.7%
Land Sales Gross Land Sales Gross
Margin Margin
Three Months Ended Six Months Ended
April 30, April 30,
2003 2002 2003 2002
-------- -------- ---------- ---------
Land and Lot Sales $1,298 $18,118 $9,750 $18,539
Cost of Sales 1,089 14,270 6,741 14,552
-------- -------- ---------- ---------
Land and Lot Gross Margin $209 $3,848 $3,009 $3,987
======== ======== ========== =========
Hovnanian Enterprises, Inc.
April 30, 2003
Reconciliation of EBITDA to Income Before Income Taxes
(Dollars in Thousands)
Three Months
Ended Six Months Ended
April 30, April 30,
2003 2002 2003 2002
------- ------ ------- -------
(Unaudited)
Income Before Income Taxes 84,428 41,573 155,564 71,370
Interest expense 13,425 12,802 27,104 26,504
------- ------ ------- -------
EBIT 97,853 54,375 182,668 97,874
Depreciation 1,656 1,684 3,225 3,342
Amortization Debt Fees 316 1,242 637 1,489
Amortization of Intangibles 2,962 1,167 4,629 1,556
Writedowns 1,326 1,424 1,484 2,329
------- ------ ------- -------
EBITDA 104,113 59,892 192,643 106,590
======= ====== ======= =======
INTEREST INCURRED 15,305 14,779 30,425 26,256
EBITDA TO
INTEREST INCURRED 6.8 4.1 6.3 4.1
Hovnanian Enterprises, Inc.
April 30, 2003
Interest Incurred, Expensed and Capitalized
(Dollars is Thousands)
Three Months Ended Six Months Ended
April, 30 April, 30
2003 2002 2003 2002
-------- ------- ------- -------
(Unaudited)
Interest Capitalized at Beginning of
Period $23,600 $22,899 $22,159 $25,124
Plus Interest Incurred 15,305 14,779 30,425 26,256
Less Interest Expensed 13,425 12,802 27,104 26,504
------- ------- ------- -------
Interest Capitalized at End of Period $25,480 $24,876 $25,480 $24,876
======= ======= ======= =======
Hovnanian Enterprises, Inc.
Summary Financial Projection
(Dollars in Millions except per share or where noted)
(Unaudited)
Fiscal Fiscal Trailing
Year Year 12 Mos. Fiscal Year
10/31/01 10/31/02 4/30/03 03 Projection *
-------- -------- ------- --------------
Total Revenues ($ Billion) $1.74 $2.55 $2.84 $2.86 -- $3.00
Income Before Income Taxes $106.4 $226.6 $309.9 $340.3 -- $353.2
Pre-tax Margin 6.1% 8.9% 10.9% 11.3% -- 11.7%
Net Income $63.7 $137.7 $191.0 $211.0 -- $219.0
Earnings Per Share (fully
diluted) $2.29 $4.28 $5.78 $6.50 -- $6.75
* 2003 Projection is based on two quarters of actual data and two
quarters
of projected results.
HOVNANIAN ENTERPRISES, INC.
(DOLLARS IN THOUSANDS EXCEPT AVG. PRICE)
Communities Under Development
Three Months - 4/30/03
Net Contracts
Three Months Ended
30-Apr-03
2003 2002 % Change
--------- ---------- ---------
NE Region
Homes 639 551 16.0%
Dollars 204,943 165,148 24.1%
Avg. Price 320,725 299,724 7.0%
N. Carolina
Homes 475 492 (3.5%)
Dollars 87,700 89,394 (1.9%)
Avg. Price 184,632 181,694 1.6%
Metro D.C.
Homes 474 518 (8.5%)
Dollars 160,624 164,098 (2.1%)
Avg. Price 338,869 316,792 7.0%
California
Homes 1,069 972 10.0%
Dollars 312,469 261,002 19.7%
Avg. Price 292,300 268,521 8.9%
Texas
Homes 732 328 123.2%
Dollars 143,979 73,145 96.8%
Avg. Price 196,692 223,003 (11.8%)
Other
Homes N/A 61 N/A
Dollars N/A 9,053 N/A
Avg. Price N/A 148,403 N/A
Total
Homes 3,389 2,922 16.0%
Dollars 909,715 761,840 19.4%
Avg. Price 268,432 260,726 3.0%
Deliveries
Three Months Ended
30-Apr-03
2003 2002 % Change
NE Region
Homes 462 478 (3.3%)
Dollars 148,155 145,249 2.0%
Avg. Price 320,682 303,868 5.5%
N. Carolina
Homes 301 353 (14.7%)
Dollars 54,070 64,784 (16.5%)
Avg. Price 179,635 183,524 (2.1%)
Metro D.C.
Homes 320 295 8.5%
Dollars 102,092 78,333 30.3%
Avg. Price 319,038 265,536 20.1%
California
Homes 893 728 22.7%
Dollars 255,469 178,688 43.0%
Avg. Price 286,080 245,451 16.6%
Texas
Homes 520 223 133.2%
Dollars 106,767 52,820 102.1%
Avg. Price 205,321 236,861 (13.3%)
Other
Homes N/A 81 N/A
Dollars N/A 12,512 N/A
Avg. Price N/A 154,469 N/A
Total
Homes 2,496 2,158 15.7%
Dollars 666,553 532,386 25.2%
Avg. Price 267,048 246,703 8.2%
Contract Backlog *
30-Apr-03
2003 2002 % Change
NE Region*
Homes 2,024 1,614 25.4%
Dollars 538,742 452,910 19.0%
Avg. Price 266,177 280,613 (5.1%)
N. Carolina
Homes 641 661 (3.0%)
Dollars 122,091 125,292 (2.6%)
Avg. Price 190,469 189,550 0.5%
Metro D.C.*
Homes 890 1,002 (11.2%)
Dollars 301,523 303,252 (0.6%)
Avg. Price 338,790 302,647 11.9%
California
Homes 1,100 812 35.5%
Dollars 336,741 231,803 45.3%
Avg. Price 306,128 285,472 7.2%
Texas
Homes 645 324 99.1%
Dollars 128,786 78,334 64.4%
Avg. Price 199,669 241,773 (17.4%)
Other
Homes N/A 88 N/A
Dollars N/A 13,660 N/A
Avg. Price N/A 155,227 N/A
Total
Homes 5,300 4,501 17.8%
Dollars 1,427,883 1,205,251 18.5%
Avg. Price 269,412 267,774 0.6%
DELIVERIES INCLUDE EXTRAS
* Hovnanian acquired sales backlog during the second quarter equal to
532
homes valued at $62.7 million.
HOVNANIAN ENTERPRISES, INC.
(DOLLARS IN THOUSANDS EXCEPT AVG. PRICE)
Communities Under Development
Six Months - 4/30/03
Net Contracts
Six Months Ended
30-Apr-03
2003 2002 % Change
-------- --------- ---------
NE Region
Homes 1,007 944 6.7%
Dollars 320,391 274,837 16.6%
Avg. Price 318,164 291,141 9.3%
N. Carolina
Homes 775 778 (0.4%)
Dollars 142,379 143,188 (0.6%)
Avg. Price 183,715 184,046 (0.2%)
Metro D.C.
Homes 760 781 (2.7%)
Dollars 254,981 243,091 4.9%
Avg. Price 335,502 311,257 7.8%
California
Homes 1,901 1,273 49.3%
Dollars 546,086 345,124 58.2%
Avg. Price 287,263 271,111 6.0%
Texas
Homes 1,085 521 108.3%
Dollars 212,905 116,972 82.0%
Avg. Price 196,226 224,514 (12.6%)
Other
Homes 2 135 (98.5%)
Dollars 313 20,418 (98.5%)
Avg. Price 156,700 151,243 3.6%
Total
Homes 5,530 4,432 24.8%
Dollars 1,477,055 1,143,630 29.2%
Avg. Price 267,099 258,039 3.5%
Deliveries
Six Months Ended
30-Apr-03
2003 2002 % Change
NE Region
Homes 893 899 (0.7%)
Dollars 284,918 278,018 2.5%
Avg. Price 319,057 309,253 3.2%
N. Carolina
Homes 600 651 (7.8%)
Dollars 108,539 121,465 (10.6%)
Avg. Price 180,898 186,582 (3.0%)
Metro D.C.
Homes 644 558 15.4%
Dollars 205,743 148,725 38.3%
Avg. Price 319,477 266,532 19.9%
California
Homes 1,756 1,168 50.3%
Dollars 494,164 293,330 68.5%
Avg. Price 281,415 251,139 12.1%
Texas
Homes 879 460 91.1%
Dollars 179,429 107,346 67.2%
Avg. Price 204,129 233,361 (12.5%)
Other
Homes 9 172 (94.8%)
Dollars 1,261 26,600 (95.3%)
Avg. Price 140,111 154,651 (9.4%)
Total
Homes 4,781 3,908 22.3%
Dollars 1,274,054 975,484 30.6%
Avg. Price 266,483 249,612 6.8%
Contract Backlog *
30-Apr-03
2003 2002 % Change
NE Region*
Homes 2,024 1,614 25.4%
Dollars 538,742 452,910 19.0%
Avg. Price 266,177 280,613 (5.1%)
N. Carolina
Homes 641 661 (3.0%)
Dollars 122,091 125,292 (2.6%)
Avg. Price 190,469 189,550 0.5%
Metro D.C.*
Homes 890 1,002 (11.2%)
Dollars 301,523 303,252 (0.6%)
Avg. Price 338,790 302,647 11.9%
California
Homes 1,100 812 35.5%
Dollars 336,741 231,803 45.3%
Avg. Price 306,128 285,472 7.2%
Texas*
Homes 645 324 99.1%
Dollars 128,786 78,334 64.4%
Avg. Price 199,669 241,773 (17.4%)
Other
Homes N/A 88 N/A
Dollars N/A 13,660 N/A
Avg. Price N/A 155,227 N/A
Total
Homes 5,300 4,501 17.8%
Dollars 1,427,883 1,205,251 18.5%
Avg. Price 269,412 267,774 0.6%
DELIVERIES INCLUDE EXTRAS
* Hovnanian acquired sales backlog during the 6-month period equal to
694 homes valued at $93.8 million.
HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
April 30, October 31,
ASSETS 2003 2002
----------- -----------
(unaudited)
Homebuilding:
Cash and cash equivalents.................... $ 18,565 $ 262,675
----------- -----------
Inventories - At the lower of cost or fair
value:
Sold and unsold homes and lots under
development.............................. 1,013,294 803,829
Land and land options held for future
development or sale...................... 240,268 171,081
Consolidated Inventory Not Owned:
Specific performance options............. 59,523 67,183
Variable interest entities............... 40,923
Other options............................ 61,110 39,489
----------- -----------
Total Inventories........................ 1,415,118 1,081,582
----------- -----------
Receivables, deposits, and notes ............ 37,577 26,276
----------- -----------
Property, plant, and equipment - net......... 26,191 19,242
----------- -----------
Senior residential rental properties - net... 9,311 9,504
----------- -----------
Prepaid expenses and other assets............ 83,340 86,582
----------- -----------
Goodwill and indefinite life intangibles..... 82,275 82,275
----------- -----------
Definite life intangibles.................... 63,503
----------- -----------
Total Homebuilding....................... 1,735,880 1,568,136
----------- -----------
Financial Services:
Cash and cash equivalents.................... 4,961 7,315
Mortgage loans held for sale................. 82,916 91,451
Other assets................................. 3,708 11,226
----------- -----------
Total Financial Services................. 91,585 109,992
----------- -----------
Income Taxes Receivable - Including deferred tax
benefits..................................... 34,800
----------- -----------
Total Assets................................... $1,862,265 $1,678,128
=========== ===========
See notes to consolidated financial statements (unaudited).
HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands Except Per Share Data)
April 30, October 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 2003 2002
----------- -----------
(unaudited)
Homebuilding:
Nonrecourse land mortgages...................... $ 29,506 $ 11,593
Accounts payable and other liabilities.......... 189,391 198,290
Customers' deposits............................. 52,868 40,422
Nonrecourse mortgages secured by operating
properties.................................... 3,210 3,274
Liabilities from inventory not owned............ 108,471 97,983
----------- -----------
Total Homebuilding.......................... 383,446 351,562
----------- -----------
Financial Services:
Accounts payable and other liabilities.......... 4,835 4,857
Mortgage warehouse line of credit............... 78,823 85,498
----------- -----------
Total Financial Services.................... 83,658 90,355
----------- -----------
Notes Payable:
Revolving and term credit agreements............ 144,800 115,000
Senior notes.................................... 396,647 396,390
Senior subordinated notes....................... 150,000 150,000
Accrued interest................................ 10,127 9,555
----------- -----------
Total Notes Payable......................... 701,574 670,945
----------- -----------
Income Taxes Payable - Net of deferred tax benefits. 777
----------- -----------
Total Liabilities........................... 1,168,678 1,113,639
----------- -----------
Minority interest................................. 37,799 1,940
---------- -----------
Stockholders' Equity:
Preferred Stock,$.01 par value-authorized 100,000
shares; none issued.............................
Common Stock,Class A,$.01 par value-authorized
87,000,000 shares; issued 27,797,055 shares at
April 30, 2003 and 27,453,994 shares at October 31,
2002 (including 5,342,599 shares at April 30, 2003
and 4,343,240 shares at October 31, 2002 held
in Treasury).................................. 278 275
Common Stock,Class B,$.01 par value (convertible to
Class A at time of sale) authorized 13,000,000
shares; issued 7,784,372 shares at April 30, 2003
and 7,788,061 shares at October 31, 2002 (including
345,874 shares at April 30, 2003 and October 31,
2002 held in Treasury)............ 78 78
Paid in Capital................................. 156,124 152,977
Retained Earnings............................... 545,131 447,802
Deferred Compensation........................... (21)
Treasury Stock - at cost........................ (45,823) (38,562)
----------- -----------
Total Stockholders' Equity.................. 655,788 562,549
----------- -----------
Total Liabilities and Stockholders' Equity........ $1,862,265 $1,678,128
=========== ===========
See notes to consolidated financial statements (unaudited).
HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands Except Per Share Data)
(Unaudited)
Three Months Ended Six Months Ended
April 30, April 30,
------------------- -----------------------
2003 2002 2003 2002
--------- --------- ----------- ----------
Revenues:
Homebuilding:
Sale of homes...................... $666,553 $532,386 $1,274,054 $ 975,484
Land sales and other revenues...... 2,365 19,936 12,004 21,913
--------- --------- ----------- ----------
Total Homebuilding............... 668,918 552,322 1,286,058 997,397
Financial Services................... 10,899 8,676 21,394 17,663
--------- --------- ----------- ----------
Total Revenues................... 679,817 560,998 1,307,452 1,015,060
--------- --------- ----------- ----------
Expenses:
Homebuilding:
Cost of sales...................... 497,219 436,526 960,397 788,009
Selling, general and administrative 59,598 47,646 113,899 85,295
Inventory impairment loss.......... 1,326 1,424 1,484 2,329
--------- --------- ----------- ----------
Total Homebuilding............... 558,143 485,596 1,075,780 875,633
Financial Services................... 6,173 5,103 11,994 10,462
Corporate General and Administration. 13,464 10,629 28,048 21,505
Interest............................. 13,425 12,802 27,104 26,504
Other Operations..................... 4,184 5,295 8,962 9,586
--------- --------- ----------- ----------
Total Expenses................... 595,389 519,425 1,151,888 943,690
--------- --------- ----------- ----------
Income Before Income Taxes............. 84,428 41,573 155,564 71,370
--------- --------- ----------- ----------
State and Federal Income Taxes:
State................................ 3,335 1,534 6,435 3,407
Federal.............................. 28,525 14,129 51,800 23,892
--------- --------- ----------- ----------
Total Taxes........................ 31,860 15,663 58,235 27,299
--------- --------- ----------- ----------
Net Income............................. $ 52,568 $ 25,910 $ 97,329 $ 44,071
========= ========= =========== ==========
Per Share Data:
Basic:
Income per common share before....... $ 1.69 $ 0.84 $ 3.11 $ 1.48
Weighted average number of common
shares outstanding................. 31,143 30,736 31,256 29,836
Assuming dilution:
Income per common share.............. $ 1.60 $ 0.80 $ 2.95 $ 1.40
Weighted average number of common
shares outstanding................ 32,761 32,570 32,944 31,511
See notes to consolidated financial statements (unaudited).
SOURCE Hovnanian Enterprises, Inc.
-0- 05/28/2003
/CONTACT: Kevin C. Hake, Vice President and Treasurer, or Brian A.
Cheripka, Assistant Director of Investor Relations, +1-732-747-7800,
both of Hovnanian Enterprises/
/First Call Analyst: /
/Web site: http://www.khov.com /
(HOV)