Hovnanian Enterprises Reports Fiscal 2018 Third Quarter Results

 | Source: Hovnanian Enterprises, Inc. Hovnanian Enterprises, Inc.

Gross Margin Percentage Increased Significantly Year Over Year
Contracts per Community Improved Year Over Year for 13th Consecutive Quarter
Consolidated Lots Controlled Grew 20% Year-over-Year and 17% Sequentially

MATAWAN, N.J., Sept. 10, 2018 (GLOBE NEWSWIRE) -- Hovnanian Enterprises, Inc. (NYSE: HOV), a leading national homebuilder, reported results for its fiscal third quarter and nine months ended July 31, 2018.

“We are pleased to report another quarter with year-over-year improvements in contracts per community, a significant increase in gross margin percentage and increases in pretax profits for our third quarter of fiscal 2018,” stated Ara K. Hovnanian, Chairman of the Board, President and Chief Executive Officer. “Our total consolidated lots controlled at the end of the third quarter expanded 20% year over year and 17% sequentially. As we move forward, we remain laser focused on further growing our land position, which should ultimately lead to increases in our community count.”

“Assuming no adverse changes in current market conditions, we continue to expect solid profitability during the fourth quarter of fiscal 2018. Similar to what we have experienced in past cycles, our planned community count growth should lead to improved operating results and sustainable levels of profitability,” concluded Mr. Hovnanian.

RESULTS FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED JULY 31, 2018:

  • Total revenues decreased to $456.7 million in the third quarter of fiscal 2018, compared with $592.0 million in the third quarter of fiscal 2017. For the nine months ended July 31, 2018, total revenues decreased to $1.38 billion compared with $1.73 billion in the first nine months of the prior year.
  • While total revenues decreased $135.3 million, homebuilding revenues for unconsolidated joint ventures increased $131.9 million to $194.5 million for the third quarter ended July 31, 2018, compared with $62.6 million in last year’s third quarter. During the first nine months of fiscal 2018, homebuilding revenues for unconsolidated joint ventures increased to $350.0 million compared with $214.1 million in the same period of the previous year.
     
  • Homebuilding gross margin percentage, after cost of sales interest expense and land charges, was 15.4% for the third quarter of fiscal 2018 compared with 12.8% in the prior year’s third quarter. For the nine months ended July 31, 2018, homebuilding gross margin percentage, after cost of sales interest expense and land charges, improved to 14.6% compared with 12.9% in the first nine months of last year.
     
  • Homebuilding gross margin percentage, before cost of sales interest expense and land charges, improved 160 basis points to 18.4% for the third quarter of fiscal 2018 compared with 16.8% in the same quarter one year ago. During the first nine months of fiscal 2018, homebuilding gross margin percentage, before cost of sales interest expense and land charges, improved 120 basis points to 18.0% compared with 16.8% in the same period of the previous year.
     
  • For the third quarter of 2018, total SG&A decreased by $7.3 million, or 11.9%, year over year. Total SG&A was $53.9 million, or 11.8% of total revenues, in the third quarter of fiscal 2018 compared with $61.2 million, or 10.3% of total revenues, in the third quarter of fiscal 2017. For the nine months ended July 31, 2018, total SG&A decreased by $4.8 million, or 2.6%, year over year. For the first nine months of fiscal 2018, total SG&A was $178.0 million, or 12.9% of total revenues, compared with $182.8 million, or 10.6% of total revenues, in the first nine months of the prior fiscal year.
     
  • Interest incurred (some of which was expensed and some of which was capitalized) was $40.4 million for the third quarter of fiscal 2018 compared with $39.1 million in the same quarter one year ago. For the nine months ended July 31, 2018, interest incurred (some of which was expensed and some of which was capitalized) was $121.6 million compared with $116.9 million during the same nine-month period last year.
     
  • Total interest expense was $38.3 million in the third quarter of fiscal 2018 compared with $42.9 million in the third quarter of fiscal 2017. Total interest expense was $125.2 million for the first nine months of fiscal 2018 compared with $126.5 million for the first nine months of fiscal 2017.
     
  • Income before income taxes for the quarter ended July 31, 2018 was $0.1 million compared with a loss before income taxes of $50.2 million during the third quarter of fiscal 2017. For the first nine months of fiscal 2018, the loss before income taxes was $40.0 million compared with loss of $57.5 million during the first nine months of fiscal 2017.
     
  • Income before income taxes excluding land-related charges, joint venture write-downs and loss on extinguishment of debt, was $4.4 million during the third quarter of fiscal 2018 compared with a loss of $3.7 million in the third quarter of fiscal 2017. For the first nine months of fiscal 2018, the loss before income taxes, excluding land-related charges, joint venture write-downs and loss on extinguishment of debt, was $30.4 million compared with $13.4 million during the first nine months of fiscal 2017.
     
  • Net loss was $1.0 million, or $0.01 per common share, in the third quarter of fiscal 2018 compared with a net loss of $337.2 million, or $2.28 per common share, including a $294.0 increase in the valuation allowance for our deferred tax assets, during the same quarter a year ago. For the nine months ended July 31, 2018, the net loss was $41.7 million, or $0.28 per common share, compared with a net loss of $344.0 million, or $2.33 per common share, including a $294.0 increase in the valuation allowance for our deferred tax assets, in the first nine months of fiscal 2017.
     
  • Contracts per community, including unconsolidated joint ventures, increased 9.8% to 10.1 contracts per community for the quarter ended July 31, 2018 compared with 9.2 contracts per community, including unconsolidated joint ventures, in last year’s third quarter. Consolidated contracts per community increased 6.4% to 10.0 contracts per community for the third quarter of fiscal 2018 compared with 9.4 contracts per community in the third quarter of fiscal 2017.
     
  • As of the end of the third quarter of fiscal 2018, community count, including unconsolidated joint ventures, was 143 communities, a 14.4% year-over-year decrease from 167 communities at July 31, 2017. Consolidated community count decreased 12.8% to 123 communities as of July 31, 2018 from 141 communities at the end of the prior year’s third quarter.
     
  • The number of contracts, including unconsolidated joint ventures, for the third quarter ended July 31, 2018, decreased 5.3% to 1,451 homes from 1,533 homes for the same quarter last year. The number of consolidated contracts decreased 6.4% to 1,236 homes, during the third quarter of fiscal 2018, compared with 1,321 homes during the third quarter of 2017.
     
  • During the first nine months of fiscal 2018, the number of contracts, including unconsolidated joint ventures, was 4,407 homes, a decrease of 4.0% from 4,593 homes during the first nine months of fiscal 2017. The number of consolidated contracts decreased 10.2% to 3,667 homes, during the nine month period ended July 31, 2018, compared with 4,084 homes in the same period of the previous year.
     
  • The dollar value of contract backlog, including unconsolidated joint ventures, as of July 31, 2018, was $1.32 billion, an increase of 2.1% compared with $1.29 billion as of July 31, 2017. The dollar value of consolidated contract backlog, as of July 31, 2018, decreased 9.4% to $946.5 million compared with $1.04 billion as of July 31, 2017.
     
  • For the quarter ended July 31, 2018, deliveries, including unconsolidated joint ventures, decreased 2.0% to 1,438 homes compared with 1,467 homes during the third quarter of fiscal 2017. Consolidated deliveries were 1,142 homes for the third quarter of fiscal 2018, a 15.4% decrease compared with 1,350 homes during the same quarter a year ago.
     
  • For the nine months ended July 31, 2018, deliveries, including unconsolidated joint ventures, decreased 8.3% to 4,002 homes compared with 4,362 homes in the first nine months of the prior year. Consolidated deliveries were 3,382 homes in the first nine months of fiscal 2018, a 15.4% decrease compared with 3,998 homes in the same period in fiscal 2017.
     
  • The contract cancellation rate, including unconsolidated joint ventures, was 19% in the third quarter of fiscal 2018 compared with 20% during the third quarter of fiscal 2017. The consolidated contract cancellation rate was 19% for both the three months ended July 31, 2018 and the three months ended July 31, 2017.
     
  • The valuation allowance was $659.9 million as of July 31, 2018. The valuation allowance is a non-cash reserve against the Company’s 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.

LIQUIDITY AND INVENTORY AS OF JULY 31, 2018:

  • Total liquidity at the end of the third quarter of fiscal 2018 was $242.1 million.
     
  • In the third quarter of fiscal 2018, approximately 5,800 lots were put under option or acquired in 56 communities, including unconsolidated joint ventures.
     
  • As of July 31, 2018, consolidated lots controlled increased sequentially by 16.7% to 30,974 from 26,537 lots at April 30, 2018, and increased 19.9% year over year from 25,834 lots at July 31, 2017. The consolidated land position, as of July 31, 2018, was 30,974 lots, consisting of 18,416 lots under option and 12,558 owned lots.

WEBCAST INFORMATION:

Hovnanian Enterprises will webcast its fiscal 2018 third quarter financial results conference call at 11:00 a.m. E.T. on Monday, September 10, 2018. 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 names K. Hovnanian® Homes, Brighton 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., including a summary investment profile and the Company’s 2017 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 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 loss 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. 

Income (Loss) Before Income Taxes Excluding Land-Related Charges, Joint Venture Write-Downs and Loss on Extinguishment of Debt is a non-GAAP financial measure. The most directly comparable GAAP financial measure is Income (Loss) Before Income Taxes. The reconciliation for historical periods of Income (Loss) Before Income Taxes Excluding Land-Related Charges, Joint Venture Write-Downs and Loss on Extinguishment of Debt to Income (Loss) Before Income Taxes is presented in a table attached to this earnings release.

Total liquidity is comprised of $216.7 million of cash and cash equivalents, $25.2 million of restricted cash required to collateralize a performance bond and letters of credit and $0.2 million of availability under the unsecured revolving credit facility as of July 31, 2018.

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 sustained homebuilding downturn; (2) adverse weather and other environmental conditions and natural disasters; (3) levels of indebtedness and restrictions on the Company’s operations and activities imposed by the agreements governing the Company’s outstanding indebtedness; (4) the Company's sources of liquidity; (5) changes in credit ratings; (6) changes in market conditions and seasonality of the Company’s business; (7) the availability and cost of suitable land and improved lots; (8) shortages in, and price fluctuations of, raw materials and labor; (9) 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; (10) fluctuations in interest rates and the availability of mortgage financing; (11) changes in tax laws affecting the after-tax costs of owning a home; (12) operations through joint ventures with third parties; (13) government regulation, including regulations concerning development of land, the home building, sales and customer financing processes, tax laws and the environment; (14) product liability litigation, warranty claims and claims made by mortgage investors; (15) levels of competition; (16) availability and terms of financing to the Company; (17) successful identification and integration of acquisitions; (18) significant influence of the Company’s controlling stockholders; (19) availability of net operating loss carryforwards; (20) utility shortages and outages or rate fluctuations; (21) geopolitical risks, terrorist acts and other acts of war; (22) increases in cancellations of agreements of sale; (23) loss of key management personnel or failure to attract qualified personnel; (24) information technology failures and data security breaches; (25) legal claims brought against us and not resolved in our favor; and (26) 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, 2017 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)



Hovnanian Enterprises, Inc.
July 31, 2018
Statements of Consolidated Operations
(Dollars in Thousands, Except Per Share Data)
   Three Months Ended Nine Months Ended
   July 31, July 31,
    2018   2017   2018   2017 
   (Unaudited) (Unaudited)
Total Revenues$456,712  $592,035  $1,376,422  $1,729,979 
Costs and Expenses (a)  463,100     596,069     1,417,586     1,742,565 
Loss on Extinguishment of Debt (4,266)    (42,258)   (5,706)    (34,854)
Income (Loss) from Unconsolidated Joint Ventures 10,732    (3,881)  6,899     (10,109)
Income (Loss) Before Income Taxes  78     (50,173)    (39,971)    (57,549)
Income Tax Provision   1,104     287,036   1,687     286,485 
Net (Loss)$(1,026) $(337,209) $(41,658) $(344,034)
          
Per Share Data:       
Basic:       
 Net (Loss) Per Common Share$(0.01) $(2.28) $(0.28) $(2.33)
 Weighted Average Number of       
  Common Shares Outstanding (b)  148,669     147,748     148,377     147,628 
Assuming Dilution:       
 Net (Loss) Per Common Share$(0.01) $(2.28) $(0.28) $(2.33)
 Weighted Average Number of       
  Common Shares Outstanding (b)  148,669     147,748     148,377     147,628 
          
(a)  Includes inventory impairment loss and land option write-offs.
(b)  For periods with a net (loss), basic shares are used in accordance with GAAP rules.
          
          
          
Hovnanian Enterprises, Inc.
July 31, 2018
Reconciliation of Income (Loss) Before Income Taxes Excluding Land-Related Charges, Joint Venture Write-Downs and Loss on Extinguishment of Debt to Income (Loss) Before Income Taxes
          
(Dollars in Thousands)       
          
   Three Months Ended Nine Months Ended
   July 31, July 31,
    2018   2017   2018   2017 
   (Unaudited) (Unaudited)
Income (Loss) Before Income Taxes$78  $(50,173) $(39,971) $(57,549)
Inventory Impairment Loss and Land Option Write-Offs  96   4,197   3,183   9,334 
Unconsolidated Joint Venture Investment Write-Downs -     -   660    - 
Loss on Extinguishment of Debt   4,266    42,258   5,706    34,854 
Income (Loss) Before Income Taxes Excluding Land-Related Charges,
   Joint Venture Write-Downs and Loss on Extinguishment of Debt (a)		$4,440  $(3,718) $(30,422) $(13,361)
          
(a) Income (Loss) Before Income Taxes Excluding Land-Related Charges, Joint Venture Write-Downs and Loss on Extinguishment of Debt is a non-GAAP financial measure. The most directly comparable GAAP financial measure is Income (Loss) Before Income Taxes.
 


 
Hovnanian Enterprises, Inc.
July 31, 2018
Gross Margin
(Dollars in Thousands)
  Homebuilding Gross Margin Homebuilding Gross Margin
  Three Months Ended Nine Months Ended
  July 31, July 31,
  2018 2017 2018
 2017 
  (Unaudited) (Unaudited)
Sale of Homes $442,859 $574,282 $1,312,553 $1,673,250
Cost of Sales, Excluding Interest Expense (a) 361,303 478,069 1,076,132 1,391,966
Homebuilding Gross Margin, Before Cost of Sales Interest Expense and Land Charges (b) 81,556 96,213 236,421 281,284
Cost of Sales Interest Expense, Excluding Land Sales Interest Expense 13,424 18,397 41,025 55,284
Homebuilding Gross Margin, After Cost of Sales Interest Expense, Before Land Charges (b) 68,132 77,816 195,396 226,000
Land Charges 96 4,197 3,183 9,334
Homebuilding Gross Margin $68,036 $73,619 $192,213 $216,666
         
Gross Margin Percentage 15.4% 12.8% 14.6% 12.9%
Gross Margin Percentage, Before Cost of Sales Interest Expense and Land Charges (b) 18.4% 16.8% 18.0% 16.8%
Gross Margin Percentage, After Cost of Sales Interest Expense, Before Land Charges (b) 15.4% 13.6% 14.9% 13.5%
         
  Land Sales Gross Margin Land Sales Gross Margin
  Three Months Ended Nine Months Ended
  July 31, July 31,
  2018 2017 2018
 2017
  (Unaudited) (Unaudited)
Land and Lot Sales $- $1,785 $20,505 $11,497
Cost of Sales, Excluding Interest and Land Charges (a) - 817 7,710 7,387
Land and Lot Sales Gross Margin, Excluding Interest and Land Charges - 968 12,795 4,110
Land and Lot Sales Interest - 974 4,055 2,746
Land and Lot Sales Gross Margin, Including Interest and Excluding Land Charges $- $(6) $8,740 $1,364
         
(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. 
(b) 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. 
  


 
Hovnanian Enterprises, Inc.
July 31, 2018
Reconciliation of Adjusted EBITDA to Net (Loss)
(Dollars in Thousands)
 Three Months Ended Nine Months Ended
 July 31, July 31,
  2018   2017   2018   2017 
 (Unaudited) (Unaudited)
Net (Loss)$(1,026) $(337,209) $(41,658) $(344,034)
Income Tax Provision 1,104   287,036   1,687   286,485 
Interest Expense 38,283   42,930   125,158   126,513 
EBIT (a) 38,361   (7,243)  85,187   68,964 
Depreciation 811   1,129   2,320   3,212 
Amortization of Debt Costs  -   -   -   1,632 
EBITDA (b) 39,172   (6,114)  87,507   73,808 
Inventory Impairment Loss and Land Option Write-offs 96   4,197   3,183   9,334 
Loss on Extinguishment of Debt   4,266     42,258     5,706    34,854 
Adjusted EBITDA (c)$43,534  $40,341  $96,396  $117,996 
        
Interest Incurred$40,438  $39,089  $121,617  $116,944 
        
Adjusted EBITDA to Interest Incurred 1.08   1.03   0.79   1.01 
        
(a)  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.
(b)  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, depreciation and amortization.
(c)  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, amortization, inventory impairment loss and land option write-offs and loss on extinguishment of debt.
        
        
        
Hovnanian Enterprises, Inc.
July 31, 2018
Interest Incurred, Expensed and Capitalized
(Dollars in Thousands)
 Three Months Ended Nine Months Ended
 July 31, July 31,
  2018   2017   2018   2017 
 (Unaudited) (Unaudited)
Interest Capitalized at Beginning of Period$65,355  $90,960  $71,051  $96,688 
Plus Interest Incurred 40,438     39,089    121,617     116,944 
Less Interest Expensed 38,283     42,930    125,158     126,513 
Interest Capitalized at End of Period (a)$67,510  $87,119  $67,510  $87,119 
        
(a) 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)

   July 31,
2018		  October 31,
2017
    (Unaudited)   (1)
ASSETS      
Homebuilding:      
Cash and cash equivalents  $216,707  $463,697 
Restricted cash and cash equivalents  25,345  2,077 
Inventories:      
Sold and unsold homes and lots under development  913,469  744,119 
Land and land options held for future development or sale  98,585  140,924 
Consolidated inventory not owned  96,989  124,784 
Total inventories  1,109,043  1,009,827 
Investments in and advances to unconsolidated joint ventures  104,752  115,090 
Receivables, deposits and notes, net  37,911  58,149 
Property, plant and equipment, net  20,138  52,919 
Prepaid expenses and other assets  41,470  37,026 
Total homebuilding  1,555,366  1,738,785 
       
Financial services cash and cash equivalents  5,232  5,623 
Financial services other assets  107,890  156,490 
Total assets  $1,668,488   $1,900,898 
       
LIABILITIES AND EQUITY      
Homebuilding:      
Nonrecourse mortgages secured by inventory, net of debt issuance costs  $95,368  $64,512 
Accounts payable and other liabilities  311,230  335,057 
Customers’ deposits  38,052  33,772 
Nonrecourse mortgages secured by operating properties  -  13,012 
Liabilities from inventory not owned, net of debt issuance costs  72,416  91,101 
Revolving and term loan credit facilities, net of debt issuance costs  301,460  124,987 
Notes payable (net of discount, premium and debt issuance costs) and accrued interest  1,255,158  1,554,687 
Total homebuilding  2,073,684  2,217,128 
       
Financial services  93,195  141,914 
Income taxes payable  2,240  2,227 
Total liabilities  2,169,119  2,361,269 
       
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 July 31, 2018 and at October 31, 2017  135,299  135,299 
Common stock, Class A, $0.01 par value - authorized 400,000,000 shares; issued 144,523,768 shares at July 31, 2018 and 144,046,073 shares at October 31, 2017  1,445  1,440 
Common stock, Class B, $0.01 par value (convertible to Class A at time of sale) - authorized 60,000,000 shares; issued 16,243,454 shares at July 31, 2018 and 15,999,355 shares at October 31, 2017  162  160 
Paid in capital - common stock  707,857  706,466 
Accumulated deficit  (1,230,034) (1,188,376) 
Treasury stock - at cost – 11,760,763 shares of Class A common stock and 691,748 shares of Class B common stock at July 31, 2018 and October 31, 2017  (115,360) (115,360) 
Total stockholders’ equity deficit  (500,631) (460,371) 
Total liabilities and equity  $1,668,488  $1,900,898 
 
(1) Derived from the audited balance sheet as of October 31, 2017
 

  

HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands Except Per Share Data)
(Unaudited)

  Three Months Ended July 31,  Nine Months Ended July 31, 
  2018  2017  2018  2017 
             
Revenues:            
Homebuilding:            
Sale of homes $442,859  $574,282  $1,312,553  $1,673,250 
Land sales and other revenues 844  2,760  26,918  14,393 
Total homebuilding 443,703  577,042  1,339,471  1,687,643 
Financial services 13,009  14,993  36,951  42,336 
Total revenues 456,712  592,035  1,376,422  1,729,979 
             
Expenses:            
Homebuilding:            
Cost of sales, excluding interest 361,303  478,886  1,083,842  1,399,353 
Cost of sales interest 13,424  19,371  45,080  58,030 
Inventory impairment loss and land option write-offs 96  4,197  3,183  9,334 
Total cost of sales 374,823  502,454  1,132,105  1,466,717 
Selling, general and administrative 37,544  45,517  126,319  135,392 
Total homebuilding expenses 412,367  547,971  1,258,424  1,602,109 
             
Financial services 8,986  8,867  26,125  23,082 
Corporate general and administrative 16,393  15,698  51,672  47,425 
Other interest 24,859  23,559  80,078  68,483 
Other operations 495  (26) 1,287  1,466 
Total expenses 463,100  596,069  1,417,586  1,742,565 
Loss on extinguishment of debt (4,266) (42,258) (5,706) (34,854)
Income (loss) from unconsolidated joint ventures 10,732  (3,881) 6,899  (10,109)
Income (loss) before income taxes 78  (50,173) (39,971) (57,549)
State and federal income tax provision:            
State 1,104  8,523  1,687  10,797 
Federal -  278,513  -  275,688 
Total income taxes 1,104  287,036  1,687  286,485 
Net (loss) $(1,026) $(337,209) $(41,658) $(344,034)
             
Per share data:            
Basic:            
Net (loss) per common share $(0.01) $(2.28) $(0.28) $(2.33)
Weighted-average number of common shares outstanding 148,669  147,748  148,377  147,628 
Assuming dilution:            
Net (loss) per common share $(0.01) $(2.28) $(0.28) $(2.33)
Weighted-average number of common shares outstanding 148,669  147,748  148,377  147,628 
             



HOVNANIAN ENTERPRISES, INC.
(DOLLARS IN THOUSANDS EXCEPT AVG. PRICE)
(SEGMENT DATA EXCLUDES UNCONSOLIDATED JOINT VENTURES)
(UNAUDITED)
     Three Months - July 31, 2018   
  Contracts (1)DeliveriesContract
  Three Months EndedThree Months EndedBacklog
  July 31,July 31,July 31,
   2018 2017% Change 2018 2017% Change 2018 2017% Change
Northeast          
(NJ, PA)Home 32 52(38.5)% 47 86(45.3)% 68 116(41.4)%
 Dollars$18,045$26,648(32.3)%$26,701$40,015(33.3)%$40,058$55,284(27.5)%
 Avg. Price$563,909$512,46210.0%$568,106$465,28922.1%$589,089$476,58623.6%
Mid-Atlantic           
(DE, MD, VA, WV)Home 144 173(16.8)% 144 194(25.8)% 324 419(22.7)%
 Dollars$76,324$97,017(21.3)%$79,593$113,111(29.6)%$196,011$257,891(24.0)%
 Avg. Price$530,032$560,791(5.5)%$552,726$583,050(5.2)%$604,973$615,493(1.7)%
Midwest          
(IL, OH) Home 143 170(15.9)% 157 12723.6% 470 474(0.8)%
 Dollars$43,596$48,257(9.7)%$45,579$40,62012.2%$130,377$133,775(2.5)%
 Avg. Price$304,865$283,8647.4%$290,313$319,839(9.2)%$277,397$282,226(1.7)%
Southeast          
(FL, GA, SC) Home 175 1721.7% 121 166(27.1)% 330 3222.5%
 Dollars$71,381$73,896(3.4)%$47,472$68,408(30.6)%$139,840$142,296(1.7)%
 Avg. Price$407,894$429,632(5.1)%$392,330$412,098(4.8)%$423,757$441,912(4.1)%
Southwest          
(AZ, TX)Home 518 522(0.8)% 469 581(19.3)% 706 6902.3%
 Dollars$177,174$177,285(0.1)%$157,406$209,041(24.7)%$250,369$244,1142.6%
 Avg. Price$342,036$339,6250.7%$335,620$359,793(6.7)%$354,630$353,7880.2%
West            
(CA)Home 224 232(3.4)% 204 1964.1% 389 454(14.3)%
 Dollars$102,183$103,342(1.1)%$86,108$103,087(16.5)%$189,868$211,470(10.2)%
 Avg. Price$456,173$445,4392.4%$422,099$525,956(19.7)%$488,094$465,7924.8%
Consolidated          
TotalHome 1,236 1,321(6.4)% 1,142 1,350(15.4)% 2,287 2,475(7.6)%
 Dollars$488,703$526,445(7.2)%$442,859$574,282(22.9)%$946,523$1,044,830(9.4)%
 Avg. Price$395,392$398,520(0.8)%$387,793$425,394(8.8)%$413,871$422,154(2.0)%
Unconsolidated          
Joint Ventures (2)Home 215 2121.4% 296 117153.0% 555 40537.0%
 Dollars$127,195$132,037(3.7)%$193,796$62,127211.9%$370,113$244,23451.5%
 Avg. Price$591,603$622,812(5.0)%$654,716$531,00123.3%$666,872$603,04610.6%
Grand          
TotalHome 1,451 1,533(5.3)% 1,438 1,467(2.0)% 2,842 2,880(1.3)%
 Dollars$615,898$658,482(6.5)%$636,655$636,4090.0%$1,316,636$1,289,0642.1%
 Avg. Price$424,465$429,538(1.2)%$442,736$433,8172.1%$463,278$447,5923.5%
           
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 EXCLUDES UNCONSOLIDATED JOINT VENTURES)
(UNAUDITED)
     Nine Months - July 31, 2018   
  Contracts (1)DeliveriesContract
  Nine Months EndedNine Months EndedBacklog
  July 31,July 31,July 31,
   2018 2017% Change 2018 2017% Change 2018 2017% Change
Northeast          
(NJ, PA)Home 104 201(48.3)% 134 289(53.6)% 68 116(41.4)%
 Dollars$58,686$94,611(38.0)%$70,406$138,839(49.3)%$40,058$55,284(27.5)%
 Avg. Price$564,290$470,70319.9%$525,421$480,4129.4%$589,089$476,58623.6%
Mid-Atlantic           
(DE, MD, VA, WV)Home 481 589(18.3)% 485 600(19.2)% 324 419(22.7)%
 Dollars$256,936$322,308(20.3)%$254,660$313,390(18.7)%$196,011$257,891(24.0)%
 Avg. Price$534,170$547,212(2.4)%$525,071$522,3170.5%$604,973$615,493(1.7)%
Midwest          
(IL, OH) Home 528 5113.3% 440 4117.1% 470 474(0.8)%
 Dollars$160,320$155,3123.2%$128,912$126,0652.3%$130,377$133,775(2.5)%
 Avg. Price$303,636$303,938(0.1)%$292,982$306,727(4.5)%$277,397$282,226(1.7)%
Southeast          
(FL, GA, SC) Home 456 4218.3% 411 431(4.6)% 330 3222.5%
 Dollars$184,577$175,9244.9%$165,120$178,799(7.7)%$139,840$142,296(1.7)%
 Avg. Price$404,774$417,873(3.1)%$401,751$414,847(3.2)%$423,757$441,912(4.1)%
Southwest          
(AZ, TX)Home 1,516 1,678(9.7)% 1,319 1,751(24.7)% 706 6902.3%
 Dollars$517,119$575,669(10.2)%$444,568$617,199(28.0)%$250,369$244,1142.6%
 Avg. Price$341,108$343,068(0.6)%$337,049$352,484(4.4)%$354,630$353,7880.2%
West            
(CA)Home 582 684(14.9)% 593 51614.9% 389 454(14.3)%
 Dollars$264,793$330,287(19.8)%$248,887$298,958(16.7)%$189,868$211,470(10.2)%
 Avg. Price$454,970$482,875(5.8)%$419,708$579,376(27.6)%$488,094$465,7924.8%
Consolidated          
TotalHome 3,667 4,084(10.2)% 3,382 3,998(15.4)% 2,287 2,475(7.6)%
 Dollars$1,442,431$1,654,111(12.8)%$1,312,553$1,673,250(21.6)%$946,523$1,044,830(9.4)%
 Avg. Price$393,354$405,022(2.9)%$388,100$418,522(7.3)%$413,871$422,154(2.0)%
Unconsolidated          
Joint Ventures (2)Home 740 50945.4% 620 36470.3% 555 40537.0%
 Dollars$443,389$299,65448.0%$348,191$212,98363.5%$370,113$244,23451.5%
 Avg. Price$599,175$588,7121.8%$561,599$585,118(4.0)%$666,872$603,04610.6%
Grand          
TotalHome 4,407 4,593(4.0)% 4,002 4,362(8.3)% 2,842 2,880(1.3)%
 Dollars$1,885,820$1,953,765(3.5)%$1,660,744$1,886,233(12.0)%$1,316,636$1,289,0642.1%
 Avg. Price$427,915$425,3790.6%$414,978$432,424(4.0)%$463,278$447,5923.5%
           
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 - July 31, 2018   
  Contracts (1)DeliveriesContract
  Three Months EndedThree Months EndedBacklog
  July 31,July 31,July 31,
   2018 2017% Change 2018 2017% Change 2018 2017% Change
Northeast          
(unconsolidated joint ventures)Home 65 105(38.1)% 140 19636.8% 227 15348.4%
(NJ, PA)Dollars$49,065$78,516(37.5)%$109,889$7,1911,428.1%$178,593$105,35669.5%
 Avg. Price$754,849$747,7670.9%$784,924$378,470107.4%$786,756$688,60214.3%
Mid-Atlantic          
(unconsolidated joint ventures)Home 12 13(7.7)% 17 170.0% 47 3823.7%
(DE, MD, VA, WV)Dollars$10,626$6,82055.8%$13,335$10,93322.0%$39,640$25,13857.7%
 Avg. Price$885,500$524,59168.8%$784,471$643,11822.0%$843,404$661,52727.5%
Midwest          
(unconsolidated joint ventures)Home 4 13(69.2)% 16 6166.7% 19 35(45.7)%
(IL, OH) Dollars$2,121$9,281(77.1)%$10,978$4,824127.6%$14,556$25,443(42.8)%
 Avg. Price$530,000$713,893(25.8)%$686,063$804,000(14.7)%$766,105$726,9435.4%
Southeast          
(unconsolidated joint ventures)Home 66 3969.2% 38 3411.8% 123 10220.6%
(FL, GA, SC) Dollars$31,702$17,35082.7%$15,619$15,731(0.7)%$61,917$49,69724.6%
 Avg. Price$480,333$444,8698.0%$411,029$462,676(11.2)%$503,394$487,2243.3%
Southwest          
(unconsolidated joint ventures)Home 38 10280.0% 45 10350.0% 99 27266.7%
(AZ, TX)Dollars$22,656$5,831288.5%$25,236$6,925264.4%$60,849$17,821241.4%
 Avg. Price$596,211$583,1002.2%$560,802$692,504(19.0)%$614,637$660,037(6.9)%
West          
(unconsolidated joint ventures)Home 30 32(6.3)% 40 3129.0% 40 50(20.0)%
(CA)Dollars$11,025$14,239(22.6)%$18,739$16,52313.4%$14,558$20,779(29.9)%
 Avg. Price$367,532$444,969(17.4)%$468,475$533,000(12.1)%$363,954$415,580(12.4)%
Unconsolidated Joint Ventures (2)          
 Home 215 2121.4% 296 117153.0% 555 40537.0%
 Dollars$127,195$132,037(3.7)%$193,796$62,127211.9%$370,113$244,23451.5%
 Avg. Price$591,603$622,812(5.0)%$654,716$531,00123.3%$666,872$603,04610.6%
           
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)
     Nine Months - July 31, 2018   
  Contracts (1)DeliveriesContract
  Nine Months EndedNine Months EndedBacklog
  July 31,July 31,July 31,
   2018 2017% Change 2018 2017% Change 2018 2017% Change
Northeast          
(unconsolidated joint ventures)Home 256 15763.1% 246 31693.5% 227 15348.4%
(NJ, PA)Dollars$176,594$106,97065.1%$154,680$11,8761,202.4%$178,593$105,35669.5%
 Avg. Price$689,819$681,3351.2%$628,781$383,09764.1%$786,756$688,60214.3%
Mid-Atlantic          
(unconsolidated joint ventures)Home 62 4344.2% 26 45(42.2)% 47 3823.7%
(DE, MD, VA, WV)Dollars$50,664$22,584124.3%$22,133$27,534(19.6)%$39,640$25,13857.7%
 Avg. Price$817,159$525,20455.6%$851,272$611,86739.1%$843,404$661,52727.5%
Midwest          
(unconsolidated joint ventures)Home 28 40(30.0)% 36 17111.8% 19 35(45.7)%
(IL, OH) Dollars$19,091$29,272(34.8)%$23,253$13,41873.3%$14,556$25,443(42.8)%
 Avg. Price$681,820$731,800(6.8)%$645,916$789,294(18.2)%$766,105$726,9435.4%
Southeast          
(unconsolidated joint ventures)Home 163 11443.0% 118 10018.0% 123 10220.6%
(FL, GA, SC) Dollars$77,408$51,09551.5%$52,301$45,12115.9%$61,917$49,69724.6%
 Avg. Price$474,895$448,2016.0%$443,229$451,209(1.8)%$503,394$487,2243.3%
Southwest          
(unconsolidated joint ventures)Home 131 32309.4% 89 12641.7% 99 27266.7%
(AZ, TX)Dollars$78,003$21,621260.8%$50,406$8,278508.9%$60,849$17,821241.4%
 Avg. Price$595,445$675,656(11.9)%$566,359$689,833(17.9)%$614,637$660,037(6.9)%
West          
(unconsolidated joint ventures)Home 100 123(18.7)% 105 159(34.0)% 40 50(20.0)%
(CA)Dollars$41,629$68,112(38.9)%$45,418$106,756(57.5)%$14,558$20,779(29.9)%
 Avg. Price$416,295$553,754(24.8)%$432,553$671,423(35.6)%$363,954$415,580(12.4)%
Unconsolidated Joint Ventures (2)          
 Home 740 50945.4% 620 36470.3% 555 40537.0%
 Dollars$443,389$299,65448.0%$348,191$212,98363.5%$370,113$244,23451.5%
 Avg. Price$599,175$588,7121.8%$561,599$585,118(4.0)%$666,872$603,04610.6%
           
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”. 
 


   
Contact:J. Larry SorsbyJeffrey T. O’Keefe
 Executive Vice President & CFOVice President, Investor Relations
 732-747-7800732-747-7800