Hovnanian Enterprises Reports Fiscal 2007 Results

Tue Dec 18, 2007 7:31pm EST

* Reuters is not responsible for the content in this press release.

RED BANK, N.J., Dec. 18 /PRNewswire-FirstCall/ -- Hovnanian Enterprises,
Inc. (NYSE: HOV), a leading national homebuilder, reported results for its
fourth quarter and fiscal year ended October 31, 2007.
    Results for the 3 months and 12 months ended October 31, 2007:

    -- Excluding unconsolidated joint ventures, the Company delivered 13,564
       homes with an aggregate sales value of $4.6 billion in fiscal 2007,
       down 24.4% from 17,940 home deliveries with an aggregate sales value of
       $5.9 billion in fiscal 2006.  In the fourth quarter, the Company
       delivered 3,969 homes with an aggregate sales value of $1.3 billion in
       fiscal 2007, a decline of 22.0% in sales value from the fourth quarter
       in fiscal 2006.

    -- Total revenues were $4.8 billion for fiscal 2007, a decrease of 21.9%
       compared to last year.  Fourth quarter revenues were $1.4 billion for
       fiscal 2007, down 20.3% from last year's fourth quarter.

    -- The Company generated $376 million of positive cash flow from
       operations during the fourth quarter of fiscal 2007 and reduced total
       debt outstanding by $390 million.

    -- Excluding land-related and intangible charges, the Company reported a
       pretax loss of $21 million for the twelve month period.  For the fourth
       quarter, the pretax loss excluding land-related and intangible charges
       was $30 million.  Including all land-related and intangible charges,
       the Company reported a pre-tax loss of $647 million for the full year
       and $413 million for the fourth quarter.

    -- During the fourth quarter of fiscal 2007, the Company incurred a total
       of $383 million of pretax charges including land impairments of $168
       million, intangible impairments of $78 million and write-offs of
       predevelopment costs and land deposits of $105 million, as well as $32
       million representing its equity portion of write-offs and impairment
       charges in unconsolidated joint ventures.  Similar charges in the
       fourth quarter of fiscal 2006 totaled $322 million.

    -- For the full year, the Company recognized pre-tax charges totaling $626
       million, including $332 million related to land impairments, $135
       million of charges associated with intangible impairments, write-off of
       predevelopment costs and land deposits of $126 million and $33 million
       representing its equity portion of write-offs and impairment charges in
       unconsolidated joint ventures.  Similar charges in fiscal 2006 totaled
       $343 million.


    FAS 109 Non-Cash Tax Charge:

    -- After a recent consultation with its auditors and the Company's own
       research regarding the application of FAS 109, the Company concluded it
       should book a $216 million after-tax non-cash valuation allowance
       during its fourth quarter by recording a reserve of that amount against
       its deferred tax assets.  The FAS 109 charge was for GAAP purposes
       only.  For tax purposes, the tax deductions associated with the
       Company's deferred tax assets may be carried forward for 20 years. The
       Company is confident that it will generate sufficient profits in the
       future to ultimately fully utilize its deferred tax assets.

    -- This accounting determination resulted in a $54 million tax expense in
       the fourth quarter instead of a $162 million tax benefit that
       management had anticipated.

    -- Including the effect of this accounting interpretation, the Company
       reported an after tax loss of $469 million or $7.42 per common share
       for the final three months of fiscal 2007, compared with a net loss of
       $118 million, or $1.88 per common share, in the fourth quarter of
       fiscal 2006.  For the full year, the Company reported an after tax loss
       of $638 million or $10.11 per common share in 2007, compared with net
       income of $139 million, or $2.14 per fully diluted common share, in
       fiscal 2006.


    Balance Sheet as of October 31, 2007:

    -- The Company ended the year with $1.3 billion in total stockholders'
       equity or $19.07 per common share and reduced its total debt
       outstanding by $390 million from the end of the third quarter, leaving
       $207 million drawn on its $1.5 billion revolving credit facility after
       repayment of $140 million of 10-1/2% senior notes that matured in
       October and were discharged early in August.

    -- The Company's average ratio of net recourse debt to capital for the
       year was 56.3% and the ratio was 61.4% at year end.  Excluding the
       impact of the FAS 109 charge, the Company's ratio of net recourse debt
       to capital at year end would have been 57.8%.

    -- As of October 31, 2007, the Company had 36,104 lots controlled under
       option contracts, down from a peak of 87,129 at the end of April 2006.
       In addition, the Company owned 28,680 lots, down from a peak at
       July 31, 2006 of 36,500 lots, and a reduction of 3,896 lots from the
       end of the third quarter in 2007.  The total land position of 64,784
       lots represents a 47% decline from the peak total land position at
       April 30, 2006.

    -- The reduction of owned lots from July 31, 2007 resulted in a $597
       million decline in total Inventory on the Company's balance sheet at
       October 31, 2007, a 14.5% reduction in just three months.  This
       reduction in owned lots included the effect of a 13% decline in unsold
       homes and models, from 3,242 at July 31, 2007 to 2,822 at year end.

    -- The Company also terminated option contracts covering a total of 8,986
       lots during the fourth quarter.


    Other Key Operating Data:

    -- Homebuilding gross margin, before interest expense included in cost of
       sales, was 15.1% for the 12 months of fiscal 2007 and 10.9% in the 2007
       fourth quarter, compared with 23.1% for fiscal 2006 and 20.4% in the
       fourth quarter of 2006.

    -- Pretax income from Financial Services in fiscal 2007 was $27.9 million,
       a reduction of 10.1% compared with fiscal 2006.  For the fourth
       quarter, Financial Services contributed pretax income of $7.1 million,
       down 36.3% from last year's fourth quarter.

    -- The Company had 431 active selling communities on October 31, 2007,
       excluding unconsolidated joint ventures, a decline of 18 active
       communities from the end of the third quarter on July 31, 2007.  The
       Company had 427 active selling communities on October 31, 2006,
       excluding unconsolidated joint ventures.

    -- During fiscal 2007, the Company delivered 1,364 homes through
       unconsolidated joint ventures, compared with 2,261 homes last year.
       The Company delivered 471 homes through unconsolidated joint ventures
       in the fourth quarter, compared with 566 homes in last year's fourth
       quarter.

    -- The number of net contracts for fiscal 2007, excluding unconsolidated
       joint ventures, declined 20.0% to 11,006 contracts.  For the fourth
       quarter, the Company recorded 2,781 net contracts excluding
       unconsolidated joint ventures, a decline of 10.3% from the fourth
       quarter of 2006.

    -- The Company's contract cancellation rate, excluding unconsolidated
       joint ventures, for the fourth quarter of fiscal 2007 was 40%, compared
       with the rate of 35% reported in both the fourth quarter of 2006 and
       the third quarter of fiscal 2007.

    -- Contract backlog as of October 31, 2007, excluding unconsolidated joint
       ventures, was 5,938 homes with a sales value of $2.0 billion, down
       31.3% compared to contract backlog with a sales value of $2.9 billion
       at the end of last year.


    Projections for Fiscal 2008:

    -- The Company continues to project positive cash flow from operations in
       excess of $100 million for fiscal 2008.


    Comments From Management:

    "Considering the challenging market conditions that homebuilders are
continuing to face, we are pleased to have exceeded our expectations for cash
generation in the fourth quarter and to have paid down our debt levels more
than we projected," commented Ara K. Hovnanian, President and Chief Executive
Officer of the Company.
    "We are focused on generating cash and strengthening our balance sheet by
reducing both our debt and inventory levels while at the same time reducing
our operating costs and overhead costs to prevent further contraction in our
margins.  We are continuing to carefully manage our land development
expenditures and generate cash by delivering significantly more lots under
homes than the number of lots we are purchasing," stated Mr. Hovnanian.
    "We have reduced our total land position 47% from the peak in April of
2006, and we expect to see this come down even further during fiscal 2008,"
said J. Larry Sorsby, Executive Vice President and Chief Financial Officer.
"In addition, a significant portion of our remaining lot option contracts are
in markets that have been less impacted by the housing slowdown, including
more than 6,500 lots in Texas and about 4,400 lots in North Carolina.  The
vast majority of the remaining lot option position, which includes about 7,700
lots in the Northeast and 8,500 in the Washington D.C. market, have been
renegotiated in price, terms or both, such that they remain economically
viable even in today's market conditions."
    "Our bank group provided a waiver under our $1.5 billion revolving credit
facility as of October 31, 2007 for the covenants related to tangible net
worth that were impacted by the non-cash FAS 109 tax charge," Mr. Sorsby said.
"We have strong, longstanding relationships with many of the banks in our
revolving credit facility, and we have initiated discussions with the bank
group to further modify our covenants with respect to future periods.  Based
on our initial discussions, we believe that we will be able to successfully
negotiate changes that are needed to the credit agreement to adjust for the
change in tax treatment, as well as to provide us with adequate operating room
as we manage through the remainder of the current housing slowdown.  We expect
to close the amendment in January," Mr. Sorsby said.
    "We remain focused on strengthening our balance sheet," Mr. Sorsby
continued.  "We intend to use cash that we generate during fiscal 2008 to
enhance our liquidity and further reduce our net outstanding debt.  We
anticipate increasing our bank borrowings modestly in the first half of the
year, with reductions weighted towards the second half of the year, which
follows our typical seasonal pattern.  Also, as a result of restrictions in
the indentures governing our senior and senior subordinated notes, we will not
pay dividends on our Series A Preferred Stock during fiscal 2008," Mr. Sorsby
concluded.
    "Our industry is currently experiencing a cyclical correction," stated Mr.
Hovnanian.  "However, after a very slow period for new sales contracts in
October and November, we have experienced an improvement in sales pace during
the first three weeks of December.  This is encouraging given that December is
historically a slower sales month."
    "Our belief in the housing industry's long-term demographic fundamentals
remains strong," Mr. Hovnanian continued.  "Fixed 30 year mortgage rates
remain at historically low levels and the price of new homes have declined in
most markets across the country.  While there is evidence that the United
States economy has slowed, GDP growth has exceeded expectations and jobs are
still being created.  Most importantly, household formation marches on, and it
is the main driver of long-term demand for housing.  While the factors that
created this downturn are different than any other throughout our 48 year
history, we know that stronger demand for new homes will return.  What is not
known is how long the market will take to rebound.  Today we are taking the
steps necessary to ensure that we will be in the best position possible
through this slow period and when the inevitable recovery takes place,"
concluded Mr. Hovnanian.
    Hovnanian Enterprises will webcast its fiscal 2007 financial results
conference call at 11:00 a.m. E.T. on Wednesday, December 19, 2007.  The
webcast can be accessed live through the "Investor Relations" section of
Hovnanian Enterprises' Web site 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 "Audio Archives" section of the Investor Relations page on
the Hovnanian Web site at http://www.khov.com.  The archive will be available
for 12 months.
    About Hovnanian Enterprises:
    Hovnanian Enterprises, Inc., founded in 1959 by Kevork S. Hovnanian,
Chairman, 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, Kentucky, Maryland, Michigan, Minnesota,
New Jersey, New York, North Carolina, Ohio, Pennsylvania, South Carolina,
Texas, Virginia and West Virginia.  The Company's homes are marketed and sold
under the trade names K. Hovnanian Homes, Matzel & Mumford, Forecast Homes,
Parkside Homes, Brighton Homes, Parkwood Builders, Windward Homes, Cambridge
Homes, Town & Country Homes, Oster Homes, First Home Builders of Florida and
CraftBuilt Homes.  As the developer of K. Hovnanian's Four Seasons
communities, the Company is also one of the nation's largest builders of
active adult homes.
    Additional information on Hovnanian Enterprises, Inc., including a summary
investment profile and the Company's 2006 annual report, can be accessed
through the "Investor Relations" section of Hovnanian Enterprises' website at
http://www.khov.com. To be added to Hovnanian's investor e-mail or fax lists,
please send an e-mail to IR@khov.com or sign up at http://www.khov.com.
    Hovnanian Enterprises, Inc. is a member of the Public Home Builders
Council of America ("PHBCA") (http://www.phbca.org), a nonprofit group devoted
to improving understanding of the business practices of America's largest
publicly-traded home building companies, the competitive advantages they bring
to the home building market, and their commitment to creating value for their
home buyers and stockholders. The PHBCA's 14 member companies build one out of
every five homes in the United States.
    Non-GAAP Financial Measures:
    Consolidated earnings before interest expense, income taxes, depreciation
and amortization ("EBITDA") and before inventory impairment loss and land
option write-offs ("Adjusted EBITDA") are not generally accepted accounting
principle (GAAP) financial measures.  The most directly comparable GAAP
financial measure is net income.  The reconciliation of EBITDA and Adjusted
EBITDA to net income is presented in a table attached to this earnings
release.
    Cash flow is a non-GAAP financial measure.  The most directly comparable
GAAP financial measure is Cash Flow from Operating Activities.  The Company
uses cash flow to mean cash flow from operating activities and cash flow from
investing activities excluding changes in mortgage notes receivable at the
mortgage company.
    Pretax (Loss) Income Excluding Land Related Charges and Intangible
Impairments is a non-GAAP financial measure.  The most directly comparable
GAAP financial measure is (Loss) Income BeforeIncome Taxes.  The
reconciliation of Pretax (Loss) Income Excluding Land Related Charges and
Intangible Impairments to (Loss) Income BeforeIncome Taxes is presented in a
table attached to this earnings release.
    Note: All statements in this Press Release that are not historical facts
should be considered as "forward-looking statements" within the meaning 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 risks, uncertainties and other factors
include, but are not limited to, (1) changes in general and local economic and
industry and business conditions, (2) adverse weather conditions and natural
disasters, (3) changes in market conditions and seasonality of the Company's
business, (4) changes in home prices and sales activity in the markets where
the Company builds homes, (5) government regulation, including regulations
concerning development of land, the home building, sales and customer
financing processes, and the environment, (6) fluctuations in interest rates
and the availability of mortgage financing, (7) shortages in, and price
fluctuations of, raw materials and labor, (8) the availability and cost of
suitable land and improved lots, (9) levels of competition, (10) availability
of financing to the Company, (11) utility shortages and outages or rate
fluctuations, (12) levels of indebtedness and restrictions on the Company's
operations and activities imposed by the agreements governing the Company's
outstanding indebtedness, (13) operations through joint ventures with third
parties, (14) product liability litigation and warranty claims, (15)
successful identification and integration of acquisitions, (16) significant
influence of the Company's controlling stockholders, (17) geopolitical risks,
terrorist acts and other acts of war and (18) other factors described in
detail in the Company's Form 10-K for the year ended October 31, 2006.


    Hovnanian Enterprises, Inc.
    October 31, 2007
    Statements of Pretax (Loss) Income Excluding Land Related Charges and
     Intangible Impairments
    (Dollars in Thousands)

                                  Three Months Ended,     Twelve Months Ended,
                                      October 31,              October 31,
                              -----------------------  -----------------------
                                   2007         2006       2007          2006
                              ------------  ---------  -----------  ----------
                                      (Unaudited)             (Unaudited)
    Total Revenues            $1,391,869   $1,745,603  $4,798,921   $6,148,235

    Costs and Expenses (a)     1,428,442    1,613,233   4,824,685    5,590,069

    Income from Unconsolidated
     Joint Ventures (b)            6,511        3,885       4,877       17,718
                              -----------------------  -----------------------
    Pretax (Loss) Income Excluding
     Land Related Charges and
     Intangible Impairments      (30,062)     136,255     (20,887)     575,884
                              ================================================

    (a) Excludes inventory impairment loss and land option write-offs, and
        intangible impairments.
    (b) Excludes our share of land related charges and intangible impairments
        recorded by our unconsolidated joint ventures.



    Reconciliation of (Loss) Income Before Income Taxes to Pretax (Loss)
     Income Excluding Land Related Charges and Intangible Impairments
    (Dollars in Thousands)
                                     Three Months Ended,  Twelve Months Ended,
                                         October 31,           October 31,
                                    --------------------  --------------------
                                       2007       2006      2007        2006
                                    ---------   --------  ---------   --------

    (Loss) Income Before Income
     Taxes                          (412,771)  (185,545)  (646,966)   233,106
    Inventory Impairment Loss and
     Land Option Write-Offs          273,353    315,226    457,773    336,204
    Intangible Impairments            77,556      4,241    135,206      4,241
    Unconsolidated Joint Venture
     Intangible and Land Related
     Charges                          31,800      2,333     33,100      2,333
    Pretax (Loss) Income Excluding
     Land Related Charges and
                                    ------------------------------------------
     Intangible Impairments         $(30,062)  $136,255   $(20,887)  $575,884
                                    ==========================================



    Hovnanian Enterprises, Inc.
    October 31, 2007
    Gross Margin
    (Dollars in Thousands)

                         Homebuilding Gross Margin   Homebuilding Gross Margin
                           Three Months Ended          Twelve Months Ended
                               October 31,                 October 31,
                           2007           2006         2007           2006
                               (Unaudited)                 (Unaudited)
    Sale of Homes       $1,308,219     $1,677,816    $4,581,375    $5,903,387
    Cost of Sales,
     excluding
     interest(a)         1,165,509      1,334,913     3,890,474     4,538,795
    Homebuilding Gross
     Margin, excluding
     interest              142,710        342,903       690,901     1,364,592
    Homebuilding Cost of
     Sales interest         45,598         45,369       130,825       106,892
    Homebuilding Gross
     Margin, including
     interest              $97,112       $297,534      $560,076    $1,257,700

    Gross Margin Percentage,
     excluding interest       10.9%          20.4%         15.1%         23.1%
    Gross Margin Percentage,
     including interest        7.4%          17.7%         12.2%         21.3%


                           Land Sales Gross Margin     Land Sales Gross Margin
                             Three Months Ended           Twelve Months Ended
                                October 31,                    October 31,
                            2007           2006          2007           2006
                                (Unaudited)                   (Unaudited)
    Land Sales             $42,107        $36,551      $107,955      $140,389
     Cost of Sales,
      excluding interest(a) 36,094         12,910        87,179        94,286
    Land Sales Gross Margin,
     excluding interest      6,013         23,641        20,776        46,103
    Land Sales interest        874            507         1,132         1,437
    Land Sales Gross Margin,
     including interest     $5,139        $23,134       $19,644       $44,666


   (a) Does not include cost associated with walking away from land options
       which are recorded as inventory impairment loses in the Statement of
       Consolidated Operations.



    Hovnanian Enterprises, Inc.
    October 31, 2007
    Reconciliation of Adjusted EBITDA to Net (Loss) Income
    (Dollars in Thousands)

                               Three Months Ended       Twelve Months Ended
                                 October 31,                October 31,
                             2007           2006        2007           2006
                                 (Unaudited)                (Unaudited)
    Net (Loss) Income    $(466,593)     $(115,259)   $(627,119)      $149,533
    Income Tax (Benefit)
     Provision              53,822        (70,286)     (19,847)        83,573
    Interest expense        47,223         47,322      141,754        111,944
      EBIT(1)             (365,548)      (138,223)    (505,212)       345,050
    Depreciation             4,754          4,296       18,283         14,884
    Amortization of Debt
     Costs                     503            640        2,576          2,293
    Amortization of
     Intangibles            83,700         16,430      162,124         54,821
      EBITDA(2)           (276,591)      (116,857)    (322,229)       417,048
    Inventory Impairment
     Loss and Land Option
     Write-offs            273,353        315,226      457,773        336,204
      Adjusted EBITDA(3)   $(3,238)      $198,369     $135,544      $ 753,252

    INTEREST INCURRED      $46,262        $57,858     $194,547      $ 166,427

    ADJUSTED EBITDA TO
     INTEREST INCURRED       (0.07)          3.43         0.70           4.53

    (1) EBIT is a non-GAAP financial measure. The comparable GAAP financial
        measure is net income. EBIT represents earnings before interest
        expense and income taxes.
    (2) EBITDA is a non-GAAP financial measure. The comparable GAAP financial
        measure is net income. EBITDA represents earnings before interest
        expense, income taxes, depreciation and amortization.
    (3) Adjusted EBITDA is a non-GAAP financial measure. The comparable GAAP
        financial measure is net income. Adjusted EBITDA represents earnings
        before interest expense, income taxes, depreciation, amortization and
        inventory impairment loss and land option write-offs.



    Hovnanian Enterprises, Inc.
    October 31, 2007
    Interest Incurred, Expensed and Capitalized
    (Dollars in Thousands)

                                Three Months Ended      Twelve Months Ended
                                   October 31,               October 31,
                               2007           2006       2007          2006
                                  (Unaudited)               (Unaudited)
     Interest Capitalized at
     Beginning of Period     $156,603        $92,313    $102,849      $48,366
     Plus Interest Incurred    46,262         57,858     194,547      166,427
     Less Interest Expensed    47,223         47,322     141,754      111,944
     Interest Capitalized at
     End of Period           $155,642       $102,849    $155,642     $102,849



                 HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
                         CONSOLIDATED BALANCE SHEETS
                     (In Thousands Except Share Amounts)

                                            October 31, 2007  October 31, 2006
    ASSETS
    Homebuilding:
    Cash and cash equivalents                        $12,275         $43,635
                                               -------------------------------
    Restricted cash                                    6,594           9,479
                                               -------------------------------
    Inventories-at the lower of cost or fair
     value
      Sold and unsold homes and lots under
       development                                 2,792,436       3,297,766
                                               -------------------------------
      Land and land options held for future
       development or sale                           446,135         362,760
                                               -------------------------------
      Consolidated inventory not owned:
      Specific performance options                    12,123          20,340
      Variable interest entities                     139,914         208,167
      Other options                                  127,726         181,808
                                               -------------------------------
      Total consolidated inventory not owned         279,763         410,315
                                               -------------------------------
      Total inventories                            3,518,334       4,070,841
                                               -------------------------------
    Investments in and advances to
     unconsolidated joint ventures                   176,365         212,581
                                               -------------------------------
    Receivables, deposits, and notes                 109,856          94,750
                                               -------------------------------
    Property, plant, and equipment-net               106,792         110,704
                                               -------------------------------
    Prepaid expenses and other assets                174,032         175,603
                                               -------------------------------
    Goodwill                                          32,658          32,658
                                               -------------------------------
    Definite life intangibles                          4,224         165,053
                                               -------------------------------
      Total homebuilding                           4,141,130       4,915,304
                                               -------------------------------
    Financial services:
    Cash and cash equivalents                          3,958          10,688
    Restricted cash                                   11,572           1,585
    Mortgage loans held for sale                     182,627         281,958
    Other assets                                       6,851          10,686
                                               -------------------------------
      Total financial services                       205,008         304,917
                                               -------------------------------
    Income taxes receivable -- including
     deferred tax benefits                           194,410         259,814
                                               -------------------------------
    Total assets                                  $4,540,548      $5,480,035
                                               ===============================



                 HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
                         CONSOLIDATED BALANCE SHEETS
                     (In Thousands Except Share Amounts)

                                                     October 31,  October 31,
                                                         2007         2006
    LIABILITIES AND STOCKHOLDERS' EQUITY
    Homebuilding:
      Nonrecourse land mortgages                        $9,430       $26,088
      Accounts payable and other liabilities           515,422       582,393
      Customers' deposits                               65,221       184,943
      Nonrecourse mortgages secured by operating
       properties                                       22,985        23,684
      Liabilities from inventory not owned             189,935       205,067
                                                     -------------------------
      Total homebuilding                               802,993     1,022,175
                                                     -------------------------
    Financial services:
      Accounts payable and other liabilities            19,597        12,158
      Mortgage warehouse line of credit                171,133       270,171
                                                     -------------------------
      Total financial services                         190,730       282,329
                                                     -------------------------
    Notes payable:
      Revolving and term credit agreements             206,750
      Senior notes                                   1,510,600     1,649,778
      Senior subordinated notes                        400,000       400,000
      Accrued interest                                  43,944        51,105
                                                     -------------------------
      Total notes payable                            2,161,294     2,100,883
                                                     -------------------------
      Total liabilities                              3,155,017     3,405,387
                                                     -------------------------
    Minority interest from inventory not owned          62,238       130,221
                                                     -------------------------
    Minority interest from consolidated joint
     ventures                                            1,490         2,264
                                                     -------------------------
    Stockholders' equity:
      Preferred stock, $.01 par value-authorized 100,000
       shares; issued 5,600 shares with a liquidation
       preference of $140,000, at October 31, 2007 and
       October 31, 2006                                135,299       135,299
      Common stock, Class A, $.01 par value-authorized
       200,000,000 shares; issued 59,263,887 shares at
       October 31, 2007; and 58,653,723 shares at October
       31, 2006 (including 11,694,720 shares at October
       31, 2007 and 11,494,720 shares at October 31, 2006
       held in Treasury)                                   593           587
      Common stock, Class B, $.01 par value (convertible
       to Class A at time of sale)-authorized
       30,000,000 shares; issued  15,338,840 shares at
       October 31, 2007; and issued 15,343,410 shares at
       October 31, 2006 (including 691,748 shares at
       October 31, 2007 and October  31, 2006 held in
       Treasury)                                           153           153
      Paid in capital -- common stock                  276,998       253,262
      Retained earnings                              1,024,017     1,661,810
      Treasury stock -- at cost                       (115,257)     (108,948)
                                                    -------------------------
      Total stockholders' equity                     1,321,803     1,942,163
                                                    -------------------------
    Total liabilities and stockholders' equity      $4,540,548    $5,480,035
                                                    =========================



                 HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
               CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                     (In Thousands Except Share Amounts)

                            Three Months Ended             Year Ended
                        October 31,    October 31,   October 31,   October 31,
                           2007           2006          2007          2006
    Revenues:
    Homebuilding:
    Sale of homes       $1,308,219    $1,677,816     $4,581,375    $5,903,387
    Land sales and other
     revenues               64,150        41,303       141,355        155,250
    Total homebuilding   1,372,369     1,719,119     4,722,730      6,058,637
    Financial services      19,500        26,484        76,191         89,598
    Total revenues       1,391,869     1,745,603     4,798,921      6,148,235
    Expenses:
    Homebuilding:
    Cost of sales, excluding
      interest           1,201,603     1,347,823     3,977,653      4,633,081
    Cost of sales interest  46,472        45,876       131,957        108,329
    Inventory impairment
     loss and land option
     write-offs            273,353       315,226       457,773        336,204
      Total cost of
       sales             1,521,428     1,708,925     4,567,383      5,077,614
    Selling, general and
     administrative        137,558       152,723       539,362        593,860
      Total homebuilding
      expenses           1,658,986     1,861,648     5,106,745      5,671,474
    Financial services      12,444        15,412        48,321         58,586
    Corporate general and
     administrative         21,559        16,404        85,878         96,781
    Other interest             751         1,446         9,797          3,615
    Other operations         1,911        21,360         4,799         45,237
    Intangible amortization 83,700        16,430       162,124         54,821
    Total expenses       1,779,351     1,932,700     5,417,664      5,930,514
    (Loss)income from
     unconsolidated joint
     ventures              (25,289)        1,552       (28,223)        15,385
    (Loss)income before
     income taxes         (412,771)     (185,545)     (646,966)       233,106
    State and federal income
     tax(benefit)/provision:
    State                    6,970        (5,846)        7,088          1,366
    Federal                 46,852       (64,440)      (26,935)        82,207
      Total taxes           53,822       (70,286)      (19,847)        83,573
    Net (loss)income      (466,593)     (115,259)     (627,119)       149,533
    Less: preferred stock
     dividends               2,668         2,669        10,674         10,675
    Net (loss)income
     available to common
     stockholders        $(469,261)    $(117,928)    $(637,793)      $138,858
    Per share data:
    Basic:
     (Loss)income per common
      share                 $(7.42)       $(1.88)      $(10.11)         $2.21
      Weighted average number
       of common shares
       outstanding          63,207        62,758        63,079         62,822
    Assuming dilution:
     (Loss)income per
      common share          $(7.42)       $(1.88)      $(10.11)         $2.14
    Weighted average number
     of common shares
     outstanding            63,207        62,758        63,079         64,838



    HOVNANIAN ENTERPRISES, INC.
    (DOLLARS IN THOUSANDS EXCEPT AVG. PRICE)
    (UNAUDITED)                             Communities Under Development
                                              Three Months - 10/31/07

                                                       Net Contracts (1)
                                                      Three Months Ended
                                                         October 31,
                                                2007        2006    % Change
    Northeast
                       Homes                     554          410     35.1%
                       Dollars               218,424      178,882     22.1%
                       Avg. Price            394,268      436,298     (9.6%)
    Mid-Atlantic
                       Homes                     333          362     (8.0%)
                       Dollars               119,188      149,168    (20.1%)
                       Avg. Price            357,920      412,066    (13.1%)
    Southeast
                       Homes                     308          508    (39.4%)
                       Dollars                76,451      142,701    (46.4%)
                       Avg. Price            248,216      280,907    (11.6%)
    Southwest
                       Homes                     751          974    (22.9%)
                       Dollars               168,440      212,366    (20.7%)
                       Avg. Price            224,288      218,035      2.9%
    Midwest
                       Homes                     355          291     22.0%
                       Dollars                71,678       61,748     16.1%
                       Avg. Price            201,910      212,192      4.8%
    West
                       Homes                     480          555     13.5%
                       Dollars               165,023      235,475    (29.9%)
                       Avg. Price            343,798      424,279    (19.0%)
    Consolidated Total
                       Homes                   2,781        3,100    (10.3%)
                       Dollars               819,204      980,340    (16.4%)
                       Avg. Price            294,572      316,239     (6.9%)
    Unconsolidated Joint
     Ventures
                       Homes                     161          148      8.8%
                       Dollars                55,750       31,833     75.1%
                       Avg. Price            346,273      215,088     61.0%
    Total
                       Homes                   2,942        3,248     (9.4%)
                       Dollars               874,954    1,012,173    (13.6%)
                       Avg. Price            297,401      311,630     (4.6%)


                                                        Deliveries
                                                    Three Months Ended
                                                         October 31,
                                                2007        2006    % Change
    Northeast
                       Homes                     645          783    (17.6%)
                       Dollars               298,039      358,355    (16.8%)
                       Avg. Price            462,076      457,669      1.0%

    Mid-Atlantic       Homes                     595          684    (13.0%)
                       Dollars               258,178      309,148    (16.5%)
                       Avg. Price            433,913      451,971     (4.0%)
    Southeast
                       Homes                     594        1,010    (41.2%)
                       Dollars               155,560      267,762    (41.9%)
                       Avg. Price            261,886      265,111     (1.2%)

    Southwest          Homes                   1,129        1,304    (13.4%)
                       Dollars               255,670      290,159    (11.9%)
                       Avg. Price            226,457      222,515      1.8%
    Midwest
                       Homes                     358          281     27.4%
                       Dollars                81,138       63,353     28.1%
                       Avg. Price            226,642      225,456      0.5%
    West
                       Homes                     648          855    (24.2%)
                       Dollars               259,634      389,039    (33.3%)
                       Avg. Price            400,670      455,016    (11.9%)
    Consolidated Total
                       Homes                   3,969        4,917    (19.3%)
                       Dollars             1,308,219    1,677,816    (22.0%)
                       Avg. Price            329,609      341,228     (3.4%)
    Unconsolidated Joint
     Ventures
                       Homes                     471          566    (16.8%)
                       Dollars               205,416      219,921     (6.6%)
                       Avg. Price            436,128      388,553     12.2%
    Total
                       Homes                   4,440        5,483    (19.0%)
                       Dollars             1,513,635    1,897,737    (20.2%)
                       Avg. Price            340,909      346,113     (1.5%)


                                                     Contract Backlog
                                                       October 31,
                                               2007        2006      % Change
    Northeast
                       Homes                     975       1,218      (20.0%)
                       Dollars               503,445     591,849      (14.9%)
                       Avg. Price            516,354     485,919        6.3%)
    Mid-Atlantic
                       Homes                     753       1,134      (33.6%)
                       Dollars               358,778     562,670      (36.2%)
                       Avg. Price            476,465     496,182       (4.0%)
    Southeast
                       Homes                   2,151       3,813      (43.6%)
                       Dollars               614,575   1,093,299      (43.8%)
                       Avg. Price            285,716     286,729       (0.4%)
    Southwest
                       Homes                     751         999      (24.8%)
                       Dollars               174,206     224,482      (22.4%)
                       Avg. Price            231,966     224,707        3.2%
    Midwest
                       Homes                     759         668       13.6%
                       Dollars               153,171     117,148       30.8%
                       Avg. Price            201,806     175,371       15.1%
    West
                       Homes                     549         664      (17.3%)
                       Dollars               205,716     334,102      (38.4%)
                       Avg. Price            374,710     503,166      (25.5%)
    Consolidated Total
                       Homes                   5,938       8,496      (30.1%)
                       Dollars             2,009,891   2,923,550      (31.3%)
                       Avg. Price            338,479     344,109       (1.6%)
    Unconsolidated Joint Ventures
                       Homes                     427       1,130      (62.2%)
                       Dollars               202,422     517,970      (60.9%)
                       Avg. Price            474,056     458,381        3.4%
    Total
                       Homes                   6,365       9,626      (33.9%)
                       Dollars             2,212,313   3,441,520      (35.7%)
                       Avg. Price            347,575     357,523       (2.8%)

    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.



    HOVNANIAN ENTERPRISES, INC.
    (DOLLARS IN THOUSANDS EXCEPT AVG. PRICE)
    (UNAUDITED)

                        Communities Under Development
                          Twelve Months - 10/31/2007

                                                   Net Contracts (1)
                                                  Twelve Months Ended
                                                       October 31,
                                              2007        2006     % Change
    Northeast
                       Homes                    1,756       1,823    (3.7%)
                       Dollars                802,459     808,736    (0.8%)
                       Avg. Price             456,981     443,629     3.0%
    Mid-Atlantic
                       Homes                    1,545       1,737   (11.1%)
                       Dollars                677,581     837,170   (19.1%)
                       Avg. Price             438,564     481,963    (9.0%)
    Southeast (2)
                       Homes                    1,109       2,806   (60.5%)
                       Dollars                312,070     826,387   (62.2%)
                       Avg. Price             281,397     294,507    (4.5%)
    Southwest
                       Homes                    3,395       3,955   (14.2%)
                       Dollars                758,340     848,352   (10.6%)
                       Avg. Price             223,370     214,501     4.1%
    Midwest
                       Homes                    1,134         942    20.4%
                       Dollars                248,744     186,750    33.2%
                       Avg. Price             219,351     198,248    10.6%
    West
                       Homes                    2,067       2,498   (17.3%)
                       Dollars                833,986   1,107,833   (24.7%)
                       Avg. Price             403,476     443,488    (9.0%)
    Consolidated Total
                       Homes                   11,006      13,761   (20.0%)
                       Dollars              3,633,180   4,615,228   (21.3%)
                       Avg. Price             330,109     335,385    (1.6%)
    Unconsolidated Joint
     Ventures
                       Homes                      661       1,051   (37.1%)
                       Dollars                211,797     355,390   (40.4%)
                       Avg. Price             320,418     338,145    (5.2%)
    Total
                       Homes                   11,667      14,812   (21.2%)
                       Dollars              3,844,977   4,970,618   (22.6%)
                       Avg. Price             329,560     335,580    (1.8%)


                                                      Deliveries
                                                  Twelve Months Ended
                                                       October 31,
                                              2007        2006     % Change
    Northeast
                       Homes                    1,999       2,188    (8.6%)
                       Dollars                935,476     992,713    (5.8%)
                       Avg. Price             467,972     453,708     3.1%
    Mid-Atlantic
                       Homes                    1,926       1,984    (2.9%)
                       Dollars                885,599     980,691    (9.7%)
                       Avg. Price             459,813     494,300    (7.0%)
    Southeast (2)
                       Homes                    2,771       5,074   (45.4%)
                       Dollars                745,240   1,243,501   (40.1%)
                       Avg. Price             268,943     245,073     9.7%
    Southwest
                       Homes                    3,643       4,252   (14.3%)
                       Dollars                828,574     925,918   (10.5%)
                       Avg. Price             227,443     217,761     4.4%
    Midwest
                       Homes                    1,043         855    22.0%
                       Dollars                226,804     173,699    30.6%
                       Avg. Price             217,453     203,157     7.0%
    West
                       Homes                    2,182       3,587   (39.2%)
                       Dollars                959,682   1,586,865   (39.5%)
                       Avg. Price             439,818     442,393    (0.6%)
    Consolidated Total
                       Homes                   13,564      17,940   (24.4%)
                       Dollars              4,581,375   5,903,387   (22.4%)
                       Avg. Price             337,760     329,063     2.6%
    Unconsolidated Joint
     Ventures
                       Homes                    1,364       2,261   (39.7%)
                       Dollars                535,051     868,222   (38.4%)
                       Avg. Price             392,266     383,999     2.2%
    Total
                       Homes                   14,928      20,201   (26.1%)
                       Dollars              5,116,426   6,771,609   (24.4%)
                       Avg. Price             342,740     335,212     2.2%


                                                    Contract Backlog
                                                       October 31,
                                              2007        2006     % Change
    Northeast
                       Homes                      975       1,218   (20.0%)
                       Dollars                503,445     591,849   (14.9%)
                       Avg. Price             516,354     485,919     6.3%
    Mid-Atlantic
                       Homes                      753       1,134   (33.6%)
                       Dollars                358,778     562,670   (36.2%)
                       Avg. Price             476,465     496,182    (4.0%)
    Southeast (2)
                       Homes                    2,151       3,813   (43.6%)
                       Dollars                614,575   1,093,299   (43.8%)
                       Avg. Price             285,716     286,729    (0.4%)
    Southwest
                       Homes                      751         999   (24.8%)
                       Dollars                174,206     224,482   (22.4%)
                       Avg. Price             231,966     224,707     3.2%
    Midwest
                       Homes                      759         668    13.6%
                       Dollars                153,171     117,148    30.8%
                       Avg. Price             201,806     175,371    15.1%
    West
                       Homes                      549         664   (17.3%)
                       Dollars                205,716     334,102   (38.4%)
                       Avg. Price             374,710     503,166   (25.5%)
    Consolidated Total
                       Homes                    5,938       8,496   (30.1%)
                       Dollars              2,009,891   2,923,550   (31.3%)
                       Avg. Price             338,479     344,109    (1.6%)
    Unconsolidated Joint
     Ventures
                       Homes                      427       1,130   (62.2%)
                       Dollars                202,422     517,970   (60.9%)
                       Avg. Price             474,056     458,381     3.4%
    Total
                       Homes                    6,365       9,626   (33.9%)
                       Dollars              2,212,313   3,441,520   (35.7%)
                       Avg. Price             347,575     357,523    (2.8%)

    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 number and the dollar amount of net contracts in the Southeast in
        fiscal 2007 include the effect of the CraftBuilt Homes acquisition,
        which closed in April 2006.

SOURCE  Hovnanian Enterprises, Inc.

Kevin C. Hake, Senior Vice President, Finance and Treasurer, or Jeffrey T.
O'Keefe, Director of Investor Relations, both of Hovnanian Enterprises, Inc.,
+1-732-747-7800
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