Hovnanian Enterprises Reports Fiscal 2019 Third Quarter Results

Date : 09/05/2019 @ 1:15PM
Source : GlobeNewswire Inc.
Stock : Hovnanian Enterprises Inc (HOV)
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Hovnanian Enterprises Reports Fiscal 2019 Third Quarter Results

Hovnanian Enterprises (NYSE:HOV)
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3 Months : From Aug 2019 to Nov 2019

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Hovnanian Enterprises, Inc. (NYSE: HOV), a leading national homebuilder, reported results for its fiscal third quarter and the nine-month period ended July 31, 2019.

RESULTS FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED JULY 31, 2019:

  • Total revenues increased 5.5% to $482.0 million in the third quarter of fiscal 2019, compared with $456.7 million in the third quarter of fiscal 2018. For the nine months ended July 31, 2019, total revenues decreased to $1.30 billion compared with $1.38 billion in the same period during the prior fiscal year. 
  • Homebuilding revenues for unconsolidated joint ventures was $121.2 million for the third quarter ended July 31, 2019, compared with $194.5 million in last year’s third quarter. During the first nine months of fiscal 2019, homebuilding revenues for unconsolidated joint ventures was $342.7 million compared with $350.0 million in the same period during the previous year. 
  • Homebuilding gross margin percentage, after cost of sales interest expense and land charges, was 14.0% for the third quarter of fiscal 2019 compared with 15.4% during the prior year’s third quarter. For the nine months ended July 31, 2019, homebuilding gross margin percentage, after cost of sales interest expense and land charges, was 14.0% compared with 14.6% last year. 
  • Homebuilding gross margin percentage, before cost of sales interest expense and land charges, was 18.4% for both the third quarter of fiscal 2019 and the third quarter of fiscal 2018. During the first nine months of fiscal 2019, homebuilding gross margin percentage, before cost of sales interest expense and land charges, was 17.7% compared with 18.0% in the same period of the previous fiscal year. 
  • Total SG&A was $58.5 million, or 12.1% of total revenues, in the third quarter of fiscal 2019 compared with $53.9 million, or 11.8% of total revenues, in the same quarter one year ago. For the first nine months of fiscal 2019, total SG&A was $179.3 million, or 13.8% of total revenues, compared with $178.0 million, or 12.9% of total revenues, in the same period of the prior fiscal year. 
  • Total interest expense was $41.4 million in the third quarter of fiscal 2019 compared with $38.3 million in the third quarter of fiscal 2018. Total interest expense was $110.5 million for the first nine months of fiscal 2019 compared with $125.2 million for the same period in fiscal 2018. 
  • Interest incurred (some of which was expensed and some of which was capitalized) was $42.1 million for the third quarter of fiscal 2019 compared with $40.4 million in the same quarter one year ago. For the nine months ended July 31, 2019, interest incurred (some of which was expensed and some of which was capitalized) was $122.3 million compared with $121.6 million last year. 
  • Income from unconsolidated joint ventures was $3.7 million for the quarter ended July 31, 2019 compared with $10.7 million in the third quarter of the previous year. For the first nine months of fiscal 2019, income from unconsolidated joint ventures was $20.6 million compared with $6.9 million in the same period a year ago. 
  • Loss before income taxes for the quarter ended July 31, 2019 was $7.1 million compared with income of $0.1 million during the third quarter of fiscal 2018. For the first nine months of fiscal 2019, the loss before income taxes was $39.1 million compared with a loss of $40.0 million during same period of fiscal 2018. 
  • Net loss was $7.6 million, or $1.27 per common share, in the third quarter of fiscal 2019 compared with a net loss of $1.0 million, or $0.18 per common share, during the same quarter a year ago. For the first nine months of fiscal 2019, net loss was $40.3 million, or $6.76 per common share, compared with a net loss of $41.7 million, or $7.03 per common share, in the same period during fiscal 2018. 
  • Consolidated contracts per community increased 10.0% to 11.0 contracts per community for the third quarter of fiscal 2019 compared with 10.0 contracts per community in the third quarter of fiscal 2018. Contracts per community, including domestic unconsolidated joint ventures(1), increased 3.9% to 10.6 contracts per community for the quarter ended July 31, 2019 compared with 10.2 contracts per community, including domestic unconsolidated joint ventures, in last year’s third quarter. 
  • The consolidated community count was 138 as of July 31, 2019. This was a 12.2% year-over-year increase from 123 communities at the end of the prior year’s third quarter. As of the end of the third quarter of fiscal 2019, community count, including domestic unconsolidated joint ventures, was 159 communities. This was a 12.0% year-over-year increase compared with 142 communities at July 31, 2018. 
  • The number of consolidated contracts increased 22.6% to 1,515 homes, during the third quarter of fiscal 2019, compared with 1,236 homes during the third quarter of fiscal 2018. The number of contracts, including domestic unconsolidated joint ventures, for the third quarter ended July 31, 2019, increased 16.6% to 1,690 homes from 1,449 homes for the same quarter last year. 
  • The number of consolidated contracts increased 8.9% to 3,995 homes, during the nine-month period ended July 31, 2019, compared with 3,667 homes in the same period of the previous fiscal year. During the first nine months of fiscal 2019, the number of contracts, including domestic unconsolidated joint ventures, was 4,497 homes, an increase of 3.0% from 4,368 homes during the same period in fiscal 2018. 
  • For August 2019, consolidated contracts per community were 3.2 compared with 2.6 for the same month one year ago. During August 2019, the number of consolidated contracts increased 37.8% to 445 homes from 323 homes in August 2018.  
  • The dollar value of consolidated contract backlog, as of July 31, 2019, increased 11.4% to $1.05 billion compared with $946.5 million as of July 31, 2018. The dollar value of contract backlog, including domestic unconsolidated joint ventures, as of July 31, 2019, was $1.28 billion, a decrease of 2.4% compared with $1.31 billion as of July 31, 2018. 
  • Consolidated deliveries were 1,185 homes for the third quarter of fiscal 2019, a 3.8% increase compared with 1,142 homes during the same quarter a year ago. For the quarter ended July 31, 2019, deliveries, including domestic unconsolidated joint ventures, decreased 3.5% to 1,377 homes compared with 1,427 homes during the third quarter of fiscal 2018. 
  • Consolidated deliveries were 3,237 homes in the first nine months of fiscal 2019, a 4.3% decrease compared with 3,382 homes in the same period in fiscal 2018. For the nine months ended July 31, 2019, deliveries, including domestic unconsolidated joint ventures, decreased 4.3% to 3,772 homes compared with 3,940 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 both the three months ended July 31, 2019 and the same quarter in fiscal 2018.

(1)When we refer to “Domestic Unconsolidated Joint Ventures”, we are excluding results from our single community unconsolidated joint venture in the Kingdom of Saudi Arabia (KSA).

LIQUIDITY AND INVENTORY AS OF JULY 31, 2019:

  • Total liquidity at the end of the of the third quarter of fiscal 2019 was $225.1 million. 
  • In the third quarter of fiscal 2019, approximately 2,100 lots were put under option or acquired in 30 communities, including unconsolidated joint ventures. 
  • As of July 31, 2019, consolidated lots controlled totaled 29,821; which, based on trailing twelve-month deliveries, equaled a 6.3 years supply.

COMMENTS FROM MANAGEMENT: “During the third quarter of fiscal 2019, we continued to make progress towards our growth objectives. We achieved year-over-year growth in total revenues, contracts, community count, contracts per community and contract backlog. Further, we saw a sequential increase in our gross margin, before cost of sales interest expense and land charges, to 18.4% in the third quarter of fiscal 2019 from 16.9% in the second quarter of fiscal 2019,” stated Ara K. Hovnanian, Chairman of the Board, President and Chief Executive Officer. “The improvements we experienced in these metrics are a solid indicator that we are moving in the right direction.” “Given our pipeline of future community openings, we expect our community count to increase in the fourth quarter of fiscal 2019. We continue to believe that our strategy of using options to control a significant majority of our lots is a strong risk mitigator should housing demand fluctuate in the future. 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 to achieve pretax profitability for the full 2019 fiscal year,” concluded Mr. Hovnanian. WEBCAST INFORMATION:

Hovnanian Enterprises will webcast its fiscal 2019 third quarter financial results conference call at 11:00 a.m. E.T. on Thursday, September 5, 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 name K. HovnanianÒ Homes. Additionally, the Company’s subsidiaries, as developers of K. Hovnanian’sÒ 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.

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

Total liquidity is comprised of $83.6 million of cash and cash equivalents, $16.5 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 July 31, 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)

 
Hovnanian Enterprises, Inc.
July 31, 2019
Statements of consolidated operations
(In thousands, except per share data
    Three Months EndedNine Months Ended
    July 31, July 31,
     2019   2018   2019   2018 
                   
                   
      
      
      
      
    (Unaudited)(Unaudited)
      
Total revenues$482,041   $456,712   $1,303,326   $1,376,422 
Costs and expenses (1)  492,847    463,100    1,362,964    1,417,586 
Loss on extinguishment of debt   -     (4,266)     (5,706)
Income from unconsolidated joint ventures 3,742   10,732   20,556     6,899 
(Loss) income before income taxes   (7,064)   78    (39,082)   (39,971)
Income tax provision 537     1,104     1,228     1,687 
Net (loss)$(7,601) $(1,026) $(40,310) $(41,658)
 
Per share data:       
Basic and assuming dilution:       
 Net (loss) per common share$(1.27) $(0.18) $(6.76) $(7.03)
 Weighted average number of       
  common shares outstanding (2) 5,971     5,947     5,964     5,935 
           
(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.
July 31, 2019
Reconciliation of (loss) before income taxes excluding land-related charges, joint venture write-downs and loss on extinguishment of debt to (loss) income before income taxes
           
(In thousands)       
           
    Three Months Ended Nine Months Ended
    July 31, July 31,
     2019   2018   2019   2018 
       
    (Unaudited) (Unaudited)
(Loss) income before income taxes$(7,064) $78  $(39,082) $(39,971)
Inventory impairment loss and land option write-offs 1,435    96     3,601     3,183 
Unconsolidated joint venture investment write-downs 854    -      854     660 
Loss on extinguishment of debt   -      4,266        5,706 
(Loss) income before income taxes excluding land-related charges, joint venture write-downs and loss on extinguishment of debt (1)$(4,775) $4,440  $(34,627) $(30,422)
 
(1) (Loss) income 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) income before income taxes.

 
Hovnanian Enterprises, Inc.
July 31, 2019
Gross margin
(In thousands)
  Homebuilding Gross Margin Homebuilding Gross Margin Homebuilding Gross Margin
  Three Months Ended Nine Months Ended Three Months Ended
  July 31, July 31, April 30, (3)
   2019   2018   2019   2018   2019 
       
       
  (Unaudited) (Unaudited) (Unaudited)
Sale of homes $467,849  $442,859  $1,257,536  $1,312,553  $427,552 
Cost of sales, excluding interest expense and land charges (1)   381,906     361,303    1,034,953     1,076,132   355,477 
Homebuilding gross margin, before cost of sales interest expense and land charges (2)  85,943    81,556    222,583     236,421   72,075 
Cost of sales interest expense, excluding land sales interest expense  18,824    13,424   42,964    41,025   13,898 
Homebuilding gross margin, after cost of sales interest expense, before land charges (2)  67,119    68,132    179,619     195,396   58,177 
Land charges    1,435     96     3,601   3,183   1,462 
Homebuilding gross margin $65,684  $68,036  $176,018  $192,213  $56,715 
           
Gross margin percentage  14.0%  15.4%  14.0%  14.6%  13.3%
Gross margin percentage, before cost of sales interest expense and land charges (2)  18.4%  18.4%  17.7%  18.0%  16.9%
Gross margin percentage, after cost of sales interest expense, before land charges (2)  14.3%  15.4%  14.3%  14.9%  13.6%
           
           
  Land Sales Gross Margin Land Sales Gross Margin  
  Three Months Ended Nine Months Ended  
  July 31, July 31,  
   2019   2018   2019   2018   
       
  (Unaudited) (Unaudited)  
Land and lot sales $542    $-   $8,050   $20,505    
Land and lot cost of sales, excluding interest and land charges (1)   33     -      7,390    7,710    
Land and lot sales gross margin, excluding interest and land charges    509     -      660     12,795    
Land and lot sales interest    205     -      205    4,055    
Land and lot sales gross margin, including interest and excluding land charges $304    $-   $455   $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.
  (3) Second quarter gross margin reconciliation included because it is referenced in the “Comments from Management” section of the press release.

Hovnanian Enterprises, Inc.
July 31, 2019
Reconciliation of adjusted EBITDA to net (loss)
(In thousands)
 Three Months Ended Nine Months Ended
 July 31, July 31,
    
  2019   2018   2019   2018 
                
                
                
    
    
    
    
    
 (Unaudited) (Unaudited)
Net (loss)$(7,601) $(1,026) $(40,310) $(41,658)
Income tax provision 537   1,104   1,228   1,687 
Interest expense 41,406   38,283   110,482   125,158 
EBIT (1) 34,342   38,361   71,400   85,187 
Depreciation and amortization 1,004   811   2,942   2,320 
EBITDA (2) 35,346   39,172   74,342   87,507 
Inventory impairment loss and land option write-offs 1,435   96   3,601   3,183 
Loss on extinguishment of debt  -     4,266      5,706 
Adjusted EBITDA (3)$36,781  $43,534  $77,943  $96,396 
        
Interest incurred$42,104  $40,438  $122,340  $121,617 
        
Adjusted EBITDA to interest incurred 0.87   1.08   0.64   0.79 
 
 
 
(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.
July 31, 2019
Interest incurred, expensed and capitalized
(In thousands)
 Three Months Ended Nine Months Ended
 July 31, July 31,
  2019   2018   2019   2018 
                
 (Unaudited) (Unaudited)
Interest capitalized at beginning of period$79,277  $65,355  $68,117  $71,051 
Plus interest incurred 42,104     40,438    122,340     121,617 
Less interest expensed 41,406     38,283    110,482     125,158 
Less interest contributed to unconsolidated joint venture (1)   1,978        1,978    -  
Interest capitalized at end of period (2)$77,997  $67,510  $77,997  $67,510 
 
(1) Represents capitalized interest which was included as part of the assets contributed to the joint venture the company entered into in June 2019. There was no impact to the Condensed Consolidated Statement of Operations as a result of this transaction.  
(2) Capitalized interest amounts are shown gross before allocating any portion of impairments to capitalized interest.

  
HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS(In Thousands) 
  
  July 31,2019  October 31,2018 
  (Unaudited)    (1) 
ASSETS      
Homebuilding:      
Cash and cash equivalents $83,634  $187,871 
Restricted cash and cash equivalents  16,919   12,808 
Inventories:      
Sold and unsold homes and lots under development  1,106,100   878,876 
Land and land options held for future development or sale  69,176   111,368 
Consolidated inventory not owned  179,642   87,921 
Total inventories  1,354,918   1,078,165 
Investments in and advances to unconsolidated joint ventures  134,111   123,694 
Receivables, deposits and notes, net  32,536   35,189 
Property, plant and equipment, net  20,488   20,285 
Prepaid expenses and other assets  43,492   39,150 
Total homebuilding  1,686,098   1,497,162 
       
Financial services  109,164   164,880 
Total assets $1,795,262  $1,662,042 
       
LIABILITIES AND EQUITY      
Homebuilding:      
Nonrecourse mortgages secured by inventory, net of debt issuance costs $207,172  $95,557 
Accounts payable and other liabilities  324,984   304,899 
Customers’ deposits  40,358   30,086 
Liabilities from inventory not owned, net of debt issuance costs  138,441   63,387 
Revolving and term loan credit facilities, net of debt issuance costs  201,493   201,389 
Notes payable (net of discount, premium and debt issuance costs) and accrued interest  1,284,624   1,273,446 
Total homebuilding  2,197,072   1,968,764 
       
Financial services  89,740   143,448 
Income taxes payable  1,521   3,334 
Total liabilities  2,288,333   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 July 31, 2019 and at October 31, 2018  135,299   135,299 
Common stock, Class A, $0.01 par value - authorized 16,000,000 shares; issued 5,792,858 shares at July 31, 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 650,449 shares at July 31, 2019 and 649,673 shares at October 31, 2018  6   6 
Paid in capital - common stock  710,517   710,349 
Accumulated deficit  (1,224,166)  (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 July 31, 2019 and October 31, 2018  (115,360)  (115,360)
Total Hovnanian Enterprises, Inc. stockholders’ equity deficit  (493,646)  (453,504)
Noncontrolling interest in consolidated joint ventures  575   - 
Total equity deficit  (493,071)  (453,504)
Total liabilities and equity $1,795,262  $1,662,042 
  1. Derived from the audited balance sheet as of October 31, 2018

  
HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(In Thousands Except Per Share Data)(Unaudited) 
  
  Three Months Ended July 31,  Nine Months Ended July 31, 
   2019   2018   2019   2018 
             
Revenues:            
Homebuilding:            
Sale of homes $467,849  $442,859  $1,257,536  $1,312,553 
Land sales and other revenues  1,428   844   11,111   26,918 
Total homebuilding  469,277   443,703   1,268,647   1,339,471 
Financial services  12,764   13,009   34,679   36,951 
Total revenues  482,041   456,712   1,303,326   1,376,422 
             
Expenses:            
Homebuilding:            
Cost of sales, excluding interest  381,939   361,303   1,042,343   1,083,842 
Cost of sales interest  19,029   13,424   43,169   45,080 
Inventory impairment loss and land option write-offs  1,435   96   3,601   3,183 
Total cost of sales  402,403   374,823   1,089,113   1,132,105 
Selling, general and administrative  43,559   37,544   130,474   126,319 
Total homebuilding expenses  445,962   412,367   1,219,587   1,258,424 
             
Financial services  8,927   8,986   26,079   26,125 
Corporate general and administrative  14,959   16,393   48,792   51,672 
Other interest  22,377   24,859   67,313   80,078 
Other operations  622   495   1,193   1,287 
Total expenses  492,847   463,100   1,362,964   1,417,586 
Loss on extinguishment of debt  -   (4,266)  -   (5,706)
Income from unconsolidated joint ventures  3,742   10,732   20,556   6,899 
(Loss) income before income taxes  (7,064  78   (39,082  (39,971)
State and federal income tax provision:            
State  537   1,104   1,228   1,687 
Federal  -   -   -   - 
Total income taxes  537   1,104   1,228   1,687 
Net (loss) $(7,601) $(1,026) $(40,310) $(41,658)
             
Per share data:            
Basic and assuming dilution:            
Net (loss) per common share $(1.27) $(0.18) $(6.76) $(7.03)
Weighted-average number of common shares outstanding  5,971   5,947   5,964   5,935 

HOVNANIAN ENTERPRISES, INC.
(DOLLARS IN THOUSANDS EXCEPT AVG. PRICE)
(SEGMENT DATA EXCLUDES UNCONSOLIDATED JOINT VENTURES)
(UNAUDITED)
     Three Months - July 31, 2019   
  Contracts (1)Three Months EndedDeliveriesContract
  Three Months EndedBacklog
  July 31,July 31,July 31,
   2019 2018% Change 2019 2018% Change 2019 2018% Change
Northeast          
(NJ, PA)Home 65 32103.1% 35 47(25.5)% 192 68182.4%
 Dollars$37,560$18,045108.1%$20,694$26,701(22.5)%$119,347$40,058197.9%
 Avg. Price$577,846$563,9092.5%$591,257$568,1064.1%$621,599$589,0895.5%
Mid-Atlantic (3)          
(DE, MD, VA, WV)Home 197 14436.8% 159 14410.4% 402 32424.1%
 Dollars$99,807$76,32430.8%$86,811$79,5939.1%$242,958$196,01124.0%
 Avg. Price$506,635$530,032(4.4)%$545,981$552,726(1.2)%$604,373$604,973(0.1)%
Midwest          
(IL, OH) Home 197 14337.8% 158 1570.6% 505 4707.4%
 Dollars$58,794$43,59634.9%$47,261$45,5793.7%$136,713$130,3774.9%
 Avg. Price$298,442$304,865(2.1)%$299,120$290,3133.0%$270,719$277,397(2.4)%
Southeast          
(FL, GA, SC) Home 147 175(16.0)% 121 1210.0% 296 330(10.3)%
 Dollars$58,648$71,381(17.8)% 50,217 47,4725.8%$128,571$139,840(8.1)%
 Avg. Price$398,966$407,894(2.2)%$415,017$392,3305.8%$434,361$423,7572.5%
Southwest          
(AZ, TX)Home 589 51813.7% 449 469(4.3)% 788 70611.6%
 Dollars$202,553$177,17414.3%$152,615$157,406(3.0)%$277,263$250,36910.7%
 Avg. Price$343,893$342,0360.5%$339,900$335,6201.3%$351,857$354,630(0.8)%
West            
(CA)Home 320 22442.9% 263 20428.9% 372 389(4.4)%
 Dollars$131,483$102,18328.7%$110,251$86,10828.0%$149,654$189,868(21.2)%
 Avg. Price$410,884$456,173(9.9)%$419,205$422,099(0.7)%$402,296$488,094(17.6)%
Consolidated Total (3)          
 Home 1,515 1,23622.6% 1,185 1,1423.8% 2,555 2,28711.7%
 Dollars$588,845$488,70320.5%$467,849$442,8595.6%$1,054,506$946,52311.4%
 Avg. Price$388,676$395,392(1.7)%$394,809$387,7931.8%$412,723$413,871(0.3)%
Unconsolidated Joint Ventures (2) (4)          
(excluding KSA JV)Home 175 213(17.8)% 192 285(32.6)% 357 543(34.3)%
 Dollars$107,579$126,887(15.2)%$119,704$191,481(37.5)%$226,778$366,777(38.2)%
 Avg. Price$614,737$595,7143.2%$623,458$671,863(7.2)%$635,232$675,464(6.0)%
Grand Total          
(excluding KSA JV)Home 1,690 1,44916.6% 1,377 1,427(3.5)% 2,912 2,8302.9%
 Dollars$696,424$615,59013.1%$587,553$634,340(7.4)%$1,281,284$1,313,300(2.4)%
 Avg. Price$412,085$424,838(3.0)%$426,691$444,527(4.0)%$440,001$464,064(5.2)%
           
KSA JV Only          
 Home 97 24,750.0% 3 11(72.7)% 131 12991.7%
 Dollars$15,346$3084,882.5%$719$2,315(68.9)%$20,800$3,336523.5%
 Avg. Price$158,205$154,0002.7%$239,667$210,45513.9%$158,777$278,000(42.9)%
           
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”.(3) Contract backlog as of July 31, 2019 excludes 29 homes that were sold to one of our joint ventures at the time of the joint venture formation.(4) Contract backlog as of July 31, 2019 includes 29 homes that were sold to one of our joint ventures at the time of the joint venture formation.

HOVNANIAN ENTERPRISES, INC.
(DOLLARS IN THOUSANDS EXCEPT AVG. PRICE)
(SEGMENT DATA EXCLUDES UNCONSOLIDATED JOINT VENTURES)
(UNAUDITED)
     Nine Months - July 31, 2019   
  Contracts (1)DeliveriesContract
  Nine Months EndedNine Months EndedBacklog
  July 31,July 31,July 31,
   2019 2018% Change 2019 2018% Change 2019 2018% Change
Northeast          
(NJ, PA)Home 221 104112.5% 80 134(40.3)% 192 68182.4%
 Dollars$135,090$58,686130.2%$46,239$70,406(34.3)%$119,347$40,058197.9%
 Avg. Price$611,267$564,2908.3%$577,988$525,42110.0%$621,599$589,0895.5%
Mid-Atlantic (3)          
(DE, MD, VA, WV)Home 547 48113.7% 412 485(15.1)% 402 32424.1%
 Dollars$299,566$256,93616.6%$220,808$254,660(13.3)%$242,958$196,01124.0%
 Avg. Price$547,653$534,1702.5%$535,942$525,0712.1%$604,373$604,973(0.1)%
Midwest          
(IL, OH) Home 559 5285.9% 448 4401.8% 505 4707.4%
 Dollars$164,584$160,3202.7%$135,020$128,9124.7%$136,713$130,3774.9%
 Avg. Price$294,426$303,636(3.0)%$301,384$292,9822.9%$270,719$277,397(2.4)%
Southeast          
(FL, GA, SC) Home 397 456(12.9)% 352 411(14.4)% 296 330(10.3)%
 Dollars$163,880$184,577(11.2)%$143,446$165,120(13.1)%$128,571$139,840(8.1)%
 Avg. Price$412,796$404,7742.0%$407,517$401,7511.4%$434,361$423,7572.5%
Southwest          
(AZ, TX)Home 1,510 1,516(0.4)% 1,245 1,319(5.6)% 788 70611.6%
 Dollars$510,521$517,119(1.3)%$414,112$444,568(6.9)%$277,263$250,36910.7%
 Avg. Price$338,093$341,108(0.9)%$332,620$337,049(1.3)%$351,857$354,630(0.8)%
West            
(CA)Home 761 58230.8% 700 59318.0% 372 389(4.4)%
 Dollars$309,117$264,79316.7%$297,911$248,88719.7%$149,654$189,868(21.2)%
 Avg. Price$406,198$454,970(10.7)%$425,587$419,7081.4%$402,296$488,094(17.6)%
Consolidated Total (3)          
 Home 3,995 3,6678.9% 3,237 3,382(4.3)% 2,555 2,28711.7%
 Dollars$1,582,758$1,442,4319.7%$1,257,536$1,312,553(4.2)%$1,054,506$946,52311.4%
 Avg. Price$396,185$393,3540.7%$388,488$388,1000.1%$412,723$413,871(0.3)%
Unconsolidated Joint Ventures (2) (4)          
(excluding KSA JV)Home 502 701(28.4)% 535 558(4.1)% 357 543(34.3)%
 Dollars$318,350$436,478(27.1)%$338,599$335,8280.8%$226,778$366,777(38.2)%
 Avg. Price$634,163$622,6501.8%$632,895$601,8425.2%$635,232$675,464(6.0)%
Grand Total          
 Home 4,497 4,3683.0% 3,772 3,940(4.3)% 2,912 2,8302.9%
 Dollars$1,901,108$1,878,9091.2%$1,596,135$1,648,381(3.2)%$1,281,284$1,313,300(2.4)%
 Avg. Price$422,750$430,153(1.7)%$423,153$418,3711.1%$440,001$464,064(5.2)%
           
KSA JV Only          
 Home 133 39241.0% 7 62(88.7)% 131 12991.7%
 Dollars$21,426$6,911210.0%$1,627$12,363(86.8)%$20,800$3,336523.5%
 Avg. Price$161,101$177,216(9.1)%$232,383$199,40616.5%$158,777$278,000(42.9)%
           
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”.(3) Contract backlog as of July 31, 2019 excludes 29 homes that were sold to one of our joint ventures at the time of the joint venture formation.(4) Contract backlog as of July 31, 2019 includes 29 homes that were sold to one of our joint ventures at the time of the joint venture formation.

HOVNANIAN ENTERPRISES, INC.
(DOLLARS IN THOUSANDS EXCEPT AVG. PRICE)
(SEGMENT DATA UNCONSOLIDATED JOINT VENTURES ONLY)
(UNAUDITED)
     Three Months - July 31, 2019   
  Contracts (1)DeliveriesContract
  Three Months EndedThree Months EndedBacklog
  July 31,July 31,July 31,
   2019 2018% Change 2019 2018% Change 2019 2018% Change
Northeast          
(unconsolidated joint ventures)Home 65 633.2% 62 129(51.9)% 111 215(48.4)%
(excluding KSA JV)Dollars$52,932$48,7578.6%$49,496$107,574(54.0)%$92,909$175,257(47.0)%
(NJ, PA)Avg. Price$814,338$773,9215.2%$798,323$833,907(4.3)%$837,018$815,1492.7%
Mid-Atlantic (3)          
(unconsolidated joint ventures)Home 9 12(25.0)% 19 1711.8% 36 47(23.4)%
(DE, MD, VA, WV)Dollars$4,490$10,626(57.7)%$13,847$13,3353.8%$21,075$39,640(46.8)%
 Avg. Price$498,889$885,500(43.7)%$728,789$784,471(7.1)%$585,417$843,404(30.6)%
Midwest          
(unconsolidated joint ventures)Home 5 425.0% 8 16(50.0)% 2 19(89.5)%
(IL, OH) Dollars$2,509$2,12118.3%$4,487$10,978(59.1)%$885$14,556(93.9)%
 Avg. Price$501,800$530,000(5.3)%$560,875$686,063(18.2)%$442,500$766,105(42.2)%
Southeast          
(unconsolidated joint ventures)Home 39 66(40.9)% 46 3821.1% 117 123(4.9)%
(FL, GA, SC) Dollars$20,919$31,702(34.0)%$23,064$15,61947.7%$64,147$61,9173.6%
 Avg. Price$536,385$480,33311.7%$501,391$411,02922.0%$548,265$503,3948.9%
Southwest          
(unconsolidated joint ventures)Home 24 38(36.8)% 37 45(17.8)% 55 99(44.4)%
(AZ, TX)Dollars$15,072$22,656(33.5)%$21,841$25,236(13.5)%$34,764$60,849(42.9)%
 Avg. Price$628,000$596,2115.3%$590,297$560,8025.3%$632,073$614,6372.8%
West          
(unconsolidated joint ventures)Home 33 3010.0% 20 40(50.0)% 36 40(10.0)%
(CA)Dollars$11,657$11,0255.7%$6,969$18,739(62.8)%$12,998$14,558(10.7)%
 Avg. Price$353,242$367,532(3.9)%$348,450$468,475(25.6)%$361,056$363,954(0.8)%
Unconsolidated Joint Ventures (2) (3)          
(excluding KSA JV)Home 175 213(17.8)% 192 285(32.6)% 357 543(34.3)%
 Dollars$107,579$126,887(15.2)%$119,704$191,481(37.5)%$226,778$366,777(38.2)%
 Avg. Price$614,737$595,7143.2%$623,458$671,863(7.2)%$635,232$675,464(6.0)%
           
KSA JV Only          
 Home 97 24,750.0% 3 11(72.7)% 131 12991.7%
 Dollars$15,346$3084,882.5%$719$2,315(68.9)%$20,800$3,336523.5%
 Avg. Price$158,205$154,0002.7%$239,667$210,45513.9%$158,777$278,000(42.9)%
           
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”.(3) Contract backlog as of July 31, 2019 includes 29 homes that were sold to one of our joint ventures at the time of the joint venture formation.

HOVNANIAN ENTERPRISES, INC.
(DOLLARS IN THOUSANDS EXCEPT AVG. PRICE)
(SEGMENT DATA UNCONSOLIDATED JOINT VENTURES ONLY)
(UNAUDITED)
     Nine Months - July 31, 2019   
  Contracts (1)DeliveriesContract
  Nine Months EndedNine Months EndedBacklog
  July 31,July 31,July 31,
   2019 2018% Change 2019 2018% Change 2019 2018% Change
Northeast          
(unconsolidated joint ventures)Home 188 217(13.4)% 191 1843.8% 111 215(48.4)%
(excluding KSA JV)Dollars$150,396$169,683(11.4)%$150,853$142,3176.0%$92,909$175,257(47.0)%
(NJ, PA)Avg. Price$799,979$781,9492.3%$789,806$773,4622.1%$837,018$815,1492.7%
Mid-Atlantic (3)          
(unconsolidated joint ventures)Home 26 62(58.1)% 43 2665.4% 36 47(23.4)%
(DE, MD, VA, WV)Dollars$19,158$50,664(62.2)%$33,267$22,13350.3%$21,075$39,640(46.8)%
 Avg. Price$736,846$817,159(9.8)%$773,651$851,272(9.1)%$585,417$843,404(30.6)%
Midwest          
(unconsolidated joint ventures)Home 12 28(57.1)% 19 36(47.2)% 2 19(89.5)%
(IL, OH) Dollars$6,472$19,091(66.1)%$11,663$23,253(49.8)%$885$14,556(93.9)%
 Avg. Price$539,333$681,820(20.9)%$613,842$645,916(5.0)%$442,500$766,105(42.2)%
Southeast          
(unconsolidated joint ventures)Home 122 163(25.2)% 127 1187.6% 117 123(4.9)%
(FL, GA, SC) Dollars$65,530$77,408(15.3)%$64,638$52,30123.6%$64,147$61,9173.6%
 Avg. Price$537,131$474,89513.1%$508,961$443,22914.8%$548,265$503,3948.9%
Southwest          
(unconsolidated joint ventures)Home 86 131(34.4)% 98 8910.1% 55 99(44.4)%
(AZ, TX)Dollars$52,455$78,003(32.8)%$58,155$50,40615.4%$34,764$60,849(42.9)%
 Avg. Price$609,942$595,4452.4%$593,418$566,3594.8%$632,073$614,6372.8%
West          
(unconsolidated joint ventures)Home 68 100(32.0)% 57 105(45.7)% 36 40(10.0)%
(CA)Dollars$24,339$41,629(41.5)%$20,023$45,418(55.9)%$12,998$14,558(10.7)%
 Avg. Price$357,926$416,295(14.0)%$351,281$432,553(18.8)%$361,056$363,954(0.8)%
Unconsolidated Joint Ventures (2) (3)          
(excluding KSA JV)Home 502 701(28.4)% 535 558(4.1)% 357 543(34.3)%
 Dollars$318,350$436,478(27.1)%$338,599$335,8280.8%$226,778$366,777(38.2)%
 Avg. Price$634,163$622,6501.8%$632,895$601,8425.2%$635,232$675,464(6.0)%
           
KSA JV Only          
 Home 133 39241.0% 7 62(88.7)% 131 12991.7%
 Dollars$21,426$6,911210.0%$1,627$12,363(86.8)%$20,800$3,336523.5%
 Avg. Price$161,101$177,216(9.1)%$232,383$199,40616.5%$158,777$278,000(42.9)%
           
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”.(3) Contract backlog as of July 31, 2019 includes 29 homes that were sold to one of our joint ventures at the time of the joint venture formation.

   
Contact:J. Larry SorsbyJeffrey T. O’Keefe
 Executive Vice President & CFOVice President, Investor Relations
 732-747-7800732-747-7800
   

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