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 2019 SECOND QUARTER RESULTS

 

11% Year-over-Year Expansion in Consolidated Community Count

Consolidated Contracts Grew 10% Year over Year, the First Improvement Since Early 2016

Consolidated Lots Controlled Increased 17% Year over Year

 

MATAWAN, NJ, June 6, 2019 – Hovnanian Enterprises, Inc. (NYSE: HOV), a leading national homebuilder, reported results for its fiscal second quarter and six-month period ended April 30, 2019.

 

“For the second quarter of fiscal 2019, we achieved an 11% year-over-year growth in consolidated community count and a 10% year-over-year increase in consolidated contracts,” stated Ara K. Hovnanian, Chairman of the Board, President and Chief Executive Officer. "Furthermore, for the month of May 2019, we had a 20% year-over-year increase in consolidated contracts."

 

“During the second quarter of fiscal 2019, driven entirely by increasing our lot option position, we also grew our consolidated land position by 17% year over year. Increasing our land position and community count should ultimately lead to rising revenues and substantially improved levels of profitability. We believe that controlling the majority of our consolidated lots through options – 60% at the end of the second quarter – gives us considerable flexibility, mitigates risk and is consistent with our strategy of achieving high inventory turns. We ended the quarter with our liquidity position above our stated goal and remain cautious and disciplined in our approach to underwriting new land purchases. We continue to invest in a housing market that appears to remain on solid economic and demographic footings. Assuming no adverse changes in current market conditions and excluding land related charges, gains or losses on extinguishment of debt and other non-recurring items, we expect the second half of the year to substantially outperform the first half, resulting in profitability for the full year,” concluded Mr. Hovnanian.

 

RESULTS FOR the THREE-Month AND SIX-MONTH PERIODS ENDED April 30, 2019:

 

 

Total revenues decreased to $440.7 million in the second quarter of fiscal 2019, compared with $502.5 million in the second quarter of fiscal 2018. For the six months ended April 30, 2019, total revenues decreased to $821.3 million compared with $919.7 million in the same period during the prior fiscal year.

 

Homebuilding revenues for unconsolidated joint ventures increased 29.7% to $125.7 million for the second quarter ended April 30, 2019, compared with $96.9 million in last year’s second quarter. During the first half of fiscal 2019, homebuilding revenues for unconsolidated joint ventures increased to $221.5 million compared with $155.5 million in the same period during the previous year.

 

Homebuilding gross margin percentage, after cost of sales interest expense and land charges, was 13.3% for the second quarter of fiscal 2019 compared with 13.8% during the prior year’s second quarter. For the six months ended April 30, 2019, homebuilding gross margin percentage, after cost of sales interest expense and land charges, was 14.0% compared with 14.3% last year.

 

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Homebuilding gross margin percentage, before cost of sales interest expense and land charges, was 16.9% for the second quarter of fiscal 2019 compared with 17.7% in the same quarter one year ago. During the first half of fiscal 2019, homebuilding gross margin percentage, before cost of sales interest expense and land charges, was 17.3% compared with 17.8% in the same period of the previous fiscal year.

 

For the second quarter of 2019, total SG&A decreased by $1.3 million, or 2.2%, year over year. Total SG&A was $60.3 million, or 13.7% of total revenues, in the second quarter of fiscal 2019 compared with $61.7 million, or 12.3% of total revenues, in the second quarter of fiscal 2018. For the six-month period ended April 30, 2019, total SG&A decreased by $3.3 million, or 2.7%, year over year. For the first six months of fiscal 2019, total SG&A was $120.7 million, or 14.7% of total revenues, compared with $124.1 million, or 13.5% of total revenues, in the same period of the prior fiscal year.

 

Total interest expense was $36.6 million in the second quarter of fiscal 2019 compared with $45.5 million in the second quarter of fiscal 2018. Total interest expense was $69.1 million for the first half of fiscal 2019 compared with $86.9 million for the same period in fiscal 2018.

 

Interest incurred (some of which was expensed and some of which was capitalized) was $41.4 million for the second quarter of fiscal 2019 compared with $40.0 million in the same quarter one year ago. For the six months ended April 30, 2019, interest incurred (some of which was expensed and some of which was capitalized) was $80.2 million compared with $81.2 million last year.

 

Income from unconsolidated joint ventures was $7.3 million for the quarter ended April 30, 2019 compared with $1.3 million in the second quarter of the previous year. For the first half of fiscal 2019, income from unconsolidated joint ventures was $16.8 million compared with a loss of $3.8 million in the same period a year ago.

 

Loss before income taxes for the quarter ended April 30, 2019 was $14.9 million compared with a loss of $9.6 million during the second quarter of fiscal 2018. For the first six months of fiscal 2019, the loss before income taxes was $32.0 million compared with a loss of $40.0 million during same period of fiscal 2018.

 

Loss before income taxes, excluding land-related charges, joint venture write-downs and loss on extinguishment of debt, was $13.5 million during the second quarter of fiscal 2019 compared with a loss before these items of $5.5 million in the second quarter of fiscal 2018. For the six months ended April 30, 2019, loss before income taxes, excluding land-related charges, joint venture write-downs and loss on extinguishment of debt, was $29.9 million compared with a loss before these items of $34.9 million during the same period in fiscal 2018.

 

Net loss was $15.3 million, or $2.56 per common share, in the second quarter of fiscal 2019 compared with a net loss of $9.8 million, or $1.65 per common share, during the same quarter a year ago. For the first six months of fiscal 2019, net loss was $32.7 million, or $5.49 per common share, compared with a net loss of $40.6 million, or $6.85 per common share, in the same period during fiscal 2018.

 

Consolidated contracts per community decreased 0.9% to 10.5 contracts per community for the second quarter of fiscal 2019 compared with 10.6 contracts per community in the second quarter of fiscal 2018. Contracts per community, including unconsolidated joint ventures, decreased 3.6% to 10.8 contracts per community for the quarter ended April 30, 2019 compared with 11.2 contracts per community, including unconsolidated joint ventures, in last year’s second quarter.

 

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The consolidated community count was 147 as of April 30, 2019. This was an 11.4% year-over-year increase from 132 communities at the end of the prior year’s second quarter and a 7.3% sequential increase compared with 137 communities at January 31, 2019. As of the end of the second quarter of fiscal 2019, community count, including unconsolidated joint ventures, was 165 communities. This was a 7.8% increase, both sequentially and year over year, compared with 153 communities at both January 31, 2019 and April 30, 2018.

 

The number of consolidated contracts increased 10.1% to 1,546 homes, during the second quarter of fiscal 2019, compared with 1,404 homes during the second quarter of fiscal 2018. The number of contracts, including unconsolidated joint ventures, for the second quarter ended April 30, 2019, increased 4.0% to 1,775 homes from 1,706 homes for the same quarter last year.

 

The number of consolidated contracts increased 2.0% to 2,480 homes, during the six-month period ended April 30, 2019, compared with 2,431 homes in the same period of the previous fiscal year. During the first six months of fiscal 2019, the number of contracts, including unconsolidated joint ventures, was 2,843 homes, a decrease of 3.8% from 2,956 homes during the same period in fiscal 2018.

 

For May 2019, consolidated contracts per community were 3.7 compared with 3.6 for the same month one year ago. During May 2019, the number of consolidated contracts increased 20.2% to 536 homes from 446 homes in May 2018.

 

The dollar value of consolidated contract backlog, as of April 30, 2019, increased 5.5% to $949.9 million compared with $900.7 million as of April 30, 2018. The dollar value of contract backlog, including unconsolidated joint ventures, as of April 30, 2019, was $1.18 billion, a decrease of 11.9% compared with $1.34 billion as of April 30, 2018.

 

Consolidated deliveries were 1,085 homes for the second quarter of fiscal 2019, a 10.7% decrease compared with 1,215 homes during the same quarter a year ago. For the quarter ended April 30, 2019, deliveries, including unconsolidated joint ventures, decreased 10.0% to 1,280 homes compared with 1,423 homes during the second quarter of fiscal 2018.

 

Consolidated deliveries were 2,052 homes in the first half of fiscal 2019, an 8.4% decrease compared with 2,240 homes in the same period in fiscal 2018. For the six months ended April 30, 2019, deliveries, including unconsolidated joint ventures, decreased 6.4% to 2,399 homes compared with 2,564 homes in the same period of the prior fiscal year.

 

The contract cancellation rate for both consolidated contracts and contracts including unconsolidated joint ventures were 19% for the three months ended April 30, 2019 compared with 17% for the same quarter in fiscal 2018.

 

Liquidity AND Inventory as of APRIL 30, 2019:

 

 

Total liquidity at the end of the of the second quarter of fiscal 2019 was $266.0 million, which is above the upper end of our target range.

 

In the second quarter of fiscal 2019, approximately 2,500 lots were put under option or acquired in 32 communities, including unconsolidated joint ventures.

 

As of April 30, 2019, consolidated lots controlled increased by 17.1% to 31,087 year over year from 26,537 lots at April 30, 2018. The consolidated lots under option at the end of the second quarter of fiscal 2019 were 18,602 lots compared with 13,949 optioned lots at the end of last year’s second quarter. As of April 30, 2019, the Company owned 12,485 lots compared with 12,588 owned lots at the end of the second quarter of fiscal 2018.

 

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Webcast Information:

 

 

Hovnanian Enterprises will webcast its fiscal 2019 second quarter financial results conference call at 11:00 a.m. E.T. on Thursday, June 6, 2019. The webcast can be accessed live through the “Investor Relations” section of Hovnanian Enterprises’ website at http://www.khov.com. For those who are not available to listen to the live webcast, an archive of the broadcast will be available under the “Past Events” section of the Investor Relations page on the Hovnanian website at http://www.khov.com. The archive will be available for 12 months.

 

About Hovnanian Enterprises, Inc.:

 

 

Hovnanian Enterprises, Inc., founded in 1959 by Kevork S. Hovnanian, is headquartered in Matawan, New Jersey and, through its subsidiaries, is one of the nation’s largest homebuilders with operations in Arizona, California, Delaware, Florida, Georgia, Illinois, Maryland, New Jersey, Ohio, Pennsylvania, South Carolina, Texas, Virginia, Washington, D.C. and West Virginia. The Company’s homes are marketed and sold under the trade names K. Hovnanian® Homes and Brighton Homes®. Additionally, the Company’s subsidiaries, as developers of K. Hovnanian’s® Four Seasons communities, make the Company one of the nation’s largest builders of active lifestyle communities.

 

Additional information on Hovnanian Enterprises, Inc. can be accessed through the “Investor Relations” section of the Hovnanian Enterprises’ website at http://www.khov.com. To be added to Hovnanian's investor e-mail list, please send an e-mail to IR@khov.com or sign up at http://www.khov.com.

 

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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 and loss on extinguishment of debt (“Adjusted EBITDA”) are not U.S. generally accepted accounting principles (GAAP) financial measures. The most directly comparable GAAP financial measure is net (loss). The reconciliation for historical periods of EBIT, EBITDA and Adjusted EBITDA to net (loss) is presented in a table attached to this earnings release.

 

Homebuilding gross margin, before cost of sales interest expense and land charges, and homebuilding gross margin percentage, before cost of sales interest expense and land charges, are non-GAAP financial measures. The most directly comparable GAAP financial measures are homebuilding gross margin and homebuilding gross margin percentage, respectively. The reconciliation for historical periods of homebuilding gross margin, before cost of sales interest expense and land charges, and homebuilding gross margin percentage, before cost of sales interest expense and land charges, to homebuilding gross margin and homebuilding gross margin percentage, respectively, is presented in a table attached to this earnings release.

 

(Loss) before income taxes excluding land-related charges, joint venture write-downs and loss on extinguishment of debt is a non-GAAP financial measure. The most directly comparable GAAP financial measure is (loss) before income taxes. The reconciliation for historical periods of (loss) before income taxes excluding land-related charges, joint venture write-downs and loss on extinguishment of debt to (loss) before income taxes is presented in a table attached to this earnings release.

 

Total liquidity is comprised of $124.0 million of cash and cash equivalents, $17.0 million of restricted cash required to collateralize letters of credit and $125.0 million of availability under the senior secured revolving credit facility as of April 30, 2019.

 

 

FORWARD-LOOKING STATEMENTS

 

All statements in this press release that are not historical facts should be considered as “Forward-Looking Statements” within the meaning of the “Safe Harbor” provisions of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such forward-looking statements include but are not limited to statements related to the Company’s goals and expectations with respect to its financial results for future financial periods. Although we believe that our plans, intentions and expectations reflected in, or suggested by, such forward-looking statements are reasonable, we can give no assurance that such plans, intentions or expectations will be achieved. By their nature, forward-looking statements: (i) speak only as of the date they are made, (ii) are not guarantees of future performance or results and (iii) are subject to risks, uncertainties and assumptions that are difficult to predict or quantify. Therefore, actual results could differ materially and adversely from those forward-looking statements as a result of a variety of factors. Such risks, uncertainties and other factors include, but are not limited to, (1) changes in general and local economic, industry and business conditions and impacts of a significant homebuilding downturn; (2) adverse weather and other environmental conditions and natural disasters; (3) high leverage and restrictions on the Company’s operations and activities imposed by the agreements governing the Company’s outstanding indebtedness; (4) availability and terms of financing to the Company; (5) the Company’s sources of liquidity; (6) changes in credit ratings; (7) the seasonality of the Company’s business; (8) the availability and cost of suitable land and improved lots and sufficient liquidity to invest in such land and lots; (9) shortages in, and price fluctuations of, raw materials and labor; (10) reliance on, and the performance of, subcontractors; (11) regional and local economic factors, including dependency on certain sectors of the economy, and employment levels affecting home prices and sales activity in the markets where the Company builds homes; (12) fluctuations in interest rates and the availability of mortgage financing; (13) increases in cancellations of agreements of sale; (14) changes in tax laws affecting the after-tax costs of owning a home; (15) operations through unconsolidated joint ventures with third parties; (16) government regulation, including regulations concerning development of land, the home building, sales and customer financing processes, tax laws and the environment; (17) legal claims brought against us and not resolved in our favor, such as product liability litigation, warranty claims and claims made by mortgage investors; (18) levels of competition; (19) successful identification and integration of acquisitions; (20) significant influence of the Company’s controlling stockholders; (21) availability of net operating loss carryforwards; (22) utility shortages and outages or rate fluctuations; (23) changes in trade policies, including the imposition of tariffs and duties on homebuilding materials and products, and related trade disputes with and retaliatory measures taken by other countries; (24) geopolitical risks, terrorist acts and other acts of war; (25) loss of key management personnel or failure to attract qualified personnel; (26) information technology failures and data security breaches; (27) negative publicity; and (28) certain risks, uncertainties and other factors described in detail in the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2018 and subsequent filings with the Securities and Exchange Commission. Except as otherwise required by applicable securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason.

 

(Financial Tables Follow)

 

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Hovnanian Enterprises, Inc.

April 30, 2019

Statements of consolidated operations

(In thousands, except per share data)

   

Three Months Ended

   

Six Months Ended

 
   

April 30,

   

April 30,

 
   

2019

   

2018

   

2019

   

2018

 
   

(Unaudited)

  (Unaudited)  

Total revenues

  $440,691     $502,544     $821,285     $919,710  

Costs and expenses (1)

  462,855     512,025     870,117     954,486  

Loss on extinguishment of debt

  -     (1,440 )   -     (1,440 )

Income (loss) from unconsolidated joint ventures

  7,252     1,343     16,814     (3,833 )

(Loss) before income taxes

  (14,912 )   (9,578 )   (32,018 )   (40,049 )

Income tax provision

  345     245     691     583  

Net (loss)

  $(15,257 )   $(9,823 )   $(32,709 )   $(40,632 )
                         

Per share data:

                       

Basic and assuming dilution:

                       

Net (loss) per common share

  $(2.56 )   $(1.65 )   $(5.49 )   $(6.85 )

Weighted average number of common shares outstanding (2)

  5,962     5,937     5,960     5,929  

 

(1) Includes inventory impairment loss and land option write-offs.

(2) For periods with a net (loss), basic shares are used in accordance with GAAP rules.

 

 

Hovnanian Enterprises, Inc.

April 30, 2019

Reconciliation of (loss) before income taxes excluding land-related charges, joint venture write-downs and loss on extinguishment of debt to (loss) before income taxes

 

(In thousands)

                       
   

Three Months Ended

   

Six Months Ended

 
   

April 30,

   

April 30,

 
   

2019

   

2018

   

2019

   

2018

 
   

(Unaudited)

   

(Unaudited)

 

(Loss) before income taxes

  $(14,912 )   $(9,578 )   $(32,018 )   $(40,049 )

Inventory impairment loss and land option write-offs

  1,462     2,673     2,166     3,087  

Unconsolidated joint venture write-downs

  -     -     -     660  

Loss on extinguishment of debt

  -     1,440     -     1,440  

(Loss) before income taxes excluding land-related charges, joint venture write-downs and loss on extinguishment of debt (1)

  $(13,450 )   $(5,465 )   $(29,852 )   $(34,862 )

 

(1) (Loss) before income taxes excluding land-related charges, joint venture write-downs and loss on extinguishment of debt is a non-GAAP financial measure. The most directly comparable GAAP financial measure is (loss) before income taxes.

 

6

 

 

Hovnanian Enterprises, Inc.

April 30, 2019

Gross margin

(In thousands)

   

Homebuilding Gross

Margin

   

Homebuilding Gross

Margin

 
   

Three Months Ended

   

Six Months Ended

 
   

April 30,

   

April 30,

 
   

2019

   

2018

   

2019

   

2018

 
   

(Unaudited)

   

(Unaudited)

 

Sale of homes

  $427,552     $468,117     $789,687     $869,694  

Cost of sales, excluding interest expense and land charges (1)

  355,477     385,302     653,047     714,829  

Homebuilding gross margin, before cost of sales interest expense and land charges (2)

  72,075     82,815     136,640     154,865  

Cost of sales interest expense, excluding land sales interest expense

  13,898     15,309     24,140     27,601  

Homebuilding gross margin, after cost of sales interest expense, before land charges (2)

  58,177     67,506     112,500     127,264  

Land charges

  1,462     2,673     2,166     3,087  

Homebuilding gross margin

  $56,715     $64,833     $110,334     $124,177  
                         

Gross margin percentage

  13.3 %   13.8 %   14.0 %   14.3 %

Gross margin percentage, before cost of sales interest expense and land charges (2)

  16.9 %   17.7 %   17.3 %   17.8 %

Gross margin percentage, after cost of sales interest expense, before land charges (2)

  13.6 %   14.4 %   14.2 %   14.6 %

 

   

Land Sales Gross

Margin

   

Land Sales Gross

Margin

 
   

Three Months Ended

   

Six Months Ended

 
   

April 30,

   

April 30,

 
   

2019

   

2018

   

2019

   

2018

 
   

(Unaudited)

   

(Unaudited)

 

Land and lot sales

  $-     $20,505     $7,508     $20,505  

Cost of sales, excluding interest and land charges (1)

  -     7,710     7,357     7,710  

Land and lot sales gross margin, excluding interest and land charges

  -     12,795     151     12,795  

Land and lot sales interest

  -     4,055     -     4,055  

Land and lot sales gross margin, including interest and excluding land charges

  $-     $8,740     $151     $8,740  

 

(1) Does not include cost associated with walking away from land options or inventory impairment losses which are recorded as Inventory impairment loss and land option write-offs in the Condensed Consolidated Statements of Operations.

(2) Homebuilding gross margin, before cost of sales interest expense and land charges, and homebuilding gross margin percentage, before cost of sales interest expense and land charges, are non-GAAP financial measures. The most directly comparable GAAP financial measures are homebuilding gross margin and homebuilding gross margin percentage, respectively.

 

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Hovnanian Enterprises, Inc.

April 30, 2019

Reconciliation of adjusted EBITDA to net (loss)

(In thousands)

   

Three Months Ended

   

Six Months Ended

 
   

April 30,

   

April 30,

 
   

2019

   

2018

   

2019

   

2018

 
   

(Unaudited)

   

(Unaudited)

 

Net (loss)

  $(15,257 )   $(9,823 )   $(32,709 )   $(40,632 )

Income tax provision

  345     245     691     583  

Interest expense

  36,561     45,452     69,076     86,875  

EBIT (1)

  21,649     35,874     37,058     46,826  

Depreciation and amortization

  959     719     1,938     1,509  

EBITDA (2)

  22,608     36,593     38,996     48,335  

Inventory impairment loss and land option write-offs

  1,462     2,673     2,166     3,087  

Loss on extinguishment of debt

  -     1,440     -     1,440  

Adjusted EBITDA (3)

  $24,070     $40,706     $41,162     $52,862  
                         

Interest incurred

  $41,383     $40,014     $80,236     $81,179  
                         

Adjusted EBITDA to interest incurred

  0.58     1.02     0.51     0.65  

 

(1) EBIT is a non-GAAP financial measure. The most directly comparable GAAP financial measure is net (loss). EBIT represents earnings before interest expense and income taxes.

(2) EBITDA is a non-GAAP financial measure. The most directly comparable GAAP financial measure is net (loss). EBITDA represents earnings before interest expense, income taxes, depreciation and amortization.

(3) Adjusted EBITDA is a non-GAAP financial measure. The most directly comparable GAAP financial measure is net (loss). Adjusted EBITDA represents earnings before interest expense, income taxes, depreciation, amortization, inventory impairment loss and land option write-offs and loss on extinguishment of debt.

 

 

Hovnanian Enterprises, Inc.

April 30, 2019

Interest incurred, expensed and capitalized

(In thousands)

   

Three Months Ended

   

Six Months Ended

 
   

April 30,

   

April 30,

 
   

2019

   

2018

   

2019

   

2018

 
   

(Unaudited)

   

(Unaudited)

 

Interest capitalized at beginning of period

  $74,455     $70,793     $68,117     $71,051  

Plus interest incurred

  41,383     40,014     80,236     81,179  

Less interest expensed

  36,561     45,452     69,076     86,875  

Interest capitalized at end of period (1)

  $79,277     $65,355     $79,277     $65,355  

 

(1) Capitalized interest amounts are shown gross before allocating any portion of impairments to capitalized interest.

 

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HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands)

 

   

April 30,

2019

   

October 31,

2018

 
   

(Unaudited)

    (1)  

ASSETS

           

Homebuilding:

           

Cash and cash equivalents

  $123,998     $187,871  

Restricted cash and cash equivalents

  17,223     12,808  

Inventories:

           

Sold and unsold homes and lots under development

  993,477     878,876  

Land and land options held for future development or sale

  120,146     111,368  

Consolidated inventory not owned

  154,435     87,921  

Total inventories

  1,268,058     1,078,165  

Investments in and advances to unconsolidated joint ventures

  135,562     123,694  

Receivables, deposits and notes, net

  29,154     35,189  

Property, plant and equipment, net

  20,307     20,285  

Prepaid expenses and other assets

  41,058     39,150  

Total homebuilding

  1,635,360     1,497,162  
             

Financial services

  119,912     164,880  

Total assets

  $1,755,272     $1,662,042  
             

LIABILITIES AND EQUITY

           

Homebuilding:

           

Nonrecourse mortgages secured by inventory, net of debt issuance costs

  $190,655     $95,557  

Accounts payable and other liabilities

  285,293     304,899  

Customers’ deposits

  37,953     30,086  

Liabilities from inventory not owned, net of debt issuance costs

  123,348     63,387  

Revolving and term loan credit facilities, net of debt issuance costs

  201,459     201,389  

Notes payable (net of discount, premium and debt issuance costs) and accrued interest

  1,298,899     1,273,446  

Total homebuilding

  2,137,607     1,968,764  
             

Financial services

  100,054     143,448  

Income taxes payable

  2,090     3,334  

Total liabilities

  2,239,751     2,115,546  
             

Equity:

           

Hovnanian Enterprises, Inc. stockholders’ equity deficit:

           

Preferred stock, $0.01 par value - authorized 100,000 shares; issued and outstanding 5,600 shares with a liquidation preference of $140,000 at April 30, 2019 and at October 31, 2018

  135,299     135,299  

Common stock, Class A, $0.01 par value – authorized 16,000,0000 shares; issued 5,786,826 shares at April 30, 2019 and 5,783,858 shares at October 31, 2018

  58     58  

Common stock, Class B, $0.01 par value (convertible to Class A at time of sale) – authorized 2,400,000 shares; issued 650,457 shares at April 30, 2019 and 649,673 shares at October 31, 2018

  6     6  

Paid in capital – common stock

  711,517     710,349  

Accumulated deficit

  (1,216,565

)

  (1,183,856

)

Treasury stock – at cost – 470,430 shares of Class A common stock and 27,669 shares of Class B common stock at April 30, 2019 and October 31, 2018

  (115,360

)

  (115,360

)

Total Hovnanian Enterprises, Inc. stockholders’ equity deficit

  (485,045

)

  (453,504

)

Noncontrolling interest in consolidated joint ventures

  566     -  

Total equity deficit

  (484,479

)

  (453,504

)

Total liabilities and equity

  $1,755,272     $1,662,042  

 

 

(1)

Derived from the audited balance sheet as of October 31, 2018

 

9

 

 

HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In Thousands Except Per Share Data)

(Unaudited)

 

   

Three Months Ended April 30,

   

Six Months Ended April 30,

 
   

2019

   

2018

   

2019

   

2018

 

Revenues:

                       

Homebuilding:

                       

Sale of homes

  $427,552     $468,117     $789,687     $869,694  

Land sales and other revenues

  832     21,373     9,683     26,074  

Total homebuilding

  428,384     489,490     799,370     895,768  

Financial services

  12,307     13,054     21,915     23,942  

Total revenues

  440,691     502,544     821,285     919,710  
                         

Expenses:

                       

Homebuilding:

                       

Cost of sales, excluding interest

  355,477     393,012     660,404     722,539  

Cost of sales interest

  13,898     19,364     24,140     31,656  

Inventory impairment loss and land option write-offs

  1,462     2,673     2,166     3,087  

Total cost of sales

  370,837     415,049     686,710     757,282  

Selling, general and administrative

  44,179     45,544     86,915     88,775  

Total homebuilding expenses

  415,016     460,593     773,625     846,057  
                         

Financial services

  8,678     8,798     17,152     17,139  

Corporate general and administrative

  16,169     16,144     33,833     35,279  

Other interest

  22,663     26,088     44,936     55,219  

Other operations

  329     402     571     792  

Total expenses

  462,855     512,025     870,117     954,486  

Loss on extinguishment of debt

  -     (1,440

)

  -     (1,440

)

Income (loss) from unconsolidated joint ventures

  7,252     1,343     16,814     (3,833

)

Loss before income taxes

  (14,912

)

  (9,578

)

  (32,018

)

  (40,049

)

State and federal income tax provision:

                       

State

  345     245     691     583  

Federal

  -     -     -     -  

Total income taxes

  345     245     691     583  

Net (loss)

  $(15,257

)

  $(9,823

)

  $(32,709

)

  $(40,632

)

                         

Per share data:

                       

Basic and assuming dilution:

                       

Net (loss) per common share

  $(2.56

)

  $(1.65

)

  $(5.49

)

  $(6.85

)

Weighted-average number of common shares outstanding

  5,962     5,937     5,960     5,929  

 

10

 

 

HOVNANIAN ENTERPRISES, INC.

 

(DOLLARS IN THOUSANDS EXCEPT AVG. PRICE)

 

(SEGMENT DATA EXCLUDES UNCONSOLIDATED JOINT VENTURES)

 

(UNAUDITED)

 
                         

Three Months - April 30, 2019

                   
       

Contracts (1)

   

Deliveries

   

Contract

 
       

Three Months Ended

   

Three Months Ended

   

Backlog

 
       

April 30,

   

April 30,

   

April 30,

 
       

2019

   

2018

   

% Change

   

2019

   

2018

   

% Change

   

2019

   

2018

   

% Change

 

Northeast

                                                         

(NJ, PA)

 

Home

  104     26     300.0 %   23     47     (51.1 )%   162     83     95.2 %
   

Dollars

  $62,580     $15,278     309.6 %   $13,040     $23,513     (44.5 )%   $102,481     $48,715     110.4 %
   

Avg. Price

  $601,731     $587,615     2.4 %   $566,957     $500,277     13.3 %   $632,599     $586,928     7.8 %

Mid-Atlantic

                                                         

(DE, MD, VA, WV)

 

Home

  199     212     (6.1 )%   142     206     (31.1 )%   393     324     21.3 %
   

Dollars

  $118,245     $117,399     0.7 %   $80,818     $104,058     (22.3 )%   $246,307     $199,279     23.6 %
   

Avg. Price

  $594,196     $553,766     7.3 %   $569,141     $505,139     12.7 %   $626,735     $615,059     1.9 %

Midwest

                                                         

(IL, OH)

 

Home

  235     220     6.8 %   141     143     (1.4 )%   466     484     (3.7 )%
   

Dollars

  $68,744     $67,308     2.1 %   $42,870     $42,816     0.1 %   $125,181     $132,360     (5.4 )%
   

Avg. Price

  $292,528     $305,943     (4.4 )%   $304,035     $299,415     1.5 %   $268,629     $273,472     (1.8 )%

Southeast

                                                         

(FL, GA, SC)

 

Home

  155     154     0.6 %   123     158     (22.2 )%   270     276     (2.2 )%
   

Dollars

  $64,772     $62,741     3.2 %   $49,346     $60,974     (19.1 )%   $120,140     $115,930     3.6 %
   

Avg. Price

  $417,884     $407,404     2.6 %   $401,187     $385,908     4.0 %   $444,963     $420,037     5.9 %

Southwest

                                                         

(AZ, TX)

 

Home

  559     587     (4.8 )%   431     466     (7.5 )%   648     657     (1.4 )%
   

Dollars

  $192,630     $198,487     (3.0 )%   $143,634     $158,958     (9.6 )%   $227,325     $230,600     (1.4 )%
   

Avg. Price

  $344,597     $338,137     1.9 %   $333,258     $341,112     (2.3 )%   $350,810     $350,989     (0.1 )%

West

                                                         

(CA)

 

Home

  294     205     43.4 %   225     195     15.4 %   315     369     (14.6 )%
   

Dollars

  $120,616     $93,213     29.4 %   $97,844     $77,798     25.8 %   $128,422     $173,794     (26.1 )%
   

Avg. Price

  $410,259     $454,697     (9.8 )%   $434,862     $398,962     9.0 %   $407,689     $470,986     (13.4 )%

Consolidated

                                                         

Total

 

Home

  1,546     1,404     10.1 %   1,085     1,215     (10.7 )%   2,254     2,193     2.8 %
   

Dollars

  $627,587     $554,426     13.2 %   $427,552     $468,117     (8.7 )%   $949,856     $900,678     5.5 %
   

Avg. Price

  $405,942     $394,889     2.8 %   $394,057     $385,281     2.3 %   $421,409     $410,706     2.6 %

Unconsolidated

                                                         

Joint Ventures (2)

 

Home

  229     302     (24.2 )%   195     208     (6.3 )%   382     636     (39.9 )%
   

Dollars

  $131,282     $178,973     (26.6 )%   $124,776     $96,296     29.6 %   228,730     $436,715     (47.6 )%
   

Avg. Price

  $573,284     $592,630     (3.3 )%   $639,877     $462,964     38.2 %   $598,770     $686,659     (12.8 )%

Grand

                                                         

Total

 

Home

  1,775     1,706     4.0 %   1,280     1,423     (10.0 )%   2,636     2,829     (6.8 )%
   

Dollars

  $758,869     $733,399     3.5 %   $552,328     $564,413     (2.1 )%   $1,178,586     $1,337,393     (11.9 )%
   

Avg. Price

  $427,532     $429,894     (0.5 )%   $431,505     $396,636     8.8 %   $447,112     $472,744     (5.4 )%

 

DELIVERIES INCLUDE EXTRAS

Notes:

(1) Contracts are defined as new contracts signed during the period for the purchase of homes, less cancellations of prior contracts.

(2) Represents home deliveries, home revenues and average prices for our unconsolidated homebuilding joint ventures for the period. We provide this data as a supplement to our consolidated results as an indicator of the volume managed in our unconsolidated homebuilding joint ventures. Our proportionate share of the income or loss of unconsolidated homebuilding and land development joint ventures is reflected as a separate line item in our consolidated financial statements under “Income (loss) from unconsolidated joint ventures”.

 

11

 

 

HOVNANIAN ENTERPRISES, INC.

(DOLLARS IN THOUSANDS EXCEPT AVG. PRICE)

(SEGMENT DATA EXCLUDES UNCONSOLIDATED JOINT VENTURES)

(UNAUDITED)

 

                         

Six Months - April 30, 2019

                   
       

Contracts (1)

   

Deliveries

   

Contract

 
       

Six Months Ended

   

Six Months Ending

   

Backlog

 
       

April 30,

   

April 30,

   

April 30,

 
       

2019

   

2018

   

% Change

   

2019

   

2018

   

% Change

   

2019

   

2018

   

% Change

 

Northeast

                                                         

(NJ, PA)

 

Home

  156     72     116.7 %   45     87     (48.3 )%   162     83     95.2 %
   

Dollars

  $97,530     $40,641     140.0 %   $25,545     $43,705     (41.6 )%   $102,481     $48,715     110.4 %
   

Avg. Price

  $625,192     $564,459     10.8 %   $567,667     $502,354     13.0 %   $632,599     $586,928     7.8 %

Mid-Atlantic

                                                         

(DE, MD, VA, WV)

 

Home

  350     337     3.9 %   253     341     (25.8 )%   393     324     21.3 %
   

Dollars

  $199,759     $180,612     10.6 %   $133,997     $175,067     (23.5 )%   $246,307     $199,279     23.6 %
   

Avg. Price

  $570,740     $535,939     6.5 %   $529,632     $513,393     3.2 %   $626,735     $615,059     1.9 %

Midwest

                                                         

(IL, OH)

 

Home

  362     385     (6.0 )%   290     283     2.5 %   466     484     (3.7 )%
   

Dollars

  $105,790     $116,724     (9.4 )%   $87,759     $83,333     5.3 %   $125,181     $132,360     (5.4 )%
   

Avg. Price

  $292,238     $303,179     (3.6 )%   $302,617     $294,463     2.8 %   $268,629     $273,472     (1.8 )%

Southeast

                                                         

(FL, GA, SC)

 

Home

  250     281     (11.0 )%   231     290     (20.3 )%   270     276     (2.2 )%
   

Dollars

  $105,232     $113,196     (7.0 )%   $93,229     $117,648     (20.8 )%   $120,140     $115,930     3.6 %
   

Avg. Price

  $420,928     $402,831     4.5 %   $403,589     $405,682     (0.5 )%   $444,963     $420,037     5.9 %

Southwest

                                                         

(AZ, TX)

 

Home

  921     998     (7.7 )%   796     850     (6.4 )%   648     657     (1.4 )%
   

Dollars

  $307,968     $339,945     (9.4 )%   $261,497     $287,162     (8.9 )%   $227,325     $230,600     (1.4 )%
   

Avg. Price

  $334,384     $340,626     (1.8 )%   $328,514     $337,838     (2.8 )%   $350,810     $350,989     (0.1 )%

West

                                                         

(CA)

 

Home

  441     358     23.2 %   437     389     12.3 %   315     369     (14.6 )%
   

Dollars

  $177,634     $162,610     9.2 %   $187,660     $162,779     15.3 %   $128,422     $173,794     (26.1 )%
   

Avg. Price

  $402,798     $454,218     (11.3 )%   $429,428     $418,454     2.6 %   $407,689     $470,986     (13.4 )%

Consolidated

                                                         

Total

 

Home

  2,480     2,431     2.0 %   2,052     2,240     (8.4 )%   2,254     2,193     2.8 %
   

Dollars

  $993,913     $953,728     4.2 %   $789,687     $869,694     (9.2 )%   $949,856     $900,678     5.5 %
   

Avg. Price

  $400,771     $392,319     2.2 %   $384,838     $388,256     (0.9 )%   $421,409     $410,706     2.6 %

Unconsolidated

                                                         

Joint Ventures (2)

 

Home

  363     525     (30.9 )%   347     324     7.1 %   382     636     (39.9 )%
   

Dollars

  $216,851     $316,194     (31.4 )%   $219,803     $154,395     42.4 %   $228,730     $436,715     (47.6 )%
   

Avg. Price

  $597,386     $602,276     (0.8 )%   $633,438     $476,529     32.9 %   $598,770     $686,659     (12.8 )%

Grand

                                                         

Total

 

Home

  2,843     2,956     (3.8 )%   2,399     2,564     (6.4 )%   2,636     2,829     (6.8 )%
   

Dollars

  $1,210,764     $1,269,922     (4.7 )%   $1,009,490     $1,024,089     (1.4 )%   $1,178,586     $1,337,393     (11.9 )%
   

Avg. Price

  $425,875     $429,608     (0.9 )%   $420,796     $399,411     5.4 %   $447,112     $472,744     (5.4 )%

 

DELIVERIES INCLUDE EXTRAS

Notes:

(1) Contracts are defined as new contracts signed during the period for the purchase of homes, less cancellations of prior contracts.

(2) Represents home deliveries, home revenues and average prices for our unconsolidated homebuilding joint ventures for the period. We provide this data as a supplement to our consolidated results as an indicator of the volume managed in our unconsolidated homebuilding joint ventures. Our proportionate share of the income or loss of unconsolidated homebuilding and land development joint ventures is reflected as a separate line item in our consolidated financial statements under “Income (loss) from unconsolidated joint ventures”.

 

12

 

 

HOVNANIAN ENTERPRISES, INC.

(DOLLARS IN THOUSANDS EXCEPT AVG. PRICE)

(SEGMENT DATA UNCONSOLIDATED JOINT VENTURES ONLY)

(UNAUDITED)

 

                         

Three Months - April 30, 2019

                   
       

Contracts (1)

   

Deliveries

   

Contract

 
       

Three Months Ended

   

Three Months Ended

   

Backlog

 
       

April 30,

   

April 30,

   

April 30,

 
       

2019

   

2018

   

% Change

   

2019

   

2018

   

% Change

   

2019

   

2018

   

% Change

 

Northeast

                                                         

(unconsolidated joint ventures)

 

Home

  109     137     (20.4 )%   77     76     1.3 %   145     302     (52.0 )%

(NJ, PA)

 

Dollars

  $64,691     $82,865     (21.9 )%   $59,840     $29,891     100.2 %   $95,645     $239,418     (60.1 )%
   

Avg. Price

  $593,495     $604,854     (1.9 )%   $777,143     $393,298     97.6 %   $659,621     $792,774     (16.8 )%

Mid-Atlantic

                                                         

(unconsolidated joint ventures)

 

Home

  4     25     (84.0 )%   14     5     180.0 %   17     52     (67.3 )%

(DE, MD, VA, WV)

 

Dollars

  $3,606     $20,337     (82.3 )%   $10,831     $4,830     124.2 %   $14,086     $42,350     (66.7 )%
   

Avg. Price

  $901,250     $813,480     10.8 %   $773,643     $966,000     (19.9 )%   $828,588     $814,422     1.7 %

Midwest

                                                         

(unconsolidated joint ventures)

 

Home

  2     15     (86.7 )%   4     14     (71.4 )%   5     31     (83.9 )%

(IL, OH)

 

Dollars

  $1,354     $10,532     (87.1 )%   $2,735     $8,905     (69.3 )%   $2,862     $23,413     (87.8 )%
   

Avg. Price

  $677,000     $702,215     (3.6 )%   $683,750     $636,071     7.5 %   $572,400     $755,280     (24.2 )%

Southeast

                                                         

(unconsolidated joint ventures)

 

Home

  58     39     48.7 %   49     48     2.1 %   124     95     30.5 %

(FL, GA, SC)

 

Dollars

  $31,519     $19,635     60.5 %   $25,985     $21,217     22.5 %   $66,292     $45,834     44.6 %
   

Avg. Price

  $543,431     $503,456     7.9 %   $530,306     $442,020     20.0 %   $534,613     $482,465     10.8 %

Southwest

                                                         

(unconsolidated joint ventures)

 

Home

  36     44     (18.2 )%   32     29     10.3 %   68     106     (35.8 )%

(AZ, TX)

 

Dollars

  $22,859     $26,990     (15.3 )%   $18,622     $16,357     13.8 %   $41,535     $63,429     (34.5 )%
   

Avg. Price

  $635,000     $613,412     3.5 %   $581,938     $564,034     3.2 %   $610,809     $598,385     2.1 %

West

                                                         

(unconsolidated joint ventures)

 

Home

  20     42     (52.4 )%   19     36     (47.2 )%   23     50     (54.0 )%

(CA)

 

Dollars

  $7,253     $18,614     (61.0 )%   $6,763     $15,096     (55.2 )%   $8,310     $22,271     (62.7 )%
   

Avg. Price

  $362,650     $443,190     (18.2 )%   $355,947     $419,333     (15.1 )%   $361,304     $445,418     (18.9 )%

Unconsolidated Joint Ventures (2)

                                                         
   

Home

  229     302     (24.2 )%   195     208     (6.3 )%   382     636     (39.9 )%
   

Dollars

  $131,282     $178,973     (26.6 )%   $124,776     $96,296     29.6 %   $228,730     $436,715     (47.6 )%
   

Avg. Price

  $573,284     $592,630     (3.3 )%   $639,877     $462,964     38.2 %   $598,770     $686,659     (12.8 )%

 

DELIVERIES INCLUDE EXTRAS

Notes:

(1) Contracts are defined as new contracts signed during the period for the purchase of homes, less cancellations of prior contracts.

(2) Represents home deliveries, home revenues and average prices for our unconsolidated homebuilding joint ventures for the period. We provide this data as a supplement to our consolidated results as an indicator of the volume managed in our unconsolidated homebuilding joint ventures. Our proportionate share of the income or loss of unconsolidated homebuilding and land development joint ventures is reflected as a separate line item in our consolidated financial statements under “Income (loss) from unconsolidated joint ventures”.

 

13

 

 

HOVNANIAN ENTERPRISES, INC.

(DOLLARS IN THOUSANDS EXCEPT AVG. PRICE)

(SEGMENT DATA UNCONSOLIDATED JOINT VENTURES ONLY)

(UNAUDITED)

 

                         

Six Months - April 30, 2019

                   
       

Contracts (1)

   

Deliveries

   

Contract

 
       

Six Months Ended

   

Six Months Ended

   

Backlog

 
       

April 30,

   

April 30,

   

April 30,

 
       

2019

   

2018

   

% Change

   

2019

   

2018

   

% Change

   

2019

   

2018

   

% Change

 

Northeast

                                                         

(unconsolidated joint ventures)

 

Home

  159     191     (16.8 )%   133     106     25.5 %   145     302     (52.0 )%

(NJ, PA)

 

Dollars

  $103,544     $127,529     (18.8 )%   $102,265     $44,791     128.3 %   $95,645     $239,418     (60.1 )%
   

Avg. Price

  $651,220     $677,689     (3.9 )%   $768,910     $422,555     82.0 %   $659,621     $792,774     (16.8 )%

Mid-Atlantic

                                                         

(unconsolidated joint ventures)

 

Home

  17     50     (66.0 )%   24     9     166.7 %   17     52     (67.3 )%

(DE, MD, VA, WV)

 

Dollars

  $14,668     $40,038     (63.4 )%   $19,420     $8,798     120.7 %   $14,086     $42,350     (66.7 )%
   

Avg. Price

  $862,824     $800,760     7.8 %   $809,167     $977,555     (17.2 )%   $828,588     $814,422     1.7 %

Midwest

                                                         

(unconsolidated joint ventures)

 

Home

  7     24     (70.8 )%   11     20     (45.0 )%   5     31     (83.9