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): June 7, 2011
HOVNANIAN ENTERPRISES, INC.
(Exact Name of Registrant as Specified in Charter)
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Delaware
(State or Other
Jurisdiction
of Incorporation)
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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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o
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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o
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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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o
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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.
OnJune 7, 2011, Hovnanian Enterprises, Inc. issued a press release announcing its preliminary financial results for the fiscal second quarter ended April 30, 2011. A copy of the 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 and Adjusted EBITDA, which are non-GAAP financial measures. The most directly comparable GAAP financial measure is net (loss) income. A reconciliation of EBITDA and Adjusted EBITDA to net (loss) income is contained in the Earnings Press Release. The Earnings Press Release contains information about Loss Before Income Taxes Excluding Land-Related Charges and Loss (Gain) on Extinguishment of Debt, which is a non−GAAP financial measure. The most directly comparable GAAP financial measure is Loss Before Income Taxes. A reconciliation of Loss Before Income Taxes Excluding Land-Related Charges and Loss (Gain) on Extinguishment of Debt to Loss 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 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.
Management believes Loss Before Income Taxes Excluding Land-Related Charges and Loss (Gain) on Extinguishment of Debt to be relevant and useful information because it provides a better metric of the Company's operating performance. Loss Before Income Taxes Excluding Land-Related Charges and Loss (Gain) on Extinguishment of Debt should be considered in addition to, but not as a substitute for, income before income taxes, net income 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 Loss Before Income Taxes Excluding Land-Related Charges and Loss (Gain) on Extinguishment of Debt may be different than the calculation used by other companies, and, therefore, comparability may be affected.
The Earnings Press Release also contains information about Cash Flow, which is a non-GAAP financial measure. The most directly comparable GAAP financial measure is Net Cash provided by (or used in) Operating Activities. As discussed in the Earnings Press Release, the Company uses cash flow to mean the amount of Net Cash provided by (or used in) Operating Activities for the period, as reported on the Consolidated Statement of Cash Flows, excluding changes in mortgage notes receivable at the mortgage company, plus (or minus) the amount of Net Cash provided by (or used in) Investing Activities. Management believes the amount of Cash Flow in any period is relevant and useful information as Cash Flow is a standard measure commonly reported and widely used by analysts, investors and others to measure our financial performance and our ability to service and repay our debt obligations. Cash Flow is also one of several metrics used by our management to measure the cash generated from (our used in) our operations and to gauge our ability to service and repay our debt obligations. For our Company, the change in the balance of mortgage notes receivable held at the mortgage company, which is included in Operating Activities, is added back to the calculation because it is generally offset by a similar amount of change in the amount outstanding under the mortgage warehouse line of credit (included as a Financing Activity), and would inaccurately distort the amount of Cash Flow reported if it were included. Unlike EBITDA, Cash Flow takes into account the payment of current income taxes and interest costs that are due and payable in the period. Cash Flow should be considered in addition to, but not as a substitute for, EBITDA, 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 Cash Flow may be different than the calculation used by other companies, and, therefore, comparability may be affected.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
Exhibit 99.1 Earnings Press Release–Fiscal Second Quarter Ended April 30, 2011.
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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||||||
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(Registrant)
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||||||
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By:
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/s/ J. Larry Sorsby
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|||||
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Name: J. Larry Sorsby
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||||||
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Title: Executive Vice President and Chief Financial Officer
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||||||
Date: June 7, 2011
INDEX TO EXHIBITS
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Exhibit Number
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Exhibit
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Exhibit 99.1
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Earnings Press Release–Second Quarter Ended April 30, 2011.
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HOVNANIAN ENTERPRISES, INC.
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News Release
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Contact:
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J. Larry Sorsby
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Jeffrey T. O’Keefe
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Executive Vice President & CFO
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Vice President, Investor Relations
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732-747-7800
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732-747-7800
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| HOVNANIAN ENTERPRISES REPORTS SECOND QUARTER FISCAL 2011 RESULTS |
RED BANK, NJ, June 7, 2011 – Hovnanian Enterprises, Inc. (NYSE: HOV), a leading national homebuilder, reported results for its second quarter and six months ended April 30, 2011.
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RESULTS FOR THE THREE AND SIX MONTH PERIODS ENDED APRIL 30, 2011:
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·
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Total revenues were $255.1 million for the second quarter ended April 30, 2011 compared with $318.6 million in last year’s second quarter. During the first six months of fiscal 2011, total revenues were $507.7 million compared with $638.2 million in the same period of the prior year.
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·
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Homebuilding gross margin percentage, before interest expense included in cost of sales, was 14.8% for the three months ended April 30, 2011, compared to 17.3% during the same quarter a year ago. For the six month period ended April 30, 2011, homebuilding gross margin percentage, before interest expense included in cost of sales, was 15.8% compared with 16.6% in the year earlier period.
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·
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Consolidated pre-tax land-related charges in the fiscal 2011 second quarter were $16.9 million, compared with $1.2 million in the prior year’s second quarter. For the first half of fiscal 2011, consolidated pre-tax land-related charges were $30.5 million compared with $6.2 million during the first half of 2010.
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·
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Excluding land-related charges and (loss) gain on extinguishment of debt, the pre-tax loss for the quarter ended April 30, 2011 was $55.1 million compared with $44.0 million in the second quarter of 2010. During the first six months of fiscal 2011, the pre-tax loss, excluding land-related charges and (loss) gain on extinguishment of debt, was $106.2 million compared with $96.6 million in last year’s first half.
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·
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For the second quarter of fiscal 2011, the after-tax net loss was $72.7 million, or $0.69 per common share, compared with $28.6 million, or $0.36 per common share, in the second quarter of the prior year. During the six months ended April 30, 2011, the after-tax net loss was $136.8 million, or $1.49 per common share, compared with net income of $207.6 million, or $2.60 per fully diluted common share in the first half of last year, which as a result of tax legislation changes included a federal income tax benefit of $291.3 million.
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·
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Net contracts during the second quarter of 2011, including unconsolidated joint ventures, decreased 17% to 1,166 homes compared with the same period of the prior year. For the six months ended April 30, 2011, net contracts, including unconsolidated joint ventures, were 2,016 homes, a 15% decrease from the same period a year ago.
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·
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Contract backlog, as of April 30, 2011, including unconsolidated joint ventures, was 1,551 homes with a sales value of $513.3 million, a decrease of 21% and 17%, respectively, compared to April 30, 2010. Compared to the the first quarter of fiscal 2011, contract backlog, including unconsolidated joint ventures, increased 15% on a units basis and 18% on a dollar basis in the second quarter of fiscal 2011.
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·
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The contract cancellation rate, excluding unconsolidated joint ventures, in the fiscal 2011 second quarter was 20%, compared with 17% in the prior year’s second quarter.
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·
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At April 30, 2011, there were 206 active selling communities, including unconsolidated joint ventures, compared with 188 active selling communities at April 30, 2010.
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·
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Deliveries, including unconsolidated joint ventures, were 967 homes for the fiscal 2011 second quarter, compared with 1,197 homes during the second quarter of fiscal 2010. For the first half of the year ended April 30, 2011, deliveries, including unconsolidated joint ventures, were 1,859 homes compared to 2,326 homes in the first six months of 2010.
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·
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The valuation allowance was $840.6 million as of April 30, 2011. The valuation allowance is a non-cash reserve against the tax assets for GAAP purposes. For tax purposes, the tax deductions associated with the tax assets may be carried forward for 20 years from the date the deductions were incurred.
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CASH AND INVENTORY AS OF APRIL 30, 2011:
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·
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As of April 30, 2011, homebuilding cash was $415.2 million, including restricted cash required to collateralize letters of credit.
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·
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Cash flow in the second quarter of fiscal 2011 was negative $88.5 million, after spending approximately $125 million of cash to purchase approximately 1,440 lots and to develop land across the Company.
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·
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As of April 30, 2011, the land position, including unconsolidated joint ventures, was 32,546 lots, consisting of 10,542 lots under option and 22,004 owned lots.
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·
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For the fiscal 2011 second quarter, approximately 1,170 of the lots purchased were within 84 newly identified communities (defined as communities controlled subsequent to January 31, 2009).
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·
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Approximately 1,650 lots were put under option in 41 newly identified communities during the second quarter of fiscal 2011.
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RECENT NET CONTRACT RESULTS:
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·
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For the month of May 2011, net contracts, including unconsolidated joint ventures, were 501 homes compared with 390 homes last year and 392 homes during April 2011, an increase of 28% over both periods.
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·
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Net contracts per community for the month of May 2011, including unconsolidated joint ventures, increased to 2.4 compared with 2.0 in the prior year and 1.9 in April 2011, an increase of 20% and 26%, respectively.
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COMMENTS FROM MANAGEMENT:
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“On a per community basis, our net contracts, including unconsolidated joint ventures, held steady at 1.9 contracts per community per month throughout the quarter, but were still well below the elevated levels of a year ago that benefited from the federal homebuyer tax credit,” commented Ara K. Hovnanian, Chairman of the Board, President and Chief Executive Officer. “While the spring selling season has been disappointing, there were a couple of bright spots, including a 28% year-over-year increase in net contracts in May, an increase in our community count during the second quarter and a sequential increase in backlog at April 30, 2011.”
“Importantly, we took additional steps throughout the second quarter to better position our balance sheet and now have only $70 million of debt that matures through the end of fiscal 2014. At the same time, we continue to find appealing land opportunities that meet our investment thresholds. Getting these new communities up and running will allow us to grow our top line and better leverage our general, administrative and interest expenses, moving us ever closer down the path to profitability. Based on our backlog, current sales paces and prices and new community openings, we believe our loss will be less in the next two quarters and that cash flow will improve. We remain confident that we have the liquidity to weather the remainder of this downturn, and will continue to position ourselves in preparation for the inevitable housing recovery,” concluded Mr. Hovnanian.
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WEBCAST INFORMATION:
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Hovnanian Enterprises will webcast its fiscal 2011 second quarter financial results conference call at 11:00 a.m. E.T. on Wednesday, June 8, 2011. 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 “Audio Archives” section of the Investor Relations page on the Hovnanian Website at http://www.khov.com. The archive will be available for 12 months.
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ABOUT HOVNANIAN ENTERPRISES®, INC.:
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Hovnanian Enterprises, Inc., founded in 1959 by Kevork S. Hovnanian, is headquartered in Red Bank, New Jersey. The Company is one of the nation’s largest homebuilders with operations in Arizona, California, Delaware, Florida, Georgia, Illinois, Kentucky, Maryland, 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. HovnanianÒ HomesÒ, Matzel & Mumford, Brighton Homes, Parkwood Builders, Town & Country Homes and Oster Homes. As the developer of K. Hovnanian’sÒ 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 2010 annual report, can be accessed through the “Investor Relations” section of the Hovnanian Enterprises’ website at http://www.khov.com. To be added to Hovnanian's investor e-mail or fax lists, please send an e-mail to IR@khov.com or sign up at http://www.khov.com.
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NON-GAAP FINANCIAL MEASURES:
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Consolidated earnings before interest expense, income taxes, depreciation and amortization (“EBITDA”) and before inventory impairment loss and land option write-offs and loss (gain) on extinguishment of debt (“Adjusted EBITDA”) are not U.S. generally accepted accounting principles (GAAP) financial measures. The most directly comparable GAAP financial measure is net (loss) income. The reconciliation of net (loss) income to EBITDA and Adjusted EBITDA is presented in a table attached to this earnings release.
Cash flow is a non-GAAP financial measure. The most directly comparable GAAP financial measure is Net Cash provided by (or used in) Operating Activities. The Company uses cash flow to mean the amount of Net Cash provided by (or used in) Operating Activities for the period, as reported on the Consolidated Statement of Cash Flows, excluding changes in mortgage notes receivable at the mortgage company, plus (or minus) the amount of Net Cash provided by (or used in) Investing Activities. For the second quarter of 2011, cash flow was negative $88.5 million, which was derived from $98.4 million from net cash used in operating activities plus the change in mortgage notes receivable of $9.7 million plus $0.2 million of net cash provided by investing activities.
Loss Before Income Taxes Excluding Land-Related Charges and Loss (Gain) on Extinguishment of Debt is a non-GAAP financial measure. The most directly comparable GAAP financial measure is Loss Before Income Taxes. The reconciliation of Loss Before Income Taxes to Loss Before Income Taxes Excluding Land-Related Charges and Loss (Gain) on Extinguishment of Debt is presented in a table attached to this earnings release.
FORWARD-LOOKING STATEMENTS
All statements in this press release that are not historical facts should be considered as “forward-looking statements”. 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 industry and business conditions and impacts of the sustained homebuilding downturn, (2) adverse weather and other environmental conditions and natural disasters, (3) changes in market conditions and seasonality of the Company’s business, (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, tax laws, 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) levels of indebtedness and restrictions on the Company’s operations and activities imposed by the agreements governing the Company’s outstanding indebtedness, (13) the Company's sources of liquidity, (14) changes in credit ratings, (15) availability of net operating loss carryforwards, (16) operations through joint ventures with third parties, (17) product liability litigation and warranty claims, (18) successful identification and integration of acquisitions, (19) significant influence of the Company’s controlling stockholders, (20) geopolitical risks, terrorist acts and other acts of war, and (21) other factors described in detail in the Company’s Annual Report on Form 10-K/A for the year ended October 31, 2010 and the Company’s quarterly reports on Form 10-Q for the quarters ended January 31, 2011 and April 30, 2011, respectively. Except as otherwise required by applicable securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason.
(Financial Tables Follow)
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Hovnanian Enterprises, Inc.
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||||||||||
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April 30, 2011
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||||||||||
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Statements of Consolidated Operations
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||||||||||
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(Dollars in Thousands, Except Per Share Data)
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||||||||||
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Three Months Ended
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Six Months Ended
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|||||||||
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April 30,
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April 30,
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|||||||||
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2011
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2010
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2011
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2010
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|||||||
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(Unaudited)
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(Unaudited)
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|||||||||
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Total Revenues
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$255,097
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$318,585
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$507,664
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$638,230
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||||||
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Costs and Expenses (a)
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323,903
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364,173
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640,041
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740,987
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||||||
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(Loss) Gain on Extinguishment of Debt
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(1,644)
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17,217
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(1,644)
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19,791
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||||||
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(Loss) Income from Unconsolidated Joint Ventures
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(3,232)
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391
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(4,224)
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18
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||||||
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Loss Before Income Taxes
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(73,682)
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(27,980)
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(138,245)
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(82,948)
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||||||
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Income Tax (Provision) Benefit
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(1,015)
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654
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(1,436)
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(290,503)
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Net (Loss) Income
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$(72,667)
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$(28,634)
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$(136,809)
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$207,555
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Per Share Data:
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||||||||||
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Basic:
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(Loss) Income Per Common Share
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$(0.69)
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$(0.36)
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$(1.49)
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$2.64
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Weighted Average Number of
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||||||||||
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Common Shares Outstanding (b)
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105,894
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78,668
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92,020
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78,610
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Assuming Dilution:
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||||||||||
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(Loss) Income Per Common Share
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$(0.69)
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$(0.36)
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$(1.49)
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$2.60
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||||||
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Weighted Average Number of
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||||||||||
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Common Shares Outstanding (b)
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105,894
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78,668
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92,020
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79,794
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||||||
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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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||||||||||
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Hovnanian Enterprises, Inc.
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||||||||||
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April 30, 2011
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||||||||||
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Reconciliation of Loss Before Income Taxes to Loss Before Income Taxes
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||||||||||
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Excluding Land-Related Charges and Loss (Gain) on Extinguishment of Debt
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||||||||||
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(Dollars in Thousands)
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||||||||||
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Three Months Ended
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Six Months Ended
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|||||||||
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April 30,
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April 30,
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|||||||||
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2011
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2010
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2011
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2010
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|||||||
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(Unaudited)
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(Unaudited)
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|||||||||
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Loss Before Income Taxes
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$(73,682)
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$(27,980)
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$(138,245)
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$(82,948)
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||||||
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Inventory Impairment Loss and Land Option Write-Offs
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16,925
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1,186
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30,450
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6,152
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||||||
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Loss (Gain) on Extinguishment of Debt
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1,644
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(17,217)
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1,644
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(19,791)
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||||||
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Loss Before Income Taxes Excluding
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||||||||||
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Land-Related Charges and Loss (Gain) on Extinguishment of Debt (a)
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$(55,113)
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$(44,011)
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$(106,151)
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$(96,587)
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||||||
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(a) Loss Before Income Taxes Excluding Land-Related Charges and Loss (Gain) on Extinguishment of Debt is a non-GAAP Financial measure. The most directly comparable GAAP financial measure is Loss Before Income Taxes.
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||||||||||
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Hovnanian Enterprises, Inc.
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||||||||
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April 30, 2011
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||||||||
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Gross Margin
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||||||||
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(Dollars in Thousands)
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||||||||
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Homebuilding Gross Margin
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Homebuilding Gross Margin
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|||||||
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Three Months Ended
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Six Months Ended
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|||||||
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April 30,
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April 30,
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|||||||
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2011
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2010
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2011
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2010
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|||||
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(Unaudited)
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(Unaudited)
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|||||||
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Sale of Homes
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$246,974
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$310,493
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$482,859
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$619,846
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||||
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Cost of Sales, Excluding Interest (a)
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210,463
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256,913
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406,377
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516,721
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||||
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Homebuilding Gross Margin, Excluding Interest
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36,511
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53,580
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76,482
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103,125
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||||
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Homebuilding Cost of Sales Interest
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13,956
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18,524
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27,449
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38,372
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||||
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Homebuilding Gross Margin, Including Interest
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$22,555
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$35,056
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$49,033
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$64,753
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||||
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Gross Margin Percentage, Excluding Interest
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14.8%
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17.3%
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15.8%
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16.6%
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||||
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Gross Margin Percentage, Including Interest
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9.1%
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11.3%
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10.2%
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10.4%
|
||||
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Land Sales Gross Margin
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Land Sales Gross Margin
|
|||||||
|
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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2011
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2010
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2011
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2010
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|||||
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(Unaudited)
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(Unaudited)
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|||||||
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Land Sales
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-
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$335
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$8,043
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$1,035
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||||
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Cost of Sales, Excluding Interest (a)
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-
|
13
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5,516
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21
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||||
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Land Sales Gross Margin, Excluding Interest
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-
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322
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2,527
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1,014
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||||
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Land Sales Interest
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-
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221
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2,133
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221
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||||
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Land Sales Gross Margin, Including Interest
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-
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$101
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$394
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$793
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||||
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(a) Does not include cost associated with walking away from land options or inventory impairment losses which are recorded as Inventory impairment loss and land option write-offs in the Condensed Consolidated Statements of Operations.
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||||||||
|
Hovnanian Enterprises, Inc.
|
|||||||
|
April 30, 2011
|
|||||||
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Reconciliation of Adjusted EBITDA to Net (Loss) Income
|
|||||||
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(Dollars in Thousands)
|
|||||||
|
Three Months Ended
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Six Months Ended
|
||||||
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April 30,
|
April 30,
|
||||||
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2011
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2010
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2011
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2010
|
||||
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(Unaudited)
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(Unaudited)
|
||||||
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Net (Loss) Income
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$(72,667)
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$(28,634)
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$(136,809)
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$207,555
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|||
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Income Tax (Provision) Benefit
|
(1,015)
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654
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(1,436)
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(290,503)
|
|||
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Interest Expense
|
38,843
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42,101
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78,454
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87,556
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|||
|
EBIT (a)
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(34,839)
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14,121
|
(59,791)
|
4,608
|
|||
|
Depreciation
|
2,246
|
3,071
|
4,565
|
6,457
|
|||
|
Amortization of Debt Costs
|
1,012
|
815
|
1,857
|
1,621
|
|||
|
EBITDA (b)
|
(31,581)
|
18,007
|
(53,369)
|
12,686
|
|||
|
Inventory Impairment Loss and Land Option Write-offs
|
16,925
|
1,186
|
30,450
|
6,152
|
|||
|
Loss (Gain) on Extinguishment of Debt
|
1,644
|
(17,217)
|
1,644
|
(19,791)
|
|||
|
Adjusted EBITDA (c)
|
$(13,012)
|
$1,976
|
$(21,275)
|
$(953)
|
|||
|
Interest Incurred
|
$39,895
|
$38,201
|
$77,722
|
$78,343
|
|||
|
Adjusted EBITDA to Interest Incurred
|
(0.33)
|
0.05
|
(0.27)
|
(0.01)
|
|||
|
(a) EBIT is a non-GAAP financial measure. The most directly comparable GAAP financial measure is net (loss) income. EBIT represents earnings before interest expense and income taxes.
|
|||||||
|
(b) EBITDA is a non-GAAP financial measure. The most directly comparable GAAP financial measure is net (loss) income. EBITDA represents earnings before interest expense, income taxes, depreciation and amortization.
|
|||||||
|
(c) Adjusted EBITDA is a non-GAAP financial measure. The most directly comparable GAAP financial measure is net (loss) income. Adjusted EBITDA represents earnings before interest expense, income taxes, depreciation, amortization, inventory impairment loss and land option write-offs, and loss (gain) on extinguishment of debt.
|
|||||||
|
Hovnanian Enterprises, Inc.
|
|||||||
|
April 30, 2011
|
|||||||
|
Interest Incurred, Expensed and Capitalized
|
|||||||
|
(Dollars in Thousands)
|
|||||||
|
Three Months Ended
|
Six Months Ended
|
||||||
|
April 30,
|
April 30,
|
||||||
|
2011
|
2010
|
2011
|
2010
|
||||
|
(Unaudited)
|
(Unaudited)
|
||||||
|
Interest Capitalized at Beginning of Period
|
$134,504
|
$159,026
|
$136,288
|
$164,340
|
|||
|
Plus Interest Incurred
|
39,895
|
38,201
|
77,722
|
78,342
|
|||
|
Less Interest Expensed
|
38,843
|
42,101
|
78,454
|
87,556
|
|||
|
Interest Capitalized at End of Period (a)
|
$135,556
|
$155,126
|
$135,556
|
$155,126
|
|||
|
(a) The Company incurred significant inventory impairments in recent years, which are determined based on total inventory including capitalized interest. However, the capitalized interest amounts are shown gross before allocating any portion of impairments to capitalized interest.
|
|||||||
|
HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands Except Share Amounts)
|
|
April 30, 2011
|
October 31, 2010
|
||
|
ASSETS
|
(Unaudited)
|
(1)
|
|
|
Homebuilding:
|
|||
|
Cash and cash equivalents
|
$348,119
|
$359,124
|
|
|
Restricted cash
|
85,346
|
108,983
|
|
|
Inventories:
|
|||
|
Sold and unsold homes and lots under development
|
655,918
|
591,729
|
|
|
Land and land options held for future
|
|||
|
development or sale
|
308,601
|
348,474
|
|
|
Consolidated inventory not owned:
|
|||
|
Specific performance options
|
12,064
|
21,065
|
|
|
Variable interest entities
|
-
|
32,710
|
|
|
Other options
|
1,026
|
7,962
|
|
|
Total consolidated inventory not owned
|
13,090
|
61,737
|
|
|
Total inventories
|
977,609
|
1,001,940
|
|
|
Investments in and advances to unconsolidated
|
|||
|
joint ventures
|
66,375
|
38,000
|
|
|
Receivables, deposits, and notes
|
50,504
|
61,023
|
|
|
Property, plant, and equipment – net
|
58,663
|
62,767
|
|
|
Prepaid expenses and other assets
|
87,323
|
83,928
|
|
|
Total homebuilding
|
1,673,939
|
1,715,765
|
|
|
Financial services:
|
|||
|
Cash and cash equivalents
|
5,611
|
8,056
|
|
|
Restricted cash
|
6,621
|
4,022
|
|
|
Mortgage loans held for sale
|
47,372
|
86,326
|
|
|
Other assets
|
3,012
|
3,391
|
|
|
Total financial services
|
62,616
|
101,795
|
|
|
Total assets
|
$1,736,555
|
$1,817,560
|
(1) Derived from the audited balance sheet as of October 31, 2010.
|
HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands Except Share Amounts)
|
|
April 30, 2011
|
October 31, 2010
|
||
|
LIABILITIES AND EQUITY
|
(Unaudited)
|
(1)
|
|
|
Homebuilding:
|
|||
|
Nonrecourse land mortgages
|
$18,934
|
$4,313
|
|
|
Accounts payable and other liabilities
|
277,269
|
319,749
|
|
|
Customers’ deposits
|
15,227
|
9,520
|
|
|
Nonrecourse mortgages secured by operating properties
|
20,210
|
20,657
|
|
|
Liabilities from inventory not owned
|
13,090
|
53,249
|
|
|
Total homebuilding
|
344,730
|
407,488
|
|
|
Financial services:
|
|||
|
Accounts payable and other liabilities
|
16,865
|
16,142
|
|
|
Mortgage warehouse line of credit
|
33,528
|
73,643
|
|
|
Total financial services
|
50,393
|
89,785
|
|
|
Notes payable:
|
|||
|
Senior secured notes
|
785,372
|
784,592
|
|
|
Senior notes
|
827,460
|
711,585
|
|
|
Senior subordinated notes
|
-
|
120,170
|
|
|
TEU senior subordinated amortizing notes
|
15,615
|
-
|
|
|
Accrued interest
|
22,319
|
23,968
|
|
|
Total notes payable
|
1,650,766
|
1,640,315
|
|
|
Income taxes payable
|
40,483
|
17,910
|
|
|
Total liabilities
|
2,086,372
|
2,155,498
|
|
|
Equity:
|
|||
|
Hovnanian Enterprises, Inc. stockholders’ equity deficit:
|
|||
|
Preferred stock, $.01 par value - authorized 100,000 shares;
|
|||
|
Issued 5,600 shares with a liquidation preference of $140,000
|
|||
|
at April 30, 2011 and at October 31, 2010
|
135,299
|
135,299
|
|
|
Common stock, Class A, $.01 par value – authorized
|
|||
|
200,000,000 shares; issued 91,430,549 shares at April 30, 2011
|
|||
|
and 74,809,683 shares at October 31, 2010 (including 11,694,720
|
|||
|
shares at April 30, 2011 and October 31, 2010 held in Treasury)
|
914
|
748
|
|
|
Common stock, Class B, $.01 par value (convertible
|
|||
|
to Class A at time of sale) – authorized 30,000,000 shares;
|
|||
|
issued 15,253,812 shares at April 30, 2011 and 15,256,543
|
|||
|
shares at October 31, 2010 (including 691,748 shares at
|
|||
|
April 30, 2011 and October 31, 2010 held in Treasury)
|
153
|
153
|
|
|
Paid in capital - common stock
|
589,123
|
463,908
|
|
|
Accumulated deficit
|
(960,228)
|
(823,419)
|
|
|
Treasury stock - at cost
|
(115,257)
|
(115,257)
|
|
|
Total Hovnanian Enterprises, Inc. stockholders’ equity deficit
|
(349,996)
|
(338,568)
|
|
|
Noncontrolling interest in consolidated joint ventures
|
179
|
630
|
|
|
Total equity deficit
|
(349,817)
|
(337,938)
|
|
|
Total liabilities and equity
|
$1,736,555
|
$1,817,560
|
(1) Derived from the audited balance sheet as of October 31, 2010.
|
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,
|
||||||
|
2011
|
2010
|
2011
|
2010
|
||||
|
Revenues:
|
|||||||
|
Homebuilding:
|
|||||||
|
Sale of homes
|
$246,974
|
$310,493
|
$482,859
|
$619,846
|
|||
|
Land sales and other revenues
|
2,819
|
1,033
|
12,407
|
3,719
|
|||
|
Total homebuilding
|
249,793
|
311,526
|
495,266
|
623,565
|
|||
|
Financial services
|
5,304
|
7,059
|
12,398
|
14,665
|
|||
|
Total revenues
|
255,097
|
318,585
|
507,664
|
638,230
|
|||
|
Expenses:
|
|||||||
|
Homebuilding:
|
|||||||
|
Cost of sales, excluding interest
|
210,463
|
256,926
|
411,893
|
516,742
|
|||
|
Cost of sales interest
|
13,956
|
18,745
|
29,582
|
38,593
|
|||
|
Inventory impairment loss and land option
|
|||||||
|
write-offs
|
16,925
|
1,186
|
30,450
|
6,152
|
|||
|
Total cost of sales
|
241,344
|
276,857
|
471,925
|
561,487
|
|||
|
Selling, general and administrative
|
39,837
|
42,359
|
80,044
|
85,431
|
|||
|
Total homebuilding expenses
|
281,181
|
319,216
|
551,969
|
646,918
|
|||
|
Financial services
|
5,177
|
5,631
|
10,647
|
11,026
|
|||
|
Corporate general and administrative
|
11,952
|
14,203
|
26,960
|
30,416
|
|||
|
Other interest
|
24,887
|
23,356
|
48,872
|
48,963
|
|||
|
Other operations
|
706
|
1,767
|
1,593
|
3,664
|
|||
|
Total expenses
|
323,903
|
364,173
|
640,041
|
740,987
|
|||
|
(Loss) gain on extinguishment of debt
|
(1,644)
|
17,217
|
(1,644)
|
19,791
|
|||
|
(Loss) income from unconsolidated joint ventures
|
(3,232)
|
391
|
(4,224)
|
18
|
|||
|
Loss before income taxes
|
(73,682)
|
(27,980)
|
(138,245)
|
(82,948)
|
|||
|
State and federal income tax (benefit) provision:
|
|||||||
|
State
|
(372)
|
657
|
293
|
828
|
|||
|
Federal
|
(643)
|
(3)
|
(1,729)
|
(291,331)
|
|||
|
Total income taxes
|
(1,015)
|
654
|
(1,436)
|
(290,503)
|
|||
|
Net (loss) income
|
$(72,667)
|
$(28,634)
|
$(136,809)
|
$207,555
|
|||
|
Per share data:
|
|||||||
|
Basic:
|
|||||||
|
(Loss) income per common share
|
$(0.69)
|
$(0.36)
|
$(1.49)
|
$2.64
|
|||
|
Weighted-average number of common
|
|||||||
|
shares outstanding
|
105,894
|
78,668
|
92,020
|
78,610
|
|||
|
Assuming dilution:
|
|||||||
|
(Loss) income per common share
|
$(0.69)
|
$(0.36)
|
$(1.49)
|
$2.60
|
|||
|
Weighted-average number of common
|
|||||||
|
shares outstanding
|
105,894
|
78,668
|
92,020
|
79,794
|
|||
|
HOVNANIAN ENTERPRISES, INC.
|
||||||||||||
|
(DOLLARS IN THOUSANDS EXCEPT AVG. PRICE)
|
||||||||||||
|
(UNAUDITED)
|
Communities Under Development
|
|||||||||||
|
Three Months - 4/30/2011
|
||||||||||||
|
Net Contracts(1)
|
Deliveries
|
|||||||||||
|
Three Months Ended
|
Three Months Ended
|
Contract Backlog
|
||||||||||
|
April 30,
|
April 30,
|
April 30,
|
||||||||||
|
2011
|
2010
|
% Change
|
2011
|
2010
|
% Change
|
2011
|
2010
|
% Change
|
||||
|
Northeast
|
||||||||||||
|
Home
|
125
|
146
|
(14.4)%
|
82
|
149
|
(45.0)%
|
249
|
416
|
(40.1)%
|
|||
|
Dollars
|
$57,394
|
$52,208
|
9.9%
|
$36,126
|
$56,955
|
(36.6)%
|
$106,387
|
$175,029
|
(39.2)%
|
|||
|
Avg. Price
|
$459,152
|
$357,589
|
28.4%
|
$440,561
|
$382,248
|
15.3%
|
$427,257
|
$420,745
|
1.5%
|
|||
|
Mid-Atlantic
|
||||||||||||
|
Home
|
162
|
202
|
(19.8)%
|
127
|
176
|
(27.8)%
|
274
|
356
|
(23.0)%
|
|||
|
Dollars
|
$55,874
|
$73,704
|
(24.2)%
|
$46,643
|
$67,634
|
(31.0)%
|
$113,349
|
$137,805
|
(17.7)%
|
|||
|
Avg. Price
|
$344,901
|
$364,871
|
(5.5)%
|
$367,268
|
$384,284
|
(4.4)%
|
$413,682
|
$387,093
|
6.9%
|
|||
|
Midwest
|
||||||||||||
|
Home
|
98
|
149
|
(34.2)%
|
89
|
70
|
27.1%
|
215
|
306
|
(29.7)%
|
|||
|
Dollars
|
$20,521
|
$27,289
|
(24.8)%
|
$17,466
|
$16,029
|
9.0%
|
$38,592
|
$53,609
|
(28.0)%
|
|||
|
Avg. Price
|
$209,398
|
$183,148
|
14.3%
|
$196,247
|
$228,986
|
(14.3)%
|
$179,498
|
$175,193
|
2.5%
|
|||
|
Southeast
|
||||||||||||
|
Home
|
98
|
112
|
(12.5)%
|
73
|
93
|
(21.5)%
|
107
|
132
|
(18.9)%
|
|||
|
Dollars
|
$23,345
|
$25,334
|
(7.9)%
|
$16,684
|
$22,041
|
(24.3)%
|
$27,450
|
$31,767
|
(13.6)%
|
|||
|
Avg. Price
|
$238,214
|
$226,205
|
5.3%
|
$228,548
|
$237,000
|
(3.6)%
|
$256,542
|
$240,659
|
6.6%
|
|||
|
Southwest
|
||||||||||||
|
Home
|
444
|
530
|
(16.2)%
|
403
|
465
|
(13.3)%
|
375
|
393
|
(4.6)%
|
|||
|
Dollars
|
$104,010
|
$114,166
|
(8.9)%
|
$97,339
|
$103,428
|
(5.9)%
|
$99,358
|
$89,512
|
11.0%
|
|||
|
Avg. Price
|
$234,257
|
$215,408
|
8.8%
|
$241,536
|
$222,426
|
8.6%
|
$264,955
|
$227,766
|
16.3%
|
|||
|
West
|
||||||||||||
|
Home
|
119
|
175
|
(32.0)%
|
125
|
165
|
(24.2)%
|
73
|
186
|
(60.8)%
|
|||
|
Dollars
|
$32,423
|
$43,857
|
(26.1)%
|
$32,716
|
$44,406
|
(26.3)%
|
$19,946
|
$46,926
|
(57.5)%
|
|||
|
Avg. Price
|
$272,462
|
$250,611
|
8.7%
|
$261,728
|
$269,127
|
(2.7)%
|
$273,233
|
$252,290
|
8.3%
|
|||
|
Consolidated Total
|
||||||||||||
|
Home
|
1,046
|
1,314
|
(20.4)%
|
899
|
1,118
|
(19.6)%
|
1,293
|
1,789
|
(27.7)%
|
|||
|
Dollars
|
$293,567
|
$336,558
|
(12.8)%
|
$246,974
|
$310,493
|
(20.5)%
|
$405,082
|
$534,648
|
(24.2)%
|
|||
|
Avg. Price
|
$280,657
|
$256,132
|
9.6%
|
$274,721
|
$277,722
|
(1.1)%
|
$313,288
|
$298,853
|
4.8%
|
|||
|
Unconsolidated Joint Ventures
|
||||||||||||
|
Home
|
120
|
85
|
41.2%
|
68
|
79
|
(13.9)%
|
258
|
176
|
46.6%
|
|||
|
Dollars
|
$53,520
|
$33,097
|
61.7%
|
$29,291
|
$33,106
|
(11.5)%
|
$108,207
|
$84,208
|
28.5%
|
|||
|
Avg. Price
|
$446,000
|
$389,376
|
14.5%
|
$430,750
|
$419,063
|
2.8%
|
$419,407
|
$478,455
|
(12.3)%
|
|||
|
Total
|
||||||||||||
|
Home
|
1,166
|
1,399
|
(16.7)%
|
967
|
1,197
|
(19.2)%
|
1,551
|
1,965
|
(21.1)%
|
|||
|
Dollars
|
$347,086
|
$369,655
|
(6.1)%
|
$276,265
|
$343,599
|
(19.6)%
|
$513,289
|
$618,856
|
(17.1)%
|
|||
|
Avg. Price
|
$297,672
|
$264,228
|
12.7%
|
$285,693
|
$287,050
|
(0.5)%
|
$330,941
|
$314,940
|
5.1%
|
|||
|
DELIVERIES INCLUDE EXTRAS
|
||||||||||||
|
Notes:
|
||||||||||||
|
(1) Net contracts are defined as new contracts signed during the period for the purchase of homes, less cancellations of prior contracts.
|
||||||||||||
|
HOVNANIAN ENTERPRISES, INC.
|
||||||||||||
|
(DOLLARS IN THOUSANDS EXCEPT AVG. PRICE)
|
||||||||||||
|
(UNAUDITED)
|
Communities Under Development
|
|||||||||||
|
Six Months - 4/30/2011
|
||||||||||||
|
Net Contracts(1)
|
Deliveries
|
|||||||||||
|
Six Months Ended
|
Six Months Ended
|
Contract Backlog
|
||||||||||
|
April 30,
|
April 30,
|
April 30,
|
||||||||||
|
2011
|
2010
|
% Change
|
2011
|
2010
|
% Change
|
2011
|
2010
|
% Change
|
||||
|
Northeast
|
||||||||||||
|
Home
|
217
|
276
|
(21.4)%
|
183
|
317
|
(42.3)%
|
249
|
416
|
(40.1)%
|
|||
|
Dollars
|
$94,829
|
$107,587
|
(11.9)%
|
$79,410
|
$125,669
|
(36.8)%
|
$106,387
|
$175,029
|
(39.2)%
|
|||
|
Avg. Price
|
$437,000
|
$389,808
|
12.1%
|
$433,934
|
$396,432
|
9.5%
|
$427,257
|
$420,745
|
1.5%
|
|||
|
Mid-Atlantic
|
||||||||||||
|
Home
|
289
|
328
|
(11.9)%
|
248
|
358
|
(30.7)%
|
274
|
356
|
(23.0)%
|
|||
|
Dollars
|
$107,888
|
$120,653
|
(10.6)%
|
$92,906
|
$133,710
|
(30.5)%
|
$113,349
|
$137,805
|
(17.7)%
|
|||
|
Avg. Price
|
$373,315
|
$367,845
|
1.5%
|
$374,621
|
$373,492
|
0.3%
|
$413,682
|
$387,093
|
6.9%
|
|||
|
Midwest
|
||||||||||||
|
Home
|
163
|
234
|
(30.3)%
|
170
|
181
|
(6.1)%
|
215
|
306
|
(29.7)%
|
|||
|
Dollars
|
$32,852
|
$43,710
|
(24.8)%
|
$31,500
|
$39,433
|
(20.1)%
|
$38,592
|
$53,609
|
(28.0)%
|
|||
|
Avg. Price
|
$201,546
|
$186,795
|
7.9%
|
$185,294
|
$217,862
|
(14.9)%
|
$179,498
|
$175,193
|
2.5%
|
|||
|
Southeast
|
||||||||||||
|
Home
|
166
|
184
|
(9.8)%
|
141
|
187
|
(24.6)%
|
107
|
132
|
(18.9)%
|
|||
|
Dollars
|
$38,985
|
$42,570
|
(8.4)%
|
$32,188
|
$46,718
|
(31.1)%
|
$27,450
|
$31,767
|
(13.6)%
|
|||
|
Avg. Price
|
$234,849
|
$231,359
|
1.5%
|
$228,284
|
$249,829
|
(8.6)%
|
$256,542
|
$240,659
|
6.6%
|
|||
|
Southwest
|
||||||||||||
|
Home
|
801
|
886
|
(9.6)%
|
763
|
844
|
(9.6)%
|
375
|
393
|
(4.6)%
|
|||
|
Dollars
|
$189,796
|
$193,822
|
(2.1)%
|
$184,566
|
$185,552
|
(0.5)%
|
$99,358
|
$89,512
|
11.0%
|
|||
|
Avg. Price
|
$236,949
|
$218,762
|
8.3%
|
$241,895
|
$219,848
|
10.0%
|
$264,955
|
$227,766
|
16.3%
|
|||
|
West
|
||||||||||||
|
Home
|
202
|
318
|
(36.5)%
|
239
|
322
|
(25.8)%
|
73
|
186
|
(60.8)%
|
|||
|
Dollars
|
$54,705
|
$79,898
|
(31.5)%
|
$62,289
|
$88,764
|
(29.8)%
|
$19,946
|
$46,926
|
(57.5)%
|
|||
|
Avg. Price
|
$270,817
|
$251,252
|
7.8%
|
$260,623
|
$275,665
|
(5.5)%
|
$273,233
|
$252,290
|
8.3%
|
|||
|
Consolidated Total
|
||||||||||||
|
Home
|
1,838
|
2,226
|
(17.4)%
|
1,744
|
2,209
|
(21.1)%
|
1,293
|
1,789
|
(27.7)%
|
|||
|
Dollars
|
$519,055
|
$588,240
|
(11.8)%
|
$482,859
|
$619,846
|
(22.1)%
|
$405,082
|
$534,648
|
(24.2)%
|
|||
|
Avg. Price
|
$282,402
|
$264,259
|
6.9%
|
$276,869
|
$280,600
|
(1.3)%
|
$313,288
|
$298,853
|
4.8%
|
|||
|
Unconsolidated Joint Ventures
|
||||||||||||
|
Home
|
178
|
134
|
32.8%
|
115
|
117
|
(1.7)%
|
258
|
176
|
46.6%
|
|||
|
Dollars
|
$77,116
|
$56,725
|
35.9%
|
$51,825
|
$54,006
|
(4.0)%
|
$108,207
|
$84,208
|
28.5%
|
|||
|
Avg. Price
|
$433,236
|
$423,321
|
2.3%
|
$450,652
|
$461,590
|
(2.4)%
|
$419,407
|
$478,455
|
(12.3)%
|
|||
|
Total
|
||||||||||||
|
Home
|
2,016
|
2,360
|
(14.6)%
|
1,859
|
2,326
|
(20.1)%
|
1,551
|
1,965
|
(21.1)%
|
|||
|
Dollars
|
$596,171
|
$644,965
|
(7.6)%
|
$534,684
|
$673,852
|
(20.7)%
|
$513,289
|
$618,856
|
(17.1)%
|
|||
|
Avg. Price
|
$295,720
|
$273,290
|
8.2%
|
$287,619
|
$289,704
|
(0.7)%
|
$330,941
|
$314,940
|
5.1%
|
|||
|
DELIVERIES INCLUDE EXTRAS
|
||||||||||||
|
Notes:
|
||||||||||||
|
(1) Net contracts are defined as new contracts signed during the period for the purchase of homes, less cancellations of prior contracts.
|
||||||||||||