================================================================================
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): December 8, 2003
HOVNANIAN ENTERPRISES, INC.
(Exact Name of Registrant as Specified in Charter)
Delaware 1-8551 22-1851059
-------- ------ ----------
(State or Other (Commission File Number) (I.R.S. Employer
Jurisdiction Identification No.)
of Incorporation)
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 - Fiscal Fourth Quarter and
Year Ended October 31, 2003.
Item 12. RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On December 8, 2003, Hovnanian Enterprises, Inc. issued a press release
announcing its preliminary financial results for the fiscal fourth quarter and
year ended October 31, 2003. A copy of the Earnings Press Release is attached as
Exhibit 99.1.
The information in this Current Report on Form 8-K and the Exhibit
attached hereto is being furnished and shall not be deemed "filed" for purposes
of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or otherwise subject to the liability of that section, nor shall it be
deemed incorporated by reference in any filing under the Securities Act of 1933,
as amended, or the Exchange Act, except as shall be expressly set forth by
specific reference in such filing.
The Earnings Press Release contains information about EBITDA, a non-GAAP
financial measure. The most directly comparable GAAP financial measure to EBITDA
is net income. A reconciliation of EBITDA to net income 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 obligations. 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.
2
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: December 8, 2003
3
INDEX TO EXHIBITS
Exhibit Number Exhibit
- -------------- -------
Exhibit 99.1 Earnings Press Release - Fiscal Fourth Quarter and Year
Ended October 31, 2003.
4
Exhibit 99.1
HOVNANIAN ENTERPRISES, INC. NEWS RELEASE
================================================================================
CONTACT: Kevin C. Hake Brian A. Cheripka
Vice President and Treasurer Assistant Director of Investor Relations
732-747-7800 732-747-7800
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HOVNANIAN ENTERPRISES ANNOUNCES 83% INCREASE IN FISCAL 2003 EPS;
ACHIEVES RECORD REVENUES, EARNINGS, DELIVERIES AND BACKLOG;
RAISES PROJECTION FOR FISCAL 2004
HIGHLIGHTS FOR THE FISCAL YEAR ENDED OCTOBER 31, 2003
o Net earnings reached a record $7.85 per diluted share, an 83% increase
from $4.28 per diluted share in fiscal 2002. Hovnanian achieved record
net earnings of $257.4 million for fiscal 2003, an 87% increase above the
net earnings of $137.7 million in 2002.
o Net earnings per diluted share have grown at a compound annual rate of
74% over the past three years and 47% over the past five years. Excluding
earnings from acquisitions closed within the last twelve months, more
than 90% of the growth in earnings were generated from the Company's
organic operations.
o Earnings for fiscal 2003 represent a return on beginning equity (ROE) of
45.8%, and an after tax return on beginning capital of 24.3%.
o Total revenues increased 26% to $3.2 billion in fiscal 2003 and the
Company's pre-tax margin rose to 12.9% from 8.8% in fiscal 2002.
o Management is increasing its projection for fiscal 2004 earnings to $9.00
per diluted share, representing a $0.75 increase over the previous
projection of $8.25 per diluted share for the year.
o Homebuilding gross margin increased 350 basis points from 22.0% in 2002
to 25.5% in 2003.
o EBITDA grew 61% to $500.6 million in fiscal 2003, covering interest 7.5
times for the year. The Company's ratio of net recourse
debt-to-capitalization at fiscal year-end was 45.4%, after taking into
consideration approximately $120 million of excess cash on the balance
sheet.
o Net contracts for the full year in fiscal 2003 increased 35% to $3.29
billion on 12,285 homes compared to $2.43 billion on 9,394 homes in
fiscal 2002. The dollar value of net contracts for the fourth quarter
increased 34% from 2002 to $854 million.
o Contract backlog as of October 31, 2003 was 5,761 homes with a sales
value of $1.53 billion, up 49% from the number of homes in last year's
backlog.
RED BANK, NJ, December 8, 2003 -- Hovnanian Enterprises, Inc. (NYSE: HOV), a
leading national homebuilder, announced today record financial results for its
fiscal fourth quarter and year ended
October 31, 2003. In fiscal 2003, net income increased 87% to $257.4 million, or
$7.85 per diluted share, compared to $137.7 million, or $4.28 per diluted share
for fiscal 2002. Pre-tax earnings rose 82% to $411.5 million in fiscal 2003 from
$225.7 million in fiscal 2002.
Consolidated earnings before interest expenses, income taxes, depreciation,
amortization and other non-cash write-offs and charges ("EBITDA") for fiscal
2003 totaled $500.6 million, a 61% increase from fiscal 2002.
The Company's ratio of net recourse debt-to-capitalization was 45.4%, at October
31, 2003, after taking more than $120 million of excess cash into consideration.
The average ratio of net debt to capitalization for the year was 47.4%.
Shareholders' equity grew 46% to $820 million at October 31, 2003 from $563
million at the end of fiscal 2002.
Total revenue grew 26% to $3.20 billion in fiscal 2003 from $2.55 billion in
fiscal 2002. Home deliveries increased 21% to 11,531 homes from 9,514 homes in
the prior year. Total selling, general and administrative expense, including
corporate expense, as a percentage of total revenue increased to 10.0% in fiscal
2003, from 9.7% last year. Earnings before taxes from Financial Services
improved 26% to $22.9 million in fiscal 2003 from $18.2 million in the prior
year.
FOURTH QUARTER PERFORMANCE
Revenue for the fourth quarter ended October 31, 2003 was $1.05 billion compared
to 2002's fourth quarter revenue of $831.4 million. For fiscal 2003's fourth
quarter, the Company reported net income of $91.2 million, or $2.79 per diluted
share. This represents a 68% increase from $54.4 million, or $1.66 per diluted
share, achieved in the fourth quarter of the previous fiscal year.
Sales continued to show strength through the end of the fiscal year, with fourth
quarter net contracts up 36% year-to-year, from 2,413 homes to 3,271 homes.
Deliveries in 2003's final quarter were 3,684 homes with a sales value of $1.02
billion. This compares to 2,959 homes delivered with a sales value of $805.3
million in the 4th quarter of fiscal 2002. Homebuilding gross margin, excluding
land sales, increased to 25.9% in the fourth quarter of fiscal 2003, an increase
of 40 basis points from 25.5% in the third quarter of 2003 and up 240 bps from
23.5% in the last quarter of fiscal 2002.
COMMENTS FROM MANAGEMENT
"We had another great year and are extremely pleased with the financial success
we have achieved in fiscal 2003," said Ara K. Hovnanian, President and Chief
Executive Officer of Hovnanian Enterprises. "For a sixth consecutive year we
were able to achieve record growth in earnings while continuing to strengthen
our financial position and improve our balance sheet. In fiscal 2003, we
achieved a return on beginning equity of 45.8% and a return on beginning capital
of 24.3%. These returns are among the highest in the industry and validate the
success of our market concentration strategy, process improvement initiatives
and diverse product offering", he added.
"I am very proud of the performance of our divisions and our excellent team of
associates that have executed our strategy in each of our markets. Our financial
success in fiscal 2003 clearly demonstrates the depth and vision of our
organization and reflects our ability to match the right product to the right
land opportunity. Our diverse product strategy allows us to build a broad array
of products ranging from townhomes, condominiums, first time, move-up, luxury,
and active adult homes. In addition, we are one of a few large builders that
specialize in urban infill opportunities. As a result, we have efficiently been
able to develop communities in areas where the supply and demand trends are
favorable," said Mr.
2
Hovnanian. "Throughout 2003, we have benefited from the ability to raise prices
in certain communities and from the advantages of being a dominant builder in
each of our markets. This is reflected in our financial performance, as our
divisions have maximized earnings while carefully controlling our inventory
position and balance sheet commitment," he added.
There was no outstanding balance on the Company's $590 million unsecured
revolving credit facility at the end of the year, and the Company had more than
$120 million in excess cash. This cash balance does not include the proceeds
from the Company's recent senior note offering, which closed in early November.
"The $215 million issuance of the 6 1/2% senior notes strengthens our balance
sheet and provides additional flexibility as we fund our growth and open new
communities," said J. Larry Sorsby, Executive Vice President and Chief Financial
Officer. "Through conservative management of our balance sheet we have been able
to achieve record growth while simultaneously reducing our leverage. We expect
to operate at or below a 50% average net recourse debt to capitalization ratio
in fiscal 2004," he added.
"Over the past 12 months, we have successfully completed five acquisitions which
have expanded our geographic footprint and provide us with a platform for
accelerating future earnings growth," Mr. Hovnanian continued. "As we enter
2004, we continue to view selective acquisitions as the best way to enter new
markets and have ample capacity to pursue selective growth opportunities. We
remain focused on a two pronged growth strategy consisting of achieving more
than 15% organic growth in earnings from our existing markets and making
financially sound acquisitions in new markets," he added.
LOOKING AHEAD
"Since we do not factor any increase in home prices into our projections, we
expect to benefit as the general economy continues to recover and meaningful job
creation returns to our markets", stated Mr. Hovnanian. "Historically, the
housing industry performs very well in a recovering economy, even with an
accompanying increase in interest rates. Most importantly, we believe the
significant consolidation and market share gains of the past several years will
likely continue, to the benefit of the larger builders. Our own organic market
share gains and acquisitions have contributed to our industry leading growth in
earnings. We expect to continue to gain share in our markets, which will allow
for our continued profitable growth, regardless of any changes in overall
housing activity," he continued.
"Our current operating platform provides great confidence as we look ahead,"
said Mr. Hovnanian. "We will continue to focus on organic growth through the
opening of additional communities in our current markets. At the same time, the
acquisitions we have made over the past 12 months will begin to enhance our
business as we deploy the additional capital necessary to grow their operations.
We remain committed to our business strategy of becoming a dominant builder in
each of our markets, and to deploying a wide array of products as a means to
gain market share and achieve organic growth. Our diverse product offering and
sizeable land position gives us confidence that we will be able to meet our
future growth objectives," he said.
Net contracts for the month of November, which were announced last week,
increased 55% from the same period in the prior year. "We are entering fiscal
2004 with the highest year-end backlog of home sales in our 44 year history and
we are increasing our projection for earnings to $9.00 per diluted share. Our
revenues are expected to reach $3.9 billion on more than 14,600 home
deliveries," Mr. Hovnanian said. "With a backlog of $1.5 billion, combined with
the new communities we anticipate opening, we are well positioned to post
another year of record earnings, sales, closings and backlog," Mr. Hovnanian
stated.
3
IN CLOSING
"Our talented team of Associates and trade partners has enabled us to achieve
record financial results in 2003 and we remain focused on accomplishing our
strategic goals for the future. We are confident that we will be able to achieve
our targeted return on investment while we continue to grow our earnings," Mr.
Hovnanian concluded.
Hovnanian Enterprises will webcast its fiscal year end earnings conference call
at 11:00 a.m. EST tomorrow morning, December 9th, 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'
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 "webcast"
section of the Investors News page on the Hovnanian website at
http://www.khov.com. The archive will be available for 12 months.
The Company has updated its summary projection for the fiscal year ending
October 31, 2004. The summary projection is available on the Company Projection
page of the Investors section of the Company's website at http://www.khov.com.
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 Arizona, California, Florida, 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, Summit Homes, Great Western Homes and
Windward 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.
NON-GAAP FINANCIAL MEASURES:
EBITDA IS NOT A GENERALLY ACCEPTED ACCOUNTING PRINCIPLE (GAAP) FINANCIAL
MEASURE. THE MOST DIRECTLY COMPARABLE GAAP FINANCIAL MEASURE IS NET INCOME. THE
RECONCILIATION OF EBITDA TO NET INCOME IS PRESENTED IN A TABLE ATTACHED TO THIS
EARNINGS RELEASE.
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)
SHORTAGES IN AND PRICE FLUCTUATIONS OF RAW MATERIALS AND LABOR, (8) THE
AVAILABILITY AND COST OF SUITABLE LAND AND IMPROVED LOTS, (9) LEVELS OF
4
COMPETITION, (10) AVAILABILITY OF FINANCING TO THE COMPANY, (11) UTILITY
SHORTAGES AND OUTAGES OR RATE FLUCTUATIONS, (12) GEOPOLITICAL RISKS, TERRORIST
ACTS AND OTHER ACTS OF WAR AND (13) OTHER FACTORS DESCRIBED IN DETAIL IN THE
COMPANY'S FORM 10-K FOR THE YEAR ENDED OCTOBER 31, 2002.
(FINANCIAL TABLES FOLLOW)
5
HOVNANIAN ENTERPRISES, INC.
October 31, 2003
Statements of Consolidated Income
(Dollars in Thousands, Except Per Share)
Three Months Ended, Twelve Months Ended,
October 31, October 31,
-------------------------- --------------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
(Unaudited)
Total Revenues $1,045,588 $ 831,410 $3,201,857 $2,551,106
Costs and Expenses 899,442 739,011 2,790,339 2,325,376
---------- ---------- ---------- ----------
Income Before Income Taxes 146,146 92,399 411,518 225,730
Provision for Taxes 54,897 37,961 154,138 88,034
---------- ---------- ---------- ----------
Net Income $ 91,249 $ 54,438 $ 257,380 $ 137,696
========== ========== ========== ==========
Per Share Data:
Basic:
Income per common share $ 2.97 $ 1.75 $ 8.31 $ 4.53
Weighted Average Number of
Common Shares Outstanding 30,709 31,089 30,960 30,405
Assuming Dilution:
Income per common share $ 2.79 $ 1.66 $ 7.85 $ 4.28
Weighted Average Number of
Common Shares Outstanding 32,659 32,886 32,769 32,155
6
HOVNANIAN ENTERPRISES, INC.
OCTOBER 31, 2003
Homebuilding Gross Margin
(Dollars in Thousands)
Homebuilding Gross Margin Homebuilding Gross Margin
Three Months Ended Twelve Months Ended
October 31, October 31,
---------------------------- ----------------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
(Unaudited)
Sale of Homes $1,025,042 $ 805,282 $3,129,830 $2,462,095
Cost of Sales 759,087 616,330 2,331,393 1,919,941
---------- ---------- ---------- ----------
Homebuilding Gross Margin $ 265,955 $ 188,952 $ 798,437 $ 542,154
========== ========== ========== ==========
Gross Margin Percentage 25.9% 23.5% 25.5% 22.0%
Land Sales Gross Margin Land Sales Gross Margin
Three Months Ended Twelve Months Ended
October 31, October 31,
---------------------------- ----------------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
Land and Lot Sales $ 1,141 $ 13,185 $ 14,205 $ 42,312
Cost of Sales 943 11,823 10,931 35,897
---------- ---------- ---------- ----------
Land and Lot Gross Margin $ 198 $ 1,362 $ 3,274 $ 6,415
========== ========== ========== ==========
7
HOVNANIAN ENTERPRISES, INC.
OCTOBER 31, 2003
Reconciliation of EBITDA to Net Income
(Dollars in Thousands)
Three Months Ended Twelve Months Ended
October 31, October 31,
-------------------------- --------------------------
2003 2002 2003 2002
------- ------- ------- -------
(Unaudited)
Net Income $ 91,249 $ 54,438 $257,380 $137,696
Income Taxes 54,897 37,961 154,138 88,034
Interest expense 19,350 18,018 63,658 60,371
-------- -------- -------- --------
EBIT 1 $165,496 $110,417 $475,176 $286,101
Depreciation 1,768 1,504 6,714 6,506
Amortization Debt Fees 364 314 2,978 2,119
Amortization of Intangibles 4,082 1,167 13,047 3,889
Asset Write-off 2,723 412 2,723 12,412
-------- -------- -------- --------
EBITDA2 $174,433 $113,814 $500,638 $311,027
======== ======== ======== ========
INTEREST INCURRED $ 18,100 $ 15,404 $ 66,332 $ 57,406
EBITDA TO
INTEREST INCURRED 9.6 7.4 7.5 5.4
(1) EBIT is a non-GAAP financial measure. The most directly comparable GAAP
financial measure is net income. EBIT represents earnings before interest
expense and income taxes.
(2) EBITDA is a non-GAAP financial measure. The most directly comparable GAAP
financial measure is net income. EBITDA represents earnings before
interest expense, income taxes, depreciation, amortization and other
non-cash, non-recurring write-offs and charges.
8
HOVNANIAN ENTERPRISES, INC.
OCTOBER 31, 2003
Interest Incurred, Expensed and Capitalized
(Dollars in Thousands)
Three Months Ended Twelve Months Ended
October, 31 October, 31
--------------------- ---------------------
2003 2002 2003 2002
------- ------- ------- -------
(Unaudited)
Interest Capitalized at Beginning of Period $26,083 $24,773 $22,159 $25,124
Plus Interest Incurred 18,100 15,404 66,332 57,406
Less Interest Expensed 19,350 18,018 63,658 60,371
------- ------- ------- -------
Interest Capitalized at End of Period $24,833 $22,159 $24,833 $22,159
======= ======= ======= =======
9
HOVNANIAN ENTERPRISES, INC.
SUMMARY FINANCIAL PROJECTION
(Dollars in Millions except per share or where noted)
(Unaudited)
Projection
Fiscal Year Fiscal Year Fiscal Year Fiscal Year
10/31/01 10/31/02 10/31/03 10/31/04
----------- ----------- ----------- -----------
Total Revenues ($ Billion) $1.74 $2.55 $3.20 $3.90
Income Before Income Taxes $106.4 $225.7 $411.5 $474.2
Pre-tax Margin 6.1% 8.8% 12.9% 12.2%
Net Income $63.7 $137.7 $257.4 $295.0
Earnings Per Share (FULLY DILUTED) $2.29 $4.28 $7.85 $9.00
10
HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
October 31, October 31,
ASSETS 2003 2002
---------- ----------
Homebuilding:
Cash and cash equivalents $ 121,913 $ 262,675
---------- ----------
Inventories - At the lower of cost or fair value:
Sold and unsold homes and lots under
development 1,184,907 803,829
---------- ----------
Land and land options held for future
development or sale 270,502 171,081
---------- ----------
Consolidated Inventory Not Owned:
Specific performance options 56,082 67,183
Variable interest entities 100,327
Other options 48,226 39,489
---------- ----------
Total Consolidated Inventory Not Owned 204,635 106,672
---------- ----------
Total Inventories 1,660,044 1,081,582
---------- ----------
Receivables, deposits, and notes 42,506 26,276
---------- ----------
Property, plant, and equipment - net 26,263 19,242
---------- ----------
Senior residential rental properties - net 9,118 9,504
---------- ----------
Prepaid expenses and other assets 97,407 86,582
---------- ----------
Goodwill and indefinite life intangibles 82,658 82,275
---------- ----------
Definite life intangibles 56,978
---------- ----------
Total Homebuilding 2,096,887 1,568,136
---------- ----------
Financial Services:
Cash and cash equivalents 6,308 7,315
Mortgage loans held for sale 224,052 91,451
Other assets 3,945 11,226
---------- ----------
Total Financial Services 234,305 109,992
---------- ----------
Income Taxes Receivable - Including deferred tax
benefits 1,179
---------- ----------
Total Assets $2,332,371 $1,678,128
========== ==========
11
HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
October 31, October 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 2003 2002
----------- -----------
Homebuilding:
Nonrecourse land mortgages $ 43,795 $ 11,593
Accounts payable and other liabilities 229,986 198,290
Customers' deposits 58,376 40,422
Nonrecourse mortgages secured by operating
properties 710 3,274
Liabilities from inventory not owned 94,780 97,983
----------- -----------
Total Homebuilding 427,647 351,562
----------- -----------
Financial Services:
Accounts payable and other liabilities 5,917 4,857
Mortgage warehouse line of credit 166,711 85,498
----------- -----------
Total Financial Services 172,628 90,355
----------- -----------
Notes Payable:
Term loan 115,000 115,000
Senior notes 387,166 396,390
Senior subordinated notes 300,000 150,000
Accrued interest 15,675 9,555
----------- -----------
Total Notes Payable 817,841 670,945
----------- -----------
Income Taxes Payable - Net of deferred tax benefits 777
----------- -----------
Total Liabilities 1,418,116 1,113,639
----------- -----------
Minority interest from inventory not owned 90,252
----------- -----------
Minority interest from consolidated joint ventures 4,291 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
28,016,497 shares in 2003 and 27,453,994 shares in 2002 (including 5,390,218
shares in 2003 and 4,343,240 shares in 2002 held
in Treasury) 280 275
Common Stock,Class B,$.01 par value
(convertible to Class A at time of sale) -authorized 13,000,000 shares;
issued 7,768,508 shares in 2003 and 7,788,061 shares in 2002
(both years include 345,874 shares held in Treasury) 78 78
Paid in Capital 163,712 152,977
Retained Earnings 705,182 447,802
Deferred Compensation (21)
Treasury Stock - at cost (49,540) (38,562)
----------- -----------
Total Stockholders' Equity 819,712 562,549
----------- -----------
Total Liabilities and Stockholders' Equity $ 2,332,371 $ 1,678,128
=========== ===========
12
HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands Except Per Share Data)
Year Ended
--------------------------------------------
October October October
31, 2003 31, 2002 31, 2001
---------- ---------- ----------
Revenues:
Homebuilding:
Sale of homes $3,129,830 $2,462,095 $1,693,717
Land sales and other revenues 20,742 48,241 16,845
---------- ---------- ----------
Total Homebuilding 3,150,572 2,510,336 1,710,562
Financial Services 51,285 40,770 31,428
---------- ---------- ----------
Total Revenues 3,201,857 2,551,106 1,741,990
---------- ---------- ----------
Expenses:
Homebuilding:
Cost of sales 2,342,324 1,955,838 1,355,381
Selling, general and administrative 253,724 194,903 140,126
Inventory impairment loss 5,150 8,199 4,368
---------- ---------- ----------
Total Homebuilding 2,601,198 2,158,940 1,499,875
---------- ---------- ----------
Financial Services 28,415 22,543 21,443
---------- ---------- ----------
Corporate General and Administrative 66,008 51,974 44,278
---------- ---------- ----------
Interest 63,658 60,371 51,446
---------- ---------- ----------
Other operations 22,680 31,548 14,830
---------- ---------- ----------
Intangible Amortization 8,380 3,764
---------- ---------- ----------
Total Expenses 2,790,339 2,325,376 1,635,636
---------- ---------- ----------
Income Before Income Taxes 411,518 225,730 106,354
---------- ---------- ----------
State and Federal Income Taxes:
State 17,458 8,993 4,024
Federal 136,680 79,041 38,644
---------- ---------- ----------
Total Taxes 154,138 88,034 42,668
---------- ---------- ----------
Net Income $ 257,380 $ 137,696 $ 63,686
========== ========== ==========
Per Share Data:
Basic:
Income Per Common Share $ 8.31 $ 4.53 $ 2.38
========== ========== ==========
Weighted Average Number of Common Shares
Outstanding 30,960 30,405 26,810
========== ========== ==========
Assuming Dilution:
Income Per Common Share $ 7.85 $ 4.28 $ 2.29
========== ========== ==========
Weighted Average Number of Common Shares
Outstanding 32,769 32,155 27,792
========== ========== ==========
HOVNANIAN ENTERPRISES, INC.
(DOLLARS IN THOUSANDS EXCEPT AVG. PRICE)
COMMUNITIES UNDER DEVELOPMENT
Three Months - 10/31/03
- -----------------------------------------------------------------------------------------------------------------------------
NET CONTRACTS 1 DELIVERIES
THREE MONTHS ENDED THREE MONTHS ENDED CONTRACT BACKLOG
OCTOBER 31ST OCTOBER 31ST OCTOBER 31ST
-------------------------------- -------------------------------- --------------------------------
2003 2002 % CHANGE 2003 2002 % CHANGE 2003 2002 % CHANGE
------- ------- -------- ------- ------- -------- ------- ------- --------
Northeast
Homes 799 494 61.7% 847 675 25.5% 2,218 1,397 58.8%
Dollars 219,102 154,623 41.7% 279,252 205,079 36.2% 581,864 416,264 39.8%
Avg. Price 274,220 313,003 (12.4%) 329,695 303,821 8.5% 262,337 297,970 (12.0%)
SOUTHEAST
Homes 841 555 51.5% 787 818 (3.8%) 1,761 1,221 44.2%
Dollars 230,807 138,802 66.3% 202,345 207,671 (2.6%) 526,348 331,682 58.7%
Avg. Price 274,444 250,093 9.7% 257,109 253,877 1.3% 298,892 271,648 10.0%
SOUTHWEST
Homes 803 269 198.5% 912 287 217.8% 989 277 257.0%
Dollars 142,411 55,893 154.8% 172,298 67,403 155.6% 157,656 60,532 160.4%
Avg. Price 177,349 207,779 (14.6%) 188,923 234,854 (19.6%) 159,410 218,528 (27.1%)
WEST
Homes 828 1,074 (22.9%) 1,138 1,126 1.1% 793 955 (17.0%)
Dollars 261,608 283,607 (7.8%) 371,147 316,412 17.3% 264,536 267,305 (1.0%)
Avg. Price 315,951 264,067 19.6% 326,140 281,005 16.1% 333,589 279,900 19.2%
OTHER
Homes -- 21 -- -- 53 -- -- 7 --
Dollars -- 3,206 -- -- 8,717 -- -- 945 --
Avg. Price -- 152,679 -- -- 164,472 -- -- 134,986 --
TOTAL
Homes 3,271 2,413 35.6% 3,684 2,959 24.5% 5,761 3,857 49.4%
Dollars 853,927 636,131 34.2% 1,025,042 805,282 27.3% 1,530,404 1,076,728 42.1%
Avg. Price 261,060 263,627 (1.0%) 278,242 272,147 2.2% 265,649 279,162 (4.8%)
DELIVERIES INCLUDE EXTRAS
- ------------------------------------------------------------------------------------------------------------------------------
Note:
1. Net contracts defined as new contracts signed during the period for the
purchase of homes, less cancellations of prior contracts.
13
HOVNANIAN ENTERPRISES, INC.
(DOLLARS IN THOUSANDS EXCEPT AVG. PRICE)
COMMUNITIES UNDER DEVELOPMENT
TWELVE MONTHS - 10/31/03
- ----------------------------------------------------------------------------------------------------------------------------
NET CONTRACTS 1 DELIVERIES
TWELVE MONTHS ENDED TWELVE MONTHS ENDED CONTRACT BACKLOG
OCTOBER 31ST OCTOBER 31ST OCTOBER 31ST
--------------------------------- --------------------------------- --------------------------------
2003 2002 % CHANGE 2003 2002 % CHANGE 2003 2002 % CHANGE
------- ------- -------- ------- ------- -------- ------- ------- --------
Northeast
Homes 2,695 1,972 36.7% 2,387 2,144 11.3% 2,218 1,397 58.8%
Dollars 801,117 577,851 38.6% 774,209 660,250 17.3% 581,865 416,264 39.8%
Avg. Price 297,260 293,028 1.4% 324,344 307,952 5.3% 262,338 297,970 (12.0%)
SOUTHEAST
Homes 3,241 2,714 19.4% 2,720 2,806 (3.1%) 1,761 1,221 44.2%
Dollars 867,984 679,569 27.7% 682,210 660,328 3.3% 526,348 331,682 58.7%
Avg. Price 267,814 250,394 7.0% 250,813 235,327 6.6% 298,892 271,648 10.0%
SOUTHWEST
Homes 2,525 1,047 141.2% 2,431 1,033 135.3% 989 277 257.0%
Dollars 480,609 227,302 111.4% 481,634 240,181 100.5% 157,655 60,532 160.4%
Avg. Price 190,340 217,098 (12.3%) 198,122 232,508 (14.8%) 159,409 218,528 (27.1%)
WEST
Homes 3,822 3,468 10.2% 3,984 3,220 23.7% 793 955 (17.0%)
Dollars 1,144,582 917,615 24.7% 1,190,516 852,373 39.7% 264,536 267,305 (1.0%)
Avg. Price 299,472 264,595 13.2% 298,824 264,712 12.9% 333,589 279,900 19.2%
OTHER
Homes 2 193 (99.0%) 9 311 (97.1%) -- 7 --
Dollars 313 30,067 (99.0%) 1,261 48,963 (97.4%) -- 945 --
Avg. Price 156,700 155,790 0.6% 140,111 157,437 (11.0%) -- 134,986 --
TOTAL
Homes 12,285 9,394 30.8% 11,531 9,514 21.2% 5,761 3,857 49.4%
Dollars 3,294,605 2,432,404 35.4% 3,129,830 2,462,095 27.1% 1,530,404 1,076,728 42.1%
Avg. Price 268,181 258,932 3.6% 271,427 258,787 4.9% 265,649 279,162 (4.8%)
DELIVERIES INCLUDE EXTRAS
- ----------------------------------------------------------------------------------------------------------------------------
Note:
1. Net contracts defined as new contracts signed during the period for the
purchase of homes, less cancellations of prior contracts.
14
