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8-K - FORM 8-K - HOVNANIAN ENTERPRISES INChov_8k-121312.htm
Exhibit 99.1
 
HOVNANIAN ENTERPRISES, INC.
News Release
 

     
Contact:
J. Larry Sorsby
Jeffrey T. O’Keefe
 
Executive Vice President & CFO
Vice President, Investor Relations
 
732-747-7800
732-747-7800
     

 
HOVNANIAN ENTERPRISES REPORTS FISCAL 2012 RESULTS
 

Fourth Quarter Net Income, Excluding Debt Extinguishment Charge, Exceeds Consensus Estimate

Reports First Quarterly Pre-Tax Profit, Excluding Gains or Losses on Extinguishment of Debt, Since the Industry Downturn Began in 2006

RED BANK, NJ, December 13, 2012 – Hovnanian Enterprises, Inc. (NYSE: HOV), a leading national homebuilder, reported results for its fourth quarter and year ended October 31, 2012.
 
RESULTS FOR THREE AND TWELVE MONTH PERIODS ENDED OCTOBER 31, 2012:
 
·
Total revenues were $487.0 million in the fiscal 2012 fourth quarter up 42.6% compared with $341.6 million in the prior year’s fourth quarter.  For all of fiscal 2012, total revenues were $1.5 billion, up 30.9%, compared with $1.1 billion during all of fiscal 2011.

·
The dollar value of net contracts, including unconsolidated joint ventures, for the fourth quarter ended October 31, 2012 increased 46.3% to $513.4 million compared with $350.9 million in the 2011 fourth quarter.  The number of net contracts increased 22.8% to 1,443 homes for the three months ended October 31, 2012 from 1,175 homes in the fourth quarter of the prior year.

·
In all of fiscal 2012, the dollar value of net contracts, including unconsolidated joint ventures, increased 43.9% to $1.9 billion compared with $1.3 billion in all of fiscal 2011 and the number of net contracts increased 30.1% to 5,838 homes compared with 4,488 homes of the previous year.

·
Deliveries, including unconsolidated joint ventures, were 1,750 homes during the fourth quarter of 2012, up 40.6% compared with 1,245 homes in the same period of the prior year.  During the twelve months ended October 31, 2012, deliveries, including unconsolidated joint ventures, were 5,356 homes compared with 4,216 homes during the twelve month period a year ago, an increase of 27.0%.

·
Contract backlog, as of October 31, 2012, including unconsolidated joint ventures, was $742.2 million for 2,145 homes, which was an increase of 34.4% and 29.0%, respectively, compared to October 31, 2011.

·
Homebuilding gross margin percentage, before interest expense included in cost of sales, increased 280 basis points to 18.3% for the fourth quarter ended October 31, 2012, compared to 15.5% in last year’s fourth quarter.  The fourth quarter of fiscal 2012 represented the sixth sequential increase in quarterly gross margin percentage.  During all of 2012, homebuilding gross margin percentage, before interest expense included in cost of sales, was 17.8% compared with 15.6% in same period of the prior year.
 
 
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·
Total SG&A was $48.7 million, or 10.0% of total revenues, for the three months ended October 31, 2012 compared to $57.8 million, or 16.9% of total revenues, during the same quarter a year ago and $48.1 million, or 12.4% of total revenues, in the third quarter of 2012.  During all of fiscal 2012, total SG&A was $190.3 million, or 12.8% of total revenues, compared with $211.4 million, or 18.6% of total revenues, last year.

·
Consolidated pre-tax land-related charges in the fiscal 2012 fourth quarter were $5.3 million compared with $59.9 million in the prior year’s fourth quarter.  For all of fiscal 2012 consolidated pre-tax land-related charges were $12.5 million compared with $101.7 million during all of 2011.

·
Excluding land-related charges and gains or losses on extinguishment of debt, the pre-tax income in the fiscal 2012 fourth quarter was $8.1 million compared with a pre-tax loss of $45.2 million in the previous year’s fourth quarter.  After $5.3 million in land-related charges, the pre-tax income, excluding gains or losses on extinguishment of debt, was $2.8 million for the fourth quarter of fiscal 2012.  For the twelve months ended October 31, 2012, excluding land-related charges, expenses associated with the debt exchange offer and gains or losses on extinguishment of debt, the pre-tax loss was $55.0 million compared with $194.1 million last year.

·
The pre-tax loss for the fourth quarter ended October 31, 2012, including an $87.0 million loss on extinguishment of debt, was $84.2 million compared with $97.8 million in the 2011 fourth quarter.  For the twelve months ended October 31, 2012, the pre-tax loss, including gains or losses on extinguishment of debt, was $101.2 million compared with $291.6 million for all of the prior year.

·
The net loss was $84.4 million during the fourth quarter of 2012, or $0.59 per common share, compared with a net loss of $98.3 million, or $0.90 per common share, in the 2011 fourth quarter.  For all of fiscal 2012, the net loss was $66.2 million, or $0.52 per common share, compared with a net loss of $286.1 million, or $2.85 per common share, in the prior year.  The net loss in the fiscal 2012 fourth quarter and for the full year included an $87.0 million loss on extinguishment of debt, associated with the 2012 fourth quarter $797 million debt refinancing.

·
The contract cancellation rate, including unconsolidated joint ventures, for the fourth quarter ended October 31, 2012 was 23%, compared with 21% in last year’s fourth quarter.

·
During November of 2012, the dollar value of net contracts and the number of net contracts, including unconsolidated joint ventures, increased 38.1% and 18.5% respectively to $131.5 million compared with $95.2 million and to 385 homes from 325 homes in the same month last year.

·
The valuation allowance was $937.9 million as of October 31, 2012.  The valuation allowance is a non-cash reserve against the tax assets for GAAP purposes.  For tax purposes, the tax deductions associated with the tax assets may be carried forward for 20 years from the date the deductions were incurred.
 
LIQUIDITY AND INVENTORY AS OF OCTOBER 31, 2012:
 
·
After spending $127.9 million during the fourth quarter of 2012 on land and land development, homebuilding cash increased $36.9 million from the third quarter to $289.0 million, as of October 31, 2012, including $30.7 million of restricted cash required to collateralize letters of credit.

·
As of October 31, 2012, the land position, including unconsolidated joint ventures, was 29,619 lots, consisting of 11,418 lots under option and 18,201 owned lots.
 
 
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·
Refinanced $797 million of secured senior notes during the fourth quarter of fiscal 2012, which reduces annual cash interest payments by approximately $17 million and extends the maturity of the refinanced debt from 2016 until 2020.

·
Announced an increase of our land banking arrangement with GSO Capital Partners LP, the credit arm of The Blackstone Group, for up to an additional $125 million of total acquisition and future development costs.
 
COMMENTS FROM MANAGEMENT:
 
“We are very happy to report a pre-tax profit before debt extinguishment gains or losses for the first time in 25 quarters.  The fourth quarter marked the sixth sequential increase in our quarterly gross margin percentage, and our gross margin has improved 350 basis points over that period,” said Ara K. Hovnanian, Chairman of the Board, President and Chief Executive Officer.  “During fiscal 2012, we were able to generate significant operating leverage by holding our total SG&A and interest expenses at a fairly constant dollar amount, while growing our revenues by more than 30%.  As a result, our SG&A as a percentage of total sales declined to 10.0% during the fourth quarter, which by historical standards we consider a normalized level.  Furthermore, our sales growth continued with a 46% increase in dollar value of net contracts for the quarter and a 34% increase in dollar value of our backlog.”

“After the worst downturn that the homebuilding industry has ever seen, I do not think there is any question that the industry is finally in a period of modest recovery.  Building homes creates jobs for carpenters, electricians, plumbers and many other trades, as well as jobs in related industries like manufacturing appliances and home furnishings.  A sustained recovery in the homebuilding sector will help drive overall improvement in the U.S. economy and that will encourage even more consumers to buy a home,” concluded Mr. Hovnanian.
 
WEBCAST INFORMATION:
 
Hovnanian Enterprises will webcast its fiscal 2012 fourth quarter financial results conference call at 11:00 a.m. E.T. on Thursday, December 13, 2012.  The webcast can be accessed live through the “Investor Relations” section of Hovnanian Enterprises’ Website at http://www.khov.com.  For those who are not available to listen to the live webcast, an archive of the broadcast will be available under the “Audio Archives” section of the Investor Relations page on the Hovnanian Website at http://www.khov.com.  The archive will be available for 12 months.
 
ABOUT HOVNANIAN ENTERPRISES®, INC.:
 
Hovnanian Enterprises, Inc., founded in 1959 by Kevork S. Hovnanian, is headquartered in Red Bank, New Jersey.  The Company is one of the nation’s largest homebuilders with operations in Arizona, California, Delaware, Florida, Georgia, Illinois, Maryland, Minnesota, New Jersey, North Carolina, 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. HovnanianÒ HomesÒ, Matzel & Mumford, Brighton Homes, Parkwood Builders, Town & Country Homes and Oster Homes.  As the developer of K. Hovnanian’sÒ Four Seasons communities, the Company is also one of the nation’s largest builders of active adult homes.

Additional information on Hovnanian Enterprises, Inc., including a summary investment profile and the Company’s 2011 annual report, can be accessed through the “Investor Relations” section of the Hovnanian Enterprises’ website at http://www.khov.com. To be added to Hovnanian's investor e-mail or fax lists, please send an e-mail to IR@khov.com or sign up at http://www.khov.com.
 
 
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NON-GAAP FINANCIAL MEASURES:
 
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, expenses associated with debt exchange offer and loss (gain) on extinguishment of debt (“Adjusted EBITDA”) are not U.S. generally accepted accounting principles (GAAP) financial measures.  The most directly comparable GAAP financial measure is net loss.  The reconciliation of EBIT, EBITDA and Adjusted EBITDA to net loss is presented in a table attached to this earnings release.

Income (Loss) Before Income Taxes Excluding Land-Related Charges, Expenses Associated with Debt Exchange Offer and Loss (Gain) on Extinguishment of Debt is a non-GAAP financial measure.  The most directly comparable GAAP financial measure is Loss Before Income Taxes.  The reconciliation of Income (Loss) Before Income Taxes Excluding Land-Related Charges, Expenses Associated with Debt Exchange Offer and Loss (Gain) on Extinguishment of Debt to Loss Before Income Taxes is presented in a table attached to this earnings release.

FORWARD-LOOKING STATEMENTS

All statements in this press release that are not historical facts should be considered as “forward-looking statements.” Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. 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. Such risks, uncertainties and other factors include, but are not limited to, (1) changes in general and local economic and industry and business conditions and impacts of the sustained homebuilding downturn, (2) adverse weather and other environmental conditions and natural disasters, (3) changes in market conditions and seasonality of the Company’s business, (4) changes in home prices and sales activity in the markets where the Company builds homes, (5) government regulation, including regulations concerning development of land, the home building, sales and customer financing processes, tax laws, and the environment, (6) fluctuations in interest rates and the availability of mortgage financing, (7) shortages in, and price fluctuations of, raw materials and labor, (8) the availability and cost of suitable land and improved lots, (9) levels of competition, (10) availability of financing to the Company, (11) utility shortages and outages or rate fluctuations, (12) levels of indebtedness and restrictions on the Company’s operations and activities imposed by the agreements governing the Company’s outstanding indebtedness, (13) the Company's sources of liquidity, (14) changes in credit ratings, (15) availability of net operating loss carryforwards, (16) operations through joint ventures with third parties, (17) product liability litigation, warranty claims and claims by mortgage investors, (18) successful identification and integration of acquisitions, (19) significant influence of the Company’s controlling stockholders, (20) changes in tax laws affecting the after-tax costs of owning a home, (21) geopolitical risks, terrorist acts and other acts of war, and (22) other factors described in detail in the Company’s Annual Report on Form 10-K for the year ended October 31, 2011 and the Company’s Quarterly Report on Form 10-Q for the quarterly period ended April 30, 2012. 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.
October 31, 2012
Statements of Consolidated Operations
(Dollars in Thousands, Except Per Share Data)
 
   
Three Months Ended
October 31,
   
Twelve Months Ended
October 31,
 
   
2012
   
2011
   
2012
   
2011
 
   
(Unaudited)
   
(Unaudited)
 
Total Revenues
    $487,045       $341,625       $1,485,353       $1,134,907  
Costs and Expenses (a)
    487,296       447,477       1,562,936       1,425,065  
(Loss) Gain on Extinguishment of Debt
    (87,033 )     10,563       (29,066 )     7,528  
Gain (Loss) from Unconsolidated Joint Ventures
    3,077       (2,479 )     5,401       (8,958 )
Loss Before Income Taxes
    (84,207 )     (97,768 )     (101,248 )     (291,588 )
Income Tax Provision (Benefit)
    203       580       (35,051 )     (5,501 )
Net Loss
    $(84,410 )     $(98,348 )     $(66,197 )     $(286,087 )
                                 
Per Share Data:
                               
Basic:
                               
Loss Per Common Share
    $(0.59 )     $(0.90 )     $(0.52 )     $(2.85 )
Weighted Average Number of Common Shares Outstanding (b)
    142,249       108,740       126,350       100,444  
Assuming Dilution:
                               
Loss Per Common Share
    $(0.59 )     $(0.90 )     $(0.52 )     $(2.85 )
Weighted Average Number of Common Shares Outstanding (b)
    142,249       108,740       126,350       100,444  
 
(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.
October 31, 2012
Reconciliation of Income (Loss) Before Income Taxes Excluding Land-Related
Charges, Expenses Associated with the Debt Exchange Offer and
Loss (Gain) on Extinguishment of Debt to Loss Before Income Taxes
(Dollars in Thousands)
 
 
Three Months Ended
October 31,
   
Twelve Months Ended
October 31,
 
 
2012
   
2011
   
2012
   
2011
 
 
(Unaudited)
   
(Unaudited)
 
Loss Before Income Taxes
  $(84,207 )     $(97,768 )     $(101,248 )     $(291,588 )
Inventory Impairment Loss and Land Option Write-Offs
  5,300       59,873       12,530       101,749  
Expenses Associated with the Debt Exchange Offer
  -       -       4,694       -  
Unconsolidated Joint Venture Investment and Land-Related Charges   -       3,289       -       3,289  
Loss (Gain) on Extinguishment of Debt
  87,033       (10,563 )     29,066       (7,528 )
Income (Loss) Before Income Taxes Excluding Land-Related
                             
Charges, Expenses Associated with the Debt Exchange Offer and Loss (Gain) on Extinguishment of Debt (a)
  $8,126       $(45,169 )     $(54,958 )     $(194,078 )
 
(a) Income (Loss) Before Income Taxes Excluding Land-Related Charges, Expenses Associated with the Debt Exchange Offer, and Loss (Gain) on Extinguishment of Debt is a non-GAAP Financial measure. The most directly comparable GAAP financial measure is Loss Before Income Taxes.
 
 
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Hovnanian Enterprises, Inc.
October 31, 2012
Gross Margin
(Dollars in Thousands)
 
   
Homebuilding Gross Margin
Three Months Ended
October 31,
   
Homebuilding Gross Margin
Twelve Months Ended
October 31,
 
   
2012
   
2011
   
2012
   
2011
 
   
(Unaudited)
   
(Unaudited)
 
Sale of Homes
    $469,275       $313,136       $1,405,580       $1,072,474  
Cost of Sales, Excluding Interest (a)
    383,275       264,747       1,155,643       905,253  
Homebuilding Gross Margin, Excluding Interest
    86,000       48,389       249,937       167,221  
Homebuilding Cost of Sales Interest
    14,014       15,345       48,843       57,016  
Homebuilding Gross Margin, Including Interest
    $71,986       $33,044       $201,094       $110,205  
                                 
Gross Margin Percentage, Excluding Interest
    18.3 %     15.5 %     17.8 %     15.6 %
Gross Margin Percentage, Including Interest
    15.3 %     10.6 %     14.3 %     10.3 %
 
   
Land Sales Gross Margin
Three Months Ended
October 31,
   
Land Sales Gross Margin
Twelve Months Ended
October 31,
 
    2012     2011     2012     2011  
   
(Unaudited)
   
(Unaudited)
 
Land Sales
    $3,051       $18,529       $31,788       $26,745  
Cost of Sales, Excluding Interest (a)
    2,358       3,005       24,158       8,648  
Land Sales Gross Margin, Excluding Interest
    693       15,524       7,630       18,097  
Land Sales Interest
    433       15,527       5,695       17,660  
Land Sales Gross Margin, Including Interest
    $260       $(3 )     $1,935       $437  

(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 Consolidated Statements of Operations.
 
 
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Hovnanian Enterprises, Inc.
October 31, 2012
Reconciliation of Adjusted EBITDA to Net Loss
(Dollars in Thousands)
 
   
Three Months Ended
October 31,
   
Twelve Months Ended
October 31,
 
   
2012
   
2011
   
2012
   
2011
 
   
(Unaudited)
   
(Unaudited)
 
Net Loss
    $(84,410 )     $(98,348 )     $(66,197 )     $(286,087 )
Income Tax Provision (Benefit)
    203       580       (35,051 )     (5,501 )
Interest Expense
    39,701       53,962       152,433       171,845  
EBIT (a)
    (44,506 )     (43,806 )     51,185       (119,743 )
Depreciation
    1,513       2,174       6,223       9,340  
Amortization of Debt Costs
    905       1,041       3,713       3,978  
EBITDA (b)
    (42,088 )     (40,591 )     61,121       (106,425 )
Inventory Impairment Loss and Land Option Write-offs
    5,300       59,873       12,530       101,749  
Expenses Associated with Debt Exchange Offer
    -       -       4,694       -  
Loss (Gain) on Extinguishment of Debt
    87,033       (10,563 )     29,066       (7,528 )
Adjusted EBITDA (c)
    $50,245       $8,719       $107,411       $(12,204 )
                                 
Interest Incurred
    $36,733       $39,225       $147,048       $156,998  
                                 
Adjusted EBITDA to Interest Incurred
    1.37       0.22       0.73       (0.08 )
 
(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, expenses associated with debt exchange offer, and loss (gain) on extinguishment of debt.
 
 
Hovnanian Enterprises, Inc.
October 31, 2012
Interest Incurred, Expensed and Capitalized
(Dollars in Thousands)
 
   
Three Months Ended
October 31,
   
Twelve Months Ended
October 31,
 
   
2012
   
2011
   
2012
   
2011
 
   
(Unaudited)
   
(Unaudited)
 
Interest Capitalized at Beginning of Period
    $119,024       $136,178       $121,441       $136,288  
Plus Interest Incurred
    36,733       39,225       147,048       156,998  
Less Interest Expensed
    39,701       53,962       152,433       171,845  
Interest Capitalized at End of Period (a)
    $116,056       $121,441       $116,056       $121,441  
 
(a) The Company incurred significant inventory impairments in recent years, which are determined based on total inventory including capitalized interest.  However, the capitalized interest amounts are shown gross before allocating any portion of impairments to capitalized interest.
 
 
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HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
 
   
October 31,
2012
   
October 31,
2011
 
   
(Unaudited)
    (1)  
ASSETS              
               
Homebuilding:              
Cash and cash equivalents
    $258,323       $244,356  
                 
Restricted cash
    41,732       73,539  
                 
Inventories:
               
Sold and unsold homes and lots under development
    671,851       720,149  
                 
Land and land options held for future development or sale
    218,996       245,529  
                 
Consolidated inventory not owned:
               
Specific performance options
    -       2,434  
Other options
    90,619       -  
                 
Total consolidated inventory not owned
    90,619       2,434  
                 
Total inventories
    981,466       968,112  
                 
Investments in and advances to unconsolidated joint ventures
    61,083       57,826  
                 
Receivables, deposits, and notes
    61,794       52,277  
                 
Property, plant, and equipment – net
    48,524       53,266  
                 
Prepaid expenses and other assets
    66,694       67,698  
                 
Total homebuilding
    1,519,616       1,517,074  
                 
Financial services:
               
Cash and cash equivalents
    14,909       6,384  
Restricted cash
    22,470       4,079  
Mortgage loans held for sale
    117,024       72,172  
Other assets
    10,231       2,471  
                 
Total financial services
    164,634       85,106  
                 
Total assets
    $1,684,250       $1,602,180  

(1) Derived from the audited balance sheet as of October 31, 2011.

 
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HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands Except Share Amounts)
 
   
October 31,
2012
   
October 31,
2011
 
   
(Unaudited)
    (1)  
LIABILITIES AND EQUITY
             
               
Homebuilding:
             
Nonrecourse land mortgages
    $38,302       $26,121  
Accounts payable and other liabilities
    296,510       303,633  
Customers’ deposits
    23,846       16,670  
Nonrecourse mortgages secured by operating properties
    18,775       19,748  
Liabilities from inventory not owned
    77,791       2,434  
                 
Total homebuilding
    455,224       368,606  
                 
Financial services:
               
Accounts payable and other liabilities
    37,609       14,517  
Mortgage warehouse line of credit
    107,485       49,729  
                 
Total financial services
    145,094       64,246  
                 
Notes payable:
               
Senior secured notes
    977,369       786,585  
Senior notes
    458,736       802,862  
Senior amortizing notes
    23,149       -  
Senior exchangeable notes
    76,851       -  
TEU senior subordinated amortizing notes
    6,091       13,323  
Accrued interest
    20,199       21,331  
                 
Total notes payable
    1,562,395       1,624,101  
                 
Income taxes payable
    6,882       41,829  
                 
Total liabilities
    2,169,595       2,098,782  
                 
Equity:
               
Hovnanian Enterprises, Inc. stockholders’ equity deficit:
               
Preferred stock, $.01 par value - authorized 100,000 shares; issued 5,600 shares with a liquidation preference of $140,000 at October 31, 2012 and 2011
    135,299       135,299  
Common stock, Class A, $.01 par value – authorized 200,000,000 shares; issued and outstanding 130,055,304 shares at October 31, 2012 and 92,141,492 shares at October 31, 2011 (including 11,760,763 and 11,694,720 shares at October 31, 2012 and 2011, respectively, held in Treasury)
    1,300       921  
Common stock, Class B, $.01 par value (convertible to Class A at time of sale) – authorized 30,000,000 shares; issued and outstanding 15,350,101 shares at October 31, 2012 and 15,252,212 shares at October 31, 2011 (including 691,748 shares at October 31, 2012 and 2011 held in Treasury)
    154       153  
Paid in capital - common stock
    668,735       591,696  
Accumulated deficit
    (1,175,703 )     (1,109,506 )
Treasury stock - at cost
    (115,360 )     (115,257 )
                 
Total Hovnanian Enterprises, Inc. stockholders’ equity deficit
    (485,575 )     (496,694 )
                 
Noncontrolling interest in consolidated joint ventures
    230       92  
                 
Total equity deficit
    (485,345 )     (496,602 )
                 
Total liabilities and equity
    $1,684,250       $1,602,180  
 
(1) Derived from the audited balance sheet as of October 31, 2011.
 
 
9

 
 
HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands Except Per Share Data)
(Unaudited)
 
   
Three Months Ended October 31,
   
Twelve Months Ended October 31,
 
   
2012
   
2011
   
2012
   
2011
 
Revenues:
                       
Homebuilding:
                       
Sale of homes
    $469,275       $313,136       $1,405,580       $1,072,474  
Land sales and other revenues
    5,025       19,257       41,038       32,952  
                                 
Total homebuilding
    474,300       332,393       1,446,618       1,105,426  
Financial services
    12,745       9,232       38,735       29,481  
                                 
Total revenues
    487,045       341,625       1,485,353       1,134,907  
                                 
Expenses:
                               
Homebuilding:
                               
Cost of sales, excluding interest
    385,633       267,752       1,179,801       913,901  
Cost of sales interest
    14,447       30,872       54,538       74,676  
Inventory impairment loss and land option write-offs
    5,300       59,873       12,530       101,749  
                                 
Total cost of sales
    405,380       358,497       1,246,869       1,090,326  
                                 
Selling, general and administrative
    37,477       46,512       142,087       161,456  
                                 
Total homebuilding expenses
    442,857       405,009       1,388,956       1,251,782  
                                 
Financial services
    6,998       5,177       23,648       21,371  
                                 
Corporate general and administrative
    11,271       11,329       48,232       49,938  
                                 
Other interest
    25,254       23,090       97,895       97,169  
                                 
Other operations
    916       2,872       4,205       4,805  
                                 
Total expenses
    487,296       447,477       1,562,936       1,425,065  
                                 
(Loss) gain on extinguishment of debt
    (87,033 )     10,563       (29,066 )     7,528  
                                 
Income (loss) from unconsolidated joint ventures
    3,077       (2,479 )     5,401       (8,958 )
                                 
Loss before income taxes
    (84,207 )     (97,768 )     (101,248 )     (291,588 )
                                 
State and federal income tax provision (benefit):
                               
State
    133       425       (35,328 )     (3,924 )
Federal
    70       155       277       (1,577 )
                                 
Total income taxes
    203       580       (35,051 )     (5,501 )
                                 
Net loss
    $(84,410 )     $(98,348 )     $(66,197 )     $(286,087 )
                                 
Per share data:
                               
Basic:
                               
Loss per common share
    $(0.59 )     $(0.90 )     $(0.52 )     $(2.85 )
Weighted-average number of common shares outstanding
    142,249       108,740       126,350       100,444  
                                 
Assuming dilution:
                               
Loss per common share
    $(0.59 )     $(0.90 )     $(0.52 )     $(2.85 )
Weighted-average number of common shares outstanding
    142,249       108,740       126,350       100,444  
 
 
10

 
 
HOVNANIAN ENTERPRISES, INC.
(DOLLARS IN THOUSANDS EXCEPT AVG. PRICE)
(UNAUDITED)
 
                       
Communities Under Development
Three Months - October 31, 2012
               
         
Net Contracts
Three Months Ending
October 31,
   
Deliveries
Three Months Ending
October 31,
   
Contract
Backlog
October 31,
 
         
2012
   
2011
% Change
   
2012
   
2011
% Change
   
2012
   
2011
% Change
 
Northeast
                                               
(includes unconsolidated
   
Home
    174       160   8.8 %     202       174   16.1 %     294       366   (19.7 )%
joint ventures)
   
Dollars
    $94,408       $75,093   25.7 %     $100,906       $87,743   15.0 %     $140,954       $163,778   (13.9 )%
(NJ, PA)
   
Avg. Price
    $542,575       $469,331   15.6 %     $499,535       $504,270   (0.9 %)     $479,435       $447,481   7.1 %
Mid-Atlantic
                                                                 
(includes unconsolidated
   
Home
    203       175   16.0 %     275       141   95.0 %     366       370   (1.1 )%
joint ventures)
   
Dollars
    $88,474       $68,491   29.2 %     $115,262       $52,470   119.7 %     $163,198       $153,953   6.0 %
(DE, MD, VA, VW)
   
Avg. Price
    $435,833       $391,377   11.4 %     $419,135       $372,128   12.6 %     $445,896       $416,089   7.2 %
Midwest
                                                                 
(includes unconsolidated
   
Home
    176       132   33.3 %     215       154   39.6 %     499       300   66.3 %
joint ventures)
   
Dollars
    $48,795       $31,064   57.1 %     $52,299       $35,401   47.7 %     $115,918       $63,317   83.1 %
(IL, MN, OH)
   
Avg. Price
    $277,244       $235,333   17.8 %     $243,251       $229,877   5.8 %     $232,301       $211,057   10.1 %
Southeast
                                                                 
(includes unconsolidated
   
Home
    197       116   69.8 %     224       139   61.2 %     283       168   68.5 %
joint ventures)
   
Dollars
    $54,466       $27,646   97.0 %     $55,639       $34,180   62.8 %     $79,340       $43,570   82.1 %
(FL, GA, NC, SC)
   
Avg. Price
    $276,477       $238,328   16.0 %     $248,388       $245,899   1.0 %     $280,353       $259,345   8.1 %
Southwest
                                                                 
(includes unconsolidated
   
Home
    511       437   16.9 %     640       502   27.5 %     506       331   52.9 %
joint ventures)
   
Dollars
    $153,700       $101,549   51.4 %     $170,913       $126,204   35.4 %     $160,840       $86,388   86.2 %
(AZ, TX)
   
Avg. Price
    $300,783       $232,378   29.4 %     $267,052       $251,402   6.2 %     $317,866       $260,991   21.8 %
West
                                                                 
(includes unconsolidated
   
Home
    182       155   17.4 %     194       135   43.7 %     197       128   53.9 %
joint ventures)
   
Dollars
    $73,566       $47,015   56.5 %     $76,143       $40,047   90.1 %     $81,973       $41,348   98.3 %
(CA)
   
Avg. Price
    $404,209       $303,323   33.3 %     $392,490       $296,644   32.3 %     $416,107       $323,031   28.8 %
Grand Total
                                                                 
(includes unconsolidated
   
Home
    1,443       1,175   22.8 %     1,750       1,245   40.6 %     2,145       1,663   29.0 %
joint ventures)
   
Dollars
    $513,409       $350,858   46.3 %     $571,162       $376,045   51.9 %     $742,223       $552,354   34.4 %
     
Avg. Price
    $355,793       $298,603   19.2 %     $326,378       $302,044   8.1 %     $346,025       $332,143   4.2 %
Consolidated Total
                                                                 
(excludes unconsolidated
   
Home
    1,289       1,016   26.9 %     1,532       1,095   39.9 %     1,889       1,387   36.2 %
joint ventures)
   
Dollars
    $440,865       $278,423   58.3 %     $469,275       $313,136   49.9 %     $632,318       $440,200   43.6 %
     
Avg. Price
    $342,021       $274,038   24.8 %     $306,315       $285,969   7.1 %     $334,737       $317,376   5.5 %
Unconsolidated
                                                                 
Joint Ventures
   
Home
    154       159   (3.1 )%     218       150   45.3 %     256       276   (7.2 )%
     
Dollars
    $72,544       $72,435   0.2 %     $101,887       $62,909   62.0 %     $109,905       $112,154   (2.0 )%
     
Avg. Price
    $471,065       $455,566   3.4 %     $467,372       $419,393   11.4 %     $429,316       $406,355   5.7 %
DELIVERIES INCLUDE EXTRAS
                                                           
Notes:
(1) Net contracts are defined as new contracts signed during the period for the purchase of homes, less cancellations of prior contracts.
 
 
11

 
 
HOVNANIAN ENTERPRISES, INC.
(DOLLARS IN THOUSANDS EXCEPT AVG. PRICE)
(UNAUDITED)
 
                          Communities Under Development
Twelve Months - October 31, 2012
                 
          Net Contracts
Twelve Months Ending
October 31,
    Deliveries
Twelve Months Ending
October 31,
    Contract
Backlog
October 31,
 
         
2012
   
2011
 
% Change
   
2012
   
2011
 
% Change
   
2012
   
2011
 
% Change
 
Northeast
                                                     
(includes unconsolidated
   
Home
    646       628   2.9 %     718       573   25.3 %     294       366   (19.7 )%
joint ventures)
   
Dollars
    $333,788       $286,690   16.4 %     $356,611       $276,012   29.2 %     $140,954       $163,778   (13.9 )%
(NJ, PA)
   
Avg. Price
    $516,700       $456,513   13.2 %     $496,673       $481,696   3.1 %     $479,435       $447,481   7.1 %
Mid-Atlantic
                                                                 
(includes unconsolidated
   
Home
    828       654   26.6 %     832       546   52.4 %     366       370   (1.1 )%
joint ventures)
   
Dollars
    $352,048       $252,982   39.2 %     $342,802       $205,584   66.7 %     $163,198       $153,953   6.0 %
(DE, MD, VA, WV)
   
Avg. Price
    $425,179       $386,823   9.9 %     $412,022       $376,527   9.4 %     $445,896       $416,089   7.2 %
Midwest
                                                                 
(includes unconsolidated
   
Home
    814       493   65.1 %     615       479   28.4 %     499       300   66.3 %
joint ventures)
   
Dollars
    $197,040       $109,896   79.3 %     $144,439       $103,017   40.2 %     $115,918       $63,317   83.1 %
(IL, MN, OH)
   
Avg. Price
    $242,064       $222,913   8.6 %     $234,860       $215,067   9.2 %     $232,301       $211,057   10.1 %
Southeast
                                                                 
(includes unconsolidated
   
Home
    681       450   51.3 %     566       370   53.0 %     283       168   68.5 %
joint ventures)
   
Dollars
    $176,735       $109,459   61.5 %     $140,965       $89,724   57.1 %     $79,340       $43,570   82.1 %
(FL, GA, NC, SC)
   
Avg. Price
    $259,523       $243,242   6.7 %     $249,055       $242,497   2.7 %     $280,353       $259,345   8.1 %
Southwest
                                                                 
(includes unconsolidated
   
Home
    2,178       1,720   26.6 %     2,003       1,726   16.0 %     506       331   52.9 %
joint ventures)
   
Dollars
    $590,208       $404,715   45.8 %     $515,757       $418,631   23.2 %     $160,840       $86,388   86.2 %
(AZ, TX)
   
Avg. Price
    $270,986       $235,299   15.2 %     $257,492       $242,544   6.2 %     $317,866       $260,991   21.8 %
West
                                                                 
(includes unconsolidated
   
Home
    691       543   27.3 %     622       522   19.2 %     197       128   53.9 %
joint ventures)
   
Dollars
    $266,288       $167,860   58.6 %     $225,663       $151,849   48.6 %     $81,973       $41,348   98.3 %
(CA)
   
Avg. Price
    $385,366       $309,134   24.7 %     $362,802       $290,898   24.7 %     $416,107       $323,031   28.8 %
Grand Total
                                                                 
(includes unconsolidated
   
Home
    5,838       4,488   30.1 %     5,356       4,216   27.0 %     2,145       1,663   29.0 %
joint ventures)
   
Dollars
    $1,916,107       $1,331,602   43.9 %     $1,726,237       $1,244,817   38.7 %     $742,223       $552,354   34.4 %
     
Avg. Price
    $328,213       $296,703   10.6 %     $322,300       $295,260   9.2 %     $346,025       $332,143   4.2 %
Consolidated Total
                                                                 
(excludes unconsolidated
   
Home
    5,137       4,023   27.7 %     4,676       3,832   22.0 %     1,889       1,387   36.2 %
joint ventures)
   
Dollars
    $1,597,698       $1,129,785   41.4 %     $1,405,580       $1,072,474   31.1 %     $632,318       $440,200   43.6 %
     
Avg. Price
    $311,018       $280,831   10.7 %     $300,595       $279,873   7.4 %     $334,737       $317,376   5.5 %
Unconsolidated
                                                                 
Joint Ventures
   
Home
    701       465   50.8 %     680       384   77.1 %     256       276   (7.2 )%
     
Dollars
    $318,409       $201,817   57.8 %     $320,657       $172,343   86.1 %     $109,905       $112,154   (2.0 )%
     
Avg. Price
    $454,221       $434,015   4.7 %     $471,554       $448,810   5.1 %     $429,316       $406,355   5.7 %
DELIVERIES INCLUDE EXTRAS
                 
Notes:
(1) Net contracts are defined as new contracts signed during the period for the purchase of homes, less cancellations of prior contracts.
 
12