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): March 5, 2020
HOVNANIAN ENTERPRISES, INC.
(Exact Name of Registrant as Specified in its Charter)
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Delaware (State or Other Jurisdiction of Incorporation) |
1-8551 (Commission File Number) |
22-1851059 (IRS Employer Identification No.) |
90 Matawan Road, Fifth Floor
Matawan, New Jersey 07747
(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:
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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)) |
Securities registered pursuant to Section 12(b) of the Act.
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Title of each class |
Trading symbol(s) |
Name of each exchange on which registered |
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Class A Common Stock $0.01 par value per share |
HOV |
New York Stock Exchange |
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Preferred Stock Purchase Rights (1) |
N/A |
New York Stock Exchange |
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Depositary Shares each representing 1/1,000th of a share of 7.625% Series A Preferred Stock |
HOVNP |
Nasdaq Global Market |
(1) Each share of Class A Common Stock includes an associated Preferred Stock Purchase Right. Each Preferred Stock Purchase Right initially represents the right, if such Preferred Stock Purchase Right becomes exercisable, to purchase from the Company one ten-thousandth of a share of its Series B Junior Preferred Stock for each share of Common Stock. The Preferred Stock Purchase Rights currently cannot trade separately from the underlying Common Stock.
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition.
On March 5, 2020, Hovnanian Enterprises, Inc. (the “Company”) issued a press release announcing its preliminary financial results for the fiscal first quarter ended January 31, 2020. 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 attached earnings press release contains information about consolidated earnings before interest expense and income taxes (“EBIT”) and before depreciation and amortization (“EBITDA”) and before inventory impairment loss and land option write-offs and gain on extinguishment of debt (“Adjusted EBITDA”), which are non-GAAP financial measures. The most directly comparable GAAP financial measure is net (loss). A reconciliation for historical periods of EBIT, EBITDA and Adjusted EBITDA to net (loss) is contained in the earnings press release.
The attached earnings press release contains information about homebuilding gross margin, before cost of sales interest expense and land charges, and homebuilding gross margin percentage, before cost of sales interest expense and land charges, which are non-GAAP financial measures. The most directly comparable GAAP financial measures are homebuilding gross margin and homebuilding gross margin percentage, respectively. A reconciliation for historical periods of homebuilding gross margin, before cost of sales interest expense and land charges, and homebuilding gross margin percentage, before cost of sales interest expense and land charges, to homebuilding gross margin and homebuilding gross margin percentage, respectively, is contained in the earnings press release.
The attached earnings press release contains information about (loss) before income taxes excluding land-related charges and 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 for historical periods of (loss) before income taxes excluding land-related charges and 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 and benchmark the Company’s financial performance without the effects of various items the Company does not believe are characteristic of its ongoing operating performance. 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, (loss) before income taxes, net (loss) 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, the Company’s calculation of EBITDA may be different than the calculation used by other companies, and, therefore, comparability may be affected.
Management believes homebuilding gross margin, before cost of sales interest expense and land charges, enables investors to better understand the Company’s operating performance. This measure is also useful internally, helping management to evaluate the Company’s operating results on a consolidated basis and relative to other companies in the Company’s industry. In particular, the magnitude and volatility of land charges for the Company, and for other homebuilders, have been significant and, as such, have made financial analysis of the Company’s industry more difficult. Homebuilding metrics excluding land charges, as well as interest amortized to cost of sales, and other similar presentations prepared by analysts and other companies are frequently used to assist investors in understanding and comparing the operating characteristics of homebuilding activities by eliminating many of the differences in companies’ respective levels of impairments and levels of debt. Homebuilding gross margin, before cost of sales interest expense and land charges, should be considered in addition to, but not as an alternative to, homebuilding gross margin determined in accordance with GAAP as an indicator of operating performance. Additionally, the Company’s calculation of homebuilding gross margin, before cost of sales interest expense and land charges, 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 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 gain on extinguishment of debt should be considered in addition to, but not as a substitute for, (loss) before income taxes, net (loss) 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, the Company’s calculation of (loss) before income taxes excluding land-related charges and gain on extinguishment of debt 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 First Quarter Ended January 31, 2020.
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: |
/s/ J. Larry Sorsby |
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Name: J. Larry Sorsby |
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Title: Executive Vice President and Chief Financial Officer |
Date: March 5, 2020
Exhibit 99.1
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HOVNANIAN ENTERPRISES, INC. |
News Release
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Contact: |
J. Larry Sorsby |
Jeffrey T. O’Keefe |
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Executive Vice President & CFO |
Vice President, Investor Relations |
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732-747-7800 |
732-747-7800 |
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HOVNANIAN ENTERPRISES REPORTS FISCAL 2020 FIRST QUARTER RESULTS
30% Year-over-Year Increase in Total Revenues
Consolidated Contracts Grew 42% Year-over-Year
MATAWAN, NJ, March 5, 2020 – Hovnanian Enterprises, Inc. (NYSE: HOV), a leading national homebuilder, reported results for its fiscal first quarter ended January 31, 2020.
RESULTS FOR the THREE-Month PERIOD ENDED January 31, 2020:
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Total revenues increased 29.8% to $494.1 million in the first quarter of fiscal 2020, compared with $380.6 million in the same period of the prior year. |
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Homebuilding gross margin percentage, after cost of sales interest expense and land charges, was 12.9% for the three months ended January 31, 2020 compared with 14.8% during the same quarter a year ago. |
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Homebuilding gross margin percentage, before cost of sales interest expense and land charges, was 17.3% during the fiscal 2020 first quarter compared with 17.8% in last year’s first quarter. |
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Total SG&A was $60.4 million, or 12.2% of total revenues, in the fiscal 2020 first quarter compared with $60.4 million, or 15.9% of total revenues, in the previous year’s first quarter. |
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Interest incurred (some of which was expensed and some of which was capitalized) was $44.3 million for the first quarter of fiscal 2020 compared with $38.9 million during the first quarter of fiscal 2019. |
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Income from unconsolidated joint ventures was $1.5 million for the first quarter ended January 31, 2020 compared with $9.6 million in the fiscal 2019 first quarter. |
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Including a $9.5 million gain on extinguishment of debt, loss before income taxes for the first quarter of fiscal 2020 was $7.4 million compared with a loss of $17.1 million in the first quarter of the prior year. |
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Net loss was $9.1 million, or $1.49 per common share, for the three months ended January 31, 2020 compared with a net loss of $17.5 million, or $2.93 per common share, in the first quarter of the previous year. |
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Adjusted EBITDA increased to $30.4 million in the first quarter ended January 31, 2020 compared with $17.1 million in the same quarter one year ago. EBITDA increased to $37.0 million for the first quarter of fiscal 2020 compared with $16.4 million in the same quarter of the prior year. |
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Loss before income taxes excluding land-related charges and gain on extinguishment of debt, was $14.1 million in the first quarter of fiscal 2020 compared with a loss before these items of $16.4 million in the fiscal 2019 first quarter. |
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Consolidated contracts per community increased 42.6% to 9.7 contracts per community for the first quarter ended January 31, 2020 compared with 6.8 contracts per community in last year’s first quarter. Contracts per community, including domestic unconsolidated joint ventures(1), increased 32.9% to 9.3 contracts per community during the first quarter of fiscal 2020 compared with 7.0 contracts per community, including domestic unconsolidated joint ventures, in the same period of the prior year. |
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The number of consolidated contracts increased 41.5% to 1,322 homes, during the fiscal 2020 first quarter, compared with 934 homes in last year’s first quarter. The number of contracts, including domestic unconsolidated joint ventures, for the three months ended January 31, 2020, increased 40.0% to 1,492 homes from 1,066 homes during the same quarter a year ago. |
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Due to stronger than expected contracts, causing us to sell through communities faster than anticipated, and after contributing four consolidated communities to unconsolidated joint ventures, the consolidated community count was 136 as of January 31, 2020, essentially unchanged compared with 137 communities at the end of the previous year’s first quarter. As of the end of the first quarter of fiscal 2020, community count, including domestic unconsolidated joint ventures, was 160 communities, up 5.3% compared with 152 communities at January 31, 2019. |
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For February 2020, consolidated contracts per community were 4.8 compared with 3.2 for the same month one year ago. During February 2020, the number of consolidated contracts increased 44.1% to 647 homes from 449 homes in February 2019. |
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The dollar value of consolidated contract backlog, as of January 31, 2020, increased 20.0% to $899.6 million compared with $749.8 million as of January 31, 2019. The dollar value of contract backlog, including domestic unconsolidated joint ventures, as of January 31, 2020, was $1.10 billion, an increase of 13.7% compared with $971.2 million as of January 31, 2019. |
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Consolidated deliveries were 1,236 homes in the fiscal 2020 first quarter a 27.8% increase compared with 967 homes in the previous year’s first quarter. For the fiscal 2020 first quarter, deliveries, including domestic unconsolidated joint ventures, increased 24.1% to 1,385 homes compared with 1,116 homes during the first quarter of fiscal 2019. |
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The contract cancellation rate for consolidated contracts was 19% for the first quarter ended January 31, 2020 compared with 24% in the fiscal 2019 first quarter. The contract cancellation rate for contracts including domestic unconsolidated joint ventures was 19% for the first quarter of fiscal 2020 compared with 23% in the first quarter of the prior year. |
(1)When we refer to “Domestic Unconsolidated Joint Ventures”, we are excluding results from our single community unconsolidated joint venture in the Kingdom of Saudi Arabia (KSA).
Liquidity AND Inventory as of January 31, 2020:
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Total liquidity at the end of the of the first quarter of fiscal 2020 was $224.9 million. |
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In the first quarter of fiscal 2020, 2,026 lots were put under option or acquired in 25 consolidated communities, which is 790 lots more than the 1,236 consolidated first quarter deliveries. |
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As of January 31, 2020, consolidated lots controlled totaled 27,701; which, based on trailing twelve-month deliveries, equaled a 5.3 years’ supply. |
Comments from ManAGEMENT:
“Both the overall U.S. economy and the current housing market continue to exhibit signs of strength. With more than 40% growth in contracts and contracts per community during the first quarter of fiscal 2020, we have seen the continuation of the positive momentum that began in the spring selling season last year,” stated Ara K. Hovnanian, Chairman of the Board, President and Chief Executive Officer. “Furthermore, we are pleased that our revenue gains have begun to catch up to the increases in contracts that we have seen over the past six months and are also pleased with the substantial growth we reported in EBITDA. The magnitude of the improvement in our revenues gives us confidence that we are making solid progress towards achieving our revenue growth goals, which ultimately should lead to higher levels of profitability.”
Webcast Information:
Hovnanian Enterprises will webcast its fiscal 2020 first quarter financial results conference call at 11:00 a.m. E.T. on Thursday, March 5, 2020. The webcast can be accessed live through the “Investor Relations” section of Hovnanian Enterprises’ website at http://www.khov.com. For those who are not available to listen to the live webcast, an archive of the broadcast will be available under the “Past Events” section of the Investor Relations page on the Hovnanian website at http://www.khov.com. The archive will be available for 12 months.
About Hovnanian Enterprises, Inc.:
Hovnanian Enterprises, Inc., founded in 1959 by Kevork S. Hovnanian, is headquartered in Matawan, New Jersey and, through its subsidiaries, is one of the nation’s largest homebuilders with operations in Arizona, California, Delaware, Florida, Georgia, Illinois, Maryland, New Jersey, Ohio, Pennsylvania, South Carolina, Texas, Virginia, Washington, D.C. and West Virginia. The Company’s homes are marketed and sold under the trade name K. Hovnanian® Homes. Additionally, the Company’s subsidiaries, as developers of K. Hovnanian’s® Four Seasons communities, make the Company one of the nation’s largest builders of active lifestyle communities.
Additional information on Hovnanian Enterprises, Inc. can be accessed through the “Investor Relations” section of the Hovnanian Enterprises’ website at http://www.khov.com. To be added to Hovnanian's investor e-mail list, please send an e-mail to IR@khov.com or sign up at http://www.khov.com.
NON-GAAP FINANCIAL MEASURES:
Consolidated earnings before interest expense and income taxes (“EBIT”) and before depreciation and amortization (“EBITDA”) and before inventory impairment loss and land option write-offs and 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). The reconciliation for historical periods of EBIT, EBITDA and Adjusted EBITDA to net (loss) is presented in a table attached to this earnings release.
Homebuilding gross margin, before cost of sales interest expense and land charges, and homebuilding gross margin percentage, before cost of sales interest expense and land charges, are non-GAAP financial measures. The most directly comparable GAAP financial measures are homebuilding gross margin and homebuilding gross margin percentage, respectively. The reconciliation for historical periods of homebuilding gross margin, before cost of sales interest expense and land charges, and homebuilding gross margin percentage, before cost of sales interest expense and land charges, to homebuilding gross margin and homebuilding gross margin percentage, respectively, is presented in a table attached to this earnings release.
(Loss) before income taxes excluding land-related charges and 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 for historical periods of (loss) before income taxes excluding land-related charges and gain on extinguishment of debt to (loss) before income taxes is presented in a table attached to this earnings release.
Total liquidity is comprised of $81.4 million of cash and cash equivalents, $18.5 million of restricted cash required to collateralize letters of credit and $125.0 million of availability under the senior secured revolving credit facility as of January 31, 2020.
FORWARD-LOOKING STATEMENTS
All statements in this press release that are not historical facts should be considered as “Forward-Looking Statements” within the meaning of the “Safe Harbor” provisions of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such forward-looking statements include but are not limited to statements related to the Company’s goals and expectations with respect to its financial results for future financial periods. Although we believe that our plans, intentions and expectations reflected in, or suggested by, such forward-looking statements are reasonable, we can give no assurance that such plans, intentions or expectations will be achieved. By their nature, forward-looking statements: (i) speak only as of the date they are made, (ii) are not guarantees of future performance or results and (iii) are subject to risks, uncertainties and assumptions that are difficult to predict or quantify. Therefore, actual results could differ materially and adversely from those forward-looking statements as a result of a variety of factors. Such risks, uncertainties and other factors include, but are not limited to, (1) changes in general and local economic, industry and business conditions and impacts of a significant homebuilding downturn; (2) adverse weather and other environmental conditions and natural disasters; (3) high leverage and restrictions on the Company’s operations and activities imposed by the agreements governing the Company’s outstanding indebtedness; (4) availability and terms of financing to the Company; (5) the Company’s sources of liquidity; (6) changes in credit ratings; (7) the seasonality of the Company’s business; (8) the availability and cost of suitable land and improved lots and sufficient liquidity to invest in such land and lots; (9) shortages in, and price fluctuations of, raw materials and labor including due to changes in trade policies, such as the imposition of tariffs and duties on homebuilding materials and products, and related trade disputes with and retaliatory measures taken by other countries; (10) reliance on, and the performance of, subcontractors; (11) regional and local economic factors, including dependency on certain sectors of the economy, and employment levels affecting home prices and sales activity in the markets where the Company builds homes; (12) increases in cancellations of agreements of sale; (13) fluctuations in interest rates and the availability of mortgage financing; (14) changes in tax laws affecting the after-tax costs of owning a home; (15) operations through unconsolidated joint ventures with third parties; (16) government regulation, including regulations concerning development of land, the homebuilding, sales and customer financing processes, tax laws and the environment; (17) legal claims brought against us and not resolved in our favor, such as product liability litigation, warranty claims and claims made by mortgage investors; (18) levels of competition; (19) successful identification and integration of acquisitions; (20) significant influence of the Company’s controlling stockholders; (21) availability of net operating loss carryforwards; (22) utility shortages and outages or rate fluctuations; (23) geopolitical risks, terrorist acts and other acts of war; (24) diseases, pandemics or other severe public health events; (25) loss of key management personnel or failure to attract qualified personnel; (26) information technology failures and data security breaches; (27) negative publicity; and (28) certain risks, uncertainties and other factors described in detail in the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2019 and subsequent filings with the Securities and Exchange Commission. Except as otherwise required by applicable securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason.
(Financial Tables Follow)
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Hovnanian Enterprises, Inc. |
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January 31, 2020 |
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Statements of consolidated operations |
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(In thousands, except per share data) |
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Three Months Ended |
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January 31, |
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2020 |
2019 |
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(Unaudited) |
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Total revenues |
$494,056 | $380,594 | ||||
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Costs and expenses (1) |
512,488 | 407,262 | ||||
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Gain on extinguishment of debt |
9,456 | - | ||||
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Income from unconsolidated joint ventures |
1,540 | 9,562 | ||||
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(Loss) before income taxes |
(7,436 | ) | (17,106 | ) | ||
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Income tax provision |
1,712 | 346 | ||||
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Net (loss) |
$(9,148 | ) | $(17,452 | ) | ||
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Per share data: |
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Basic and assuming dilution: |
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Net (loss) per common share |
$(1.49 | ) | $(2.93 | ) | ||
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Weighted average number of common shares outstanding (2) |
6,161 | 5,958 | ||||
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(1) Includes inventory impairment loss and land option write-offs. |
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(2) 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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January 31, 2020 |
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Reconciliation of (loss) before income taxes excluding land-related charges and gain on extinguishment of debt to (loss) before income taxes |
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(In thousands) |
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Three Months Ended |
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January 31, |
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2020 |
2019 |
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(Unaudited) |
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(Loss) before income taxes |
$(7,436 | ) | $(17,106 | ) | ||
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Inventory impairment loss and land option write-offs |
2,828 | 704 | ||||
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Gain on extinguishment of debt |
(9,456 | ) | - | |||
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(Loss) before income taxes excluding land-related charges and gain on extinguishment of debt (1) |
$(14,064 | ) | $(16,402 | ) | ||
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(1) (Loss) before income taxes excluding land-related charges and 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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Hovnanian Enterprises, Inc. |
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January 31, 2020 |
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Gross margin |
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(In thousands) |
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Homebuilding Gross Margin |
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Three Months Ended |
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January 31, |
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2020 |
2019 |
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(Unaudited) |
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Sale of homes |
$479,233 | $362,135 | ||||
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Cost of sales, excluding interest expense and land charges (1) |
396,318 | 297,570 | ||||
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Homebuilding gross margin, before cost of sales interest expense and land charges (2) |
82,915 | 64,565 | ||||
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Cost of sales interest expense, excluding land sales interest expense |
18,136 | 10,242 | ||||
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Homebuilding gross margin, after cost of sales interest expense, before land charges (2) |
64,779 | 54,323 | ||||
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Land charges |
2,828 | 704 | ||||
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Homebuilding gross margin |
$61,951 | $53,619 | ||||
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Gross margin percentage |
12.9 | % | 14.8 | % | ||
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Gross margin percentage, before cost of sales interest expense and land charges (2) |
17.3 | % | 17.8 | % | ||
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Gross margin percentage, after cost of sales interest expense, before land charges (2) |
13.5 | % | 15.0 | % | ||
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Land Sales Gross Margin |
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Three Months Ended |
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January 31, |
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2020 |
2019 |
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(Unaudited) |
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Land and lot sales |
$25 | $7,508 | ||||
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Land and lot sales cost of sales, excluding interest and land charges (1) |
37 | 7,357 | ||||
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Land and lot sales gross margin, excluding interest and land charges |
(12 | ) | 151 | |||
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Land and lot sales interest |
- | - | ||||
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Land and lot sales gross margin, including interest and excluding land charges |
$(12 | ) | $151 | |||
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(1) 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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(2) Homebuilding gross margin, before cost of sales interest expense and land charges, and homebuilding gross margin percentage, before cost of sales interest expense and land charges, are non-GAAP financial measures. The most directly comparable GAAP financial measures are homebuilding gross margin and homebuilding gross margin percentage, respectively. |
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Hovnanian Enterprises, Inc. |
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January 31, 2020 |
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Reconciliation of adjusted EBITDA to net (loss) |
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(In thousands) |
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Three Months Ended |
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January 31, |
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2020 |
2019 |
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(Unaudited) |
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Net (loss) |
$(9,148 | ) | $(17,452 | ) | ||
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Income tax provision |
1,712 | 346 | ||||
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Interest expense |
43,139 | 32,515 | ||||
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EBIT (1) |
35,703 | 15,409 | ||||
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Depreciation and amortization |
1,279 | 979 | ||||
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EBITDA (2) |
36,982 | 16,388 | ||||
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Inventory impairment loss and land option write-offs |
2,828 | 704 | ||||
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Gain on extinguishment of debt |
(9,456 | ) | - | |||
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Adjusted EBITDA (3) |
$30,354 | $17,092 | ||||
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Interest incurred |
$44,334 | $38,853 | ||||
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Adjusted EBITDA to interest incurred |
0.68 | 0.44 | ||||
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(1) EBIT is a non-GAAP financial measure. The most directly comparable GAAP financial measure is net (loss). EBIT represents earnings before interest expense and income taxes. |
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(2) EBITDA is a non-GAAP financial measure. The most directly comparable GAAP financial measure is net (loss). EBITDA represents earnings before interest expense, income taxes and depreciation and amortization. |
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(3) Adjusted EBITDA is a non-GAAP financial measure. The most directly comparable GAAP financial measure is net (loss). Adjusted EBITDA represents earnings before interest expense, income taxes, depreciation and amortization, inventory impairment loss and land option write-offs and gain on extinguishment of debt. |
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Hovnanian Enterprises, Inc. |
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January 31, 2020 |
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Interest incurred, expensed and capitalized |
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(In thousands) |
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Three Months Ended |
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January 31, |
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2020 |
2019 |
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(Unaudited) |
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Interest capitalized at beginning of period |
$71,264 | $68,117 | ||||
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Plus interest incurred |
44,334 | 38,853 | ||||
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Less interest expensed |
43,139 | 32,515 | ||||
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Less interest contributed to unconsolidated joint venture (1) |
4,580 | - | ||||
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Interest capitalized at end of period (2) |
$67,879 | $74,455 | ||||
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(1) Represents capitalized interest which was included as part of the assets contributed to the joint venture the Company entered into in December 2019. There was no impact to the Condensed Consolidated Statement of Operations as a result of this transaction. |
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(2) 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)
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January 31, |
October 31, |
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2020 |
2019 |
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(Unaudited) |
(1) |
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ASSETS |
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Homebuilding: |
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|
Cash and cash equivalents |
$81,396 | $130,976 | ||||
|
Restricted cash and cash equivalents |
19,878 | 20,905 | ||||
|
Inventories: |
||||||
|
Sold and unsold homes and lots under development |
1,009,098 | 993,647 | ||||
|
Land and land options held for future development or sale |
81,402 | 108,565 | ||||
|
Consolidated inventory not owned |
205,215 | 190,273 | ||||
|
Total inventories |
1,295,715 | 1,292,485 | ||||
|
Investments in and advances to unconsolidated joint ventures |
135,331 | 127,038 | ||||
|
Receivables, deposits and notes, net |
49,188 | 44,914 | ||||
|
Property, plant and equipment, net |
19,654 | 20,127 | ||||
|
Prepaid expenses and other assets |
71,284 | 45,704 | ||||
|
Total homebuilding |
1,672,446 | 1,682,149 | ||||
|
Financial services |
117,557 | 199,275 | ||||
|
Total assets |
$1,790,003 | $1,881,424 | ||||
|
LIABILITIES AND EQUITY |
||||||
|
Homebuilding: |
||||||
|
Nonrecourse mortgages secured by inventory, net of debt issuance costs |
$205,805 | $203,585 | ||||
|
Accounts payable and other liabilities |
306,559 | 320,193 | ||||
|
Customers’ deposits |
33,312 | 35,872 | ||||
|
Liabilities from inventory not owned, net of debt issuance costs |
152,235 | 141,033 | ||||
|
Senior notes and credit facilities (net of discount, premium and debt issuance costs) |
1,460,200 | 1,479,990 | ||||
|
Accrued interest |
30,899 | 19,081 | ||||
|
Total homebuilding |
2,189,010 | 2,199,754 | ||||
|
Financial services |
96,057 | 169,145 | ||||
|
Income taxes payable |
4,015 | 2,301 | ||||
|
Total liabilities |
2,289,082 | 2,371,200 | ||||
|
Equity: |
||||||
|
Hovnanian Enterprises, Inc. stockholders’ equity deficit: |
||||||
|
Preferred stock, $0.01 par value - authorized 100,000 shares; issued and outstanding 5,600 shares with a liquidation preference of $140,000 at January 31, 2020 and October 31, 2019 |
135,299 | 135,299 | ||||
|
Common stock, Class A, $0.01 par value – authorized 16,000,000 shares; issued 5,976,731 shares at January 31, 2020 and 5,973,727 shares at October 31, 2019 |
60 | 60 | ||||
|
Common stock, Class B, $0.01 par value (convertible to Class A at time of sale) – authorized 2,400,000 shares; issued 652,155 shares at January 31, 2020 and 650,363 shares at October 31, 2019 |
7 | 7 | ||||
|
Paid in capital – common stock |
715,336 | 715,504 | ||||
|
Accumulated deficit |
(1,235,121 |
) |
(1,225,973 |
) |
||
|
Treasury stock – at cost – 470,430 shares of Class A common stock and 27,669 shares of Class B common stock at January 31, 2020 and October 31, 2019 |
(115,360 |
) |
(115,360 |
) |
||
|
Total Hovnanian Enterprises, Inc. stockholders' equity deficit |
(499,779 |
) |
(490,463 |
) |
||
|
Noncontrolling interest in consolidated joint ventures |
700 | 687 | ||||
|
Total equity deficit |
(499,079 |
) |
(489,776 |
) |
||
|
Total liabilities and equity |
$1,790,003 | $1,881,424 |
|
(1) |
Derived from the audited balance sheet as of October 31, 2019 |
HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share data)
(Unaudited)
|
Three Months Ended January 31, |
||||||
|
2020 |
2019 |
|||||
|
Revenues: |
||||||
|
Homebuilding: |
||||||
|
Sale of homes |
$479,233 | $362,135 | ||||
|
Land sales and other revenues |
809 | 8,851 | ||||
|
Total homebuilding |
480,042 | 370,986 | ||||
|
Financial services |
14,014 | 9,608 | ||||
|
Total revenues |
494,056 | 380,594 | ||||
|
Expenses: |
||||||
|
Homebuilding: |
||||||
|
Cost of sales, excluding interest |
396,355 | 304,927 | ||||
|
Cost of sales interest |
18,136 | 10,242 | ||||
|
Inventory impairment loss and land option write-offs |
2,828 | 704 | ||||
|
Total cost of sales |
417,319 | 315,873 | ||||
|
Selling, general and administrative |
40,674 | 42,736 | ||||
|
Total homebuilding expenses |
457,993 | 358,609 | ||||
|
Financial services |
9,554 | 8,474 | ||||
|
Corporate general and administrative |
19,744 | 17,664 | ||||
|
Other interest |
25,003 | 22,273 | ||||
|
Other operations |
194 | 242 | ||||
|
Total expenses |
512,488 | 407,262 | ||||
|
Gain on extinguishment of debt |
9,456 | - | ||||
|
Income from unconsolidated joint ventures |
1,540 | 9,562 | ||||
|
(Loss) before income taxes |
(7,436 |
) |
(17,106 |
) |
||
|
State and federal income tax provision: |
||||||
|
State |
1,712 | 346 | ||||
|
Federal |
- | - | ||||
|
Total income taxes |
1,712 | 346 | ||||
|
Net (loss) |
$(9,148 |
) |
$(17,452 |
) |
||
|
Per share data: |
||||||
|
Basic and assuming dilution: |
||||||
|
Net (loss) per common share |
$(1.49 |
) |
$(2.93 |
) |
||
|
Weighted-average number of common shares outstanding |
6,161 | 5,958 | ||||
|
HOVNANIAN ENTERPRISES, INC. |
||||||||||
|
(DOLLARS IN THOUSANDS EXCEPT AVG. PRICE) |
||||||||||
|
(SEGMENT DATA EXCLUDES UNCONSOLIDATED JOINT VENTURES ONLY) |
||||||||||
|
(UNAUDITED) |
|
Three Months - January 31, 2020 |
||||||||||||||||||||||||||||
|
Contracts (1) |
Deliveries |
Contract |
||||||||||||||||||||||||||
|
Three Months Ended |
Three Months Ended |
Backlog |
||||||||||||||||||||||||||
|
January 31, |
January 31, |
January 31, |
||||||||||||||||||||||||||
|
2020 |
2019 |
% Change |
2020 |
2019 |
% Change |
2020 |
2019 |
% Change |
||||||||||||||||||||
|
Northeast |
||||||||||||||||||||||||||||
|
(NJ, PA) |
Home |
63 | 52 | 21.2 | % | 81 | 22 | 268.2 | % | 134 | 81 | 65.4 | % | |||||||||||||||
|
Dollars |
$33,003 | $34,950 | (5.6 | )% | $45,264 | $12,505 | 262.0 | % | $74,296 | $52,941 | 40.3 | % | ||||||||||||||||
|
Avg. Price |
$523,857 | $672,115 | (22.1 | )% | $558,815 | $568,409 | (1.7 | )% | $554,448 | $653,593 | (15.2 | )% | ||||||||||||||||
|
Mid-Atlantic |
||||||||||||||||||||||||||||
|
(DE, MD, VA, WV) |
Home |
183 | 151 | 21.2 | % | 155 | 111 | 39.6 | % | 350 | 336 | 4.2 | % | |||||||||||||||
|
Dollars |
$93,702 | $81,514 | 15.0 | % | $87,589 | $53,179 | 64.7 | % | $189,646 | $208,881 | (9.2 | )% | ||||||||||||||||
|
Avg. Price |
$512,033 | $539,828 | (5.1 | )% | $565,090 | $479,090 | 18.0 | % | $541,846 | $621,670 | (12.8 | )% | ||||||||||||||||
|
Midwest |
||||||||||||||||||||||||||||
|
(IL, OH) |
Home |
187 | 127 | 47.2 | % | 159 | 149 | 6.7 | % | 478 | 372 | 28.5 | % | |||||||||||||||
|
Dollars |
$58,276 | $37,046 | 57.3 | % | $46,392 | $44,889 | 3.3 | % | $134,566 | $99,306 | 35.5 | % | ||||||||||||||||
|
Avg. Price |
$311,636 | $291,701 | 6.8 | % | $291,774 | $301,268 | (3.2 | )% | $281,519 | $266,952 | 5.5 | % | ||||||||||||||||
|
Southeast |
||||||||||||||||||||||||||||
|
(FL, GA, SC) |
Home |
155 | 95 | 63.2 | % | 97 | 108 | (10.2 | )% | 305 | 238 | 28.2 | % | |||||||||||||||
|
Dollars |
$67,158 | $40,460 | 66.0 | % | $36,680 | $43,883 | (16.4 | )% | $139,505 | $104,714 | 33.2 | % | ||||||||||||||||
|
Avg. Price |
$433,277 | $425,895 | 1.7 | % | $378,144 | $406,324 | (6.9 | )% | $457,393 | $439,975 | 4.0 | % | ||||||||||||||||
|
Southwest |
||||||||||||||||||||||||||||
|
(AZ, TX) |
Home |
528 | 362 | 45.9 | % | 493 | 365 | 35.1 | % | 698 | 520 | 34.2 | % | |||||||||||||||
|
Dollars |
$178,433 | $115,338 | 54.7 | % | $163,703 | $117,863 | 38.9 | % | $245,627 | $178,329 | 37.7 | % | ||||||||||||||||
|
Avg. Price |
$337,941 | $318,613 | 6.1 | % | $332,055 | $322,912 | 2.8 | % | $351,901 | $342,940 | 2.6 | % | ||||||||||||||||
|
West |
||||||||||||||||||||||||||||
|
(CA) |
Home |
206 | 147 | 40.1 | % | 251 | 212 | 18.4 | % | 256 | 246 | 4.1 | % | |||||||||||||||
|
Dollars |
$90,832 | $57,018 | 59.3 | % | $99,605 | $89,816 | 10.9 | % | $115,927 | $105,650 | 9.7 | % | ||||||||||||||||
|
Avg. Price |
$440,932 | $387,878 | 13.7 | % | $396,833 | $423,660 | (6.3 | )% | $452,840 | $429,472 | 5.4 | % | ||||||||||||||||
|
Consolidated Total |
||||||||||||||||||||||||||||
|
Home |
1,322 | 934 | 41.5 | % | 1,236 | 967 | 27.8 | % | 2,221 | 1,793 | 23.9 | % | ||||||||||||||||
|
Dollars |
$521,404 | $366,326 | 42.3 | % | $479,233 | $362,135 | 32.3 | % | $899,567 | $749,821 | 20.0 | % | ||||||||||||||||
|
Avg. Price |
$394,405 | $392,212 | 0.6 | % | $387,729 | $374,493 | 3.5 | % | $405,028 | $418,194 | (3.1 | )% | ||||||||||||||||
|
Unconsolidated Joint Ventures (2) |
||||||||||||||||||||||||||||
|
(excluding KSA JV) |
Home |
170 | 132 | 28.8 | % | 149 | 149 | 0.0 | % | 336 | 344 | (2.3 | )% | |||||||||||||||
|
Dollars |
$106,917 | $84,936 | 25.9 | % | $86,349 | $94,231 | (8.4 | )% | $205,122 | $221,386 | (7.3 | )% | ||||||||||||||||
|
Avg. Price |
$628,921 | $643,455 | (2.3 | )% | $579,523 | $632,423 | (8.4 | )% | $610,482 | $643,564 | (5.1 | )% | ||||||||||||||||
|
Grand Total |
||||||||||||||||||||||||||||
|
Home |
1,492 | 1,066 | 40.0 | % | 1,385 | 1,116 | 24.1 | % | 2,557 | 2,137 | 19.7 | % | ||||||||||||||||
|
Dollars |
$628,321 | $451,262 | 39.2 | % | $565,582 | $456,366 | 23.9 | % | $1,104,689 | $971,207 | 13.7 | % | ||||||||||||||||
|
Avg. Price |
$421,127 | $423,322 | (0.5 | )% | $408,362 | $408,930 | (0.1 | )% | $432,025 | $454,472 | (4.9 | )% | ||||||||||||||||
|
KSA JV Only |
||||||||||||||||||||||||||||
|
Home |
95 | 2 | 4,650.0 | % | 0 | 3 | (100.0 | )% | 297 | 4 | 7,325.0 | % | ||||||||||||||||
|
Dollars |
$14,841 | $633 | 2,244.5 | % | $0 | $796 | (100.0 | )% | $47,157 | $837 | 5,534.1 | % | ||||||||||||||||
|
Avg. Price |
$156,220 | $316,500 | (50.6 | )% | $0 | $265,374 | (100.0 | )% | $158,779 | $209,333 | (24.2 | )% | ||||||||||||||||
|
DELIVERIES INCLUDE EXTRAS |
||||||||||||||||||||||||||||
|
Notes: |
||||||||||||||||||||||||||||
|
(1) Contracts are defined as new contracts signed during the period for the purchase of homes, less cancellations of prior contracts. |
||||||||||||||||||||||||||||
|
(2) Represents home deliveries, home revenues and average prices for our unconsolidated homebuilding joint ventures for the period. We provide this data as a supplement to our consolidated results as an indicator of the volume managed in our unconsolidated homebuilding joint ventures. Our proportionate share of the income or loss of unconsolidated homebuilding and land development joint ventures is reflected as a separate line item in our consolidated financial statements under “Income (loss) from unconsolidated joint ventures”. |
||||||||||||||||||||||||||||
|
HOVNANIAN ENTERPRISES, INC. |
||||||||||||||||||||
|
(DOLLARS IN THOUSANDS EXCEPT AVG. PRICE) |
||||||||||||||||||||
|
(SEGMENT DATA UNCONSOLIDATED JOINT VENTURES ONLY) |
||||||||||||||||||||
|
(UNAUDITED) |
|
Three Months - January 31, 2020 |
||||||||||||||||||||||||||||
|
Net Contracts (1) |
Deliveries |
Contract |
||||||||||||||||||||||||||
|
Three Months Ended |
Three Months Ended |
Backlog |
||||||||||||||||||||||||||
|
January 31, |
January 31, |
January 31, |
||||||||||||||||||||||||||
|
2020 |
2019 |
% Change |
2020 |
2019 |
% Change |
2020 |
2019 |
% Change |
||||||||||||||||||||
|
Northeast |
||||||||||||||||||||||||||||
|
(unconsolidated joint ventures) |
Home |
57 | 48 | 18.8 | % | 50 | 53 | (5.7 | )% | 83 | 109 | (23.9 | )% | |||||||||||||||
|
(excluding KSA JV) |
Dollars |
$45,300 | $38,220 | 18.5 | % | $37,096 | $41,629 | (10.9 | )% | $71,882 | $89,957 | (20.1 | )% | |||||||||||||||
|
(NJ, PA) |
Avg. Price |
$794,737 | $796,250 | (0.2 | )% | $741,920 | $785,453 | (5.5 | )% | $866,048 | $825,294 | 4.9 | % | |||||||||||||||
|
Mid-Atlantic |
||||||||||||||||||||||||||||
|
(unconsolidated joint ventures) |
Home |
17 | 13 | 30.8 | % | 12 | 10 | 20.0 | % | 47 | 27 | 74.1 | % | |||||||||||||||
|
(DE, MD, VA, WV) |
Dollars |
$9,265 | $11,062 | (16.2 | )% | $6,180 | $8,589 | (28.0 | )% | $24,061 | $21,312 | 12.9 | % | |||||||||||||||
|
Avg. Price |
$545,000 | $850,923 | (36.0 | )% | $515,000 | $858,900 | (40.0 | )% | $511,936 | $789,333 | (35.1 | )% | ||||||||||||||||
|
Midwest |
||||||||||||||||||||||||||||
|
(unconsolidated joint ventures) |
Home |
6 | 5 | 20.0 | % | 4 | 7 | (42.9 | )% | 5 | 7 | (28.6 | )% | |||||||||||||||
|
(IL, OH) |
Dollars |
$2,894 | $2,609 | 10.9 | % | $1,710 | $4,441 | (61.5 | )% | $2,469 | $4,243 | (41.8 | )% | |||||||||||||||
|
Avg. Price |
$482,333 | $521,800 | (7.6 | )% | $427,500 | $634,429 | (32.6 | )% | $493,800 | $606,143 | (18.5 | )% | ||||||||||||||||
|
Southeast |
||||||||||||||||||||||||||||
|
(unconsolidated joint ventures) |
Home |
37 | 25 | 48.0 | % | 45 | 32 | 40.6 | % | 115 | 115 | 0.0 | % | |||||||||||||||
|
(FL, GA, SC) |
Dollars |
$21,395 | $13,092 | 63.4 | % | $23,049 | $15,589 | 47.9 | % | $58,919 | $60,758 | (3.0 | )% | |||||||||||||||
|
Avg. Price |
$578,243 | $523,680 | 10.4 | % | $512,200 | $487,156 | 5.1 | % | $512,339 | $528,330 | (3.0 | )% | ||||||||||||||||
|
Southwest |
||||||||||||||||||||||||||||
|
(unconsolidated joint ventures) |
Home |
35 | 26 | 34.6 | % | 17 | 29 | (41.4 | )% | 63 | 64 | (1.6 | )% | |||||||||||||||
|
(AZ, TX) |
Dollars |
$21,798 | $14,524 | 50.1 | % | $10,539 | $17,692 | (40.4 | )% | $39,577 | $37,296 | 6.1 | % | |||||||||||||||
|
Avg. Price |
$622,800 | $558,615 | 11.5 | % | $619,941 | $610,069 | 1.6 | % | $628,206 | $582,750 | 7.8 | % | ||||||||||||||||
|
West |
||||||||||||||||||||||||||||
|
(unconsolidated joint ventures) |
Home |
18 | 15 | 20.0 | % | 21 | 18 | 16.7 | % | 23 | 22 | 4.5 | % | |||||||||||||||
|
(CA) |
Dollars |
$6,265 | $5,429 | 15.4 | % | $7,775 | $6,291 | 23.6 | % | $8,214 | $7,820 | 5.0 | % | |||||||||||||||
|
Avg. Price |
$348,056 | $361,933 | (3.8 | )% | $370,238 | $349,500 | 5.9 | % | $357,130 | $355,455 | 0.5 | % | ||||||||||||||||
|
Unconsolidated Joint Ventures (2) |
||||||||||||||||||||||||||||
|
(excluding KSA JV) |
Home |
170 | 132 | 28.8 | % | 149 | 149 | 0.0 | % | 336 | 344 | (2.3 | )% | |||||||||||||||
|
Dollars |
$106,917 | $84,936 | 25.9 | % | $86,349 | $94,231 | (8.4 | )% | $205,122 | $221,386 | (7.3 | )% | ||||||||||||||||
|
Avg. Price |
$628,921 | $643,455 | (2.3 | )% | $579,523 | $632,423 | (8.4 | )% | $610,482 | $643,564 | (5.1 | )% | ||||||||||||||||
|
KSA JV Only |
||||||||||||||||||||||||||||
|
Home |
95 | 2 | 4,650.0 | % | 0 | 3 | (100.0 | )% | 297 | 4 | 7,325.0 | % | ||||||||||||||||
|
Dollars |
$14,841 | $633 | 2,244.5 | % | $0 | $796 | (100.0 | )% | $47,157 | $837 | 5,534.1 | % | ||||||||||||||||
|
Avg. Price |
$156,220 | $316,500 | (50.6 | )% | $0 | $265,374 | (100.0 | )% | $158,779 | $209,333 | (24.2 | )% | ||||||||||||||||
|
DELIVERIES INCLUDE EXTRAS |
|
Notes: |
|
(1) Contracts are defined as new contracts signed during the period for the purchase of homes, less cancellations of prior contracts. |
|
(2) Represents home deliveries, home revenues and average prices for our unconsolidated homebuilding joint ventures for the period. We provide this data as a supplement to our consolidated results as an indicator of the volume managed in our unconsolidated homebuilding joint ventures. Our proportionate share of the income or loss of unconsolidated homebuilding and land development joint ventures is reflected as a separate line item in our consolidated financial statements under “Income (loss) from unconsolidated joint ventures”. |
11