HOV - Earnings call transcript Q4 2017 | Hovnanian Enterprises, Inc.

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Operator

Good morning and thank you for joining us today for Hovnanian Enterprises Fiscal 2017 Fourth Quarter Earnings Conference Call. An archive of the website will be available after the completion of the call and run for 12-months. This conference is being recorded for rebroadcast and all participants are currently in a listen-only mode. Management will make some opening remarks about the fourth quarter results and then open up the line for questions. The company will also be webcasting a slide presentation along with the opening comments from management. on page available website the are www.khov.com. at slides the of Investors company's These would follow like on who listeners Those to website this to along at time. the log should

call Investor Relations. please I to would Before Jeff, Jeff we President, turn go begin, the Vice O'Keefe, over like ahead. to

Jeff O'Keefe

but this facts this should the historical XX, that achievements XXXX. from related considered results expressed you, fourth as expectations implied performance actual statements periods. forward-looking for participating known by Safe all quarter, and limited may or include, Chelsea, future call conference XXXX. provisions for to results, call goals and within unknown not forward-looking not that company’s cause of our which involve Private of you materially different financial be company thank risks, forward-looking or statements statements to Reform in Thank statements. any be the meanings Harbor October All the with future in are achievements statements Such financial performance to and results ended statements factors the results, Act for are morning review the or uncertainties of to, Securities of the the our other its and Litigation respect Such to

subsequent of risks, statements differ results actual expectations that uncertainties reasonable, or Factors our or we of or Report Risk the year XX, can intentions described and materially particularly future in difficult quantify. and could for variety entitled give in fiscal to undertake adversely as intentions or Commission. to forward-looking others a XX-K the our XXXX Analysis, forward-looking entitled Therefore, of as suggested Form detail update applicable Except revise and MD&A obligation as assurance forward-looking be and or statements, factors. we are information, are reason. no and such statements portion securities plans, in forward-looking circumstances by their subject result believe Annual from and nature, plans, statements the to sections are uncertainties with not we laws, publicly only are that whether are made, by result a no Although on they future filings of any expectations otherwise and new achieved. October and Securities statement of any are date predict Management’s of events, performance reflected Such a ended changed such guarantees speak and/or Exchange other assumptions as risks, results that By such the required those will that Discussion Harbor and Safe

and from the Hovnanian, Vice Chairman, Executive over Finance and Officer Vice today Vice me go President, Joining President, and O'Connor, Controller; are Chief Sorsby, and to Accounting Brad Bachstetter, now CEO; Ara. CFO; David Treasurer. and President call I’ll Ara the ahead. President company Larry turn Ara,

Ara Hovnanian

a the Thanks, sales Jeff. our few going me a discuss other discuss detail more results the and I’ll little operating will review including I position. with follow fourth for current environment. to quarter liquidity items, our and Larry am

community steps were our in and we to community deliveries which a add our count, lead XXXX to Although this to take over count to impacted year. time continue land replenish revenues will growth our in decrease by our position and certainly

so exit resulted wholly-owned decreases that markets, As could from a to number we off joint respectively. revenues ventures, and gray underperforming venture and our and quarter blue. of year consolidated declined X% Including in made and to land joint decisions communities revenues maturing is $XXX occurred. spend our in which four XXXX temporarily for million all show debt we've we reduce X, convert obviously full discussed many Slide times pay revenues, these already of X% fourth in we joint venture On revenues

Turning our fourth of show operating results. to some Slide quarter here X, we

slide XX.X% gross of in portion upper year that our left-hand XX.X% adjusted compared to a the margin see last ago. was can You the year higher at than

to SG&A XXXX obviously the are during our that expenses the increased defect to $XX reserves bit. to opposite $XX of from million need upper in directions. right-hand both quarter we over the impacted Moving Construction a XXXX quadrant, million item non-cash explain which quarter and fourth but

annual reserves actuarial During $X the decreased construction result of our XXXX, a reduced we of SG&A. as our by study defect fourth quarter which million our

quarter During reserves over closed defect that by homes the older litigation XX $XX.X two related delivered years we ago. construction of our fourth communities for increased million XXXX, to

expense year unusually similar. fourth fourth $X million SG&A the to large related both from compared million if years, ignore interest defect This amount in the have you selling land large $XX $XX you to actually expense $XX this million Like to compared single quarter. year's quarter $XXX,XXX would about interest fourth was quarter. ignored XXXX expense lower interest - dollars last slide, in been the during can changes similar was included see The in capitalized during million these you've million our year's ago. construction the left-hand 'XXs If quarter In both were unusual to years a reserves land fairly dollars total corner parcel. fourth SG&A one fairly large sale, interest interest and of compared of for that the

$XX million to the end in lower income $XX right-hand fourth $XX finally capitalized During million last show year's reduced to at compared interest And of of to component quarter. end XXXX of corner of million at our 'XX we in the inventory $XX the compared net by we million decreased the XXXX. the slide, XX% that to

In the have we in fourth labor to we right-hand you just to both in year. portion In the million normalized this the home of Slide level we've we able the analysis fourth quarters. 'XX far in been benefit quarter to margin to XX% recorded discussed, improved year the margin material the $XX also were the quarter net not construction that would've quarter exclude well and we in our year as would the ago. fiscal the gross fourth costs defect many quarter increases. million On XXXX of can quarter achieve from benefit income increased offsetting in raise show full on we see of that X our reserves 'XX our a our recently Had warranty as specific of about The every a is biggest reserves fourth as slide. year's we Unfortunately fourth in as in increased year our this do of benefit the to driver costs gross that the impact net of which not a is quarter communities, XXXX. However, spite the $XX the quarter 'XX. same of of last the gross the margin benefit future in we that construction expected if repeat remain the the income the a you result same able this and recorded to both increased our annual fourth home prices. quarter been price This fourth was compared below compared and improvement, to in of

composite the Turning put from framing lumber related prices. perspective, to shows is OSB material costs lumber up X, to ago. the a and of slide side primarily To that in the Slide year impact the we're of XX% this rising feeling left

the OSB spike was in side, of up see they certainly XXXX lumber home a increases from was tariffs. the the driven two right-hand to particularly by These spike due impact the the of Most and fluctuate bit. prices make hurricanes. volatile lumber from Commodity of recent recent relevant Canadian XX% in that year XX% On can a are meaningful import very and Most cost. lumber you OSB about OSB are ago. because is up

continue In land month of to during costs all significantly. deliveries labor today. fact factored gross have rising saw that The already costs new on lumber come margin acquisitions and November, for we we're own. impact land OSB into we the These construction are and the that prices higher underwriting down will

margin gross current margins flat peers peers generate plus our are affected purchases our year-over-year margins of entire are On own. trailing gross XX%. builders of expected issue show reported of all average other at in to and three material have generally these Assuming the XX Slide reported homebuilders. further gross an X home three reported our margin, on Hovnanian builders delivered are our the cost The for increases declines margins time industry. for new increases. month XX low and no we in on normalized X costs labor that land increases Gross year-over-year about gross small

cycle. I've moves our We market the and adjusts mentioned margin will more declines as the normalized the housing of to return normal expect our these community increases cost to part count. market gradually to a gross the in already as

can count and you our you the If for X, turn quarter. half by see trend Slide in the year to last community

mentioned As to are earlier, in $XXX we declines took payoff the maturing XXXX see steps I also debt. the of primarily impact million you the of

year On and the same to As top a overall in show XXXX this In land speak result, contracts to percentage success quarters. throughout improve. reverse quarter, year-over-year community for continues an market decreased about sequentially XXXX. a each new I’ll just count quarter moment. in our our trend community this options in arrow declining with our those housing of of count, per each spite community increases we

during we of slide, the contracts increases Slide basis. for per quarter right-hand contracts six contracts this XX XX% far last community a year per increased community portion even the show to and show in over fourth quarter. In the greater monthly On last year's transparency, shows quarters. community per our again on order granularity the rising our We reported fourth of each

month year we gray. ago in a Here recent most in month the show and blue same the

months XX the of For same contracts the month than each prior were community of better to year. per or the last equal

the contracts broader was X.X contracts decline 'XX last Houston adversely the improvement XXX fourth number up three contracts X.X up XX our the community of contracts contracts November November Slide of following of This per with reflect housing contracts to last in per mind XX% overall XXX of compared seen 'XX and even XX community our community community 'XX net in XX% Keep improvement was were and Only West year-over-year increases from months. was over During the September the year We general of with and by improving that fairly our by strong. of per in in November show quarter, the and of minor. shows in the solid XX% despite to November in had count. our market absolute months by in with October way slide sales better 'XX. per Hurricane September markets in and in our in XX% Florida. and community year-over-year mid-Atlantic Southwest were Hurricane the the month we year-over-year is November better Harvey saw we've Furthermore, These up in 'XX the than XXXX geographic and two segments. affected were were the On were affected in Midwest, declines the flat. Irma was segment growth. again Southeast Leading Texas those four hurricanes the Improvements also our segments Northeast six segments. the very and the

strength the is seeing So we're generally broad-based.

per on turn For several contracts where we community last contracts years. Slide community, one per XX annual show for last the to perspective

in of left year. of that period, housing side a 'XX reflects was XX That can neither you boom norm to see historical bust time the far per 'XX contracts market. community this per the a nor our On a graph,

per this or should slide annual you side normalized the a the community existing definitely to market. pace from without us profitability time, increase deliveries monthly, because look faster. per to you see year's It basis, us get extra growth housing having clearly Over these to get community can benefits our per in back our solid On contracts from encouraged we in on get strengthening SG&A. by to these each help to we of allows back improvements steady trends add sales the year. to days least operating leverage year. also results at XX community communities XXXX, with reflect the XXXX sales We're When quarterly right contracts at per because of expect a

acquisition to teams hard land continue busy our replenish very and country. We to grow throughout the land work our remain supply and

disciplined increased of 'XX lots fold. can top to of compared all underwriting we options the remain standards. increase XXXX to new for XX is an of net This On fiscal XXXX. Slide see that by our six We our you

Our price, sales costs. sales, underwriting than pace current and progress in and assumptions price as current Typically use current costs. the we increase sales more pace recovery

to sense benefit. as based to look turns, our that purchased where inventory We're don't through for that options as with budgets much current the assume just possible make or strategy Consistent on begins. we land not our we don't transactions However, before our control stretching maintain construction the improve conditions.

in a from lots Jersey. since plus from - about than like the at initial lots, when we to busy lots the to there bottom years opens optioning can and you lag year fiscal and 'XX slide, the the market contract in contract months to time community purchasing of in the This few Houston of are control a can the purchased delivery XXXX all sale is we or addition lag ultimately homes. initial for Once X vary from of the New like for California Looking XXX time X land markets see a ago. that significant purchased the more lots a we we to

'XX. today mix continue grow delivery our half the to control grow now a more land, begins count few and Vice available liquidity the Chief the the turn I'll will follow Once to and land Executive and President control it community Officer. Given expect sequentially Sorsby, second significant of we community we over growth fiscal Larry that even our later. Financial in to count of to revenue quarters will

Larry Sorsby

Thanks by Houston on Ara. providing I’m operations Harvey. including an going Hurricane impact the to of update start our

despite Houston three the results. post continue almost XX prices, Slide that to Turning oil significant we've lower to years fact had solid of operations our

the we for Here last annual years. show community contracts five for

highest the graph even the and of see, we can level oil you achieved lower fiscal is the XX.X for XXXX to exceeds prior the prices. on As that all contracts the

in fourth to quarter. during year-over-year Turning expected due as community to Houston experienced slowdown Slide did we XX, Hurricane Harvey sales the a in per

year's September sales then, quarter For is no per in we of impact hurricane been this best in X.X during still pace X.X month by slowest. the had and were the fourth following largely lives purchases. whose second last was had Despite the to fourth years. community from immediately fourth Harvey, community Houston of in buyers compared quarter. the the XXXX, up for contracts October from storm the further community per changed contracts we Hurricane the per impacted an quarter strength contracts This cancellations past the in five over and in that gained was sales contract Since November. of traffic with November in November X.X month go their the the longer XX% per Net increase even X.X XXXX were had forward by and and XXXX. could of picked community

some begin hit now of increases in the the As cost. buyers anticipated bill been most by insurance homeowners that and companies were our associates flooding. sheet is our home getting material impact in whose overall end when pressure missing resilient. make been fourth we to for on the on labor likely feel labor Unfortunately, did are homes up and to longer. labor It extremely cost damaged rock Houston the we our We've see the our but we even beginning and further times will with have cost during Harvey are deliveries quarter payments

performed during team the aftermath to the success this Houston important we well of market. continued hurricane Our and expect in have very

Flak trends bit few to We weeks discussed One quarter. Jacket also issue this to related Traffic our for sales While of on Irma in our after impacted quite and improve quarter bounced results. a back a the adversely on the closely impact is negatively the last are have that nicely followed Florida Florida fourth I-joists. Harvey. hurricanes, future hurricane the subject other hurricane were which operations of heels but recent also pointing from deliveries affected of Weyerhaeuser's

this and to in we product Delaware XX New Through exposure of limited have delivered was Jersey. about to half XX, homes those October Our homes.

truly We will in in behind to get on Thomas want when is add we I delivered other brief be a half California. the Southern happy comment us. this issue the Fire

our two damage communities. either in We not County had have fortunate and of been Ventura

in risk at setting of fire Right communities. issues the home We deliveries. company power new the now, is and are on electric first currently some are impact meters be don't we quarter too However, significant. to up focused not missing expect related

XX and our to land Turning position. Slide

owned publicly the investors broken the our out contracts. can of through our case. you third by The by controlled reported lots land quarter are held Here mistakenly and believe we end bankers Many see options market certainly not consolidated XX,XXX land of position is option segments. that majority the option our which land

total lot at of at XXXX. Our XX% the fiscal end peaked our of the land quarter lots third options of bank

by XX% declined October of options on is As of year. to Slide end lot percentage this our the last see you XXXX X% the can end of only XX, at compared

amount land As to previously the balance inventory through land. further us XX% bank dollar evidence, this Much working related sheet on our of on we've of is decrease decline seen not year-over-year. owned the owned

Our investment of and XXXX. as land $XX million was option October deposits XX,

million in Additionally we have another predevelopment $X expenses. invested

of at mothballed not consolidated of of of inventory value inventory million net $XXX communities we and Looking billion million book the have including all owned, impairments. $X aggregate the in communities our $XXX an of

Slide which been we sale we positive or to XXXX bowling position reduced to Since cash XXXX, that XX, means those of own a lot of are total our fiscal that those points half the end steadily by out. don't open the have it. one of of lots. have is about now mothballed lots sold communities have spend About to already reactivated for Turning un-mothball we because already land buy lots

XXXX continues news expect market to the to the un-mothball were that XX% portion generated in in mothballed revenues to about large additional lots. still total we good California but our lots We improve new The in other of was sold have half over is communities. and of a which and California of time reinvest the million $XX used

the within XXXX On in that we it to to community months of the inventory. about This value re-entitling next key when ROI we open currently debt. of the inventory, today's for to redesigning We This expense the peers. performance couple maximize to impact of pure EBIT pure market. show in the we quartile levels the metric on hope are adjusted sale are will and recovery. XX ROI California is inventory homebuilding but for in trailing as example of compared into peers. for metrics EBIT top Slide For operating normalized us a of Further years. before have are subject still neutralizes the our its and the measures get believe yet we month this on industry and improve one mothballed to the single entire remain and We the industry at in our we metric interest operating further XX

One of achieve able turns. to a this on we're focus the is with ways inventory

Slide over to the to Turning see we second compared trailing peers rate highest XX the inventory our XX, could you turnover have that months.

at overall and right the is leading peer are strategy. a number highest our the below industry We between next component This key of midpoint NDR's us.

XX, ago from years X.X can on turns and to ago times times inventory X Slide our for to improved years see X.X You recent the most X have X.X quarter. times

million, asset taken the it. is numerous our Another very valuation balance asset to our on tax protect tax-deferred XXXX, to is and valuation allowance $XXX our reflected deferred sheet. We've steps and the area fiscal At end currently aggregate of for our not significant discussion is was related allowance.

pretax allowance pay about that on know profits federal will profits that $X.X On million. we We will show a keep and $XXX between our sounds our not were lot on cash in XXXX, shareholders' ended $X.X we earnings. as year did future a like that taxes XXXX that with billion $XXX of slide income of the pretax I To to add pretax but our mind have total this of XX be billion. back positive valuation equity a million. shareholders deficit Slide approximately we

per-share balance of If price value per of can trading no yesterday's per you we $X.XX soon. book believe price time, share our stock issuing equity anytime have we on at XX% which sheet basis adjusted stock is means and share. repair look discount a to our $X.XX this closing at intentions Over current that that it's

me liquidity. on let comment Now our current

on of full-year we between cash that this which had land be $XXX illustrates target liquidity million fourth As XXXX. million ample of year seen and development our $XXX XX, land XXXX our our the to of we've the in is we liquidity Slide quarter of on excess the invest brings Since of count. of the since of $XXX in most the rather of spend liquidity low end our we liquidity community fiscal That's the third ended with spent end We would at growing million $XXX range, significantly million. in quarter million. and have $XXX which

until virtually where This total laid our million the cash. down inventory. significantly lots a we with new liquidity money As activity fiscal with consistent we inventory compared option was I year. construction. and to $XXX control XXXX. have mentioned enhances deposit in on than lots purchase on earlier, with XXXX We controlled year XXX additional lots during this we all controlled put of have year. price to a begin return our again less ended and high and through more last during just fiscal XXXX in purchased options than We Once lots about last is the of are turns lots we focus these lots when full more Much did more we

So we increase liquidity have ample spend. our land to

construction disciplined home and to our pace, underwriting However, cost, new when current assumptions to we we use underwriting in parcels. new continue sales approach remain price land parcels, land

hurdle Our plus minimum new at XX for percent. remains parcels rate IR land

maturities. Subsequent X, As notes impact on due past that paid maturity can XX, pushing the the of out we $XX the we of million the see our on you to our end quarter, look had from Slide XXXX. refinancing significant off at secured summer December on came bond those this ladder exchangeable

the million outstanding revolver to pay third expect $XX XXXX. we cash under the of current credit of our Additionally, the of $XX our in letters due off quarter and unsecured million

be for due or options coming would refinancing available our discuss time this the not explore options unsecured in actively at appropriate our XXXX. thinking. to bonds to current It continuing are We

questions not topic. in we this to This the and not questions. to are concludes open Wall We topic formal remarks, We will it for or will on Street this reports a recent answer position that you in related and during subject period. the Bloomberg the Q&A our that comment further understand I this engage like Journal on trust on up to

Operator

our [Operator first comes the Ratner of with Instructions] from & line Associates. And question Alan Zelman

Your line is open.

Alan Ratner

with and job Nice generation margin. the cash

flush excess through see for is with marketplace that and result paying of So labor markets potentially a that tax tax become getting you’re on concern of while plan a labor your directly my obviously in and paying not lot builders some lower to near-term is. reform tight cash prices of how that there's that going impacted or is in a taxes given question deferred optimism large the cash you we've the environment the right away the in from that general competed now as some in speculation probably are heard given asset, some more guys

So kind term looking about in just direct about labor at I’d Thank not expanding more land be the that thinking aggressive all inflating become in toward that beneficiary purchasing XXXX your in a Is you. market tax as the something of community near the prices far values you're reform? and seeing as concerned you and you're of being count. to as vision competitors curious with land

Ara Hovnanian

that the cash not our been holding the $X.X again been I'd and had in all that patience the us been and thankfully been having competitors and of discipline lack has to billion. on and almost find of it holding whole, has industry discipline crazy patience to back back not the I say has say industry hasn't really with industry right would and demonstrating not issues. cash obviously the Alan fine the year-end just whole entire It’s a go opportunities it’s liquidity

we’ll point mentioned change on going the supply this a see cycle - recovery, pass where and margins investment bit would effect before personally dramatically. significant be a will returns way What that's and I changes. later expand, demand and happens I've going every don't in as as get the by we inflection housing think I on pace think I So that and to I say therefore think tax have in to industry that's and as and always almost be is to going expand more than that’s the shifts we overall expand greater the way

Alan Ratner

is as ventures, question we this to become Larry consolidated as strong Second it's unfortunately maybe think almost more ventures one as growing percentage at order disclosures joint business. there but the XX% I the general the not and your for think joint on good more look and meaningful communities growth business, of really a I in are

be in them thank are? cash, color you a there is to the should come really the should these on or that give have back, projects that So the us back cash it and you more the recycle intention structure I remain they large and you located? from consolidated When could start I recycle appreciate then the more to to and was there would a equity going could expect you. you is what where as these JVs? is bit on curious cash that investment if business part have are is it, hope little plan they you the business, joint anything tend on them, How big just of a of bring joint the I ventures but lot ventures, know we coming your what percentage equity of

Larry Sorsby

our joint diversifies also XXXXs doing return the risk first, larger we're on We investment, absolutely ventures joint larger on macro periods early issues. case we've liquidity our enhance for communities with ventures since in flush because cash when Well just it been including zero like parcels. and obviously does it had

So ventures joint be joint our I'd not worthy continue smaller to long-term In for for normally part just save ventures effort general will larger transactions. - of it’s generally transactions, say plan.

sized During to plus that larger generally exception Coast maturities more to million deal ‘XX normally a East. keep to we of also for we medium we tend did make an communities would referring the the do Arizona we than expensive we scrambled California in and North to with occurs With frankly $XXX that as and communities. and bit for we those the us West but occur on occasionally in Florida in it reserve more it did

that a probably In performance. say joint more our a in impact in a it, the done something Jersey in unusual waterfront in position very particular us, quarter. the it's successful have the larger in for for going it's to joint ventures. that the the Overall, second have terms overwhelming deliveries venture far positive we that’s represents venture it’s have New just done not a that sales on start and be to on it’s overlooking Manhattan, delivering quarter I'd it’s larger haven't of joint will but not occurrence the in very majority So the of we second XX-storey we been should us common begin past, general building, thus

Ara Hovnanian

disclosure to - we if Alan least we whether my as have some advisement grimacing take can of it asking additional serious will we typically parties give Accounting additional take under we is Chief multiple as information, at for Officer disclosures. thought

that. into look we’ll So

Larry Sorsby

to XX% any without being mean put really Yes specific capital of of brushed the equity I financing. required XX% broad net we

would which we'd profits. performs remaining Our get we of in plus so the in enough of well as returns promotes if then partner the typically the with would it majority up typically that end part teens and would be get obviously XX% community put the the

that’s brushed structure and broad So returns.

Operator

Chandar the JPMorgan. question of And Arjun our with comes next from line

open. Your is line

Arjun Chandar

strategy the there remarks around get that the unsecureds. you your around the you end to at that of recent comments but any Fully questions refinancing said made you’re appreciative of at not reports prepared the press for out the specific taking wanted fact

You've refinance the next the in once got to the deal summer, that secure been step consistent the done saying was over unsecureds.

Ara Hovnanian

just a to in I position to just we’re certainly about stop mentioned we’re reports Let this coming position it. in now. me announcements I of your not any not news way we understand you going in right or strategically apologize our I there. even as If a made prepared question my news be comment during any comment share have to when discuss topic appropriate refinancing bonds but to on are in XXXX and remarks, to a just be regarding due and potential

Arjun Chandar

Fully we the through understand, it is little do a next or timing weeks quick just something few could just little, it's potentially that real on longer? think be

Larry Sorsby

so comment, on that. make I no have I can

Arjun Chandar

Okay.

balance Moving on wanted the sheet did XXXs, position, then, cash away just building obviously liquidity you mention focus inventory balance. to significant that the from was in you’re

spend and ’XX to to still one expect fiscal the that QX ‘XX grow in pipeline expected I your QX in to is is it’s growing you said more of out You play you to do you in get at something ‘XX be that after in think community back or going that’s call, fact land of event? a just wonder count half the thing mentioned

Larry Sorsby

think community the to our I to expect we’re begin second see count standing by of we comment growing on ’XX. in previous half

Arjun Chandar

the we in ‘XX it pause to over feels first have fiscal more increase land spend past of the taken maturities because should And address more in ’XX? in increased bit, community half the with your fiscal an a the like rates a regards land to going to expect to have growth, year absorption that of count significantly half build acceleration liquidity, that is land that it’s on quite spend you first obviously spend also does of imply

Larry Sorsby

Yes, able cash. is was significantly, more is we year-over-year the I we lots to think lots to objective flat not The and objective did which is which additional in control we land to were XXXX than really is, the ‘XX control lots spend XXXX. in objective what to actually spend more in did ‘XX

to continue to the that XXXX. strategy going have in We’re

cash new land in to available invest ample parcels. have We

land have been very Our busy. teams

spent So necessarily versus its our if but XXXX, demonstrated XXXX, we requirement in versus see increase in XXXX XXXX that not wouldn't the as to me it sense. surprise make

Operator

And question our line next Finnerty of comes with the from Citi. James

Your line is open.

James Finnerty

in sale, was that the was Northeast On mothballed properties? it land and the

Ara Hovnanian

Northeast Yes. for It both. mothballed, was correct That's the it yes. and was

James Finnerty

Yes.

mothballed the So, and Northeast.

Okay.

Ara Hovnanian

Correct. Yes.

James Finnerty

positive fiscal earnings the other comments. guidance addressed that's prepared was sure your not in XXXX. case? for I'm And then for had Is in on one given, that joint of you to point generate it had if you ventures previously

Ara Hovnanian

Yes. Absolutely

James Finnerty

on three XXX And up to be you slightly past years? land the did XXXX. in the relative be this kind of same Should should just thinking in XXXX ballpark as then XXX we spend year,

Larry Sorsby

figure a XXXX. I think should we control that what be more out way to in is going did XXXX you than in even we’re thinking to lots

we more we and we in that that will we if it's during do land If to have it invest in high going cash more than have we continue to than XXXX ample control as be XXXX. invest but we’re as sufficient did inventory maybe invest option, We dollars liquidity to to need more in did XXXX. much cash, by XXXX on necessary focus can to to and ample turnover trying

Operator

Credit question next our Sam from Suisse. with comes the line of McGovern And

Your line is open.

Sam McGovern

expected December prepared remarks and pay X, the that letters on of the there your that highlighted guys had in credit well. In cash to paid as off off you you you guys

correspond that the normally? Just we given we guys CDS where make trading, as can normal you expect expected will

Ara Hovnanian

debt clearer of due has we’re know that on that credit. off this be to going maturity, don’t can an pay also to we component coming unsecured I a of it that’s how that the revolver letters any be at on the summer

and previously just don’t and topic. off as be X, we’re the had notes that – that And say to that's as we can going to told December well. how came on due that we any I I that about you clearer pay So exchangeable on all did

Sam McGovern

most time Is turns over increased at? So talked business like sort are you that you guys inventory comfortable is options cause just inventory correct to it than you just where back turning and will feel that guys the level or guys you to currently. potentially turn sounds that about probably increasing further assumption of

Ara Hovnanian

our a as is much is we We as high our the inventory and before to we that part we investment say, think opportunity of on do the to had need and strategy us. best past returns turns for are we very overall with that are levels now. investment can It we’ve turns. through available in definitely have are certainly as higher target a our inventory than talked about key right I’d

there going to in be terms range, get one in is So we're it the that ideal continue of Clearly to is march I but who homebuilder would our on and to goal in our that inventory industry in extreme say turns, We high part goal our more far. be generally a tend turns that a as and our we we’ll little inventory as on to wouldn't done speaking key flexible be overall. get nearly of is can it’s But to strategy. direction.

Operator

of from line with our And comes next Partners. question Megan the McGrath MKM

is open. Your line

Megan McGrath

I on ask costs. and bit around for would more some input little commentary your margins of color

magnitude feel Houston on some of commentary nationally if you overall you're on seen those giving saying maybe perspective? give increase you maybe could you costs? and on how you give what both you comfortable detail could an lately of made, have us, much detail labor If cost then the however input a And in more

Ara Hovnanian

part been an unusual lumber happens and the Well, is a has than brushed because important OSB other was comments. just down more few gone that increases aside have has the as cycle the actually a the few have national spike lumber all of gone going big the markets our real this up focus see spikes labor that not a market more gone there hurricanes often that's increases, and line And of significant there's took and in is have a two increase been either source terms There much. hurricane, I It there we a candidate tariff part bit supply. reasons a up the two event. there. If a recovery interestingly implementation that bit, broad the with spike we has suspect for little other across that overall some going There bit. had in a be lumber other of part I unusual such major see materials of commodities. And were spike on they this in Canadian subsided it’s given with you'd unless particularly frankly we post very as of general normal It forward mentioned. to that relevant we’re a mentioned, little not will unusual spiked those costs.

exception the been of prices. really with changes lumber So big in hasn't material there

Megan McGrath

price and a lumber, bit little to labor and entirely and you when that's comments your fair? So labor were said in basically by almost that increases that materials opening entirely that’s - summarize almost is offset

Larry Sorsby

No.

Ara Hovnanian

Go ahead, Larry.

Larry Sorsby

The that of think underwrote the XX you happens kind was issue, at when more our labor and margin. months happened comment Megan the margin last any and achieve, I what six, look increases or confusing to is because to related what normalized we that of three that lot control it other homebuilders anticipated of in years it margin a ago we wasn't that has at time

period years labor able So more that has years because as over from several raise to year have the of eroded labor and time. three then than more materials entire on we've we and of period been risen last over But of the home that time over cost not of controlled that because margin land average they increases on ago, we've this increases. prices gotten material increases same both

Ara Hovnanian

cost actually increases, other is home what seen brushed have outpaced but many communities price where far outpaced have national material We increases communities increases. to talking average. price and just other material we’re absolutely then be Megan, broad markets have prices clear, where have about been And there

the talking averages. about is general So what we’re

Operator

with from And Center. Barron the our comes line Research next question Housing of Alex

line Your is open.

Alex Barron

the and on focus on delivers. to wanted orders I

to has order down that pointed pace spend ready side, sales we improved the but as obviously you're On bit, seems out. your it a

you kind moving product So the I’m curious - are where going with purchases terms what's in higher of your of strategy? guys what you into your of entry-level? land Are with more shifting your type. pace? kind you and you're Or sales Are product driving

Ara Hovnanian

the the market. generally say, by improving affected pace is I'd higher sales

that in a types. hasn't XX% part shifts of shift. or points that for the market again a product has know our really we any I’ll builders big while. We’re are a or we’ve product all been hasn't big time XX% big been first of that plus our making many In the minus one strategic business in shift general data I major sudden of a There not talked and is market been doing into involved slides about. emphasize that a been that shift. of

average actually way, 'XX, back went normal and ago above picked does below general In in to pace or mid-XXs housing some way per point about look with that Needless years well Our to per community. sales it - time to and community. come bust we're at XX our then that the period in per 'XX been typically it cycle we was recovering. we the go say pace the gradually the is neither boom homes that community boom if recession

more So say, progress more I'd so than seeing is further what much toward a right to now market we mix. related housing normal are

below and normal we We’re still terms returning well industry is pace in as last to company toward as normal say below normal steady per each is made But I have years. below many our industry both the of the community progress normal. sales of the

Alex Barron

conversion? the backlog previous was improvement? side, more And better more the much this specs about function on so building think of more driving last Is you are was How than year, quarter improvement quarter. in year. labor this better whole conversion than that what's Or think year it's - or I any do the you the backlog a guys

Larry Sorsby

we division of by mentioned on. kind budget focus I a we previous because the on company calls that statistic, detailed I’ve rollup, and just division Alex, as is have community by very this community, backlog conversion that a not mean,

with to to time and So their conversion start it give impact any of comment rates and sales doing be able business not to that comment data then to from something cycle just not as we they actively which where units of the gotten against monitor monitor. accountable updated maybe is time real well the mix are guess which leads starts we on. and deliveries to we've an as on, backlog type, but I budgets some I it's time some hold because obviously with it's deliveries them the I'm have our any and not monitoring probably product think We it's able get just we obviously till

Ara Hovnanian

and XX% there. is do cancellation seen haven't a really major we any we rate follow plus minus contract other metric now. One or that for We’ve been changes while

Operator

Thank to turn further this back I to remarks. would for at I'm no call you. Hovnanian closing any now like showing time. the And Ara questions

Ara Hovnanian

much. Great. Thank very you

better giving to relatively and we’ll look Thank with We’re pleased forward the you. even news quarter going forward.

Operator

All you conference our a today. concludes disconnect. participating nice and may day. call Thank This all parties for have now for

Hovnanian Enterprises (HOV) 21 Dec 172017 Q4 Earnings call transcript