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Hovnanian Enterprises Reports Fiscal 2017 Second Quarter Results

RED BANK, N.J., June 02, 2017 (GLOBE NEWSWIRE) -- Hovnanian Enterprises, Inc. (NYSE:HOV), a leading national homebuilder, reported results for its fiscal second quarter and six months ended April 30, 2017.

“We made progress during our second fiscal quarter toward our goal of returning to consistent profitability. We experienced a strong spring selling season reflected in an 18.5% increase in net contracts per active selling community during the quarter,” stated Ara K. Hovnanian, Chairman of the Board, President and Chief Executive Officer. “As we discussed last quarter, the cumulative effect of our decision to exit four underperforming markets, temporarily reduce our overall land spend and pay off $320 million of maturing debt has led to decreases in our community count, net contracts, deliveries and revenues over the short term. Given these limitations, our second quarter results overall were in line with our expectations.”

“Our focus remains on execution, further operational improvements and reloading our land position. We finished the quarter with liquidity in excess of our target range, and our land acquisition teams continue to find new land parcels throughout the country so that we can grow our land position, which, assuming no changes in market conditions should ultimately result in higher levels of deliveries and profitability going forward. We are confident we are taking the appropriate steps to best position our company for success in the future,” commented Mr. Hovnanian.

RESULTS FOR THE THREE-MONTH AND SIX-MONTH PERIODS ENDED APRIL 30, 2017:

  • Total revenues were $585.9 million in the second quarter of fiscal 2017, a decrease of 10.5% compared with $654.7 million in the second quarter of fiscal 2016. For the six months ended April 30, 2017, total revenues decreased 7.5% to $1.14 billion compared with $1.23 billion in the first half of the prior year.
  • Homebuilding revenues for unconsolidated joint ventures increased 236.0% to $86.6 million in the second quarter of fiscal 2017, compared with $25.8 million in the second quarter of fiscal 2016. For the six months ended April 30, 2017, homebuilding revenues for unconsolidated joint ventures increased 229.1% to $151.5 million compared with $46.0 million in the first half of the prior year.
  • For the second quarter of 2017, total SG&A decreased by $7.4 million, or 10.8%, year over year. Total SG&A was $61.5 million, or 10.5% of total revenues, for the second quarter ended April 30, 2017 compared with $69.0 million, or 10.5% of total revenues, in last year’s second quarter. For the first half of 2017, total SG&A decreased by $11.2 million, or 8.4%, year over year. Total SG&A decreased to $121.6 million, or 10.7% of total revenues, for the first six months of fiscal 2017 compared with $132.8 million, or 10.8% of total revenues, in the first half of the prior fiscal year.
  • Interest incurred (some of which was expensed and some of which was capitalized) decreased by 11.5% to $39.2 million for the second quarter of fiscal 2017 compared with $44.2 million in the same quarter one year ago. For the six months ended April 30, 2017, interest incurred decreased 9.7% to $77.9 million compared with $86.2 million during the same six-month period last year.
  • Total interest expense decreased 6.4% to $42.6 million in the second quarter of fiscal 2017 compared with $45.5 million in the second quarter of fiscal 2016. Total interest expense was $83.6 million for the first half of both fiscal 2017 and 2016.
  • Homebuilding gross margin percentage improved to 12.6% for the second quarter of fiscal 2017 compared with 11.1% in the prior year’s second quarter. During the first six months of fiscal 2017, homebuilding gross margin percentage improved significantly to 13.0% compared with 11.3% in the same period of the previous year.
  • Homebuilding gross margin percentage, before interest expense and land charges included in cost of sales, improved to 16.5% for the second quarter of fiscal 2017 compared with 16.1% in the prior year’s second quarter. During the first six months of fiscal 2017, homebuilding gross margin percentage, before interest expense and land charges included in cost of sales, improved to 16.8% compared with 16.3% in the same period of the previous year.
  • Loss before income taxes for the quarter ended April 30, 2017 was $7.7 million compared to a loss before income taxes of $17.6 million during the second quarter of 2016. For the first half of fiscal 2017, the loss before income taxes was $7.4 million compared to a loss before income taxes of $30.8 million during the first six months of fiscal 2016.
  • Net loss was $6.7 million, or $0.05 per common share, in the second quarter of fiscal 2017, compared with a net loss of $8.5 million, or $0.06 per common share, during the same quarter a year ago. For the six months ended April 30, 2017, the net loss was $6.8 million, or $0.05 per common share, compared with a net loss of $24.6 million, or $0.17 per common share, in the first half of fiscal 2016.
  • Adjusted EBITDA as a percentage of total revenues improved to 6.5% during the second quarter of fiscal 2017 compared with 6.1% for the second quarter of fiscal 2016. For the six months ended April 30, 2017, Adjusted EBITDA as a percentage of total revenues improved to 6.8% compared with 6.4% during the same period a year ago.
  • During the second quarter of fiscal 2017, Adjusted EBITDA decreased 3.7% to $38.2 million compared with $39.7 million during the second quarter of fiscal 2016. For the first half of fiscal 2017, Adjusted EBITDA decreased 1.1% to $77.7 million compared with $78.5 million during the first six months of fiscal 2016.
  • Adjusted EBITDA to interest incurred improved to 0.98x for the second quarter ended April 30, 2017 compared with 0.90x in the second quarter of the prior year. Adjusted EBITDA to interest incurred improved to 1.00x for the six months ended April 30, 2017 compared with 0.91x in the first half of the prior year.
  • Reflecting a strong spring selling season, consolidated net contracts per active selling community increased 18.5% to 10.9 net contracts per active selling community for the second quarter of fiscal 2017 compared with 9.2 net contracts per active selling community in the second quarter of fiscal 2016. Net contracts per active selling community, including unconsolidated joint ventures, increased 14.4% to 10.3 net contracts per active selling community for the quarter ended April 30, 2017 compared with 9.0 net contracts, including unconsolidated joint ventures, per active selling community in last year’s second quarter.
  • For May 2017, consolidated net contracts per active selling community increased to 3.6 net contracts per active selling community compared to 2.9 net contracts per active selling community for the same month one year ago. During May 2017, the number of consolidated net contracts decreased to 509 homes from 512 homes in May 2016 and the dollar value of net contracts decreased 8.3% to $197.2 million in May 2017 compared with $215.0 million for May 2016.
  • For May 2017, net contracts per active selling community, including unconsolidated joint ventures, increased to 3.4 net contracts per active selling community compared to 2.8 net contracts per active selling community for the same month one year ago. During May 2017, the number of net contracts, including unconsolidated joint ventures, increased 6.6% to 567 homes from 532 homes in May 2016 and the dollar value of net contracts, including unconsolidated joint ventures, increased 2.8% to $230.2 million in May 2017 compared with $224.0 million for May 2016.
  • As of the end of the second quarter of fiscal 2017, active selling communities, including unconsolidated joint ventures, decreased 18.3% to 170 communities compared with 208 communities at April 30, 2016. Consolidated active selling communities decreased 25.5% to 146 communities as of April 30, 2017 from 196 communities at the end of the prior year’s second quarter.
  • For the second quarter ended April 30, 2017, the number of net contracts, including unconsolidated joint ventures, decreased 6.1% to 1,748 homes from 1,862 homes for the same quarter last year. The number of consolidated net contracts, during the second quarter of fiscal 2017, decreased 12.3% to 1,590 homes compared with 1,812 homes during the second quarter of 2016.
  • During the first half of fiscal 2017, the number of net contracts, including unconsolidated joint ventures, was 3,060 homes, a decrease of 11.4% from 3,454 homes during the first six months of fiscal 2016. The number of consolidated net contracts, during the six month period ended April 30, 2017, decreased 17.3% to 2,763 homes compared with 3,343 homes in the same period of the previous year.
  • The dollar value of contract backlog, including unconsolidated joint ventures, as of April 30, 2017, was $1.27 billion, a decrease of 19.7% compared with $1.58 billion as of April 30, 2016. The dollar value of consolidated contract backlog, as of April 30, 2017, decreased 23.6% to $1.09 billion compared with $1.43 billion as of April 30, 2016.
  • For the quarter ended April 30, 2017, deliveries, including unconsolidated joint ventures, decreased 9.1% to 1,497 homes compared with 1,647 homes during the second quarter of fiscal 2016. Consolidated deliveries were 1,358 homes for the second quarter of fiscal 2017, a 15.0% decrease compared with 1,598 homes during the same quarter a year ago.
  • For the six months ended April 30, 2017, deliveries, including unconsolidated joint ventures, decreased 7.0% to 2,895, homes compared with 3,113 homes in the first half of the prior year. Consolidated deliveries were 2,648 homes in the first half of fiscal 2017, a 12.3% decrease compared with 3,020 homes in the same period in fiscal 2016.
  • The consolidated contract cancellation rate for the three months ended April 30, 2017 decreased to 18%, compared with 19% in the second quarter of the prior year. The contract cancellation rate, including unconsolidated joint ventures, for the second quarter of fiscal 2017 decreased to 19%, compared with 20% in the second quarter of fiscal 2016.
  • The valuation allowance was $628.0 million as of April 30, 2017. 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 APRIL 30, 2017:

  • Total liquidity at the end of the second quarter of fiscal 2017 was $284.3 million.
  • For the first time since the first quarter of fiscal 2016, total land position, including unconsolidated joint ventures, increased sequentially from 31,178 lots as of January 31, 2017 to 31,511 lots as of April 30, 2017. The total land position, including unconsolidated joint ventures, was 31,511 lots, consisting of 14,314 lots under option and 17,197 owned lots, as of April 30, 2017, compared with a total of 34,997 lots as of April 30, 2016.
  • In the second quarter of fiscal 2017, approximately 2,600 lots were put under option or acquired in 38 communities, including unconsolidated joint ventures.

COMMENTS FROM MANAGEMENT:

“Although adjusted homebuilding EBIT to inventory return metric is lower than historical levels for the entire industry, we are pleased that our adjusted homebuilding EBIT to inventory return metric continues to rank us in the top quartile when compared to our peers. We have a lot of opportunity for future upside,” concluded Mr. Hovnanian.

WEBCAST INFORMATION:

Hovnanian Enterprises will webcast its fiscal 2017 second quarter financial results conference call at 11:00 a.m. E.T. on Friday, June 2, 2017. 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 2016 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 (gain) on extinguishment of debt (“Adjusted EBITDA”) are not U.S. generally accepted accounting principles (GAAP) financial measures. The most directly comparable GAAP financial measure is net loss. The reconciliation 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 costs of sales interest expense and land charges, and homebuilding gross margin percentage, before costs 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 costs of sales interest expense and land charges, and homebuilding gross margin percentage, before costs 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 and Loss (Gain) on Extinguishment of Debt is a non-GAAP financial measure. The most directly comparable GAAP financial measure is Loss Before Income Taxes. The reconciliation for historical periods of Loss Before Income Taxes Excluding Land-Related Charges and Loss (Gain) on Extinguishment of Debt to Loss Before Income Taxes is presented in a table attached to this earnings release.

Adjusted Homebuilding EBIT to Inventory is defined as Adjusted Homebuilding EBIT for the last 12 months divided by the last five quarter average inventory, excluding inventory not owned and capitalized interest. Adjusted Homebuilding EBIT is a non-GAAP financial measure. The most directly comparable GAAP financial measure is net loss. The calculation of Adjusted Homebuilding EBIT to Inventory and the reconciliation for historical periods of Adjusted Homebuilding EBIT to net loss is presented in a table attached to this earnings release.

Total liquidity is comprised of $275.0 million of cash and cash equivalents, $1.7 million of restricted cash required to collateralize letters of credit and $7.6 million of availability under the unsecured revolving credit facility as of April 30, 2017.

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 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, 2016 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.
April 30, 2017
Statements of Consolidated Operations
(Dollars in Thousands, Except Per Share Data)
Three Months Ended Six Months Ended
April 30, April 30,
2017
2016
2017
2016
(Unaudited) (Unaudited)
Total Revenues$585,935 $654,723 $1,137,944 $1,230,328
Costs and Expenses (a) 588,830 670,981 1,146,496 1,258,300
(Loss) Gain on Extinguishment of Debt (242) - 7,404 -
Loss from Unconsolidated Joint Ventures (4,562) (1,346) (6,228) (2,826)
Loss Before Income Taxes (7,699) (17,604) (7,376) (30,798)
Income Tax Benefit (1,017) (9,143) (551) (6,164)
Net Loss$(6,682) $(8,461) $(6,825) $(24,634)
Per Share Data:
Basic:
Loss Per Common Share$(0.05) $(0.06) $(0.05) $(0.17)
Weighted Average Number of
Common Shares Outstanding (b) 147,558 147,334 147,556 147,301
Assuming Dilution:
Loss Per Common Share$(0.05) $(0.06) $(0.05) $(0.17)
Weighted Average Number of
Common Shares Outstanding (b) 147,558 147,334 147,556 147,301
(a) Includes inventory impairment loss and land option write-offs.
(b) For periods with a net loss, basic shares are used in accordance with GAAP rules.
Hovnanian Enterprises, Inc.
April 30, 2017
Reconciliation of Loss Before Income Taxes Excluding Land-Related Charges and Loss (Gain) on Extinguishment of Debt to Loss Before
Income Taxes
(Dollars in Thousands)
Three Months Ended Six Months Ended
April 30, April 30,
2017
2016
2017
2016
(Unaudited) (Unaudited)
Loss Before Income Taxes$(7,699) $(17,604) $(7,376) $(30,798)
Inventory Impairment Loss and Land Option Write-Offs 1,953 9,669 5,137 21,350
Loss (Gain) on Extinguishment of Debt 242 - (7,404) -
Loss Before Income Taxes Excluding Land-Related Charges and
Loss (Gain) on Extinguishment of Debt (a)$(5,504) $(7,935) $(9,643) $(9,448)
(a) Loss Before Income Taxes Excluding Land-Related Charges and Loss (Gain) on Extinguishment of Debt is a non-GAAP financial
measure. The most directly comparable GAAP financial measure is Loss Before Income Taxes.



Hovnanian Enterprises, Inc.
April 30, 2017
Gross Margin
(Dollars in Thousands)
Homebuilding Gross Margin Homebuilding Gross Margin
Three Months Ended Six Months Ended
April 30, April 30,
2017
2016
2017
2016
(Unaudited) (Unaudited)
Sale of Homes$567,553 $626,157 $1,098,968 $1,182,932
Cost of Sales, Excluding Interest Expense (a) 473,980 525,442 913,897 989,588
Homebuilding Gross Margin, Before Cost of Sales Interest
Expense and Land Charges (b) 93,573 100,715 185,071 193,344
Cost of Sales Interest Expense, Excluding Land
Sales Interest Expense 20,313 21,340 36,887 38,183
Homebuilding Gross Margin, After Cost of Sales Interest
Expense, Before Land Charges (b) 73,260 79,375 148,184 155,161
Land Charges 1,953 9,669 5,137 21,350
Homebuilding Gross Margin$71,307 $69,706 $143,047 $133,811
Gross Margin Percentage 12.6% 11.1% 13.0% 11.3%
Gross Margin Percentage, Before Cost of Sales Interest
Expense and Land Charges (b) 16.5% 16.1% 16.8% 16.3%
Gross Margin Percentage, After Cost of Sales Interest
Expense, Before Land Charges (b) 12.9% 12.7% 13.5% 13.1%
Land Sales Gross MarginLand Sales Gross Margin
Three Months Ended Six Months Ended
April 30, April 30,
2017
2016
2017
2016
(Unaudited) (Unaudited)
Land and Lot Sales$2,711 $11,154 $9,712 $11,154
Cost of Sales, Excluding Interest and Land Charges (a) 1,460 10,608 6,570 10,608
Land and Lot Sales Gross Margin, Excluding Interest
and Land Charges 1,251 546 3,142 546
Land and Lot Sales Interest 24 104 1,772 104
Land and Lot Sales Gross Margin, Including Interest and
Excluding Land Charges$1,227 $442 $1,370 $442
(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 Condensed Consolidated Statements of Operations.
(b) 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.



Hovnanian Enterprises, Inc.
April 30, 2017
Reconciliation of Adjusted EBITDA to Net Loss
(Dollars in Thousands)
Three Months Ended Six Months Ended
April 30, April 30,
2017
2016
2017
2016
(Unaudited) (Unaudited)
Net Loss$(6,682) $(8,461) $(6,825) $(24,634)
Income Tax Benefit (1,017) (9,143) (551) (6,164)
Interest Expense 42,634 45,528 83,583 83,596
EBIT (a) 34,935 27,924 76,207 52,798
Depreciation 1,071 864 2,083 1,729
Amortization of Debt Costs - 1,227 1,632 2,610
EBITDA (b) 36,006 30,015 79,922 57,137
Inventory Impairment Loss and Land Option Write-offs 1,953 9,669 5,137 21,350
Loss (Gain) on Extinguishment of Debt 242 - (7,404) -
Adjusted EBITDA (c)$38,201 $39,684 $77,655 $78,487
Interest Incurred$39,156 $44,224 $77,855 $86,183
Adjusted EBITDA to Interest Incurred 0.98 0.90 1.00 0.91
(a) EBIT is a non-GAAP financial measure. The most directly comparable GAAP financial measure is net loss. EBIT represents earnings
before interest expense and income taxes.
(b) EBITDA is a non-GAAP financial measure. The most directly comparable GAAP financial measure is net loss. EBITDA represents
earnings before interest expense, income taxes, depreciation and amortization.
(c) Adjusted EBITDA is a non-GAAP financial measure. The most directly comparable GAAP financial measure is net loss. Adjusted
EBITDA represents earnings before interest expense, income taxes, depreciation, amortization, inventory impairment loss and land option
write-offs and loss (gain) on extinguishment of debt.
Hovnanian Enterprises, Inc.
April 30, 2017
Interest Incurred, Expensed and Capitalized
(Dollars in Thousands)
Three Months Ended Six Months Ended
April 30, April 30,
2017
2016
2017
2016
(Unaudited) (Unaudited)
Interest Capitalized at Beginning of Period$94,438 $117,113 $96,688 $123,898
Plus Interest Incurred 39,156 44,224 77,855 86,183
Less Interest Expensed (a) 42,634 45,528 83,583 83,596
Less Interest Contributed to Unconsolidated Joint Venture (a) - - - 10,676
Interest Capitalized at End of Period (b)$90,960 $115,809 $90,960 $115,809
(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 Condensed 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.
April 30, 2017
Reconciliation of Adjusted Homebuilding EBIT to Inventory
(Dollars in Thousands)
(Unaudited)
For the Three Months Ended
LTM(a)4/30/20171/31/201710/31/20167/31/2016
Homebuilding:
Net (Loss) Income$ 14,990 $ (6,682)$(143)$22,289 $(474)
Income Tax Benefit (Provision) 10,868 (1,017) 466 9,852 1,567
Interest Expense 183,345 42,634 40,949 48,197 51,565
EBIT (b) 209,203 34,935 41,272 80,338 52,658
Financial Services Revenue (64,731) (14,494) (12,849) (20,903) (16,485)
Financial Services Expense 33,526 7,360 6,855 10,395 8,916
Homebuilding EBIT (b) 177,998 27,801 35,278 69,830 45,089
Inventory Impairment loss and land option write-offs 17,140 1,953 3,184 10,438 1,565
Other Operations 3,835 (95) 1,587 1,386 957
Loss (Gain) on Extinguishment of Debt (4,204) 242 (7,646) 3,200 -
Loss (Income) from Unconsolidated Joint Ventures 7,748 4,562 1,666 (881) 2,401
Adjusted Homebuilding EBIT (b)$ 202,517 $ 34,463 $ 34,069 $ 83,973 $ 50,012
As of
4/30/20171/31/201710/31/20167/31/20164/30/2016
Total Inventories $1,209,212 $1,293,426 $1,283,084 $1,466,754 $1,676,136
Consolidated Inventory Not Owned 154,620 171,572 208,701 280,728 312,841
Capitalized Interest 90,960 94,438 96,688 104,544 115,809
Five Quarter Average
Inventories less Consolidated Inventory Not Owned and Capitalized Interest$1,059,542 $963,632 $1,027,416 $977,695 $1,081,482 $1,247,486
Adjusted Homebuilding EBIT to Inventory 19.1%
(a) Represents the aggregation of each of the prior four fiscal quarters.
(b) EBIT, Homebuilding EBIT and Adjusted Homebuilding EBIT are non-GAAP financial measures. The most directly comparable GAAP financial measure is net (income) loss.



HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
April 30,
2017
October 31,
2016
(Unaudited) (1)
ASSETS
Homebuilding:
Cash and cash equivalents $275,011 $339,773
Restricted cash and cash equivalents 1,797 3,914
Inventories:
Sold and unsold homes and lots under development 892,401 899,082
Land and land options held for future development or sale 162,191 175,301
Consolidated inventory not owned 154,620 208,701
Total inventories 1,209,212 1,283,084
Investments in and advances to unconsolidated joint ventures 106,704 100,502
Receivables, deposits and notes, net 37,683 49,726
Property, plant and equipment, net 52,987 50,332
Prepaid expenses and other assets 46,212 46,762
Total homebuilding 1,729,606 1,874,093
Financial services cash and cash equivalents 5,776 6,992
Financial services other assets 113,762 190,238
Income taxes receivable – including net deferred tax benefits 284,452 283,633
Total assets $2,133,596 $2,354,956
LIABILITIES AND EQUITY
Homebuilding:
Nonrecourse mortgages secured by inventory, net of debt issuance costs $66,365 $82,115
Accounts payable and other liabilities 311,958 369,228
Customers’ deposits 40,321 37,429
Nonrecourse mortgages secured by operating properties 13,675 14,312
Liabilities from inventory not owned, net of debt issuance costs 116,728 150,179
Revolving credit facility 52,000 52,000
Notes payable and term loan, net of discount and debt issuance costs 1,569,375 1,605,758
Total homebuilding 2,170,422 2,311,021
Financial services 97,077 172,445
Total liabilities 2,267,499 2,483,466
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, 2017 and at October 31, 2016
135,299 135,299
Common stock, Class A, $0.01 par value – authorized 400,000,000 shares; issued 143,876,014
shares at April 30, 2017 and 143,806,775 shares at October 31, 2016
1,439 1,438
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 April 30, 2017 and 15,942,809 shares at October 31, 2016
159 159
Paid in capital – common stock 707,568 706,137
Accumulated deficit (863,008) (856,183)
Treasury stock – at cost - 11,760,763 shares of Class A common stock and 691,748 shares of Class
B common stock at April 30, 2017 and October 31, 2016
(115,360) (115,360)
Total stockholders’ equity deficit (133,903) (128,510)
Total liabilities and equity $2,133,596 $2,354,956
(1) Derived from the audited balance sheet as of October 31, 2016.



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,
2017 2016 2017 2016
Revenues:
Homebuilding:
Sale of homes $567,553 $626,157 $1,098,968 $1,182,932
Land sales and other revenues 3,888 11,563 11,633 12,167
Total homebuilding 571,441 637,720 1,110,601 1,195,099
Financial services 14,494 17,003 27,343 35,229
Total revenues 585,935 654,723 1,137,944 1,230,328
Expenses:
Homebuilding:
Cost of sales, excluding interest 475,440 536,050 920,467 1,000,196
Cost of sales interest 20,337 21,444 38,659 38,287
Inventory impairment loss and land option write-offs 1,953 9,669 5,137 21,350
Total cost of sales 497,730 567,163 964,263 1,059,833
Selling, general and administrative 45,467 56,371 89,875 103,875
Total homebuilding expenses 543,197 623,534 1,054,138 1,163,708
Financial services 7,360 9,618 14,215 17,833
Corporate general and administrative 16,071 12,598 31,727 28,919
Other interest 22,297 24,084 44,924 45,309
Other operations (95) 1,147 1,492 2,531
Total expenses 588,830 670,981 1,146,496 1,258,300
(Loss) gain on extinguishment of debt (242) - 7,404 -
Loss from unconsolidated joint ventures (4,562) (1,346) (6,228) (2,826)
Loss before income taxes (7,699) (17,604) (7,376) (30,798)
State and federal income tax (benefit) provision:
State 2,292 (758) 2,274 3,561
Federal (3,309) (8,385) (2,825) (9,725)
Total income taxes (1,017) (9,143) (551) (6,164)
Net loss $(6,682) $(8,461) $(6,825) $(24,634)
Per share data:
Basic:
Loss per common share $(0.05) $(0.06) $(0.05) $(0.17)
Weighted-average number of common shares outstanding 147,558 147,334 147,556 147,301
Assuming dilution:
Loss per common share $(0.05) $(0.06) $(0.05) $(0.17)
Weighted-average number of common shares outstanding 147,558 147,334 147,556 147,301



HOVNANIAN ENTERPRISES, INC.
(DOLLARS IN THOUSANDS EXCEPT AVG. PRICE)
(SEGMENT DATA EXCLUDES UNCONSOLIDATED JOINT VENTURES)
(UNAUDITED)Communities Under Development
Three Months -April 30, 2017
Net ContractsDeliveriesContract
Three Months EndedThree Months EndedBacklog
Apr 30,Apr 30,Apr 30,
20172016% Change20172016% Change20172016% Change
Northeast
(NJ, PA)Home 66 142(53.5)% 99 108(8.3)% 150 268(44.0)%
Dollars$29,918$74,727(60.0)%$45,917$53,913(14.8)%$68,650$135,164(49.2)%
Avg. Price$453,300$526,248(13.9)%$463,805$499,194(7.1)%$457,667$504,343(9.3)%
Mid-Atlantic
(DE, MD, VA, WV)Home 226 285(20.7)% 202 1944.1% 440 598(26.4)%
Dollars$123,045$150,369(18.2)%$100,120$89,87311.4%$273,986$336,358(18.5)%
Avg. Price$544,445$527,6093.2%$495,647$463,2627.0%$622,696$562,47210.7%
Midwest(2)
(IL, MN, OH) Home 196 216(9.3)% 134 239(43.9)% 431 554(22.2)%
Dollars$61,489$69,445(11.5)%$41,794$76,793(45.6)%$126,138$162,671(22.5)%
Avg. Price$313,721$321,503(2.4)%$311,896$321,312(2.9)%$292,663$293,630(0.3)%
Southeast(3)
(FL, GA, NC, SC) Home 141 205(31.2)% 127 156(18.6)% 316 425(25.6)%
Dollars$55,577$84,665(34.4)%$54,005$51,2305.4%$136,807$190,435(28.2)%
Avg. Price$394,159$412,996(4.6)%$425,235$328,39629.5%$432,935$448,083(3.4)%
Southwest
(AZ, TX)Home 671 731(8.2)% 639 733(12.8)% 749 1,041(28.0)%
Dollars$227,500$262,344(13.3)%$224,898$273,304(17.7)%$275,870$416,205(33.7)%
Avg. Price$339,047$358,884(5.5)%$351,954$372,857(5.6)%$368,317$399,812(7.9)%
West
(CA)Home 290 23324.5% 157 168(6.5)% 418 34222.2%
Dollars$142,522$126,50512.7%$100,819$81,04424.4%$211,215$188,85911.8%
Avg. Price$491,454$542,944(9.5)%$642,158$482,40433.1%$505,299$552,218(8.5)%
Consolidated Segment Total
Home 1,590 1,812(12.3)% 1,358 1,598(15.0)% 2,504 3,228(22.4)%
Dollars$640,051$768,055(16.7)%$567,553$626,157(9.4)%$1,092,666$1,429,692(23.6)%
Avg. Price$402,547$423,871(5.0)%$417,933$391,8386.7%$436,368$442,903(1.5)%
Unconsolidated Joint Ventures(4)
Home 158 50216.0% 139 49183.7% 310 22537.8%
Dollars$87,317$21,236311.2%$86,215$25,576237.1%$174,325$147,37618.3%
Avg. Price$552,641$424,72030.1%$620,248$521,95918.8%$562,337$655,004(14.1)%
Grand Total
Home 1,748 1,862(6.1)% 1,497 1,647(9.1)% 2,814 3,453(18.5)%
Dollars$727,368$789,291(7.8)% $1,266,991$1,577,068(19.7)%
Avg. Price$416,114$423,894(1.8)% $450,246$456,724(1.4)%
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 16 homes and $7.0 million for the three months ended April 30, 2016 from Minneapolis, MN.
(3) The Southeast net contracts include 24 homes and $9.9 million for the three months ended April 30, 2016 from Raleigh, NC.
(4) 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 “Loss from unconsolidated joint ventures”.



HOVNANIAN ENTERPRISES, INC.
(DOLLARS IN THOUSANDS EXCEPT AVG. PRICE)
(SEGMENT DATA EXCLUDES UNCONSOLIDATED JOINT VENTURES)
(UNAUDITED) Communities Under Development
Six Months -April 30, 2017
Net ContractsDeliveriesContract
Six Months EndedSix Months EndingBacklog
Apr 30,Apr 30,Apr 30,
20172016% Change20172016% Change20172016% Change
Northeast
(NJ, PA)Home 149 234(36.3)% 203 259(21.6)% 150 268(44.0)%
Dollars$67,963$114,511(40.6)%$98,824$126,351(21.8)%$68,650$135,164(49.2)%
Avg. Price$456,124$489,363(6.8)%$486,819$487,841(0.2)%$457,667$504,343(9.3)%
Mid-Atlantic
(DE, MD, VA, WV)Home 416 545(23.7)% 406 4001.5% 440 598(26.4)%
Dollars$225,291$280,685(19.7)%$200,279$183,4259.2%$273,986$336,358(18.5)%
Avg. Price$541,564$515,0175.2%$493,297$458,5627.6%$622,696$562,47210.7%
Midwest(2)
(IL, MN, OH) Home 341 423(19.4)% 284 513(44.6)% 431 554(22.2)%
Dollars$107,055$137,014(21.9)%$85,445$168,633(49.3)%$126,138$162,671(22.5)%
Avg. Price$313,946$323,911(3.1)%$300,863$328,720(8.5)%$292,663$293,630(0.3)%
Southeast(3)
(FL, GA, NC, SC) Home 249 418(40.4)% 265 272(2.6)% 316 425(25.6)%
Dollars$102,028$174,924(41.7)%$110,391$90,42422.1%$136,807$190,435(28.2)%
Avg. Price$409,750$418,478(2.1)%$416,569$332,44325.3%$432,935$448,083(3.4)%
Southwest
(AZ, TX)Home 1,156 1,291(10.5)% 1,170 1,283(8.8)% 749 1,041(28.0)%
Dollars$398,384$470,986(15.4)%$408,158$477,493(14.5)%$275,870$416,205(33.7)%
Avg. Price$344,623$364,823(5.5)%$348,854$372,169(6.3)%$368,317$399,812(7.9)%
West
(CA)Home 452 4324.6% 320 2939.2% 418 34222.2%
Dollars$226,945$218,5783.8%$195,871$136,60643.4%$211,215$188,85911.8%
Avg. Price$502,090$505,969(0.8)%$612,096$466,23131.3%$505,299$552,218(8.5)%
Consolidated Segment Total
Home 2,763 3,343(17.3)% 2,648 3,020(12.3)% 2,504 3,228(22.4)%
Dollars$1,127,666$1,396,698(19.3)%$1,098,968$1,182,932(7.1)%$1,092,666$1,429,692(23.6)%
Avg. Price$408,131$417,798(2.3)%$415,018$391,6996.0%$436,368$442,903(1.5)%
Unconsolidated Joint Ventures(4)
Home 297 111167.6% 247 93165.6% 310 22537.8%
Dollars$167,617$61,057174.5%$150,856$45,763229.6%$174,325$147,37618.3%
Avg. Price$564,368$550,0612.6%$610,753$492,07424.1%$562,337$655,004(14.1)%
Grand Total
Home 3,060 3,454(11.4)% 2,895 3,113(7.0)% 2,814 3,453(18.5)%
Dollars$1,295,283$1,457,755(11.1)% $1,266,991$1,577,068(19.7)%
Avg. Price$423,295$422,0480.3% $450,246$456,724(1.4)%
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 61 homes and $25.5 million for the six months ended April 30, 2016 from Minneapolis, MN.
(3) The Southeast net contracts include 70 homes and $23.7 million for the six months ended April 30, 2016 from Raleigh, NC.
(4) 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 “Loss from unconsolidated joint ventures”.



HOVNANIAN ENTERPRISES, INC.
(DOLLARS IN THOUSANDS EXCEPT AVG. PRICE)
(SEGMENT DATA UNCONSOLIDATED JOINT VENTURES)
(UNAUDITED) Communities Under Development
Three Months - April 30, 2017
Net ContractsDeliveriesContract
Three Months EndedThree Months EndedBacklog
Apr 30,Apr 30,Apr 30,
20172016% Change20172016% Change20172016% Change
Northeast
(unconsolidated joint ventures)Home 27 (3)n/a% 6 60.0% 67 26157.7%
(NJ, PA)Dollars$16,379$(3,683)n/a%$2,945$1,64079.6%$34,032$9,604254.4%
Avg. Price$606,630$(1,227,667)n/a%$490,833$273,33379.6%$507,940
$369,38537.5%
Mid-Atlantic
(unconsolidated joint ventures)Home 13 18(27.8)% 18 9100.0% 42 2661.5%
(DE, MD, VA, WV)Dollars$6,337$7,990(20.7)%$11,411$5,466108.8%$29,252$11,086163.9%
Avg. Price$487,462$443,8899.8%$633,944$607,3274.4
%$696,478$426,38563.3%
Midwest
(unconsolidated joint ventures)Home 17 -n/a% 4 -
n/a% 28 -
n/a%
(IL, MN, OH) Dollars$12,765$-
n/a%$2,978$-
n/a%$20,986$-n/a%
Avg. Price$750,882$-
n/a%$744,514$-
n/a%$749,500$-n/a%
Southeast
(unconsolidated joint ventures)Home 40 16150.0% 42 -
n/a% 97 31212.9%
(FL, GA, NC, SC) Dollars$16,866$9,75872.8%$19,551$-n/a%$48,077$19,123151.4%
Avg. Price$421,650$609,875(30.9)%$465,497$-n/a%$495,640$616,871(19.7)%
Southwest
(unconsolidated joint ventures)Home 10 -n/a% 2 -n/a% 27 -n/a%
(AZ, TX)Dollars$7,124$-n/a%$1,353$-n/a%$18,914$-n/a%
Avg. Price$712,400$-
n/a%$676,282$-n/a%$700,519$-n/a%
West
(unconsolidated joint ventures)Home 51 19168.4% 67 3497.1% 49 142(65.5)%
(CA)Dollars$27,846$7,171288.3%$47,977$18,470159.8%$23,064$107,563(78.6)%
Avg. Price$546,000$377,42144.7%$716,060$543,23531.8%$470,694$757,486(37.9)%
Unconsolidated Joint Ventures(2)
Home 158 50216.0% 139 49183.7% 310 22537.8%
Dollars$87,317$21,236311.2%$86,215$25,576237.1%$174,325$147,37618.3%
Avg. Price$552,641$424,72030.1%$620,248$521,95918.8%$562,337$655,004(14.1)%
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) 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 “Loss from unconsolidated joint ventures”.



HOVNANIAN ENTERPRISES, INC.
(DOLLARS IN THOUSANDS EXCEPT AVG. PRICE)
(SEGMENT DATA UNCONSOLIDATED JOINT VENTURES)
(UNAUDITED) Communities Under Development
Six Months - April 30, 2017
Net ContractsDeliveriesContract
Six Months EndedSix Months EndedBacklog
Apr 30,Apr 30,Apr 30,
20172016% Change20172016% Change20172016% Change
Northeast
(unconsolidated joint ventures)Home 52 (8)n/a% 12 14(14.3)% 67 26157.7%
(NJ, PA)Dollars$28,454$(7,973)n/a%$4,685$3,89620.3%$34,032$9,604254.4%
Avg. Price$547,192$996,622n/a%$390,378$278,28640.3%$507,940$369,38537.5%
Mid-Atlantic
(unconsolidated joint ventures)Home 30 31(3.2)% 28 1947.4% 42 2661.5%
(DE, MD, VA, WV)Dollars$15,764$14,4139.4%$16,601$11,13549.1%$29,252$11,086163.9%
Avg. Price$525,470$464,93613.0%$592,893$586,0531.2%$696,478$426,38563.3%
Midwest
(unconsolidated joint ventures)Home 27 -
n/a% 11 -
n/a% 28 -
n/a%
(IL, MN, OH) Dollars$19,992$-n/a%$8,594$-n/a%$20,986$-n/a%
Avg. Price$740,444$-n/a%$781,272$-n/a%$749,500$-n/a%
Southeast
(unconsolidated joint ventures)Home 75 23226.1% 66 1n/a% 97 31212.9%
(FL, GA, NC, SC) Dollars$33,745$14,584131.4%$29,390$385n/a%$48,077$19,123151.4%
Avg. Price$449,934$634,092(29.0)%$445,303$385,00015.7%$495,640$616,871(19.7)%
Southwest
(unconsolidated joint ventures)Home 22 -n/a% 2 -n/a% 27 -n/a%
(AZ, TX)Dollars$15,790$-n/a%$1,353$-n/a%$18,914$-n/a%
Avg. Price$717,723$-n/a%$676,500$-n/a%$700,519$-n/a%
West
(unconsolidated joint ventures)Home 91 6540.0% 128 59116.9% 49 142(65.5)%
(CA)Dollars$53,872$40,03334.6%$90,233$30,347197.3%$23,064$107,563(78.6)%
Avg. Price$592,004$615,887(3.9)%$704,941$514,35937.1%$470,694$757,486(37.9)%
Unconsolidated Joint Ventures(2)
Home 297 111167.6% 247 93165.6% 310 22537.8%
Dollars$167,617$61,057174.5%$150,856$45,763229.6%$174,325$147,37618.3%
Avg. Price$564,368$550,0612.6%$610,753$492,07424.1%$562,337$655,004(14.1)%
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) 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 “Loss from unconsolidated joint ventures”.

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