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Hovnanian Enterprises Reports Fiscal 2016 Results

Reports 28% Growth in Total Revenues for All of Fiscal 2016

Reports Pretax Income for Fourth Quarter and Full Year

RED BANK, N.J., Dec. 08, 2016 (GLOBE NEWSWIRE) -- Hovnanian Enterprises, Inc. (NYSE:HOV), a leading national homebuilder, reported results for its fiscal fourth quarter and year ended October 31, 2016.

RESULTS FOR THE THREE AND TWELVE MONTH PERIODS ENDED OCTOBER 31, 2016:

  • Total revenues were $805.1 million in the fourth quarter of fiscal 2016, an increase of 16.1% compared with $693.2 million in the fourth quarter of fiscal 2015. For the year ended October 31, 2016, total revenues increased 28.1% to $2.75 billion compared with $2.15 billion in the prior year.
  • Total SG&A was $53.7 million, or 6.7% of total revenues, during the fourth quarter of fiscal 2016 compared with $49.4 million, or 7.1% of total revenues, in last year’s fourth quarter. Total SG&A was $253.1 million, or 9.2% of total revenues, for all of fiscal 2016 compared with $250.9 million, or 11.7% of total revenues, in the prior fiscal year.
  • Total interest expense as a percentage of total revenues was 6.0% during the fourth quarter of fiscal 2016 compared with 5.9% for the fourth quarter of fiscal 2015. For the twelve months ended October 31, 2016, total interest expense as a percentage of total revenues declined 30 basis points to 6.7% compared with 7.0% during the same period a year ago.
  • Homebuilding gross margin percentage, before interest expense and land charges included in cost of sales, was 17.6% for the fourth quarter ended October 31, 2016 compared with 18.0% for the fourth quarter of fiscal 2015. During all of fiscal 2016, homebuilding gross margin percentage, before interest expense and land charges included in cost of sales, was 16.9% compared with 17.6% in the same period of the previous year.
  • Income before income taxes in the fourth quarter of fiscal 2016 was $32.1 million compared with $37.4 million in the prior year’s fourth quarter. For all twelve months of fiscal 2016, income before income taxes was $2.4 million compared with a loss before income taxes of $21.8 million during all of fiscal 2015.
  • Income before income taxes, excluding land-related charges and loss on extinguishment of debt, in the fourth quarter of fiscal 2016 was $45.8 million compared with $41.8 million in the prior year’s fourth quarter. For fiscal 2016, income before income taxes, excluding land-related charges and loss on extinguishment of debt, was $39.0 million compared with a loss before income taxes, excluding land-related charges, of $9.7 million during fiscal 2015.
  • Net income was $22.3 million, or $0.14 per common share, for the fourth quarter of fiscal 2016, compared with $25.5 million, or $0.17 per common share, in the fourth quarter of the previous year. For the fiscal year ended October 31, 2016, the net loss was $2.8 million, or $0.02 per common share, compared with a net loss of $16.1 million, or $0.11 per common share, in all of fiscal 2015.
  • For the fourth quarter of fiscal 2016, Adjusted EBITDA increased 13.6% to $96.4 million compared with $84.9 million during the fourth quarter of 2015. For all of fiscal 2016, Adjusted EBITDA increased 53.5% to $231.2 million compared with $150.6 million during all of fiscal 2015.
  • Adjusted EBITDA to interest incurred was 2.39x for fourth quarter of fiscal 2016 compared with 2.01x for the same quarter last year. For the twelve-month period ended October 31, 2016, Adjusted EBITDA to interest incurred was 1.39x compared with 0.91x for the same period one year ago.
  • Consolidated net contracts per active selling community increased 11.4% to 7.8 net contracts per active selling community for the fourth quarter of fiscal 2016 compared with 7.0 net contracts per active selling community in the fourth quarter of fiscal 2015. Net contracts per active selling community, including unconsolidated joint ventures, increased 4.2% to 7.4 net contracts per active selling community for the quarter ended October 31, 2016 compared with 7.1 net contracts, including unconsolidated joint ventures, per active selling community in the fourth quarter of fiscal 2015.
  • Consolidated active selling communities decreased 23.7% from 219 communities at the end of the prior year’s fourth quarter to 167 communities as of October 31, 2016, which was impacted by the sale of ten communities in Minneapolis and Raleigh and the conversion of four consolidated communities into unconsolidated joint venture communities. As of the end of the fourth quarter of fiscal 2016, active selling communities, including unconsolidated joint ventures, decreased 17.9% to 188 communities compared with 229 communities at October 31, 2015.
  • The dollar value of consolidated net contracts decreased 14.5% to $534.3 million for the three months ended October 31, 2016 compared with $624.9 million during the same quarter a year ago. The dollar value of net contracts, including unconsolidated joint ventures, during the fourth quarter of fiscal 2016 decreased 14.9% to $582.7 million compared with $684.3 million in last year’s fourth quarter.
  • The dollar value of consolidated net contracts increased 2.6% to $2.51 billion for all of fiscal 2016 compared with $2.45 billion in the previous fiscal year. The dollar value of net contracts, including unconsolidated joint ventures, for the twelve months ended October 31, 2016 increased 0.9% to $2.67 billion compared with $2.65 billion in fiscal 2015.
  • The number of consolidated net contracts, during the fourth quarter of fiscal 2016, decreased 15.4% to 1,299 homes compared with 1,535 homes in the prior year’s fourth quarter. In the fourth quarter of fiscal 2016, the number of net contracts, including unconsolidated joint ventures, decreased 14.7% to 1,389 homes from 1,629 homes during the fourth quarter of fiscal 2015.
  • The number of consolidated net contracts, during the twelve-month period ended October 31, 2016, decreased 1.2% to 6,109 homes compared with 6,183 homes in the same period of the previous year. During all of fiscal 2016, the number of net contracts, including unconsolidated joint ventures, was 6,380 homes, a decrease of 2.6% from 6,547 homes during fiscal 2015.
  • As of October 31, 2016, the dollar value of contract backlog, including unconsolidated joint ventures, was $1.22 billion, a decrease of 9.4% compared with $1.35 billion as of October 31, 2015. The dollar value of consolidated contract backlog, as of October 31, 2016, decreased 12.1% to $1.07 billion compared with $1.22 billion as of October 31, 2015.
  • As of October 31, 2016, the number of homes in contract backlog, including unconsolidated joint ventures, decreased 14.9% to 2,649 homes compared with 3,112 homes as of October 31, 2015. The number of homes in consolidated contract backlog, as of October 31, 2016, decreased 17.5% to 2,398 homes compared with 2,905 homes as of the end of the fourth quarter of fiscal 2015.
  • Consolidated deliveries were 1,870 homes in the fourth quarter of fiscal 2016, an 8.3% increase compared with 1,727 homes in the fourth quarter of fiscal 2015. For the three months ended October 31, 2016, deliveries, including unconsolidated joint ventures, increased 10.0% to 1,972 homes compared with 1,792 homes in the fourth quarter of the prior year.
  • Consolidated deliveries were 6,464 homes for all of fiscal 2016, a 17.4% increase compared with 5,507 homes in the same period of fiscal 2015. For the twelve months ended October 31, 2016, deliveries, including unconsolidated joint ventures, increased 16.2% to 6,712 homes compared with 5,776 homes in the twelve months of the prior fiscal year.
  • The contract cancellation rate, including unconsolidated joint ventures, for the fourth quarter of fiscal 2016 was 21%, compared with 20% in the fourth quarter of fiscal 2015.
  • The valuation allowance was $627.9 million as of October 31, 2016. The valuation allowance is a non-cash reserve against the tax assets for GAAP purposes. For tax purposes, the tax deductions associated with the tax assets may be carried forward for 20 years from the date the deductions were incurred.

LIQUIDITY AND INVENTORY AS OF OCTOBER 31,2016:

  • After paying off $320.0 million of debt that matured in October 2015, January 2016 and May 2016, total liquidity at the end of the fourth quarter of fiscal 2016 was $346.6 million.
  • During the fourth quarter of fiscal 2016, land and land development spending was $131.4 million compared with $192.1 million in last year’s fourth quarter. For the year ended October 31, 2016, land and land development spending was $567.0 million compared to $656.5 million in the prior fiscal year.
  • As of October 31, 2016, the land position, including unconsolidated joint ventures, was 31,281 lots, consisting of 14,165 lots under option and 17,116 owned lots, compared with a total of 37,659 lots as of October 31, 2015.
  • During the fourth quarter of fiscal 2016, approximately 2,100 lots, including unconsolidated joint ventures, were put under option or acquired in 37 communities.

COMMENTS FROM MANAGEMENT:

“For fiscal 2016, we grew revenues by 28%, reduced our SG&A ratio by 250 basis points, paid off $260 million of public debt at maturity and returned to profitability. Nonetheless, fiscal 2016 was a very challenging year,” stated Ara K. Hovnanian, Chairman of the Board, President and Chief Executive Officer. “The debt markets remained closed to companies with our credit ratings and we needed to raise funds to pay off $260 million of maturing public debt. This led to our decision to enhance our liquidity by increasing our use of land bank financings and joint ventures, as well as exiting four underperforming markets. This adversely affected our ability to invest as aggressively in new land parcels as previously planned. However, we ended the year with a liquidity position of $347 million, allowing us to once again actively seek land investment opportunities, which should ultimately result in community count growth and, assuming no change in market conditions, higher levels of profitability in the future,” concluded Mr. Hovnanian.

WEBCAST INFORMATION:

Hovnanian Enterprises will webcast its fiscal 2016 fourth quarter financial results conference call at 11:00 a.m. E.T. on Thursday, December 8, 2016. 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 Red Bank, New Jersey. The Company is one of the nation’s largest homebuilders with operations in Arizona, California, Delaware, Florida, Georgia, Illinois, Maryland, New Jersey, Ohio, Pennsylvania, South Carolina, Texas, Virginia, Washington, D.C. and West Virginia. The Company’s homes are marketed and sold under the trade names K. Hovnanian® Homes, Brighton Homes® and Parkwood Builders. As the developer of K. Hovnanian’s® Four Seasons communities, the Company is also one of the nation’s largest builders of active lifestyle communities.

Additional information on Hovnanian Enterprises, Inc., including a summary investment profile and the Company’s 2015 annual report, can be accessed through the “Investor Relations” section of the Hovnanian Enterprises’ website at http://www.khov.com. To be added to Hovnanian's investor e-mail list, please send an e-mail to IR@khov.com or sign up at http://www.khov.com.

NON-GAAP FINANCIAL MEASURES:

Consolidated earnings before interest expense and income taxes (“EBIT”) and before depreciation and amortization (“EBITDA”) and before inventory impairment loss and land option write-offs and loss on extinguishment of debt (“Adjusted EBITDA”) are not U.S. generally accepted accounting principles (GAAP) financial measures. The most directly comparable GAAP financial measure is net income (loss). The reconciliation for historical periods of EBIT, EBITDA and Adjusted EBITDA to net income (loss) is presented in a table attached to this earnings release.

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

Total liquidity is comprised of $339.8 million of cash and cash equivalents, $1.7 million of restricted cash required to collateralize letters of credit and $5.1 million of availability under the unsecured revolving credit facility as of October 31, 2016.

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 the sustained homebuilding downturn; (2) adverse weather and other environmental conditions and natural disasters; (3) levels of indebtedness and restrictions on the Company’s operations and activities imposed by the agreements governing the Company’s outstanding indebtedness; (4) the Company's sources of liquidity; (5) changes in credit ratings; (6) changes in market conditions and seasonality of the Company’s business; (7) the availability and cost of suitable land and improved lots; (8) shortages in, and price fluctuations of, raw materials and labor; (9) regional and local economic factors, including dependency on certain sectors of the economy, and employment levels affecting home prices and sales activity in the markets where the Company builds homes; (10) fluctuations in interest rates and the availability of mortgage financing; (11) changes in tax laws affecting the after-tax costs of owning a home; (12) operations through joint ventures with third parties; (13) government regulation, including regulations concerning development of land, the home building, sales and customer financing processes, tax laws and the environment; (14) product liability litigation, warranty claims and claims made by mortgage investors; (15) levels of competition; (16) availability and terms of financing to the Company; (17) successful identification and integration of acquisitions; (18) significant influence of the Company’s controlling stockholders; (19) availability of net operating loss carryforwards; (20) utility shortages and outages or rate fluctuations; (21) geopolitical risks, terrorist acts and other acts of war; (22) increases in cancellations of agreements of sale; (23) loss of key management personnel or failure to attract qualified personnel; (24) information technology failures and data security breaches; (25) legal claims brought against us and not resolved in our favor; and (26) certain risks, uncertainties and other factors described in detail in the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2015 and subsequent filings with the Securities and Exchange Commission. Except as otherwise required by applicable securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason.

(Financial Tables Follow)

Hovnanian Enterprises, Inc.
October 31, 2016
Statements of Consolidated Operations
(Dollars in Thousands, Except Per Share Data)
Three Months Ended Twelve Months Ended
October 31, October 31,
2016 2015 2016 2015
(Unaudited) (Unaudited)
Total Revenues$805,069 $693,204 $2,752,247 $2,148,480
Costs and Expenses (a) 770,609 657,506 2,742,265 2,174,414
Loss on Extinguishment of Debt (3,200) - (3,200) -
Income (Loss) from Unconsolidated Joint Ventures 881 1,699 (4,346) 4,169
Income (Loss) Before Income Taxes 32,141 37,397 2,436 (21,765)
Income Tax Provision (Benefit) 9,852 11,878 5,255 (5,665)
Net Income (Loss)$22,289 $25,519 $(2,819) $(16,100)
Per Share Data:
Basic:
Income (Loss) Per Common Share$0.14 $0.17 $(0.02) $(0.11)
Weighted Average Number of Common Shares Outstanding (b) 147,521 147,057 147,451 146,899
Assuming Dilution:
Income (Loss) Per Common Share$0.14 $0.16 $(0.02) $(0.11)
Weighted Average Number of Common Shares Outstanding (b) 160,590 160,299 147,451 146,899
(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, 2016
Reconciliation of Income (Loss) Before Income Taxes Excluding Land-Related Charges and Loss on Extinguishment of Debt to Income (Loss) Before Income Taxes
(Dollars in Thousands)
Three Months Ended Twelve Months Ended
October 31, October 31,
2016 2015 2016 2015
(Unaudited) (Unaudited)
Income (Loss) Before Income Taxes$32,141 $37,397 $2,436 $(21,765)
Inventory Impairment Loss and Land Option Write-Offs 10,438 4,426 33,353 12,044
Loss on Extinguishment of Debt 3,200 - 3,200 -
Income (Loss) Before Income Taxes Excluding Land-Related Charges and Loss on Extinguishment of Debt (a)$45,779 $41,823 $38,989 $(9,721)
(a) Income (Loss) Before Income Taxes Excluding Land-Related Charges and Loss on Extinguishment of Debt is a non-GAAP Financial measure. The most directly comparable GAAP financial measure is Income (Loss) Before Income Taxes.


Hovnanian Enterprises, Inc.
October 31, 2016
Gross Margin
(Dollars in Thousands)
Homebuilding Gross Margin Homebuilding Gross Margin
Three Months Ended Twelve Months Ended
October 31, October 31,
2016 2015 2016 2015
(Unaudited) (Unaudited)
Sale of Homes $777,472 $673,330 $2,600,790 $2,088,129
Cost of Sales, Excluding Interest and Land Charges (a) 640,580 552,462 2,162,284 1,721,336
Homebuilding Gross Margin, Excluding Interest and Land Charges 136,892 120,868 438,506 366,793
Homebuilding Cost of Sales Interest 25,302 19,959 86,593 59,574
Homebuilding Gross Margin, Including Interest and Excluding Land Charges$111,590 $100,909 $351,913 $307,219
Gross Margin Percentage, Excluding Interest and Land Charges 17.6% 18.0% 16.9% 17.6%
Gross Margin Percentage, Including Interest and Excluding Land Charges 14.4% 15.0% 13.5% 14.7%
Land Sales Gross Margin Land Sales Gross Margin
Three Months Ended Twelve Months Ended
October 31, October 31,
2016 2015 2016 2015
(Unaudited) (Unaudited)
Land and Lot Sales $5,990 $- $76,041 $850
Cost of Sales, Excluding Interest and Land Charges (a) 5,898 - 68,173 702
Land and Lot Sales Gross Margin, Excluding Interest and Land Charges 92 - 7,868 148
Land and Lot Sales Interest 396 - 5,798 39
Land and Lot Sales Gross Margin, Including Interest and Excluding Land Charges$(304) $- $2,070 $109
(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, 2016
Reconciliation of Adjusted EBITDA to Net Income (Loss)
(Dollars in Thousands)
Three Months Ended Twelve Months Ended
October 31, October 31,
2016 2015 2016 2015
(Unaudited) (Unaudited)
Net Income (Loss)$22,289 $25,519 $(2,819) $(16,100)
Income Tax Provision (Benefit) 9,852 11,878 5,255 (5,665)
Interest Expense 48,197 41,200 183,358 151,448
EBIT (a) 80,338 78,597 185,794 129,683
Depreciation 957 835 3,565 3,388
Amortization of Debt Costs 1,446 1,008 5,261 5,459
EBITDA (b) 82,741 80,440 194,620 138,530
Inventory Impairment Loss and Land Option Write-offs 10,438 4,426 33,353 12,044
Loss on Extinguishment of Debt 3,200 - 3,200 -
Adjusted EBITDA (c)$96,379 $84,866 $231,173 $150,574
Interest Incurred$40,341 $42,157 $166,824 $166,188
Adjusted EBITDA to Interest Incurred 2.39 2.01 1.39 0.91
(a) EBIT is a non-GAAP financial measure. The most directly comparable GAAP financial measure is net income (loss). EBIT represents earnings before interest expense and income taxes.
(b) EBITDA is a non-GAAP financial measure. The most directly comparable GAAP financial measure is net income (loss). EBITDA represents earnings before interest expense, income taxes, depreciation and amortization.
(c) Adjusted EBITDA is a non-GAAP financial measure. The most directly comparable GAAP financial measure is net income (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.
October 31, 2016
Interest Incurred, Expensed and Capitalized
(Dollars in Thousands)
Three Months Ended Twelve Months Ended
October 31, October 31,
2016 2015 2016 2015
(Unaudited) (Unaudited)
Interest Capitalized at Beginning of Period$104,544 $122,941 $123,898 $109,158
Plus Interest Incurred 40,341 42,157 166,824 166,188
Less Interest Expensed (a) 48,197 41,200 183,358 151,448
Less Interest Contributed to Unconsolidated Joint Venture (a) - - 10,676 -
Interest Capitalized at End of Period (b)$96,688 $123,898 $96,688 $123,898
(a) Represents capitalized interest which was included as part of the assets contributed to the joint venture the Company entered into in November 2015. There was no impact to the Consolidated Statement of Operations as a result of this transaction.
(b) 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, 2016 October 31, 2015
(Unaudited) (1)
ASSETS
Homebuilding:
Cash and cash equivalents $339,773 $ 245,398
Restricted cash and cash equivalents 3,914 7,299
Inventories:
Sold and unsold homes and lots under development 899,082 1,307,850
Land and land options held for future development or sale 175,301 214,503
Consolidated inventory not owned 208,701 122,225
Total inventories 1,283,084 1,644,578
Investments in and advances to unconsolidated joint ventures 100,502 61,209
Receivables, deposits and notes, net 49,726 70,349
Property, plant and equipment, net 50,332 45,534
Prepaid expenses and other assets 71,246 77,671
Total homebuilding 1,898,577 2,152,038
Financial services:
Cash and cash equivalents 6,992 8,347
Restricted cash and cash equivalents 19,034 19,223
Mortgage loans held for sale at fair value 165,083 130,320
Other assets 6,121 2,091
Total financial services 197,230 159,981
Income taxes receivable – including net deferred tax benefits 283,633 290,279
Total assets $2,379,440 $ 2,602,298
(1) Derived from the audited balance sheet as of October 31, 2015


HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands Except Share and Per Share Amounts)
October 31,
2016
October 31,
2015
(Unaudited) (1
)
LIABILITIES AND EQUITY
Homebuilding:
Nonrecourse mortgages secured by inventory$83,470 $143,863
Accounts payable and other liabilities 369,228 348,516
Customers’ deposits 37,429 44,218
Nonrecourse mortgages secured by operating properties 14,312 15,511
Liabilities from inventory not owned 153,151 105,856
Total homebuilding 657,590 657,964
Financial services:
Accounts payable and other liabilities 26,857 27,908
Mortgage warehouse lines of credit 145,588 108,875
Total financial services 172,445 136,783
Notes payable:
Revolving credit agreement 52,000 47,000
Senior secured term loan 75,000 -
Senior secured notes, net of discount 1,054,333 981,346
Senior notes, net of discount 400,000 780,319
Senior amortizing notes 6,316 12,811
Senior exchangeable notes 57,841 73,771
Accrued interest 32,425 40,388
Total notes payable 1,677,915 1,935,635
Total liabilities 2,507,950 2,730,382
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 October 31, 2016 and 2015 135,299 135,299
Common stock, Class A, $0.01 par value - authorized 400,000,000 shares; issued 143,806,775 shares at October 31, 2016 and 143,292,881 shares at October 31, 2015 (including 11,760,763 shares at October 31, 2016 and 2015 held in Treasury) 1,438 1,433
Common stock, Class B, $0.01 par value (convertible to Class A at time of sale) - authorized 60,000,000 shares; issued 15,942,809 shares at October 31, 2016 and 15,676,829 shares at October 31, 2015 (including 691,748 shares at October 31, 2016 and 2015 held in Treasury) 159 157
Paid in capital - common stock 706,137 703,751
Accumulated deficit (856,183) (853,364)
Treasury stock - at cost (115,360) (115,360)
Total stockholders' equity deficit (128,510) (128,084)
Total liabilities and equity$2,379,440 $2,602,298
(1) Derived from the audited balance sheet as of October 31, 2015


HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands Except Per Share Data)
(Unaudited)
Three Months Ended
October 31,
Twelve Months Ended
October 31,
2016 2015 2016 2015
Revenues:
Homebuilding:
Sale of homes$777,472 $673,330 $2,600,790 $2,088,129
Land sales and other revenues 6,694 1,148 78,840 3,686
Total homebuilding 784,166 674,478 2,679,630 2,091,815
Financial services 20,903 18,726 72,617 56,665
Total revenues 805,069 693,204 2,752,247 2,148,480
Expenses:
Homebuilding:
Cost of sales, excluding interest 646,478 552,462 2,230,457 1,722,038
Cost of sales interest 25,698 19,959 92,391 59,613
Inventory impairment loss and land option write-offs 10,438 4,426 33,353 12,044
Total cost of sales 682,614 576,847 2,356,201 1,793,695
Selling, general and administrative 37,378 36,145 192,938 188,403
Total homebuilding expenses 719,992 612,992 2,549,139 1,982,098
Financial services 10,395 8,903 37,144 31,972
Corporate general and administrative 16,337 13,231 60,141 62,506
Other interest 22,499 21,241 90,967 91,835
Other operations 1,386 1,139 4,874 6,003
Total expenses 770,609 657,506 2,742,265 2,174,414
Loss on extinguishment of debt (3,200) - (3,200) -
Income (loss) from unconsolidated joint ventures 881 1,699 (4,346) 4,169
Income (loss) before income taxes 32,141 37,397 2,436 (21,765)
State and federal income tax provision (benefit):
State (2,538) 576 2,457 4,293
Federal 12,390 11,302 2,798 (9,958)
Total income taxes 9,852 11,878 5,255 (5,665)
Net income (loss)$22,289 $25,519 $(2,819) $(16,100)
Per share data:
Basic:
Income (loss) per common share$0.14 $0.17 $(0.02) $(0.11)
Weighted-average number of common shares outstanding 147,521 147,057 147,451 146,899
Assuming dilution:
Income (loss) per common share$0.14 $0.16 $(0.02) $(0.11)
Weighted-average number of common shares outstanding 160,590 160,299 147,451 146,899


HOVNANIAN ENTERPRISES, INC.
(DOLLARS IN THOUSANDS EXCEPT AVG. PRICE)
(SEGMENT DATA EXCLUDES UNCONSOLIDATED JOINT VENTURES)
(UNAUDITED) Communities Under Development
Three Months - October 31, 2016
Net Contracts (1)DeliveriesContract
Three Months EndedThree Months EndedBacklog
Oct 31,Oct 31,Oct 31,
2016 2015 % Change 2016 2015 % Change 2016 2015 % Change
Northeast
(NJ, PA)Home 106 143 (25.9)% 162 136 19.1% 204 293 (30.4)%
Dollars$50,179 $66,846 (24.9)%$81,467 $63,175 29.0%$99,512 $147,004 (32.3)%
Avg. Price$473,383 $467,455 1.3%$502,884 $464,522 8.3%$487,803 $501,719 (2.8)%
Mid-Atlantic
(DE, MD, VA, WV)Home 196 236 (16.9)% 332 256 29.7% 430 453 (5.1)%
Dollars$99,179 $114,191 (13.1)%$162,902 $127,233 28.0%$248,974 $239,099 4.1%
Avg. Price$506,012 $483,860 4.6%$490,668 $497,004 (1.3)%$579,009 $527,812 9.7%
Midwest (2)
(IL, MN, OH)Home 125 232 (46.1)% 215 284 (24.3)% 374 644 (41.9)%
Dollars$38,339 $73,693 (48.0)%$62,193 $91,122 (31.7)%$104,527 $194,290 (46.2)%
Avg. Price$306,712 $317,640 (3.4)%$289,271 $320,852 (9.8)%$279,485 $301,692 (7.4)%
Southeast (3)
(FL, GA, NC, SC)Home 141 168 (16.1)% 164 220 (25.5)% 332 279 19.0%
Dollars$53,372 $58,382 (8.6)%$67,690 $63,074 7.3%$145,171 $105,935 37.0%
Avg. Price$378,522 $347,512 8.9%$412,744 $286,698 44.0%$437,261 $379,699 15.2%
Southwest
(AZ, TX)Home 551 571 (3.5)% 796 686 16.0% 763 1,033 (26.1)%
Dollars$190,426 $216,371 (12.0)%$298,689 $262,713 13.7%$285,644 $422,711 (32.4)%
Avg. Price$345,601 $378,933 (8.8)%$375,237 $382,963 (2.0)%$374,370 $409,207 (8.5)%
West
(CA)Home 180 185 (2.7)% 201 145 38.6% 295 203 45.3%
Dollars$102,819 $95,419 7.8%$104,531 $66,013 58.3%$185,274 $106,886 73.3%
Avg. Price$571,218 $515,780 10.7%$520,055 $455,262 14.2%$628,047 $526,531 19.3%
Consolidated Total
Home 1,299 1,535 (15.4)% 1,870 1,727 8.3% 2,398 2,905 (17.5)%
Dollars$534,314 $624,902 (14.5)%$777,472 $673,330 15.5%$1,069,102 $1,215,925 (12.1)%
Avg. Price$411,327 $407,102 1.0%$415,761 $389,884 6.6%$445,831 $418,563 6.5%
Unconsolidated Joint Ventures
Home 90 94 (4.3)% 102 65 56.9% 251 207 21.3%
Dollars$48,394 $59,441 (18.6)%$64,099 $37,730 69.9%$152,430 $132,082 15.4%
Avg. Price$537,706 $632,347 (15.0)%$628,417 $580,467 8.3%$607,292 $638,077 (4.8)%
Grand Total
Home 1,389 1,629 (14.7)% 1,972 1,792 10.0% 2,649 3,112 (14.9)%
Dollars$582,708 $684,343 (14.9)%$841,571 $711,060 18.4%$1,221,532 $1,348,007 (9.4)%
Avg. Price$419,516 $420,100 (0.1)%$426,760 $396,797 7.6%$461,130 $433,164 6.5%
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.
(2) The Midwest net contracts include 54 homes and $23.0 million in 2015 from Minneapolis, MN. Contract backlog as of October 31, 2016 reflects the reduction of 64 homes and $24.1 million, related to the sale of our land portfolio in Minneapolis, MN.
(3) The Southeast net contracts include 29 homes and $12.2 million in 2015 from Raleigh, NC. Contract backlog as of October 31, 2016 reflects the reduction of 67 homes and $33.7 million, related to the sale of our land portfolio in Raleigh, NC.


HOVNANIAN ENTERPRISES, INC.
(DOLLARS IN THOUSANDS EXCEPT AVG. PRICE)
(SEGMENT DATA INCLUDES UNCONSOLIDATED JOINT VENTURES)
(UNAUDITED) Communities Under Development
Three Months - October 31, 2016
Net Contracts (1)DeliveriesContract
Three Months EndedThree Months EndedBacklog
Oct 31,Oct 31,Oct 31,
2016 2015 % Change 2016 2015 % Change 2016 2015 % Change
Northeast
(includes unconsolidated joint ventures)Home 116 156 (25.6)% 169 141 19.9% 231 341 (32.3)%
(NJ, PA)Dollars$54,173 $73,417 (26.2)%$83,790 $69,345 20.8%$109,775 $168,476 (34.8)%
Avg. Price$467,009 $470,623 (0.8)%$495,797 $491,808 0.8%$475,215 $494,065 (3.8)%
Mid-Atlantic
(includes unconsolidated joint ventures)Home 208 244 (14.8)% 348 288 20.8% 470 467 0.6%
(DE, MD, VA, WV)Dollars$107,998 $118,957 (9.2)%$171,133 $145,192 17.9%$279,063 $246,906 13.0%
Avg. Price$519,220 $487,533 6.5%$491,759 $504,141 (2.5)%$593,751 $528,707 12.3%
Midwest (2)
(includes unconsolidated joint ventures)Home 126 232 (45.7)% 218 284 (23.2)% 386 644 (40.1)%
(IL, MN, OH) Dollars$38,744 $73,693 (47.4)%$64,235 $91,121 (29.5)%$114,116 $194,290 (41.3)%
Avg. Price$307,487 $317,640 (3.2)%$294,658 $320,850 (8.2)%$295,638 $301,692 (2.0)%
Southeast (3)
(includes unconsolidated joint ventures)Home 173 176 (1.7)% 166 226 (26.5)% 420 288 45.8%
(FL, GA, NC, SC) Dollars$67,754 $62,941 7.6%$68,347 $65,449 4.4%$188,893 $110,860 70.4%
Avg. Price$391,646 $357,617 9.5%$411,729 $289,596 42.2%$449,746 $384,930 16.8%
Southwest
(includes unconsolidated joint ventures)Home 558 571 (2.3)% 796 686 16.0% 770 1,033 (25.5)%
(AZ, TX)Dollars$194,903 $216,371 (9.9)%$298,688 $262,713 13.7%$290,121 $422,711 (31.4)%
Avg. Price$349,289 $378,932 (7.8)%$375,237 $382,963 (2.0)%$376,781 $409,207 (7.9)%
West
(includes unconsolidated joint ventures)Home 208 250 (16.8)% 275 167 64.7% 372 339 9.7%
(CA)Dollars$119,136 $138,964 (14.3)%$155,378 $77,240 101.2%$239,564 $204,764 17.0%
Avg. Price$572,769 $555,857 3.0%$565,010 $462,513 22.2%$643,990 $604,024 6.6%
Grand Total
Home 1,389 1,629 (14.7)% 1,972 1,792 10.0% 2,649 3,112 (14.9)%
Dollars$582,708 $684,343 (14.9)%$841,571 $711,060 18.4%$1,221,532 $1,348,007 (9.4)%
Avg. Price$419,516 $420,100 (0.1)%$426,760 $396,797 7.6%$461,130 $433,164 6.5%
Consolidated Total
Home 1,299 1,535 (15.4)% 1,870 1,727 8.3% 2,398 2,905 (17.5)%
Dollars$534,314 $624,902 (14.5)%$777,472 $673,330 15.5%$1,069,102 $1,215,925 (12.1)%
Avg. Price$411,327 $407,102 1.0%$415,761 $389,884 6.6%$445,831 $418,563 6.5%
Unconsolidated Joint Ventures
Home 90 94 (4.3)% 102 65 56.9% 251 207 21.3%
Dollars$48,394 $59,441 (18.6)%$64,099 $37,730 69.9%$152,430 $132,082 15.4%
Avg. Price$537,706 $632,347 (15.0)%$628,417 $580,467 8.3%$607,292 $638,077 (4.8)%
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.
(2) The Midwest net contracts include 54 homes and $23.0 million in 2015 from Minneapolis, MN. Contract backlog as of October 31, 2016 reflects the reduction of 64 homes and $24.1 million, related to the sale of our land portfolio in Minneapolis, MN.
(3) The Southeast net contracts include 29 homes and $12.2 million in 2015 from Raleigh, NC. Contract backlog as of October 31, 2016 reflects the reduction of 67 homes and $33.7 million, related to the sale of our land portfolio in Raleigh, NC.


HOVNANIAN ENTERPRISES, INC.
(DOLLARS IN THOUSANDS EXCEPT AVG. PRICE)
(SEGMENT DATA EXCLUDES UNCONSOLIDATED JOINT VENTURES)
(UNAUDITED) Communities Under Development
Twelve Months - October 31, 2016
Net Contracts (1)DeliveriesContract
Twelve Months EndedTwelve Months EndedBacklog
Oct 31,Oct 31,Oct 31,
2016 2015 % Change 2016 2015 % Change 2016 2015 % Change
Northeast
(NJ, PA)Home 468 527 (11.2)% 557 380 46.6% 204 293 (30.4)%
Dollars$226,635 $262,726 (13.7)%$274,126 $189,049 45.0%$99,512 $147,004 (32.3)%
Avg. Price$484,261 $498,531 (2.9)%$492,147 $497,497 (1.1)%$487,803 $501,719 (2.8)%
Mid-Atlantic
(DE, MD, VA, WV)Home 949 936 1.4% 960 854 12.4% 430 453 (5.1)%
Dollars$467,782 $448,307 4.3%$457,906 $398,132 15.0%$248,974 $239,099 4.1%
Avg. Price$492,920 $478,961 2.9%$476,985 $466,197 2.3%$579,009 $527,812 9.7%
Midwest (2)
(IL, MN, OH)Home 724 937 (22.7)% 921 958 (3.9)% 374 644 (41.9)%
Dollars$222,835 $317,059 (29.7)%$287,469 $311,364 (7.7)%$104,527 $194,290 (46.2)%
Avg. Price$307,784 $338,376 (9.0)%$312,127 $325,015 (4.0)%$279,485 $301,692 (7.4)%
Southeast (3)
(FL, GA, NC, SC)Home 701 722 (2.9)% 581 675 (13.9)% 332 279 19.0%
Dollars$287,538 $232,272 23.8%$214,585 $207,407 3.5%$145,171 $105,935 37.0%
Avg. Price$410,183 $321,706 27.5%$369,339 $307,269 20.2%$437,261 $379,699 15.2%
Southwest
(AZ, TX)Home 2,480 2,526 (1.8)% 2,750 2,263 21.5% 763 1,033 (26.1)%
Dollars$887,341 $949,763 (6.6)%$1,024,410 $822,371 24.6%$285,644 $422,711 (32.4)%
Avg. Price$357,799 $375,995 (4.8)%$372,512 $363,399 2.5%$374,370 $409,207 (8.5)%
West
(CA)Home 787 535 47.1% 695 377 84.4% 295 203 45.3%
Dollars$420,681 $238,080 76.7%$342,294 $159,806 114.2%$185,274 $106,886 73.3%
Avg. Price$534,539 $445,010 20.1%$492,509 $423,889 16.2%$628,047 $526,531 19.3%
Consolidated Total
Home 6,109 6,183 (1.2)% 6,464 5,507 17.4% 2,398 2,905 (17.5)%
Dollars$2,512,812 $2,448,207 2.6%$2,600,790 $2,088,129 24.6%$1,069,102 $1,215,925 (12.1)%
Avg. Price$411,329 $395,958 3.9%$402,350 $379,177 6.1%$445,831 $418,563 6.5%
Unconsolidated Joint Ventures
Home 271 364 (25.5)% 248 269 (7.8)% 251 207 21.3%
Dollars$160,924 $202,879 (20.7)%$140,576 $119,920 17.2%$152,430 $132,082 15.4%
Avg. Price$593,814 $557,359 6.5%$566,836 $445,799 27.2%$607,292 $638,077 (4.8)%
Grand Total
Home 6,380 6,547 (2.6)% 6,712 5,776 16.2% 2,649 3,112 (14.9)%
Dollars$2,673,736 $2,651,086 0.9%$2,741,366 $2,208,049 24.2%$1,221,532 $1,348,007 (9.4)%
Avg. Price$419,081 $404,931 3.5%$408,427 $382,280 6.8%$461,130 $433,164 6.5%
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.
(2) The Midwest net contracts include 65 homes and $27.4 million and 246 homes and $98.2 million in 2016 and 2015, respectively, from Minneapolis, MN. Contract backlog as of October 31, 2016 reflects the reduction of 64 homes and $24.1 million, related to the sale of our land portfolio in Minneapolis, MN.
(3) The Southeast net contracts include 70 homes and $31.6 million and 128 homes and $42.4 million in 2016 and 2015, respectively, from Raleigh, NC. Contract backlog as of October 31, 2016 reflects the reduction of 67 homes and $33.7 million, related to the sale of our land portfolio in Raleigh, NC.


HOVNANIAN ENTERPRISES, INC.
(DOLLARS IN THOUSANDS EXCEPT AVG. PRICE)
(SEGMENT DATA INCLUDES UNCONSOLIDATED JOINT VENTURES)
(UNAUDITED) Communities Under Development
Twelve Months - October 31, 2016
Net Contracts (1)DeliveriesContract
Twelve Months EndedTwelve Months EndedBacklog
Oct 31,Oct 31,Oct 31,
2016 2015 % Change 2016 2015 % Change 2016 2015 % Change
Northeast
(includes unconsolidated joint ventures)Home 472 577 (18.2)% 582 402 44.8% 231 341 (32.3)%
(NJ, PA)Dollars$223,050 $286,792 (22.2)%$281,751 $199,896 40.9%$109,775 $168,476 (34.8)%
Avg. Price$472,563 $497,040 (4.9)%$484,108 $497,255 (2.6)%$475,215 $494,065 (3.8)%
Mid-Atlantic
(includes unconsolidated joint ventures)Home 1,010 1,006 0.4% 1,007 945 6.6% 470 467 0.6%
(DE, MD, VA, WV)Dollars$514,592 $485,551 6.0%$482,436 $448,605 7.5%$279,063 $246,906 13.0%
Avg. Price$509,496 $482,654 5.6%$479,081 $474,714 0.9%$593,751 $528,707 12.3%
Midwest (2)
(includes unconsolidated joint ventures)Home 730 940 (22.3)% 924 978 (5.5)% 386 644 (40.1)%
(IL, MN, OH) Dollars$234,466 $317,989 (26.3)%$289,511 $316,960 (8.7)%$114,116 $194,290 (41.3)%
Avg. Price$321,186 $338,286 (5.1)%$313,324 $324,090 (3.3)%$295,638 $301,692 (2.0)%
Southeast (3)
(includes unconsolidated joint ventures)Home 783 773 1.3% 584 746 (21.7)% 420 288 45.8%
(FL, GA, NC, SC) Dollars$327,378 $254,484 28.6%$215,628 $236,617 (8.9)%$188,893 $110,860 70.4%
Avg. Price$418,108 $329,216 27.0%$369,226 $317,181 16.4%$449,746 $384,930 16.8%
Southwest
(includes unconsolidated joint ventures)Home 2,487 2,526 (1.5)% 2,750 2,263 21.5% 770 1,033 (25.5)%
(AZ, TX)Dollars$891,819 $949,763 (6.1)%$1,024,409 $822,371 24.6%$290,121 $422,711 (31.4)%
Avg. Price$358,592 $375,995 (4.6)%$372,512 $363,399 2.5%$376,781 $409,207 (7.9)%
West
(includes unconsolidated joint ventures)Home 898 725 23.9% 865 442 95.7% 372 339 9.7%
(CA)Dollars$482,431 $356,507 35.3%$447,631 $183,600 143.8%$239,564 $204,764 17.0%
Avg. Price$537,228 $491,734 9.3%$517,493 $415,384 24.6%$643,990 $604,024 6.6%
Grand Total
Home 6,380 6,547 (2.6)% 6,712 5,776 16.2% 2,649 3,112 (14.9)%
Dollars$2,673,736 $2,651,086 0.9%$2,741,366 $2,208,049 24.2%$1,221,532 $1,348,007 (9.4)%
Avg. Price$419,081 $404,931 3.5%$408,427 $382,280 6.8%$461,130 $433,164 6.5%
Consolidated Total
Home 6,109 6,183 (1.2)% 6,464 5,507 17.4% 2,398 2,905 (17.5)%
Dollars$2,512,812 $2,448,207 2.6%$2,600,790 $2,088,129 24.6%$1,069,102 $1,215,925 (12.1)%
Avg. Price$411,329 $395,958 3.9%$402,350 $379,177 6.1%$445,831 $418,563 6.5%
Unconsolidated Joint Ventures
Home 271 364 (25.5)% 248 269 (7.8)% 251 207 21.3%
Dollars$160,924 $202,879 (20.7)%$140,576 $119,920 17.2%$152,430 $132,082 15.4%
Avg. Price$593,814 $557,359 6.5%$566,836 $445,799 27.2%$607,292 $638,077 (4.8)%
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.
(2) The Midwest net contracts include 65 homes and $27.4 million and 246 homes and $98.2 million in 2016 and 2015, respectively, from Minneapolis, MN. Contract backlog as of October 31, 2016 reflects the reduction of 64 homes and $24.1 million, related to the sale of our land portfolio in Minneapolis, MN.
(3) The Southeast net contracts include 70 homes and $31.6 million and 128 homes and $42.4 million in 2016 and 2015, respectively, from Raleigh, NC. Contract backlog as of October 31, 2016 reflects the reduction of 67 homes and $33.7 million, related to the sale of our land portfolio in Raleigh, NC.

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

Source:Hovnanian Enterprises