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 31, 2007
HOVNANIAN ENTERPRISES, INC.
(Exact Name of Registrant as Specified in Charter)
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Delaware (State or Other Jurisdiction of Incorporation) |
1-8551 (Commission File Number)
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22-1851059 (I.R.S. Employer Identification No.) |
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110 West Front Street
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)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
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Item 2.02. |
Results of Operations and Financial Condition. |
On May 31, 2007, Hovnanian Enterprises, Inc. issued a press release announcing its preliminary financial results for the fiscal second quarter ended April 30, 2007. A copy of the press release is attached as Exhibit 99.
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 and Adjusted EBITDA, which are non-GAAP financial measures. The most directly comparable GAAP financial measure is net income. A reconciliation of EBITDA and Adjusted 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 Securities and Exchange Commission. Additionally, our calculation of EBITDA may be different than the calculation used by other companies, and, therefore, comparability may be affected.
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Item 9.01. |
Financial Statements and Exhibits. |
(d) Exhibits.
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Exhibit 99 |
Earnings Press Release – Fiscal Second Quarter Ended April 30, 2007. |
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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.
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HOVNANIAN ENTERPRISES, INC. |
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(Registrant) |
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By: |
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Name: J. Larry Sorsby | |
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Title: Executive Vice President and Chief Financial Officer | |
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Date: May 31, 2007
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INDEX TO EXHIBITS
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Exhibit Number |
Exhibit |
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Exhibit 99 |
Earnings Press Release – Fiscal Second Quarter Ended April 30, 2007. |
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4 |
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HOVNANIAN ENTERPRISES, INC. |
News Release |
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Contact: |
Kevin C. Hake |
Jeffrey T. O’Keefe |
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Senior Vice President, Finance and Treasurer |
Director of Investor Relations | ||
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732-747-7800 |
732-747-7800 |
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HOVNANIAN ENTERPRISES REPORTS FISCAL 2007 SECOND QUARTER RESULTS
Highlights for the Quarter Ended April 30, 2007
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The Company reported a pretax loss, prior to the effect of land related charges, of $7.1 million for the second quarter, equivalent to a $0.12 net loss per common share. |
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During the second quarter, the Company incurred $34.4 million of pretax charges related to land impairment and write-offs of predevelopment costs and land deposits, due to a continued decline in sales pace and general market conditions in many of the Company’s communities during the quarter. |
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After all land-related charges, the Company reported a net loss of $30.7 million for the second quarter of fiscal 2007, or a loss of $0.49 per common share, compared with earnings of $101.0 million, or $1.55 per fully diluted common share, in last year’s second quarter. |
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Due to increased uncertainty of housing market conditions, management has withdrawn its prior estimates for 2007 earnings and will not provide updated earnings projections at this time. However, for the full 2007 fiscal year, the Company expects to deliver between 13,200 and 14,200 homes, excluding deliveries from unconsolidated joint ventures. |
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Management has increased its focus on managing balance sheet leverage and inventory investment levels. The Company is projecting positive cash flow in both the fourth quarter of fiscal 2007 and for fiscal 2008. |
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Total revenues decreased 29.4% to $1.1 billion in the second quarter of fiscal 2007. Excluding unconsolidated joint ventures, the Company delivered 3,150 homes with an aggregate sales value of $1.1 billion in the second quarter, down 30.8% compared to deliveries of 4,555 homes with an aggregate sales value of $1.5 billion in the second quarter of fiscal 2006. During the second quarter of fiscal 2007, the Company delivered 275 homes through unconsolidated joint ventures, compared with 612 homes in the second quarter of fiscal 2006. |
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The number of net contracts for the second quarter of fiscal 2007, excluding unconsolidated joint ventures, declined 21.4% to 3,116 contracts. |
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Contract backlog as of April 30, 2007, excluding unconsolidated joint ventures, was 7,766 homes with a sales value of $2.7 billion, down 31.1% in dollars and down 33.0% in number of homes, compared to a contract backlog of 11,587 homes with a $4.0 billion sales value at the end of the second quarter of fiscal 2006. |
RED BANK, NJ, May 31, 2007 – Hovnanian Enterprises, Inc. (NYSE: HOV), a leading national homebuilder, reported a net loss of $30.7 million, after tax, or $0.49 per common share for the quarter ended April 30, 2007. For the six-month period ended April 30, 2007, revenues declined 20.2% to $2.3 billion, from $2.9 billion in the year earlier period. The Company reported a net loss of $88.0 million for the first half of 2007, or $1.40 per common share, compared to net income of $182.4 million, or $2.80 per fully diluted common share, in the same period a year ago.
Homebuilding gross margin, before interest expense included in cost of sales, was 16.3% for the second quarter of fiscal 2007, a 740 basis point decline from 23.7% in the prior year’s second quarter. The Company’s pretax income from Financial Services in the second quarter of fiscal 2007 declined 6.3% over the same period in 2006, to $6.3 million.
The number of active selling communities on April 30, 2007, excluding unconsolidated joint ventures, was 437, an increase of 6% compared with 411 active communities at the end of the same period last year. The Company’s contract cancellation rate, excluding unconsolidated joint ventures, for the second quarter of fiscal 2007 was 32%, a decrease from the rate of 36% reported in the first quarter of 2007.
Comments From Management
“We are frustrated to report that the housing market has continued to slip further in many locations in terms of both sales pace and sales prices,” commented Ara K. Hovnanian, President and Chief Executive Officer of the Company. “The housing market weakened in the latter part of the second quarter and the slower conditions have continued into May. Lower prices offered to buyers to close homes during the quarter also led to a further reduction in margins and a net loss for the quarter.”
“After a 3% increase in our February contracts over last year, the overall market fell off again, and our net contracts declined approximately 30% year over year through March and April,” Mr. Hovnanian said. “We believe that much of this decline was a reaction to recent problems in the sub-prime mortgage market. While we have felt the sub-prime impact directly in the form of fewer potential homebuyers qualifying for a mortgage as lending standards have tightened, the more significant impact has been indirectly through a further pullback in home buyers’ psychology toward making a purchase,” Mr. Hovnanian stated.
“Given the increased uncertainty of housing market conditions, we have discontinued offering earnings guidance and we have increased our focus on improving our balance sheet and generating positive cash flow,” Mr. Hovnanian said.
“Our use of options to control land allows us to walk away from land options that do not meet our financial hurdle rates and thus slow our investments during this current housing market slowdown,” said J. Larry Sorsby, Executive Vice President and Chief Financial Officer. “As of April 30, 2007, we had 52,147 lots held under option contracts and controlled a total of 85,902
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lots, a 29% decline from the end of the second quarter of fiscal 2006. To further enhance cash flow, we are evaluating walking away from additional land options,” Mr. Sorsby stated.
“Despite a challenging environment, we remain focused on realistically pricing homes to achieve a reasonable balance of absorption and margin and modifying product offerings so that we can steadily work through our land inventory,” Mr. Sorsby continued. “We are also focused on reevaluating and renegotiating land options and slowing down expenditures on land development to manage our inventory levels, generate cash flow, reduce leverage and improve our overall financial performance. As a result of delaying land take downs, walking away from additional communities, and delaying the opening of certain communities, we have lowered our expectations for the number of selling communities at the end of the year. While we are primarily focused on the balance sheet, we are also renegotiating with subcontractors and reducing our overheads.” Mr. Sorsby stated.
“While conditions in many of our markets have recently deteriorated further, there are some bright spots in some of our markets where we outperformed our expectations during the second quarter,” said Mr. Hovnanian. “For instance, our operations in San Diego and Minnesota, which had experienced substantial slowdowns over the past year or so, reported significant increases in sales per community on a year-over-year comparison for the second quarter. Although we are not confident that we’ve seen a bottom in these or any other markets yet, the improved pace of sales does give us confidence that over time our strategy to adjust the pricing on our homes is having its intended impact.”
“An excess supply consisting primarily of existing homes remains in many of our markets,” Mr. Hovnanian said. “Before the current housing market correction is over, the market needs to work through those inventories. Throughout our 48-year history, we have successfully navigated past down cycles, and we are confident that we will emerge from the current slowdown with a solid financial footing and positioned to capitalize on strategic opportunities in our markets,” Mr. Hovnanian concluded.
Hovnanian Enterprises will webcast its second quarter earnings conference call at 11:00 a.m. E.T. on Friday, June 1, 2007, 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 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 “Audio Archives” section of the Investor Relations page on the Hovnanian Web site at http:www.khov.com. The archive will be available for 12 months.
About Hovnanian Enterprises
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, Delaware, Florida, Georgia, Illinois, Kentucky, Maryland, Michigan, Minnesota, 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 Homes, Matzel & Mumford, Forecast Homes, Parkside Homes, Brighton Homes, Parkwood Builders, Windward Homes, Cambridge Homes, Town & Country Homes, Oster Homes, First Home Builders of Florida and CraftBuilt
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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 2006 annual report, can be accessed through the “Investor Relations” section of Hovnanian Enterprises’ website at http://www.khov.com. To be added to Hovnanian's investor e-mail or fax lists, please send an e-mail to IR@khov.com or sign up at http:www.khov.com.
Hovnanian Enterprises, Inc. is a member of the Public Home Builders Council of America (“PHBCA”) (http://www.phbca.org), a nonprofit group devoted to improving understanding of the business practices of America's largest publicly-traded home building companies, the competitive advantages they bring to the home building market, and their commitment to creating value for their home buyers and stockholders. The PHBCA's 14 member companies build one out of every five homes in the United States.
Non-GAAP Financial Measures:
Consolidated earnings before interest expense, income taxes, depreciation and amortization (“EBITDA”) and before inventory impairment loss and land option write-offs (“Adjusted EBITDA”) are not generally accepted accounting principle (GAAP) financial measures. The most directly comparable GAAP financial measure is net income. The reconciliation of EBITDA and Adjusted 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 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 risks, uncertainties and other factors include, but are not limited to, (1) changes in general and local economic and business conditions, (2) adverse weather conditions and natural disasters, (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 home building, sales and customer financing processes 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 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, 2006.
(Financial Tables Follow)
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Hovnanian Enterprises, Inc. |
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April 30, 2007 |
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Statements of Consolidated Operations |
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(Dollars in Thousands, Except Per Share) |
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Three Months Ended, |
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Six Months Ended, | ||||
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April 30, |
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April 30, | ||||
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2007 |
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2006 |
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2007 |
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2006 |
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(Unaudited) |
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(Unaudited) | ||||
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Total Revenues |
$ 1,110,658 |
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$ 1,574,121 |
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$ 2,276,459 |
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$ 2,852,113 | |||
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Costs and Expenses (a) |
1,149,931 |
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1,421,070 |
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2,384,326 |
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2,571,411 | |||
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(Loss) Income from Unconsolidated Joint Ventures |
(2,160) |
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9,497 |
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(195) |
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17,072 | |||
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(Loss) Income Before Income Taxes |
(41,433) |
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162,548 |
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(108,062) |
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297,774 | |||
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Income Tax (Benefit) Provision |
(13,374) |
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58,899 |
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(25,395) |
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110,029 | |||
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Net (Loss) Income |
(28,059) |
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103,649 |
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(82,667) |
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187,745 | |||
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Less: Preferred Stock Dividends |
2,669 |
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2,669 |
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5,338 |
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5,338 | |||
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Net (Loss) Income Available to Common Stockholders |
$ (30,728) |
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$ 100,980 |
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$ (88,005) |
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$ 182,407 | |||
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Per Share Data: |
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Basic: |
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(Loss) Income per common share |
$ (0.49) |
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$ 1.60 |
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$ (1.40) |
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$ 2.90 | |
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Weighted Average Number of |
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Common Shares Outstanding |
63,004 |
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62,919 |
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62,953 |
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62,864 |
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Assuming Dilution: |
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(Loss) Income per common share |
$ (0.49) |
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$ 1.55 |
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$ (1.40) |
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$ 2.80 | |
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Weighted Average Number of |
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Common Shares Outstanding (b) |
63,004 |
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65,106 |
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62,953 |
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65,254 |
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(a) Includes inventory impairment loss and land option write-offs. |
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(b) For periods with a net loss, basic shares are used in accordance with GAAP rules. | ||||||||||
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Hovnanian Enterprises, Inc. |
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April 30, 2007 |
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Gross Margin |
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(Dollars in Thousands) |
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Homebuilding Gross Margin |
Homebuilding Gross Margin |
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Three Months Ended |
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Six Months Ended |
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April 30, |
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April 30, |
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2007 |
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2006 |
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2007 |
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2006 |
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(Unaudited) |
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(Unaudited) |
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Sale of Homes |
$ 1,058,014 |
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$ 1,479,548 |
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$ 2,193,930 |
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$ 2,725,745 |
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Cost of Sales, excluding interest(a) |
885,783 |
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1,128,530 |
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1,817,266 |
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2,055,352 |
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Homebuilding Gross Margin, excluding interest |
172,231 |
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351,018 |
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376,664 |
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670,393 |
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Homebuilding Cost of Sales interest |
28,578 |
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19,861 |
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55,394 |
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35,972 |
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Homebuilding Gross Margin, including interest |
$ 143,653 |
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$ 331,157 |
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$ 321,270 |
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$ 634,421 |
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Gross Margin Percentage, excluding interest |
16.3% |
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23.7% |
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17.2% |
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24.6% |
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Gross Margin Percentage, including interest |
13.6% |
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22.4% |
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14.6% |
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23.3% |
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Land Sales Gross Margin |
Land Sales Gross Margin |
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Three Months Ended |
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Six Months Ended |
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April 30, |
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April 30, |
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2007 |
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2006 |
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2007 |
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2006 |
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(Unaudited) |
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(Unaudited) |
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Land Sales |
$ 31,695 |
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$ 70,238 |
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$ 35,294 |
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$ 80,793 |
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Cost of Sales, excluding interest(a) |
18,027 |
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51,769 |
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20,519 |
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59,634 |
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Land Sales Gross Margin, excluding interest |
13,668 |
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18,469 |
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14,775 |
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21,159 |
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Land Sales interest |
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178 |
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422 |
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234 |
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880 |
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Land Sales Gross Margin, including interest |
$ 13,490 |
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$ 18,047 |
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$ 14,541 |
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$ 20,279 |
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(a) Does not include cost associated with walking away from land options which are recorded as inventory impairment losses in the Statements of Consolidated Operations. |
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Hovnanian Enterprises, Inc. |
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April 30, 2007 |
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Reconciliation of Adjusted EBITDA to Net (Loss) Income |
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(Dollars in Thousands) |
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Three Months Ended |
Six Months Ended | |||||
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April 30, |
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April 30, | ||||
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2007 |
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2006 |
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2007 |
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2006 |
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(Unaudited) |
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(Unaudited) | ||||
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Net (Loss) Income |
$ (28,059) |
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$ 103,649 |
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$ (82,667) |
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$ 187,745 |
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Income Tax (Benefit) Provision |
(13,374) |
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58,899 |
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(25,395) |
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110,029 |
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Interest expense |
35,422 |
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20,983 |
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63,514 |
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38,372 |
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EBIT 1 |
(6,011) |
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183,531 |
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(44,548) |
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336,146 |
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Depreciation |
4,588 |
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3,233 |
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8,972 |
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6,319 |
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Amortization of Debt Costs |
672 |
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573 |
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1,372 |
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1,009 |
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Amortization of Intangibles |
6,718 |
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13,391 |
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68,274 |
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25,060 |
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EBITDA2 |
5,967 |
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200,728 |
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34,070 |
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368,534 |
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Inventory Impairment Loss and Land Option Write-offs |
34,353 |
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5,595 |
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75,827 |
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8,704 |
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Adjusted EBITDA3 |
$ 40,320 |
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$ 206,323 |
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$ 109,897 |
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$ 377,238 |
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INTEREST INCURRED |
$ 53,501 |
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$ 36,250 |
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$ 98,798 |
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$ 67,054 |
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ADJUSTED EBITDA TO |
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INTEREST INCURRED |
0.75 |
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5.69 |
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1.11 |
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5.63 |
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(1) EBIT is a non-GAAP financial measure. The comparable GAAP financial measure is net income. EBIT represents earnings before interest expense and income taxes. | |||||||
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(2) EBITDA is a non-GAAP financial measure. The comparable GAAP financial measure is net income. EBITDA represents earnings before interest expense, income taxes, depreciation and amortization. | |||||||
|
(3) Adjusted EBITDA is a non-GAAP financial measure. The comparable GAAP financial measure is net income. 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, 2007 |
|
|
|
|
|
|
|
|
Interest Incurred, Expensed and Capitalized |
|
|
|
|
|
| |
|
(Dollars in Thousands) |
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended | ||||
|
|
April 30, |
|
April 30, | ||||
|
|
2007 |
|
2006 |
|
2007 |
|
2006 |
|
|
(Unaudited) |
|
(Unaudited) | ||||
|
Interest Capitalized at Beginning of Period |
$ 120,054 |
|
$ 61,781 |
|
$ 102,849 |
|
$ 48,366 |
|
Plus Interest Incurred |
53,501 |
|
36,250 |
|
98,798 |
|
67,054 |
|
Less Interest Expensed |
35,422 |
|
20,983 |
|
63,514 |
|
38,372 |
|
Interest Capitalized at End of Period |
$ 138,133 |
|
$ 77,048 |
|
$ 138,133 |
|
$ 77,048 |
7
|
HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In Thousands Except Share Amounts) | |||
|
|
|
|
|
|
|
April 30, 2007 |
|
October 31, 2006 |
|
ASSETS |
|
|
|
|
|
(unaudited) |
|
|
|
Homebuilding: |
|
|
|
|
Cash and cash equivalents |
$10,144 |
|
$43,635 |
|
|
|
|
|
|
Restricted cash |
11,332 |
|
9,479 |
|
|
|
|
|
|
Inventories - at the lower of cost or fair value: |
|
|
|
|
Sold and unsold homes and lots under development |
3,428,811 |
|
3,297,766 |
|
|
|
|
|
|
Land and land options held for future |
|
|
|
|
development or sale |
392,274 |
|
362,760 |
|
|
|
|
|
|
Consolidated inventory not owned: |
|
|
|
|
Specific performance options |
14,996 |
|
20,340 |
|
Variable interest entities |
185,443 |
|
208,167 |
|
Other options |
216,006 |
|
181,808 |
|
|
|
|
|
|
Total consolidated inventory not owned |
416,445 |
|
410,315 |
|
|
|
|
|
|
Total inventories |
4,237,530 |
|
4,070,841 |
|
|
|
|
|
|
Investments in and advances to unconsolidated |
|
|
|
|
joint ventures |
215,962 |
|
212,581 |
|
|
|
|
|
|
Receivables, deposits, and notes |
82,904 |
|
94,750 |
|
|
|
|
|
|
Property, plant, and equipment – net |
113,098 |
|
110,704 |
|
|
|
|
|
|
Prepaid expenses and other assets |
182,324 |
|
175,603 |
|
|
|
|
|
|
Goodwill |
32,658 |
|
32,658 |
|
|
|
|
|
|
Definite life intangibles |
71,814 |
|
165,053 |
|
|
|
|
|
|
Total homebuilding |
4,957,766 |
|
4,915,304 |
|
|
|
|
|
|
Financial services: |
|
|
|
|
Cash and cash equivalents |
9,387 |
|
10,688 |
|
Restricted cash |
8,777 |
|
1,585 |
|
Mortgage loans held for sale |
133,326 |
|
281,958 |
|
Other assets |
6,637 |
|
10,686 |
|
|
|
|
|
|
Total financial services |
158,127 |
|
304,917 |
|
|
|
|
|
|
Income taxes receivable – including deferred |
|
|
|
|
tax benefits |
293,139 |
|
259,814 |
|
|
|
|
|
|
Total assets |
$5,409,032 |
|
$5,480,035 |
8
|
HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In Thousands Except Share Amounts) | ||||
|
|
April 30, 2007 |
|
October 31, 2006 |
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
(unaudited) |
|
|
|
|
|
|
|
|
|
|
Homebuilding: |
|
|
|
|
|
Nonrecourse land mortgages |
$10,190 |
|
$26,088 |
|
|
Accounts payable and other liabilities |
381,252 |
|
582,393 |
|
|
Customers’ deposits |
127,232 |
|
184,943 |
|
|
Nonrecourse mortgages secured by operating |
|
|
|
|
|
Properties |
23,341 |
|
23,684 |
|
|
Liabilities from inventory not owned |
261,438 |
|
205,067 |
|
|
|
|
|
|
|
|
Total homebuilding |
803,453 |
|
1,022,175 |
|
|
|
|
|
|
|
|
Financial services: |
|
|
|
|
|
Accounts payable and other liabilities |
15,284 |
|
12,158 |
|
|
Mortgage warehouse line of credit |
121,837 |
|
270,171 |
|
|
|
|
|
|
|
|
Total financial services |
137,121 |
|
282,329 |
|
|
|
|
|
|
|
|
Notes payable: |
|
|
|
|
|
Revolving credit agreement |
412,300 |
|
|
|
|
Senior notes |
1,650,336 |
|
1,649,778 |
|
|
Senior subordinated notes |
400,000 |
|
400,000 |
|
|
Accrued interest |
49,812 |
|
51,105 |
|
|
|
|
|
|
|
|
Total notes payable |
2,512,448 |
|
2,100,883 |
|
|
|
|
|
|
|
|
Total liabilities |
3,453,022 |
|
3,405,387 |
|
|
|
|
|
|
|
|
Minority interest from inventory not owned |
94,533 |
|
130,221 |
|
|
|
|
|
|
|
|
Minority interest from consolidated joint ventures |
1,599 |
|
2,264 |
|
|
|
|
|
|
|
|
Stockholders’ equity: |
|
|
|
|
|
Preferred stock, $.01 par value-authorized 100,000 |
|
|
|
|
|
shares; issued 5,600 shares at April 30, |
|
|
|
|
|
2007 and at October 31, 2006 with a |
|
|
|
|
|
liquidation preference of $140,000 |
135,299 |
|
135,299 |
|
|
Common stock, Class A, $.01 par value-authorized |
|
|
|
|
|
200,000,000 shares; issued 59,232,205 shares at |
|
|
|
|
|
April 30, 2007 and 58,653,723 shares at |
|
|
|
|
|
October 31, 2006 (including 11,694,720 shares |
|
|
|
|
|
at April 30, 2007 and 11,494,720 shares at |
|
|
|
|
|
October 31, 2006 held in Treasury) |
592 |
|
587 |
|
|
Common stock, Class B, $.01 par value (convertible |
|
|
|
|
|
to Class A at time of sale) authorized |
|
|
|
|
|
30,000,000 shares; issued 15,341,316 shares at |
|
|
|
|
|
April 30, 2007 and 15,343,410 shares at |
|
|
|
|
|
October 31, 2006 (including 691,748 shares at |
|
|
|
|
|
April 30, 2007 and October 31, 2006 held in |
|
|
|
|
|
Treasury) |
153 |
|
153 |
|
|
Paid in capital – common stock |
265,286 |
|
253,262 |
|
|
Retained earnings |
1,573,805 |
|
1,661,810 |
|
|
Treasury stock - at cost |
(115,257) |
|
(108,948) |
|
|
|
|
|
|
|
|
Total stockholders’ equity |
1,859,878 |
|
1,942,163 |
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ equity |
$5,409,032 |
|
$5,480,035 |
|
9
|
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, | ||||
|
|
2007 |
|
2006 |
|
2007 |
|
2006 |
|
Revenues: |
|
|
|
|
|
|
|
|
Homebuilding: |
|
|
|
|
|
|
|
|
Sale of homes |
$1,058,014 |
|
$1,479,548 |
|
$2,193,930 |
|
$2,725,745 |
|
Land sales and other revenues |
34,761 |
|
73,382 |
|
43,098 |
|
85,915 |
|
|
|
|
|
|
|
|
|
|
Total homebuilding |
1,092,775 |
|
1,552,930 |
|
2,237,028 |
|
2,811,660 |
|
Financial services |
17,883 |
|
21,191 |
|
39,431 |
|
40,453 |
|
|
|
|
|
|
|
|
|
|
Total revenues |
1,110,658 |
|
1,574,121 |
|
2,276,459 |
|
2,852,113 |
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
Homebuilding: |
|
|
|
|
|
|
|
|
Cost of sales, excluding interest |
903,810 |
|
1,180,299 |
|
1,837,785 |
|
2,114,986 |
|
Cost of sales interest |
28,756 |
|
20,283 |
|
55,628 |
|
36,852 |
|
Inventory impairment loss and land |
|
|
|
|
|
|
|
|
option write-offs |
34,353 |
|
5,595 |
|
75,827 |
|
8,704 |
|
|
|
|
|
|
|
|
|
|
Total cost of sales |
966,919 |
|
1,206,177 |
|
1,969,240 |
|
2,160,542 |
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
137,637 |
|
151,853 |
|
269,779 |
|
287,087 |
|
|
|
|
|
|
|
|
|
|
Total homebuilding |
1,104,556 |
|
1,358,030 |
|
2,239,019 |
|
2,447,629 |
|
|
|
|
|
|
|
|
|
|
Financial services |
11,628 |
|
14,517 |
|
24,698 |
|
28,047 |
|
|
|
|
|
|
|
|
|
|
Corporate general and administrative |
19,558 |
|
25,911 |
|
42,191 |
|
53,633 |
|
|
|
|
|
|
|
|
|
|
Other interest |
6,666 |
|
700 |
|
7,886 |
|
1,520 |
|
|
|
|
|
|
|
|
|
|
Other operations |
805 |
|
8,521 |
|
2,258 |
|
15,522 |
|
|
|
|
|
|
|
|
|
|
Intangible amortization |
6,718 |
|
13,391 |
|
68,274 |
|
25,060 |
|
|
|
|
|
|
|
|
|
|
Total expenses |
1,149,931 |
|
1,421,070 |
|
2,384,326 |
|
2,571,411 |
|
|
|
|
|
|
|
|
|
|
(Loss) income from unconsolidated |
|
|
|
|
|
|
|
|
joint ventures |
(2,160) |
|
9,497 |
|
(195) |
|
17,072 |
|
|
|
|
|
|
|
|
|
|
(Loss) income before income taxes |
(41,433) |
|
162,548 |
|
(108,062) |
|
297,774 |
|
|
|
|
|
|
|
|
|
|
State and federal income tax |
|
|
|
|
|
|
|
|
(benefit)/provision: |
|
|
|
|
|
|
|
|
State |
1,094 |
|
6,235 |
|
(1,252) |
|
11,109 |
|
Federal |
(14,468) |
|
52,664 |
|
(24,143) |
|
98,920 |
|
|
|
|
|
|
|
|
|
|
Total taxes |
(13,374) |
|
58,899 |
|
(25,395) |
|
110,029 |
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
(28,059) |
|
103,649 |
|
(82,667) |
|
187,745 |
|
Less: preferred stock dividends |
2,669 |
|
2,669 |
|
5,338 |
|
5,338 |
|
|
|
|
|
|
|
|
|
|
Net (loss) income available to common |
|
|
|
|
|
|
|
|
stockholders |
$(30,728) |
|
$100,980 |
|
$(88,005) |
|
$182,407 |
|
Per share data: |
|
|
|
|
|
|
|
|
Basic: |
|
|
|
|
|
|
|
|
(Loss) income per common share |
$(0.49) |
|
$1.60 |
|
$(1.40) |
|
$2.90 |
|
Weighted average number of common |
|
|
|
|
|
|
|
|
shares outstanding |
63,004 |
|
62,919 |
|
62,953 |
|
62,864 |
|
Assuming dilution: |
|
|
|
|
|
|
|
|
(Loss) income per common share |
$(0.49) |
|
$1.55 |
|
$(1.40) |
|
$2.80 |
|
Weighted average number of common |
|
|
|
|
|
|
|
|
shares outstanding |
63,004 |
|
65,106 |
|
62,953 |
|
65,254 |
10
|
HOVNANIAN ENTERPRISES, INC. |
|
|
|
|
|
|
|
|
|
|
| |
|
(DOLLARS IN THOUSANDS EXCEPT AVG. PRICE) |
|
|
|
|
|
|
|
|
|
| ||
|
(UNAUDITED) |
Communities Under Development | |||||||||||
|
|
Three Months - 4/30/07 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Contracts (1) |
|
Deliveries |
|
|
|
| ||||
|
|
|
Three Months Ended |
|
Three Months Ended |
|
Contract Backlog | ||||||
|
|
|
April 30, |
|
April 30, |
|
April 30, | ||||||
|
|
|
2007 |
2006 |
% Change |
|
2007 |
2006 |
% Change |
|
2007 |
2006 |
% Change |
|
Northeast |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homes |
408 |
501 |
(18.6%) |
|
409 |
437 |
(6.4%) |
|
1,143 |
1,665 |
(31.4%) |
|
|
Dollars |
202,884 |
225,355 |
(10.0%) |
|
185,852 |
203,828 |
(8.8%) |
|
592,250 |
758,960 |
(22.0%) |
|
|
Avg.Price |
497,264 |
449,810 |
10.5% |
|
454,406 |
466,426 |
(2.6%) |
|
518,154 |
455,832 |
13.7% |
|
Mid-Atlantic |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homes |
513 |
615 |
(16.6%) |
|
402 |
491 |
(18.1%) |
|
1,206 |
1,478 |
(18.4%) |
|
|
Dollars |
239,485 |
309,773 |
(22.7%) |
|
189,370 |
251,012 |
(24.6%) |
|
587,339 |
761,279 |
(22.8%) |
|
|
Avg.Price |
466,832 |
503,696 |
(7.3%) |
|
471,070 |
511,226 |
(7.9%) |
|
487,014 |
515,074 |
(5.4%) |
|
Southeast(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homes |
350 |
633 |
(44.7%) |
|
766 |
1,316 |
(41.8%) |
|
2,727 |
5,265 |
(48.2%) |
|
|
Dollars |
107,345 |
189,762 |
(43.4%) |
|
207,844 |
311,202 |
(33.2%) |
|
785,921 |
1,438,488 |
(45.4%) |
|
|
Avg.Price |
306,699 |
299,782 |
2.3% |
|
271,337 |
236,476 |
14.7% |
|
288,200 |
273,217 |
5.5% |
|
Southwest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homes |
989 |
1,235 |
(19.9%) |
|
866 |
1,054 |
(17.8%) |
|
1,066 |
1,406 |
(24.2%) |
|
|
Dollars |
222,119 |
265,790 |
(16.4%) |
|
200,053 |
232,289 |
(13.9%) |
|
245,148 |
315,309 |
(22.3%) |
|
|
Avg.Price |
224,589 |
215,215 |
4.4% |
|
231,008 |
220,388 |
4.8% |
|
229,970 |
224,260 |
2.5% |
|
Midwest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homes |
286 |
260 |
10.0% |
|
199 |
209 |
(4.8%) |
|
813 |
610 |
33.3% |
|
|
Dollars |
68,735 |
52,226 |
31.6% |
|
41,524 |
29,124 |
42.6% |
|
167,350 |
110,774 |
51.1% |
|
|
Avg.Price |
240,331 |
200,869 |
19.6% |
|
208,663 |
139,349 |
49.7% |
|
205,842 |
181,597 |
13.4% |
|
West |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homes |
570 |
718 |
(20.6%) |
|
508 |
1,048 |
(51.5%) |
|
811 |
1,163 |
(30.3%) |
|
|
Dollars |
248,815 |
343,303 |
(27.5%) |
|
233,371 |
452,093 |
(48.4%) |
|
357,982 |
587,465 |
(39.1%) |
|
|
Avg.Price |
436,518 |
478,138 |
(8.7%) |
|
459,392 |
431,386 |
6.5% |
|
441,408 |
505,129 |
(12.6%) |
|
Consolidated Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homes |
3,116 |
3,962 |
(21.4%) |
|
3,150 |
4,555 |
(30.8%) |
|
7,766 |
11,587 |
(33.0%) |
|
|
Dollars |
1,089,383 |
1,386,209 |
(21.4%) |
|
1,058,014 |
1,479,548 |
(28.5%) |
|
2,735,990 |
3,972,275 |
(31.1%) |
|
|
Avg.Price |
349,610 |
349,876 |
(0.1%) |
|
335,877 |
324,818 |
3.4% |
|
352,304 |
342,822 |
2.8% |
|
Unconsolidated Joint Ventures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homes |
202 |
380 |
(46.8%) |
|
275 |
612 |
(55.1%) |
|
811 |
1,797 |
(54.9%) |
|
|
Dollars |
61,782 |
129,757 |
(52.4%) |
|
103,241 |
244,402 |
(57.8%) |
|
370,634 |
810,115 |
(54.2%) |
|
|
Avg.Price |
305,853 |
341,466 |
(10.4%) |
|
375,422 |
399,350 |
(6.0%) |
|
457,008 |
450,815 |
1.4% |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homes |
3,318 |
4,342 |
(23.6%) |
|
3,425 |
5,167 |
(33.7%) |
|
8,577 |
13,384 |
(35.9%) |
|
|
Dollars |
1,151,165 |
1,515,966 |
(24.1%) |
|
1,161,255 |
1,723,950 |
(32.6%) |
|
3,106,624 |
4,782,390 |
(35.0%) |
|
|
Avg.Price |
346,945 |
349,140 |
(0.6%) |
|
339,053 |
333,646 |
1.6% |
|
362,204 |
357,321 |
1.4% |
|
DELIVERIES INCLUDE EXTRAS |
|
|
|
|
|
|
|
|
|
|
| |
|
Notes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Net contracts are defined as a new contracts signed during the period for the purchase of homes, less cancellations of prior contracts. |
|
|
|
| ||||||||
|
(2) The number and the dollar amount of net contracts in the Southeast in the 2007 second quarter include the effect of CraftBuilt Homes acquisition, which closed in April 2006. | ||||||||||||
11
|
HOVNANIAN ENTERPRISES, INC. |
|
|
|
|
|
|
|
|
|
|
|
|
|
(DOLLARS IN THOUSANDS EXCEPT AVG. PRICE) |
|
|
|
|
|
|
|
|
|
| ||
|
(UNAUDITED) |
Communities Under Development | |||||||||||
|
|
Six Months - 4/30/2007 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Contracts (1) |
|
Deliveries |
|
|
|
| ||||
|
|
|
Six Months Ended |
|
Six Months Ended |
|
Contract Backlog | ||||||
|
|
|
April 30, |
|
April 30, |
|
April 30, | ||||||
|
|
|
2007 |
2006 |
% Change |
|
2007 |
2006 |
% Change |
|
2007 |
2006 |
% Change |
|
Northeast |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homes |
794 |
961 |
(17.4%) |
|
869 |
879 |
(1.1%) |
|
1,143 |
1,665 |
(31.4%) |
|
|
Dollars |
377,932 |
420,376 |
(10.1%) |
|
399,138 |
400,127 |
(0.2%) |
|
592,250 |
758,960 |
(22.0%) |
|
|
Avg.Price |
475,984 |
437,436 |
8.8% |
|
459,307 |
455,207 |
0.9% |
|
518,154 |
455,832 |
13.7% |
|
Mid-Atlantic |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homes |
944 |
967 |
(2.4%) |
|
872 |
870 |
0.2% |
|
1,206 |
1,478 |
(18.4%) |
|
|
Dollars |
432,124 |
497,147 |
(13.1%) |
|
412,058 |
448,890 |
(8.2%) |
|
587,339 |
761,279 |
(22.8%) |
|
|
Avg.Price |
457,759 |
514,113 |
(11.0%) |
|
472,544 |
515,966 |
(8.4%) |
|
487,014 |
515,074 |
(5.4%) |
|
Southeast (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homes |
494 |
1,648 |
(70.0%) |
|
1,580 |
2,464 |
(35.9%) |
|
2,727 |
5,265 |
(48.2%) |
|
|
Dollars |
147,366 |
503,789 |
(70.7%) |
|
425,569 |
580,980 |
(26.7%) |
|
785,921 |
1,438,488 |
(45.4%) |
|
|
Avg.Price |
298,311 |
305,697 |
(2.4%) |
|
269,347 |
235,787 |
14.2% |
|
288,200 |
273,217 |
5.5% |
|
Southwest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homes |
1,720 |
2,036 |
(15.5%) |
|
1,653 |
1,926 |
(14.2%) |
|
1,066 |
1,406 |
(24.2%) |
|
|
Dollars |
388,321 |
436,494 |
(11.0%) |
|
376,223 |
415,548 |
(9.5%) |
|
245,148 |
315,309 |
(22.3%) |
|
|
Avg.Price |
225,768 |
214,388 |
5.3% |
|
227,600 |
215,757 |
5.5% |
|
229,970 |
224,260 |
2.5% |
|
Midwest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homes |
540 |
408 |
32.4% |
|
395 |
379 |
4.2% |
|
813 |
610 |
33.3% |
|
|
Dollars |
124,680 |
81,606 |
52.8% |
|
80,103 |
58,327 |
37.3% |
|
167,350 |
110,774 |
51.1% |
|
|
Avg.Price |
230,889 |
200,015 |
15.4% |
|
202,792 |
153,897 |
31.8% |
|
205,842 |
181,597 |
13.4% |
|
West |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homes |
1,194 |
1,292 |
(7.6%) |
|
1,047 |
1,882 |
(44.4%) |
|
811 |
1,163 |
(30.3%) |
|
|
Dollars |
523,668 |
600,454 |
(12.8%) |
|
500,839 |
821,873 |
(39.1%) |
|
357,982 |
587,465 |
(39.1%) |
|
|
Avg.Price |
438,583 |
464,748 |
(5.6%) |
|
478,356 |
436,702 |
9.5% |
|
441,408 |
505,129 |
(12.6%) |
|
Consolidated Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homes |
5,686 |
7,312 |
(22.2%) |
|
6,416 |
8,400 |
(23.6%) |
|
7,766 |
11,587 |
(33.0%) |
|
|
Dollars |
1,994,091 |
2,539,866 |
(21.5%) |
|
2,193,930 |
2,725,745 |
(19.5%) |
|
2,735,990 |
3,972,275 |
(31.1%) |
|
|
Avg.Price |
350,702 |
347,356 |
1.0% |
|
341,947 |
324,493 |
5.4% |
|
352,304 |
342,822 |
2.8% |
|
Unconsolidated Joint Ventures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homes |
245 |
654 |
(62.5%) |
|
564 |
1,197 |
(52.9%) |
|
811 |
1,797 |
(54.9%) |
|
|
Dollars |
59,612 |
238,329 |
(75.0%) |
|
211,737 |
459,014 |
(53.9%) |
|
370,634 |
810,115 |
(54.2%) |
|
|
Avg.Price |
243,315 |
364,417 |
(33.2%) |
|
375,419 |
383,470 |
(2.1%) |
|
457,008 |
450,815 |
1.4% |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Homes |
5,931 |
7,966 |
(25.5%) |
|
6,980 |
9,597 |
(27.3%) |
|
8,577 |
13,384 |
(35.9%) |
|
|
Dollars |
2,053,703 |
2,778,195 |
(26.1%) |
|
2,405,667 |
3,184,759 |
(24.5%) |
|
3,106,624 |
4,782,390 |
(35.0%) |
|
|
Avg.Price |
346,266 |
348,757 |
(0.7%) |
|
344,651 |
331,849 |
3.9% |
|
362,204 |
357,321 |
1.4% |
|
DELIVERIES INCLUDE EXTRAS |
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Net contracts are defined as a new contracts signed during the period for the purchase of homes, less cancellations of prior contracts. |
|
| ||||||||||
|
(2) The number and the dollar amount of net contracts in the Southeast in the first six months of 2007 include the effect of CraftBuilt Homes acquisition, which closed in April 2006. | ||||||||||||
12