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 2011 RESULTS | |
RED BANK, NJ, December 15, 2011 – Hovnanian Enterprises, Inc. (NYSE: HOV), a leading national homebuilder, reported results for its fourth quarter and year ended October 31, 2011.
RESULTS FOR THE THREE AND TWELVE MONTH PERIODS ENDED OCTOBER 31, 2011:
| · | Total revenues were $341.6 million during the fourth quarter of 2011 compared with $353.0 million in the same period of the prior year and $285.6 million for the third quarter of fiscal 2011. For the twelve months ended October 31, 2011, total revenues were $1.1 billion compared with $1.4 billion a year ago. |
| · | Homebuilding gross margin percentage, before interest expense included in cost of sales, was 15.5% during the fiscal 2011 fourth quarter, compared to 16.9% in last year’s fourth quarter and 15.3% for the third quarter of fiscal 2011. For the year ended October 31, 2011, homebuilding gross margin percentage, before interest expense included in cost of sales, was 15.6% compared with 16.8% in the prior year. |
| · | Total SG&A, which includes homebuilding selling, general and administrative and corporate general and administrative expenses, was $57.8 million in the fourth quarter compared to $65.4 million in the same period a year ago and $46.5 million for the third quarter of fiscal 2011. The majority of the sequential increase of $11.3 million was from unusually large charges for abandoned leased space, legal reserves and construction defect reserves based on our annual actuarial study. |
| · | Consolidated pre-tax land-related charges for the fiscal 2011 fourth quarter were $63.2 million, compared with $80.6 million during the fourth quarter of 2010. For all of fiscal 2011, consolidated pre-tax land-related charges were $105.0 million compared with $135.7 million in fiscal 2010. |
| · | During the fourth quarter, $25.6 million of unsecured senior notes were repurchased for $15.1 million in cash, including $1.1 million for accrued interest, an average price of 55%, resulting in a $10.6 million gain on extinguishment of debt. |
| · | Excluding land-related charges and gain on extinguishment of debt, the pre-tax loss in the three months ended October 31, 2011 was $45.2 million compared with $51.9 million in the fourth quarter of the prior year. During the entire 2011 fiscal year, the pre-tax loss, excluding land-related charges and gain on extinguishment of debt, was $194.1 million compared with $184.6 million in fiscal 2010. |
| · | For the fourth quarter of fiscal 2011, the after-tax net loss was $98.3 million, or $0.90 per common share, compared with $132.1 million, or $1.68 per common share, in the fourth quarter of the prior year. For the year ended October 31, 2011, the after-tax net loss was $286.1 million, or $2.85 per common share, compared with net income of $2.6 million, or $0.03 per fully diluted common share last year, which as a result of tax legislation changes included a federal income tax benefit of $291.3 million. |
| · | For the fourth quarter of 2011, Adjusted EBITDA (adjusted for land-related charges and gains from extinguishment of debt) was $8.7 million compared to $2.4 million for last year’s fourth quarter and $0.4 million in the third quarter of fiscal 2011. |
| · | Net contracts during the fourth quarter of 2011, including unconsolidated joint ventures, increased 3% to 1,175 homes compared with the same period of the prior year. For the year ended October 31, 2011, net contracts, including unconsolidated joint ventures, were 4,488 homes compared with 4,472 homes a year ago. |
| · | Net contracts for the month of November 2011 were 325, an increase of 31% over the same month last year. |
| · | Contract backlog, as of October 31, 2011, including unconsolidated joint ventures, was 1,663 homes with a sales value of $552.4 million, which was an increase of 19% and 26%, respectively, compared to October 31, 2010. |
| · | The contract cancellation rate, excluding unconsolidated joint ventures, during the fiscal 2011 fourth quarter was 21%, compared with 24% in last year’s fourth quarter. |
| · | At October 31, 2011, there were 214 active selling communities, including unconsolidated joint ventures, compared with 204 active selling communities at October 31, 2010 and 202 active selling communities at July 31, 2011. |
| · | Deliveries, including unconsolidated joint ventures, were 1,245 homes in the fiscal 2011 fourth quarter, compared with 1,287 homes in the prior year’s fourth quarter and 1,112 homes for the third quarter of fiscal 2011. For all of fiscal 2011, deliveries, including unconsolidated joint ventures, were 4,216 homes compared to 5,009 homes during fiscal 2010. |
| · | The valuation allowance was $899.4 million as of October 31, 2011. The valuation allowance is a non-cash reserve against the tax assets for GAAP purposes. For tax purposes, the tax deductions associated with the tax assets may be carried forward for 20 years from the date the deductions were incurred. |
CASH AND INVENTORY AS OF OCTOBER 31, 2011:
| · | As of October 31, 2011, homebuilding cash was $302.1 million, including $57.7 million of restricted cash required to collateralize letters of credit, after spending approximately $95 million in the fourth quarter on land and land development and $15.1 million to repurchase debt, compared to $334.2 million, including $60.8 million of restricted cash required to collateralize letters of credit at July 31, 2011. |
| · | After spending approximately $95 million of cash to purchase approximately 550 lots and to develop land across the Company, cash flow in the fourth quarter of fiscal 2011 was negative $7.9 million. Cash flow in the third quarter of fiscal 2011 was negative $76.2 million, after spending approximately $105 million of cash to purchase approximately 1,200 lots and to develop land across the Company. Excluding land and land development spending, cash flow would have been approximately $87.1 million positive in the fourth quarter of 2011. |
| · | As of October 31, 2011, the land position, including unconsolidated joint ventures, was 30,921 lots, consisting of 9,913 lots under option and 21,008 owned lots. |
COMMENTS FROM MANAGEMENT:
“We were pleased that our fourth quarter deliveries and homebuilding revenues were in line with our expectations. Our fourth quarter gross margin increased slightly from the third quarter, but the increase was not as much as we expected, due primarily to the need to offer additional incentives and lower base prices. This is reflective of a persistently challenging housing market,” commented Ara K. Hovnanian, Chairman of the Board, President and Chief Executive Officer. “However, our cash flow in the fourth quarter of 2011, both before and after land spend, was materially better than any of the periods since we began reporting this information five quarters ago.”
“Following our year end, we announced the successful results of our debt exchange offer. We exchanged $195 million of unsecured debt together with cash payments of approximately $17.5 million, including $3.3 million for accrued interest, for new secured debt that has a lower coupon and extends the maturity to 2021, from the original maturity dates between 2014 and 2017. Our liquidity continues to govern our land investment decisions, as we manage our business to a cash target of $245 million to $170 million, which includes cash used to collateralize letters of credit,” concluded Mr. Hovnanian.
Hovnanian Enterprises will webcast its fiscal 2011 fourth quarter financial results conference call at 11:00 a.m. E.T. on Thursday, December 15, 2011. The webcast can be accessed live through the “Investor Relations” section of Hovnanian Enterprises’ Website at http://www.khov.com. For those who are not available to listen to the live webcast, an archive of the broadcast will be available under the “Audio Archives” section of the Investor Relations page on the Hovnanian Website at http://www.khov.com. The archive will be available for 12 months.
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 2010 annual report, can be accessed through the “Investor Relations” section of the Hovnanian Enterprises’ website at http://www.khov.com. To be added to Hovnanian's investor e-mail or fax lists, please send an e-mail to IR@khov.com or sign up at http://www.khov.com.
NON-GAAP FINANCIAL MEASURES:
Consolidated earnings before interest expense, income taxes, depreciation and amortization (“EBITDA”) and before inventory impairment loss and land option write-offs and loss (gain) on extinguishment of debt (“Adjusted EBITDA”) are not U.S. generally accepted accounting principles (GAAP) financial measures. The most directly comparable GAAP financial measure is net (loss) income. The reconciliation of net (loss) income to EBITDA and Adjusted EBITDA is presented in a table attached to this earnings release.
Cash flow is a non-GAAP financial measure. The most directly comparable GAAP financial measure is Net Cash provided by (or used in) Operating Activities. The Company uses cash flow to mean the amount of Net Cash provided by (or used in) Operating Activities for the period, as reported on the Consolidated Statement of Cash Flows, excluding changes in mortgage notes receivable at the mortgage company, plus (or minus) the amount of Net Cash provided by (or used in) Investing Activities. For the fourth quarter of 2011, cash flow was negative $7.9 million, which was derived from $28.2 million from net cash used in operating activities plus the change in mortgage notes receivable of $19.0 million plus $1.3 million of net cash provided by investing activities. For the third quarter of 2011, cash flow was negative $76.2 million, which was derived from $83.3 million from net cash used in operating activities plus the change in mortgage notes receivable of $5.8 million plus $1.3 million of net cash provided by investing activities.
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 of Loss Before Income Taxes to Loss Before Income Taxes Excluding Land-Related Charges and Gain on Extinguishment of Debt is presented in a table attached to this earnings release.
FORWARD-LOOKING STATEMENTS
All statements in this press release that are not historical facts should be considered as “forward-looking statements”. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such risks, uncertainties and other factors include, but are not limited to, (1) changes in general and local economic and industry and business conditions and impacts of the sustained homebuilding downturn, (2) adverse weather and other environmental conditions and natural disasters, (3) changes in market conditions and seasonality of the Company’s business, (4) changes in home prices and sales activity in the markets where the Company builds homes, (5) government regulation, including regulations concerning development of land, the home building, sales and customer financing processes, tax laws, and the environment, (6) fluctuations in interest rates and the availability of mortgage financing, (7) shortages in, and price fluctuations of, raw materials and labor, (8) the availability and cost of suitable land and improved lots, (9) levels of competition, (10) availability of financing to the Company, (11) utility shortages and outages or rate fluctuations, (12) levels of indebtedness and restrictions on the Company’s operations and activities imposed by the agreements governing the Company’s outstanding indebtedness, (13) the Company's sources of liquidity, (14) changes in credit ratings, (15) availability of net operating loss carryforwards, (16) operations through joint ventures with third parties, (17) product liability litigation, 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/A for the year ended October 31, 2010 and the Company’s quarterly reports on Form 10-Q or Form 10-Q/A for the quarters ended January 31, 2011, April 30, 2011 and July 31, 2011. 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. | | | | | | | | | | | | |
| October 31, 2011 | | | | | | | | | | | | |
| Statements of Consolidated Operations | | | | | | | | | | | | |
| (Dollars in Thousands, Except Per Share Data) | | | | | | | | | | | | |
| | | Three Months Ended | | | Twelve Months Ended | |
| | | October 31, | | | October 31, | |
| | | 2011 | | | 2010 | | | 2011 | | | 2010 | |
| | | (Unaudited) | | | (Unaudited) | |
| Total Revenues | | $ | 341,625 | | | $ | 353,012 | | | $ | 1,134,907 | | | $ | 1,371,842 | |
| Costs and Expenses (a) | | | 447,477 | | | | 487,313 | | | | 1,425,065 | | | | 1,693,127 | |
| Gain on Extinguishment of Debt | | | 10,563 | | | | - | | | | 7,528 | | | | 25,047 | |
| (Loss) Gain from Unconsolidated Joint Ventures | | | (2,479 | ) | | | 1,809 | | | | (8,958 | ) | | | 956 | |
| Loss Before Income Taxes | | | (97,768 | ) | | | (132,492 | ) | | | (291,588 | ) | | | (295,282 | ) |
| Income Tax Provision (Benefit) | | | 580 | | | | (379 | ) | | | (5,501 | ) | | | (297,870 | ) |
| Net (Loss) Income | | $ | (98,348 | ) | | $ | (132,113 | ) | | $ | (286,087 | ) | | $ | 2,588 | |
| | | | | | | | | | | | | | | | | |
| Per Share Data: | | | | | | | | | | | | | | | | |
| Basic: | | | | | | | | | | | | | | | | |
| (Loss) Income Per Common Share | | $ | (0.90 | ) | | $ | (1.68 | ) | | $ | (2.85 | ) | | $ | 0.03 | |
| Weighted Average Number of | | | | | | | | | | | | | | | | |
| Common Shares Outstanding (b) | | | 108,740 | | | | 78,779 | | | | 100,444 | | | | 78,691 | |
| Assuming Dilution: | | | | | | | | | | | | | | | | |
| (Loss) Income Per Common Share | | $ | (0.90 | ) | | $ | (1.68 | ) | | $ | (2.85 | ) | | $ | 0.03 | |
| Weighted Average Number of | | | | | | | | | | | | | | | | |
| Common Shares Outstanding (b) | | | 108,740 | | | | 78,779 | | | | 100,444 | | | | 79,683 | |
| | | | | | | | | | | | | | | | | |
| (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, 2011 | | | | | | | | | | | | | | | | |
| Reconciliation of Loss Before Income Taxes Excluding Land-Related | | | | | | | | | | | | | |
| Charges and Gain on Extinguishment of Debt to Loss Before Income Taxes | | | | | | | | | | | | | |
| (Dollars in Thousands) | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | | Twelve Months Ended | |
| | | October 31, | | | October 31, | |
| | | | 2011 | | | | 2010 | | | | 2011 | | | | 2010 | |
| | | (Unaudited) | | | (Unaudited) | |
| Loss Before Income Taxes | | $ | (97,768 | ) | | $ | (132,492 | ) | | $ | (291,588 | ) | | $ | (295,282 | ) |
| Inventory Impairment Loss and Land Option Write-Offs | | | 59,873 | | | | 80,588 | | | | 101,749 | | | | 135,699 | |
| Unconsolidated Joint Venture Investment and Land-Related Charges | | | 3,289 | | | | - | | | | 3,289 | | | | - | |
| Gain on Extinguishment of Debt | | | (10,563 | ) | | | - | | | | (7,528 | ) | | | (25,047 | ) |
| Loss Before Income Taxes Excluding | | | | | | | | | | | | | | | | |
| Land-Related Charges and Gain on Extinguishment of Debt (a) | | $ | (45,169 | ) | | $ | (51,904 | ) | | $ | (194,078 | ) | | $ | (184,630 | ) |
| | | | | | | | | | | | | | | | | |
| (a) 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. | |
| Hovnanian Enterprises, Inc. | | | | | | | | | | | | |
| October 31, 2011 | | | | | | | | | | | | |
| Gross Margin | | | | | | | | | | | | |
| (Dollars in Thousands) | | | | | | | | | | | | |
| | | Homebuilding Gross Margin | | | Homebuilding Gross Margin | |
| | | Three Months Ended | | | Twelve Months Ended | |
| | | October 31, | | | October 31, | |
| | | 2011 | | | 2010 | | | 2011 | | | 2010 | |
| | | (Unaudited) | | | (Unaudited) | |
| Sale of Homes | | $ | 313,136 | | | $ | 339,576 | | | $ | 1,072,474 | | | $ | 1,327,499 | |
| Cost of Sales, Excluding Interest (a) | | | 264,747 | | | | 282,096 | | | | 905,253 | | | | 1,103,872 | |
| Homebuilding Gross Margin, Excluding Interest | | | 48,389 | | | | 57,480 | | | | 167,221 | | | | 223,627 | |
| Homebuilding Cost of Sales Interest | | | 15,345 | | | | 19,805 | | | | 57,016 | | | | 79,095 | |
| Homebuilding Gross Margin, Including Interest | | $ | 33,044 | | | $ | 37,675 | | | $ | 110,205 | | | $ | 144,532 | |
| | | | | | | | | | | | | | | | | |
| Gross Margin Percentage, Excluding Interest | | | 15.5% | | | | 16.9% | | | | 15.6% | | | | 16.8% | |
| Gross Margin Percentage, Including Interest | | | 10.6% | | | | 11.1% | | | | 10.3% | | | | 10.9% | |
| | | Land Sales Gross Margin | | | Land Sales Gross Margin | |
| | | Three Months Ended | | | Twelve Months Ended | |
| | | October 31, | | | October 31, | |
| | | | 2011 | | | | 2010 | | | | 2011 | | | | 2010 | |
| | | (Unaudited) | | | (Unaudited) | |
| Land Sales | | $ | 18,529 | | | $ | 2,999 | | | $ | 26,745 | | | $ | 6,820 | |
| Cost of Sales, Excluding Interest (a) | | | 3,005 | | | | (843 | ) | | | 8,648 | | | | 177 | |
| Land Sales Gross Margin, Excluding Interest | | | 15,524 | | | | 3,842 | | | | 18,097 | | | | 6,643 | |
| Land Sales Interest | | | 15,527 | | | | 3,858 | | | | 17,660 | | | | 5,345 | |
| Land Sales Gross Margin, Including Interest | | $ | (3 | ) | | $ | (16 | ) | | $ | 437 | | | $ | 1,298 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| (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. | |
| Hovnanian Enterprises, Inc. | | | | | | | | | | |
| October 31, 2011 | | | | | | | | | | |
| Reconciliation of Adjusted EBITDA to Net (Loss) Income | | | | | | | | | | |
| (Dollars in Thousands) | | | | | | | | | | |
| | | | Three Months Ended July 31, | | | | Three Months Ended October 31, | | | | Twelve Months Ended October 31, | |
| | | | 2011 | | | | 2011 | | | | 2010 | | | | 2011 | | | | 2010 | |
| | | | (Unaudited) | | | | (Unaudited) | | | | (Unaudited) | |
| Net (Loss) Income | | $ | (50,930 | ) | | $ | (98,348 | ) | | $ | (132,113 | ) | | $ | (286,087 | ) | | $ | 2,588 | |
| Income Tax Provision (Benefit) | | | (4,645 | ) | | | 580 | | | | (379 | ) | | | (5,501 | ) | | | (297,870 | ) |
| Interest Expense | | | 39,429 | | | | 53,962 | | | | 49,948 | | | | 171,845 | | | | 182,359 | |
| EBIT (a) | | | (16,146 | ) | | | (43,806 | ) | | | (82,544 | ) | | | (119,743 | ) | | | (112,923 | ) |
| Depreciation | | | 2,602 | | | | 2,174 | | | | 3,487 | | | | 9,340 | | | | 12,576 | |
| Amortization of Debt Costs | | | 1,080 | | | | 1,041 | | | | 844 | | | | 3,978 | | | | 3,310 | |
| EBITDA (b) | | | (12,464 | ) | | | (40,591 | ) | | | (78,213 | ) | | | (106,425 | ) | | | (97,037 | ) |
| Inventory Impairment Loss and Land Option Write-offs | | | 11,426 | | | | 59,873 | | | | 80,588 | | | | 101,749 | | | | 135,699 | |
| Loss (Gain) on Extinguishment of Debt | | | 1,391 | | | | (10,563 | ) | | | - | | | | (7,528 | ) | | | (25,047 | ) |
| Adjusted EBITDA (c) | | $ | 353 | | | $ | 8,719 | | | $ | 2,375 | | | $ | (12,204 | ) | | $ | 13,615 | |
| | | | | | | | | | | | | | | | | | | | | |
| Interest Incurred | | $ | 40,051 | | | $ | 39,225 | | | $ | 37,858 | | | $ | 156,998 | | | $ | 154,307 | |
| | | | | | | | | | | | | | | | | | | | | |
| Adjusted EBITDA to Interest Incurred | | | 0.01 | | | | 0.22 | | | | 0.06 | | | | (0.08 | ) | | | 0.09 | |
| | | | | | | | | | | | | | | | | | | | | |
| (a) EBIT is a non-GAAP financial measure. The most directly comparable GAAP financial measure is net (loss) income. EBIT represents earnings before interest expense and income taxes. | | | |
| (b) EBITDA is a non-GAAP financial measure. The most directly comparable GAAP financial measure is net (loss) income. EBITDA represents earnings before interest expense, income taxes, depreciation and amortization. | |
| (c) Adjusted EBITDA is a non-GAAP financial measure. The most directly comparable GAAP financial measure is net (loss) income. Adjusted EBITDA represents earnings before interest expense, income taxes, depreciation, amortization, inventory impairment loss and land option write-offs, and loss (gain) on extinguishment of debt. | |
| Hovnanian Enterprises, Inc. | | | | | | | | | | | | |
| October 31, 2011 | | | | | | | | | | | | |
| Interest Incurred, Expensed and Capitalized | | | | | | | | | | | | |
| (Dollars in Thousands) | | | | | | | | | | | | |
| | | Three Months Ended | | | Twelve Months Ended | |
| | | October 31, | | | October 31, | |
| | | 2011 | | | 2010 | | | 2011 | | | 2010 | |
| | | (Unaudited) | | | (Unaudited) | |
| Interest Capitalized at Beginning of Period | | $ | 136,178 | | | $ | 148,378 | | | $ | 136,288 | | | $ | 164,340 | |
| Plus Interest Incurred | | | 39,225 | | | | 37,858 | | | | 156,998 | | | | 154,307 | |
| Less Interest Expensed | | | 53,962 | | | | 49,948 | | | | 171,845 | | | | 182,359 | |
| Interest Capitalized at End of Period (a) | | $ | 121,441 | | | $ | 136,288 | | | $ | 121,441 | | | $ | 136,288 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| (a) The Company incurred significant inventory impairments in recent years, which are determined based on total inventory including capitalized interest. However, the capitalized interest amounts are shown gross before allocating any portion of impairments to capitalized interest. | |
HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| (In thousands) | | October 31, 2011 | | | October 31, 2010 | |
| ASSETS | | (Unaudited) | | | | (1) | |
| Homebuilding: | | | | | | | |
| Cash and cash equivalents | | | $244,356 | | | | $359,124 | |
| Restricted cash | | | 73,539 | | | | 108,983 | |
| Inventories: | | | | | | | | |
| Sold and unsold homes and lots under development | | | 720,149 | | | | 591,729 | |
| Land and land options held for future development or sale | | | 245,529 | | | | 348,474 | |
| Consolidated inventory not owned: | | | | | | | | |
| Specific performance options | | | 2,434 | | | | 21,065 | |
| Variable interest entities | | | - | | | | 32,710 | |
| Other options | | | - | | | | 7,962 | |
| Total consolidated inventory not owned | | | 2,434 | | | | 61,737 | |
| Total inventories | | | 968,112 | | | | 1,001,940 | |
| Investments in and advances to unconsolidated joint ventures | | | 57,826 | | | | 38,000 | |
| Receivables, deposits, and notes | | | 52,277 | | | | 61,023 | |
| Property, plant, and equipment - net | | | 53,266 | | | | 62,767 | |
| Prepaid expenses and other assets | | | 67,698 | | | | 83,928 | |
| Total homebuilding | | | 1,517,074 | | | | 1,715,765 | |
| Financial services: | | | | | | | | |
| Cash and cash equivalents | | | 6,384 | | | | 8,056 | |
| Restricted cash | | | 4,079 | | | | 4,022 | |
| Mortgage loans held for sale | | | 72,172 | | | | 86,326 | |
| Other assets | | | 2,471 | | | | 3,391 | |
| Total financial services | | | 85,106 | | | | 101,795 | |
| Total assets | | | $1,602,180 | | | | $1,817,560 | |
(1) Derived from the audited balance sheet as of October 31, 2010.
HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| (In thousands, except share amounts) | | October 31, 2011 | | | October 31, 2010 | |
| LIABILITIES AND EQUITY | | (Unaudited) | | | | (1) | |
| Homebuilding: | | | | | | | |
| Nonrecourse land mortgages | | | $26,121 | | | | $4,313 | |
| Accounts payable and other liabilities | | | 303,633 | | | | 319,749 | |
| Customers’ deposits | | | 16,670 | | | | 9,520 | |
| Nonrecourse mortgages secured by operating properties | | | 19,748 | | | | 20,657 | |
| Liabilities from inventory not owned | | | 2,434 | | | | 53,249 | |
| Total homebuilding | | | 368,606 | | | | 407,488 | |
| Financial services: | | | | | | | | |
| Accounts payable and other liabilities | | | 14,517 | | | | 16,142 | |
| Mortgage warehouse line of credit | | | 49,729 | | | | 73,643 | |
| Total financial services | | | 64,246 | | | | 89,785 | |
| Notes payable: | | | | | | | | |
| Senior secured notes | | | 786,585 | | | | 784,592 | |
| Senior notes | | | 802,862 | | | | 711,585 | |
| Senior subordinated notes | | | - | | | | 120,170 | |
| TEU senior subordinated amortizing notes | | | 13,323 | | | | - | |
| Accrued interest | | | 21,331 | | | | 23,968 | |
| Total notes payable | | | 1,624,101 | | | | 1,640,315 | |
| Income taxes payable | | | 41,829 | | | | 17,910 | |
| Total liabilities | | | 2,098,782 | | | | 2,155,498 | |
| Equity: | | | | | | | | |
| Hovnanian Enterprises, Inc. stockholders' equity deficit: | | | | | | | | |
| Preferred stock, $.01 par value - authorized 100,000 shares; issued 5,600 shares with a liquidation preference of $140,000, at October 31, 2011 and 2010 | | | 135,299 | | | | 135,299 | |
| Common stock, Class A, $.01 par value - authorized 200,000,000 shares; issued 92,141,492 shares at October 31, 2011 and, 74,809,683 shares at October 31, 2010 (including 11,694,720 shares at October 31, 2011 and 2010 held in Treasury) | | | 921 | | | | 748 | |
| Common stock, Class B, $.01 par value (convertible to Class A at time of sale) - authorized 30,000,000 shares; issued 15,252,212 shares at October 31, 2011 and 15,256,543 shares at October 31, 2010 (including 691,748 shares at October 31, 2011 and 2010 held in Treasury) | | | 153 | | | | 153 | |
| Paid in capital - common stock | | | 591,696 | | | | 463,908 | |
| Accumulated deficit | | | (1,109,506 | ) | | | (823,419 | ) |
| Treasury stock - at cost | | | (115,257 | ) | | | (115,257 | ) |
| Total Hovnanian Enterprises, Inc. stockholders' equity deficit | | | (496,694 | ) | | | (338,568 | ) |
| Noncontrolling interest in consolidated joint ventures | | | 92 | | | | 630 | |
| Total equity deficit | | | (496,602 | ) | | | (337,938 | ) |
| Total liabilities and equity | | | $1,602,180 | | | | $1,817,560 | |
(1) Derived from the audited balance sheet as of October 31, 2010.
HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
| | | Three Months Ended | | | Year Ended | |
| (Dollars in thousands except per share data) | | October 31, 2011 | | | October 31, 2010 | | | October 31, 2011 | | | October 31, 2010 | |
| | | (Unaudited) | | | (Unaudited) | | | | (1) | |
| Revenues: | | | | | | | | | | | | | |
| Homebuilding: | | | | | | | | | | | | | |
| Sale of homes | | | $313,136 | | | | $339,576 | | | | $1,072,474 | | | | $1,327,499 | |
| Land sales and other revenues | | | 19,257 | | | | 4,881 | | | | 32,952 | | | | 12,370 | |
| Total homebuilding | | | 332,393 | | | | 344,457 | | | | 1,105,426 | | | | 1,339,869 | |
| Financial services | | | 9,232 | | | | 8,555 | | | | 29,481 | | | | 31,973 | |
| Total revenues | | | 341,625 | | | | 353,012 | | | | 1,134,907 | | | | 1,371,842 | |
| Expenses: | | | | | | | | | | | | | | | | |
| Homebuilding: | | | | | | | | | | | | | | | | |
| Cost of sales, excluding interest | | | 267,752 | | | | 281,253 | | | | 913,901 | | | | 1,104,049 | |
| Cost of sales interest | | | 30,872 | | | | 23,663 | | | | 74,676 | | | | 84,440 | |
| Inventory impairment loss and land option write-offs | | | 59,873 | | | | 80,588 | | | | 101,749 | | | | 135,699 | |
| Total cost of sales | | | 358,497 | | | | 385,504 | | | | 1,090,326 | | | | 1,324,188 | |
| Selling, general and administrative | | | 46,512 | | | | 50,716 | | | | 161,456 | | | | 178,331 | |
| Total homebuilding expenses | | | 405,009 | | | | 436,220 | | | | 1,251,782 | | | | 1,502,519 | |
| Financial services | | | 5,177 | | | | 5,880 | | | | 21,371 | | | | 23,074 | |
| Corporate general and administrative | | | 11,329 | | | | 14,668 | | | | 49,938 | | | | 59,900 | |
| Other interest | | | 23,090 | | | | 26,285 | | | | 97,169 | | | | 97,919 | |
| Other operations | | | 2,872 | | | | 4,260 | | | | 4,805 | | | | 9,715 | |
| Total expenses | | | 447,477 | | | | 487,313 | | | | 1,425,065 | | | | 1,693,127 | |
| Gain on extinguishment of debt | | | 10,563 | | | | - | | | | 7,528 | | | | 25,047 | |
| (Loss) income from unconsolidated joint ventures | | | (2,479 | ) | | | 1,809 | | | | (8,958 | ) | | | 956 | |
| Loss before income taxes | | | (97,768 | ) | | | (132,492 | ) | | | (291,588 | ) | | | (295,282 | ) |
| State and federal income tax provision (benefit): | | | | | | | | | | | | | | | | |
| State | | | 425 | | | | (376 | ) | | | (3,924 | ) | | | (6,536 | ) |
| Federal | | | 155 | | | | (3 | ) | | | (1,577 | ) | | | (291,334 | ) |
| Total income taxes | | | 580 | | | | (379 | ) | | | (5,501 | ) | | | (297,870 | ) |
| Net (loss) income | | | $(98,348 | ) | | | $(132,113 | ) | | | $(286,087 | ) | | | $2,588 | |
| Per share data: | | | | | | | | | | | | | | | | |
| Basic: | | | | | | | | | | | | | | | | |
| (Loss) income per common share | | | $(0.90 | ) | | | $(1.68 | ) | | | $(2.85 | ) | | | $0.03 | |
| Weighted average number of common shares outstanding | | | 108,740 | | | | 78,779 | | | | 100,444 | | | | 78,691 | |
| Assuming dilution: | | | | | | | | | | | | | | | | |
| (Loss) income per common share | | | $(0.90 | ) | | | $(1.68 | ) | | | $(2.85 | ) | | | $0.03 | |
| Weighted average number of common shares outstanding | | | 108,740 | | | | 78,779 | | | | 100,444 | | | | 79,683 | |
(1) Derived from the audited statements of operation for the year ended October 31, 2010.
| HOVNANIAN ENTERPRISES, INC. |
| (DOLLARS IN THOUSANDS EXCEPT AVG. PRICE) |
| (UNAUDITED) |
| | | | | | | Communities Under Development Three Months - 10/31/2011 | | | | |
| | | | Net Contracts(1) Three Months Ended | | | Deliveries Three Months Ended | | | Contract Backlog October 31, | |
| | | | 2011 | | | 2010 | | | % Change | | | 2011 | | | 2010 | | | % Change | | | 2011 | | | 2010 | | | % Change | |
| Northeast | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Home | | | 98 | | | | 116 | | | | (15.5)% | | | | 117 | | | | 180 | | | | (35.0)% | | | | 265 | | | | 236 | | | | 12.3% | |
| | Dollars | | | $40,014 | | | | $42,925 | | | | (6.8)% | | | | $57,014 | | | | $79,040 | | | | (27.9)% | | | | $108,645 | | | | $94,363 | | | | 15.1% | |
| | Avg. Price | | | $408,306 | | | | $370,043 | | | | 10.3% | | | | $487,299 | | | | $439,111 | | | | 11.0% | | | | $409,981 | | | | $399,843 | | | | 2.5% | |
| Mid-Atlantic | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Home | | | 146 | | | | 164 | | | | (11.0)% | | | | 129 | | | | 201 | | | | (35.8)% | | | | 325 | | | | 262 | | | | 24.0% | |
| | Dollars | | | $56,269 | | | | $64,597 | | | | (12.9)% | | | | $49,050 | | | | $73,654 | | | | (33.4)% | | | | $137,303 | | | | $106,589 | | | | 28.8% | |
| | Avg. Price | | | $385,404 | | | | $393,884 | | | | (2.2)% | | | | $380,233 | | | | $366,438 | | | | 3.8% | | | | $422,471 | | | | $406,828 | | | | 3.8% | |
| Midwest | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Home | | | 98 | | | | 84 | | | | 16.7% | | | | 103 | | | | 148 | | | | (30.4)% | | | | 226 | | | | 222 | | | | 1.8% | |
| | Dollars | | | $20,863 | | | | $12,111 | | | | 72.3% | | | | $21,249 | | | | $29,177 | | | | (27.2)% | | | | $44,870 | | | | $34,188 | | | | 31.2% | |
| | Avg. Price | | | $212,888 | | | | $144,179 | | | | 47.7% | | | | $206,301 | | | | $197,142 | | | | 4.6% | | | | $198,540 | | | | $154,000 | | | | 28.9% | |
| Southeast | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Home | | | 93 | | | | 83 | | | | 12.0% | | | | 123 | | | | 76 | | | | 61.8% | | | | 124 | | | | 82 | | | | 51.2% | |
| | Dollars | | | $20,775 | | | | $18,965 | | | | 9.5% | | | | $29,064 | | | | $17,472 | | | | 66.3% | | | | $30,080 | | | | $20,212 | | | | 48.8% | |
| | Avg. Price | | | $223,387 | | | | $228,494 | | | | (2.2)% | | | | $236,293 | | | | $229,895 | | | | 2.8% | | | | $242,581 | | | | $246,488 | | | | (1.6)% | |
| Southwest | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Home | | | 437 | | | | 498 | | | | (12.2)% | | | | 502 | | | | 451 | | | | 11.3% | | | | 331 | | | | 337 | | | | (1.8)% | |
| | Dollars | | | $101,549 | | | | $111,760 | | | | (9.1)% | | | | $126,204 | | | | $103,190 | | | | 22.3% | | | | $86,388 | | | | $88,123 | | | | (2.0)% | |
| | Avg. Price | | | $232,378 | | | | $224,418 | | | | 3.5% | | | | $251,402 | | | | $228,803 | | | | 9.9% | | | | $260,991 | | | | $261,493 | | | | (0.2)% | |
| West | | | | | | | | | | | | | | | | | | | | | | | �� | | | | | | | | | | | | | | |
| | Home | | | 144 | | | | 133 | | | | 8.3% | | | | 121 | | | | 148 | | | | (18.2)% | | | | 116 | | | | 110 | | | | 5.5% | |
| | Dollars | | | $38,953 | | | | $31,571 | | | | 23.4% | | | | $30,555 | | | | $37,043 | | | | (17.5)% | | | | $32,914 | | | | $27,304 | | | | 20.5% | |
| | Avg. Price | | | $270,507 | | | | $237,376 | | | | 14.0% | | | | $252,521 | | | | $250,291 | | | | 0.9% | | | | $283,741 | | | | $248,218 | | | | 14.3% | |
| Consolidated Total | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Home | | | 1,016 | | | | 1,078 | | | | (5.8)% | | | | 1,095 | | | | 1,204 | | | | (9.1)% | | | | 1,387 | | | | 1,249 | | | | 11.0% | |
| | Dollars | | | $278,423 | | | | $281,929 | | | | (1.2)% | | | | $313,136 | | | | $339,576 | | | | (7.8)% | | | | $440,200 | | | | $370,779 | | | | 18.7% | |
| | Avg. Price | | | $274,038 | | | | $261,530 | | | | 4.8% | | | | $285,969 | | | | $282,040 | | | | 1.4% | | | | $317,375 | | | | $296,861 | | | | 6.9% | |
| Unconsolidated Joint Ventures | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Home | | | 159 | | | | 61 | | | | 160.7% | | | | 150 | | | | 83 | | | | 80.7% | | | | 276 | | | | 145 | | | | 90.3% | |
| | Dollars | | | $72,435 | | | | $22,252 | | | | 225.5% | | | | $62,909 | | | | $35,534 | | | | 77.0% | | | | $112,154 | | | | $67,112 | | | | 67.1% | |
| | Avg. Price | | | $455,566 | | | | $364,787 | | | | 24.9% | | | | $419,393 | | | | $428,120 | | | | (2.0)% | | | | $406,355 | | | | $462,841 | | | | (12.2)% | |
| Total | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Home | | | 1,175 | | | | 1,139 | | | | 3.2% | | | | 1,245 | | | | 1,287 | | | | (3.3)% | | | | 1,663 | | | | 1,394 | | | | 19.3% | |
| | Dollars | | | $350,858 | | | | $304,181 | | | | 15.3% | | | | $376,045 | | | | $375,110 | | | | 0.2% | | | | $552,354 | | | | $437,891 | | | | 26.1% | |
| | Avg. Price | | | $298,603 | | | | $267,060 | | | | 11.8% | | | | $302,044 | | | | $291,461 | | | | 3.6% | | | | $332,143 | | | | $314,126 | | | | 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. | |
| HOVNANIAN ENTERPRISES, INC. |
| (DOLLARS IN THOUSANDS EXCEPT AVG. PRICE) |
| (UNAUDITED) |
| | | | | | | | | | | | | Communities Under Development Twelve Months - 10/31/2011 | | | | | | | | | | |
| | | | Net Contracts(1) Twelve Months Ended | | | Deliveries Twelve Months Ended | | | Contract Backlog October 31, | |
| | | | 2011 | | | 2010 | | | % Change | | | 2011 | | | 2010 | | | % Change | | | 2011 | | | 2010 | | | % Change | |
| Northeast | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Home | | | 449 | | | | 497 | | | | (9.7)% | | | | 399 | | | | 718 | | | | (44.4)% | | | | 265 | | | | 236 | | | | 12.3% | |
| | Dollars | | | $191,270 | | | | $193,826 | | | | (1.3)% | | | | $179,866 | | | | $296,449 | | | | (39.3)% | | | | $108,645 | | | | $94,363 | | | | 15.1% | |
| | Avg. Price | | | $425,991 | | | | $389,992 | | | | 9.2% | | | | $450,792 | | | | $412,882 | | | | 9.2% | | | | $409,981 | | | | $399,843 | | | | 2.5% | |
| Mid-Atlantic | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Home | | | 616 | | | | 629 | | | | (2.1)% | | | | 524 | | | | 753 | | | | (30.4)% | | | | 325 | | | | 262 | | | | 24.0% | |
| | Dollars | | | $238,143 | | | | $236,095 | | | | 0.9% | | | | $199,061 | | | | $280,132 | | | | (28.9)% | | | | $137,303 | | | | $106,589 | | | | 28.8% | |
| | Avg. Price | | | $386,596 | | | | $375,350 | | | | 3.0% | | | | $379,887 | | | | $372,021 | | | | 2.1% | | | | $422,471 | | | | $406,828 | | | | 3.8% | |
| Midwest | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Home | | | 364 | | | | 408 | | | | (10.8)% | | | | 360 | | | | 439 | | | | (18.0)% | | | | 226 | | | | 222 | | | | 1.8% | |
| | Dollars | | | $74,988 | | | | $72,347 | | | | 3.7% | | | | $70,465 | | | | $91,260 | | | | (22.8)% | | | | $44,870 | | | | $34,188 | | | | 31.2% | |
| | Avg. Price | | | $206,011 | | | | $177,321 | | | | 16.2% | | | | $195,736 | | | | $207,882 | | | | (5.8)% | | | | $198,540 | | | | $154,000 | | | | 28.9% | |
| Southeast | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Home | | | 381 | | | | 331 | | | | 15.1% | | | | 339 | | | | 384 | | | | (11.7)% | | | | 124 | | | | 82 | | | | 51.2% | |
| | Dollars | | | $88,061 | | | | $76,799 | | | | 14.7% | | | | $79,146 | | | | $92,712 | | | | (14.6)% | | | | $30,080 | | | | $20,212 | | | | 48.8% | |
| | Avg. Price | | | $231,131 | | | | $232,021 | | | | (0.4)% | | | | $233,469 | | | | $241,438 | | | | (3.3)% | | | | $242,581 | | | | $246,488 | | | | (1.6)% | |
| Southwest | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Home | | | 1,720 | | | | 1,753 | | | | (1.9)% | | | | 1,726 | | | | 1,767 | | | | (2.3)% | | | | 331 | | | | 337 | | | | (1.8)% | |
| | Dollars | | | $404,715 | | | | $393,943 | | | | 2.7% | | | | $418,631 | | | | $391,807 | | | | 6.8% | | | | $86,388 | | | | $88,123 | | | | (2.0)% | |
| | Avg. Price | | | $235,299 | | | | $224,725 | | | | 4.7% | | | | $242,544 | | | | $221,736 | | | | 9.4% | | | | $260,991 | | | | $261,493 | | | | (0.2)% | |
| West | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Home | | | 493 | | | | 588 | | | | (16.2)% | | | | 484 | | | | 668 | | | | (27.5)% | | | | 116 | | | | 110 | | | | 5.5% | |
| | Dollars | | | $132,608 | | | | $144,782 | | | | (8.4)% | | | | $125,305 | | | | $175,139 | | | | (28.5)% | | | | $32,914 | | | | $27,304 | | | | 20.5% | |
| | Avg. Price | | | $268,982 | | | | $246,228 | | | | 9.2% | | | | $258,895 | | | | $262,184 | | | | (1.3)% | | | | $283,741 | | | | $248,218 | | | | 14.3% | |
| Consolidated Total | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Home | | | 4,023 | | | | 4,206 | | | | (4.4)% | | | | 3,832 | | | | 4,729 | | | | (19.0)% | | | | 1,387 | | | | 1,249 | | | | 11.0% | |
| | Dollars | | | $1,129,785 | | | | $1,117,792 | | | | 1.1% | | | | $1,072,474 | | | | $1,327,499 | | | | (19.2)% | | | | $440,200 | | | | $370,780 | | | | 18.7% | |
| | Avg. Price | | | $280,831 | | | | $265,761 | | | | 5.7% | | | | $279,873 | | | | $280,715 | | | | (0.3)% | | | | $317,375 | | | | $296,861 | | | | 6.9% | |
| Unconsolidated Joint Ventures | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Home | | | 465 | | | | 266 | | | | 74.8% | | | | 384 | | | | 280 | | | | 37.1% | | | | 276 | | | | 145 | | | | 90.3% | |
| | Dollars | | | $201,817 | | | | $114,740 | | | | 75.9% | | | | $172,343 | | | | $124,149 | | | | 38.8% | | | | $112,154 | | | | $67,112 | | | | 67.1% | |
| | Avg. Price | | | $434,015 | | | | $431,353 | | | | 0.6% | | | | $448,810 | | | | $443,389 | | | | 1.2% | | | | $406,355 | | | | $462,841 | | | | (12.2)% | |
| Total | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Home | | | 4,488 | | | | 4,472 | | | | 0.4% | | | | 4,216 | | | | 5,009 | | | | (15.8)% | | | | 1,663 | | | | 1,394 | | | | 19.3% | |
| | Dollars | | | $1,331,602 | | | | $1,232,532 | | | | 8.0% | | | | $1,244,817 | | | | $1,451,648 | | | | (14.2)% | | | | $552,354 | | | | $437,892 | | | | 26.1% | |
| | Avg. Price | | | $296,703 | | | | $275,611 | | | | 7.7% | | | | $295,260 | | | | $289,808 | | | | 1.9% | | | | $332,143 | | | | $314,126 | | | | 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
