HOVNANIAN ENTERPRISES INC [HOVVB] Filings

10-Q 1 hov20230731_10q.htm FORM 10-Q hov20230731_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended July 31, 2023

☐	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission file number 1-8551

Hovnanian Enterprises, Inc. (Exact Name of Registrant as Specified in Its Charter)

Delaware (State or Other Jurisdiction of Incorporation or Organization)

22-1851059 (I.R.S. Employer Identification No.)

90 Matawan Road, 5th Floor, Matawan, NJ 07747 (Address of Principal Executive Offices)

732-747-7800 (Registrant’s Telephone Number, Including Area Code)

N/A (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol(s)	Name of each exchange on which registered
Class A Common Stock, $0.01 par value per share	HOV	New York Stock Exchange
Preferred Stock Purchase Rights(1)	N/A	New York Stock Exchange
Depositary Shares each representing 1/1,000th of a share of 7.625% Series A Preferred Stock	HOVNP	The Nasdaq Stock Market LLC

(1) Each share of Common Stock includes an associated Preferred Stock Purchase Right. Each Preferred Stock Purchase Right initially represents the right, if such Preferred Stock Purchase Right becomes exercisable, to purchase from the Company one ten-thousandth of a share of its Series B Junior Preferred Stock for each share of Common Stock. The Preferred Stock Purchase Rights currently cannot trade separately from the underlying Common Stock.

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer ☐

Accelerated Filer ☒

Nonaccelerated Filer ☐

Smaller Reporting Company ☐

Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. 5,345,668 shares of Class A Common Stock and 749,081 shares of Class B Common Stock were outstanding as of August 29, 2023.

Table of Contents

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HOVNANIAN ENTERPRISES, INC.

FORM 10-Q

INDEX	PAGE NUMBER

PART I. Financial Information
Item l. Financial Statements:

Condensed Consolidated Balance Sheets (unaudited) as of July 31, 2023 and October 31, 2022	3

Condensed Consolidated Statements of Operations (unaudited) for the three and nine months ended July 31, 2023 and 2022	4

Condensed Consolidated Statements of Changes in Equity (unaudited) for the three and nine months ended July 31, 2023 and 2022	5

Condensed Consolidated Statements of Cash Flows (unaudited) for the nine months ended July 31, 2023 and 2022	7

Notes to Condensed Consolidated Financial Statements (unaudited)	9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	28

Item 3. Quantitative and Qualitative Disclosures About Market Risk	43

Item 4. Controls and Procedures	43

PART II. Other Information
Item 1. Legal Proceedings	44

Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	44

Item 5. Other Information	44

Item 6. Exhibits	45

Signatures	47

Table of Contents

HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

(Unaudited)

	July 31,			October 31,
	2023			2022

ASSETS
Homebuilding:
Cash and cash equivalents	$	325,182		$	326,198
Restricted cash and cash equivalents		8,623			13,382
Inventories:
Sold and unsold homes and lots under development		1,049,802			1,058,183
Land and land options held for future development or sale		110,343			152,406
Consolidated inventory not owned		251,115			308,595
Total inventories		1,411,260			1,519,184
Investments in and advances to unconsolidated joint ventures		85,260			74,940
Receivables, deposits and notes, net		33,016			37,837
Property and equipment, net		31,330			25,819
Prepaid expenses and other assets		58,945			63,884
Total homebuilding		1,953,616			2,061,244

Financial services		115,603			155,993

Deferred tax assets, net		324,698			344,793
Total assets	$	2,393,917		$	2,562,030

LIABILITIES AND EQUITY
Homebuilding:
Nonrecourse mortgages secured by inventory, net of debt issuance costs	$	129,127		$	144,805
Accounts payable and other liabilities		381,761			439,952
Customers’ deposits		63,907			74,020
Liabilities from inventory not owned, net of debt issuance costs		145,979			202,492
Senior notes and credit facilities (net of discounts, premiums and debt issuance costs)		1,044,779			1,146,547
Accrued interest		50,913			32,415
Total homebuilding		1,816,466			2,040,231

Financial services		94,502			135,581

Income taxes payable		434			3,167
Total liabilities		1,911,402			2,178,979

Equity:
Hovnanian Enterprises, Inc. stockholders' equity:
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, 2023 and October 31, 2022		135,299			135,299
Common stock, Class A, $0.01 par value - authorized 16,000,000 shares; issued 6,247,047 shares at July 31, 2023 and 6,159,886 shares at October 31, 2022		62			62
Common stock, Class B, $0.01 par value (convertible to Class A at time of sale) - authorized 2,400,000 shares; issued 776,750 shares at July 31, 2023 and 733,374 shares at October 31, 2022		8			7
Paid in capital - common stock		731,285			727,663
Accumulated deficit		(251,794	)		(352,413	)
Treasury stock - at cost – 901,379 shares of Class A common stock at July 31, 2023 and 782,901 shares at October 31, 2022; 27,669 shares of Class B common stock at July 31, 2023 and October 31, 2022		(132,382	)		(127,582	)
Total Hovnanian Enterprises, Inc. stockholders’ equity		482,478			383,036
Noncontrolling interest in consolidated joint ventures		37			15
Total equity		482,515			383,051
Total liabilities and equity	$	2,393,917		$	2,562,030

See notes to condensed consolidated financial statements (unaudited).

Table of Contents

HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

	Three Months Ended July 31,					Nine Months Ended July 31,
	2023			2022		2023			2022
Revenues:
Homebuilding:
Sale of homes	$	630,371		$	736,654	$	1,800,724		$	1,973,843
Land sales and other revenues		4,937			16,406		27,244			18,052
Total homebuilding		635,308			753,060		1,827,968			1,991,895
Financial services		14,649			14,533		41,016			43,548
Total revenues		649,957			767,593		1,868,984			2,035,443

Expenses:
Homebuilding:
Cost of sales, excluding interest		483,990			548,576		1,415,652			1,480,175
Cost of sales interest		19,272			22,453		55,719			57,876
Inventory impairments and land option write-offs		308			1,173		922			1,837
Total cost of sales		503,570			572,202		1,472,293			1,539,888
Selling, general and administrative		47,716			50,163		146,090			139,410
Total homebuilding expenses		551,286			622,365		1,618,383			1,679,298

Financial services		10,345			10,790		29,550			31,982
Corporate general and administrative		27,365			24,774		77,934			75,893
Other interest		13,502			9,624		43,096			35,442
Other (income) expense, net (1)		(18,612	)		670		(17,652	)		1,679
Total expenses		583,886			668,223		1,751,311			1,824,294
Loss on extinguishment of debt, net		(4,082	)		-		(4,082	)		(6,795	)
Income from unconsolidated joint ventures		8,401			12,557		20,969			23,919
Income before income taxes		70,390			111,927		134,560			228,273
State and federal income tax provision:
State		(500	)		6,385		2,794			11,515
Federal		15,126			22,928		23,140			46,901
Total income taxes		14,626			29,313		25,934			58,416
Net income		55,764			82,614		108,626			169,857
Less: preferred stock dividends		2,669			2,669		8,007			8,007
Net income available to common stockholders	$	53,095		$	79,945	$	100,619		$	161,850

Per share data:
Basic:
Net income per common share	$	7.92		$	10.92	$	14.97		$	22.05
Weighted-average number of common shares outstanding		6,249			6,485		6,201			6,424
Assuming dilution:
Net income per common share	$	7.38		$	10.82	$	13.97		$	21.77
Weighted-average number of common shares outstanding		6,705			6,544		6,642			6,507

(1) Includes gain on consolidation of a joint venture of $19.1 million for the three and nine months ended July 31, 2023 (see Note 18).

See notes to condensed consolidated financial statements (unaudited).

Table of Contents

HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Nine MONTH PERIOD ENDED July 31, 2023

(In thousands, except share data)

(Unaudited)

	A Common Stock					B Common Stock					Preferred Stock
	Shares					Shares					Shares
	Issued and					Issued and					Issued and				Paid-In			Accumulated			Treasury			Noncontrolling
	Outstanding			Amount		Outstanding			Amount		Outstanding		Amount		Capital			Deficit			Stock			Interest		Total

Balance, October 31, 2022		5,376,985		$	62		705,705		$	7		5,600	$	135,299	$	727,663		$	(352,413	)	$	(127,582	)	$	15	$	383,051

Stock options, amortization and issuances		209														8											8

Preferred dividend declared ($476.56 per share)																			(2,669	)							(2,669	)

Restricted stock amortization, issuances and forfeitures		18,051					14,620									1,487											1,487

Changes in noncontrolling interest in consolidated joint ventures																									4		4

Share repurchases		(118,478	)																			(4,800	)				(4,800	)

Net income																			18,716								18,716

Balance, January 31, 2023		5,276,767		$	62		720,325		$	7		5,600	$	135,299	$	729,158		$	(336,366	)	$	(132,382	)	$	19	$	395,797

Stock options, amortization and issuances		1,720														59											59

Preferred dividend declared ($476.56 per share)																			(2,669	)							(2,669	)

Restricted stock amortization, issuances and forfeitures																2,157											2,157

Conversion of Class B to Class A common stock		18					(18	)																			-

Changes in noncontrolling interest in consolidated joint ventures																									7		7

Net income																			34,146								34,146

Balance, April 30, 2023		5,278,505		$	62		720,307		$	7		5,600	$	135,299	$	731,374		$	(304,889	)	$	(132,382	)	$	26	$	429,497

Stock options, amortization and issuances		1,610														23											23

Preferred dividend declared ($476.56 per share)																			(2,669	)							(2,669	)

Restricted stock amortization, issuances and forfeitures		65,372					28,955			1						(112	)										(111	)

Conversion of Class B to Class A common stock		181					(181	)																			-

Changes in noncontrolling interest in consolidated joint ventures																									11		11

Net income																			55,764								55,764

Balance, July 31, 2023		5,345,668		$	62		749,081		$	8		5,600	$	135,299	$	731,285		$	(251,794	)	$	(132,382	)	$	37	$	482,515

See notes to condensed consolidated financial statements (unaudited).

Table of Contents

HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Nine MONTH PERIOD ENDED July 31, 2022

(In thousands, except share data)

(Unaudited)

	A Common Stock				B Common Stock					Preferred Stock
	Shares				Shares					Shares
	Issued and				Issued and					Issued and				Paid-In			Accumulated			Treasury			Noncontrolling
	Outstanding		Amount		Outstanding			Amount		Outstanding		Amount		Capital			Deficit			Stock			Interest			Total

Balance, October 31, 2021		5,595,734	$	61		659,207		$	7		5,600	$	135,299	$	722,118		$	(567,228	)	$	(115,360	)	$	487		$	175,384

Stock options, amortization and issuances		804													4												4

Preferred dividend declared ($476.56 per share)																		(2,669	)								(2,669	)

Restricted stock amortization, issuances and forfeitures		17,654				17,445									(552	)											(552	)

Conversion of Class B to Class A common stock		48				(48	)																				-

Changes in noncontrolling interest in consolidated joint ventures																								(88	)		(88	)

Net income																		24,808									24,808

Balance, January 31, 2022		5,614,240	$	61		676,604		$	7		5,600	$	135,299	$	721,570		$	(545,089	)	$	(115,360	)	$	399		$	196,887

Stock options, amortization and issuances		600													77												77

Preferred dividend declared ($476.56 per share)																		(2,669	)								(2,669	)

Restricted stock amortization, issuances and forfeitures		20,483													1,672												1,672

HOVNANIAN ENTERPRISES INC [HOVVB] Filings
HOVNANIAN ENTERPRISES INC [HOV] Filings
HOVNANIAN ENTERPRISES INC [HOVNP] Filings
10-Q	[2023-09-01]
10-Q	[2023-06-05]
10-Q	[2023-03-06]
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HOVNANIAN ENTERPRISES INC [HOVVB] Filings

HOVNANIAN ENTERPRISES INC [HOV] Filings

HOVNANIAN ENTERPRISES INC [HOVNP] Filings