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Note 23 - Financial Information of Subsidiary Issuer and Subsidiary Guarantors

12 Months Ended

Oct. 31, 2013

Disclosure Text Block Supplement [Abstract]

Condensed Financial Statements [Text Block]

23. Financial Information of Subsidiary Issuer and Subsidiary Guarantors

Hovnanian Enterprises, Inc., the parent company (the “Parent”), is the issuer of publicly traded common stock, preferred stock, which is represented by depository shares, and 7.25% Tangible Equity Units. One of its wholly owned subsidiaries, K. Hovnanian Enterprises, Inc. (the “Subsidiary Issuer”), acts as a finance entity that, as of October 31, 2013, had issued and outstanding approximately $992.0 million of senior secured notes ($978.6 million, net of discount), $462.6 million senior notes ($461.2 million, net of discount), $20.9 million senior amortizing notes and $66.6 million senior exchangeable notes (issued as components of our 6.0% Exchangeable Note Units), and $2.2 million senior subordinated amortizing notes (issued as a component of our 7.25% Tangible Equity Units). The senior secured notes, senior notes, senior amortizing notes, senior exchangeable notes and senior subordinated amortizing notes are fully and unconditionally guaranteed by the Parent.

In addition to the Parent, each of the wholly owned subsidiaries of the Parent other than the Subsidiary Issuer (collectively, “Guarantor Subsidiaries”), with the exception of our home mortgage subsidiaries, certain of our title insurance subsidiaries, joint ventures, subsidiaries holding interests in our joint ventures and our foreign subsidiary (collectively, the “Nonguarantor Subsidiaries”), have guaranteed fully and unconditionally, on a joint and several basis, the obligations of the Subsidiary Issuer to pay principal and interest under the senior secured notes (other than the 2021 Notes), senior notes, senior exchangeable notes, senior amortizing notes and senior subordinated amortizing notes. The Guarantor Subsidiaries are directly or indirectly 100% owned subsidiaries of the Parent. The 2021 Notes are guaranteed by the Guarantor Subsidiaries and the members of the Secured Group (see Note 9).

The senior unsecured notes, senior amortizing notes, senior exchangeable notes and senior subordinated amortizing notes have been registered under the Securities Act of 1933, as amended. The 2020 Secured Notes and the 2021 Notes (see Note 9) are not, pursuant to the indentures under which such notes were issued, required to be registered. The Consolidating Financial Statements presented below are in respect of our registered notes only and not the 2020 Secured Notes or the 2021 Notes (however, the Guarantor Subsidiaries for the 2020 Secured Notes are the same as those represented by the accompanying Consolidating Financial Statements). In lieu of providing separate financial statements for the Guarantor Subsidiaries of our registered notes, we have included the accompanying Consolidating Financial Statements. Therefore, separate financial statements and other disclosures concerning such Guarantor Subsidiaries are not presented.

The following Consolidating Condensed Financial Statements present the results of operations, financial position and cash flows of (i) the Parent, (ii) the Subsidiary Issuer, (iii) the Guarantor Subsidiaries, (iv) the Nonguarantor Subsidiaries and (v) the eliminations to arrive at the information for Hovnanian Enterprises, Inc. on a consolidated basis. Investments in consolidated subsidiaries, Stockholders’(deficit)equity and Intercompany in the Consolidating Condensed Balance Sheet as of October 31, 2012, Equity in (loss)income from subsidiaries in the Consolidating Condensed Statement of Operations for the Years Ended October 31, 2012 and 2011 and Net (loss)income and Adjustments to reconcile net (loss)income to net cash (used in) provided by operating activities in the Consolidating Condensed Statement of Cash Flows for the Years Ended October 31, 2012 and 2011 have been reclassified to conform to the fiscal 2013 presentation.

CONSOLIDATING CONDENSED BALANCE SHEET

OCTOBER 31, 2013

(In thousands)	Parent			Subsidiary Issuer			Guarantor Subsidiaries			Nonguarantor Subsidiaries		Eliminations			Consolidated
Assets:
Homebuilding		$-			$277,800			$1,020,435			$312,042	$				$1,610,277
Financial services								14,570			134,283					148,853
Intercompany receivable					1,093,906						14,489		(1,108,395	)		-
Investments in and amounts due to and from consolidated subsidiaries		(62,298	)		2,275			286,216					(226,193	)		-
Total assets		$(62,298	)		$1,373,981			$1,321,221			$460,814		$(1,334,588	)		$1,759,130
Liabilities and equity:
Homebuilding		$3,798			$491			$437,767			$64,329	$				$506,385
Financial services								14,789			109,748					124,537
Notes payable					1,555,336			2,276			94					1,557,706
Intercompany payable		326,262						805,774					(1,132,036	)		-
Income taxes payable (receivable)		40,868						(37,567	)							3,301
Stockholders’ (deficit) equity		(433,226	)		(181,846	)		98,182			286,216		(202,552	)		(433,226	)
Non-controlling interest in consolidated joint ventures											427					427
Total liabilities and equity		$(62,298	)		$1,373,981			$1,321,221			$460,814		$(1,334,588	)		$1,759,130

CONSOLIDATING CONDENSED BALANCE SHEET

OCTOBER 31, 2012

(In thousands)	Parent			Subsidiary Issuer			Guarantor Subsidiaries			Nonguarantor Subsidiaries			Eliminations			Consolidated
Assets:
Homebuilding		$6,155			$259,339			$976,836			$277,286		$				$1,519,616
Financial services								23,669			140,965						164,634
Investments in consolidated subsidiaries		(80,674	)		13,790			246,467						(179,583	)		-
Total assets		$(74,519	)		$273,129			$1,246,972			$418,251			$(179,583	)		$1,684,250
Liabilities and equity:
Homebuilding		$1,671			$125			$391,628			$61,800		$				$455,224
Financial services								23,070			122,024						145,094
Notes payable					1,561,635			271			489						1,562,395
Income taxes payable (receivable)		40,551						(33,669	)								6,882
Intercompany		368,834			(1,930,998	)		1,589,502			(12,759	)		(14,579	)		-
Stockholders’ (deficit) equity		(485,575	)		642,367			(723,830	)		246,467			(165,004	)		(485,575	)
Non-controlling interest in consolidated joint ventures											230						230
Total liabilities and equity		$(74,519	)		$273,129			$1,246,972			$418,251			$(179,583	)		$1,684,250

CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS

YEAR ENDED OCTOBER 31, 2013

(In thousands)	Parent			Subsidiary Issuer			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Revenues:
Homebuilding		$3			$(235	)		$1,497,016			$311,730			$(4,988	)		$1,803,526
Financial services								9,386			38,341						47,727
Intercompany charges					81,816			(104,212	)		(2,325	)		24,721			-
Total revenues		3			81,581			1,402,190			347,746			19,733			1,851,253
Expenses:
Homebuilding		8,608			123,511			1,373,360			295,390			10,670			1,811,539
Financial services		17						6,721			22,321						29,059
Total expenses		8,625			123,511			1,380,081			317,711			10,670			1,840,598
(Loss) gain on extinguishment of debt					(770,769	)		770,009									(760	)
Income from unconsolidated joint ventures								2,327			9,713						12,040
(Loss) income before income taxes		(8,622	)		(812,699	)		794,445			39,748			9,063			21,935
State and federal income tax (benefit) provision		(21,541	)					12,181									(9,360	)
Equity in income (loss) from subsidiaries		18,376			(11,514	)		39,748						(46,610	)		-
Net income (loss)		$31,295			$(824,213	)		$822,012			$39,748			$(37,547	)		$31,295

CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS

YEAR ENDED OCTOBER 31, 2012

(In thousands)	Parent			Subsidiary Issuer			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Revenues:
Homebuilding		$9			$(270	)		$1,364,733			$87,124			$(4,978	)		$1,446,618
Financial services								8,082			30,653						38,735
Intercompany charges					98,805			(120,094	)		(3,590	)		24,879			-
Total revenues		9			98,535			1,252,721			114,187			19,901			1,485,353
Expenses:
Homebuilding		3,030			150,297			1,300,728			79,899			5,334			1,539,288
Financial services		(28	)					5,737			17,951			(12	)		23,648
Total expenses		3,002			150,297			1,306,465			97,850			5,322			1,562,936
Loss on extinguishment of debt					(29,066	)											(29,066	)
Income from unconsolidated joint ventures								561			4,840						5,401
(Loss) income before income taxes		(2,993	)		(80,828	)		(53,183	)		21,177			14,579			(101,248	)
State and federal income tax (benefit) provision		(17,495	)					(17,580	)		24						(35,051	)
Equity in (loss) income from subsidiaries		(80,699	)		(1,521	)		21,153						61,067			-
Net (loss) income		$(66,197	)		$(82,349	)		$(14,450	)		$21,153			$75,646			$(66,197	)

CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS

YEAR ENDED OCTOBER 31, 2011

(In thousands)	Parent			Subsidiary Issuer			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Revenues:
Homebuilding		$21			$(245	)		$1,103,249			$7,360			$(4,959	)		$1,105,426
Financial services								5,523			23,958						29,481
Intercompany charges					114,592			(152,042	)		(655	)		38,105			-
Total revenues		21			114,347			956,730			30,663			33,146			1,134,907
Expenses:
Homebuilding		5,704			164,947			1,218,886			1,073			13,084			1,403,694
Financial services		307						4,809			16,263			(8	)		21,371
Total expenses		6,011			164,947			1,223,695			17,336			13,076			1,425,065
Gain on extinguishment of debt					7,528												7,528
Loss from unconsolidated joint ventures								(712	)		(8,246	)					(8,958	)
(Loss) income before income taxes		(5,990	)		(43,072	)		(267,677	)		5,081			20,070			(291,588	)
State and federal income tax (benefit) provision		(20,084	)					14,583									(5,501	)
Equity in (loss) income from subsidiaries		(300,181	)		8,018			5,081						287,082			-
Net (loss) income		$(286,087	)		$(35,054	)		$(277,179	)		$5,081			$307,152			$(286,087	)

CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS

YEAR ENDED OCTOBER 31, 2013

(In thousands)	Parent			Subsidiary Issuer			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net income (loss)		$31,295			$(824,213	)		$822,012			$39,748			$(37,547	)		$31,295
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities		29,653			797,892			(875,287	)		(11,832	)		37,547			(22,027	)
Net cash provided by (used in) operating activities		60,948			(26,321	)		(53,275	)		27,916			-			9,268
Net cash provided by investing activities					235			11,819			18,231			-			30,285
Net cash (used in) provided by financing activities					(6,139	)		52,914			(30,356	)		-			16,419
Intercompany financing activities - net		(60,948	)		78,598			(15,920	)		(1,730	)		-			-
Net increase (decrease) in cash		-			46,373			(4,462	)		14,061			-			55,972
Cash and cash equivalents balance, beginning of period		-			197,097			(2,017	)		78,152			-			273,232
Cash and cash equivalents balance, end of period		$-			$243,470			$(6,479	)		$92,213			$-			$329,204

CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS

YEAR ENDED OCTOBER 31, 2012

(In thousands)	Parent			Subsidiary Issuer			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net (loss) income		$(66,197	)		$(82,349	)		$(14,450	)		$21,153			$75,646			$(66,197	)
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities		37,030			53,114			124,875			(140,174	)		(75,646	)		(801	)
Net cash (used in) provided by operating activities		(29,167	)		(29,235	)		110,425			(119,021	)		-			(66,998	)
Net cash provided by (used in) investing activities		-			146			(3,260	)		1,614			-			(1,500	)
Net cash provided by (used in) financing activities		47,221			(79,976	)		49,670			74,075			-			90,990
Intercompany financing activities - net		(18,054	)		194,040			(153,863	)		(22,123	)		-			-
Net increase (decrease) in cash		-			84,975			2,972			(65,455	)		-			22,492
Cash and cash equivalents balance, beginning of period		-			112,122			(4,989	)		143,607			-			250,740
Cash and cash equivalents balance, end of period		$-			$197,097			$(2,017	)		$78,152			$-			$273,232

CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS

YEAR ENDED OCTOBER 31, 2011

(In thousands)	Parent			Subsidiary Issuer			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net (loss) income		$(286,087	)		$(35,054	)		$(277,179	)		$5,081			$307,152			$(286,087	)
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities		93,926			(42,459	)		352,320			(17,963	)		(307,152	)		78,672
Net cash (used in) provided by operating activities		(192,161	)		(77,513	)		75,141			(12,882	)		-			(207,415	)
Net cash provided by (used in) investing activities		-			-			(223	)		1,418			-			1,195
Net cash provided by (used in) financing activities		54,899			56,428			2,367			(23,914	)		-			89,780
Intercompany financing activities - net		137,252			(79,163	)		(69,462	)		11,373			-			-
Net (decrease) increase in cash		(10	)		(100,248	)		7,823			(24,005	)		-			(116,440	)
Cash and cash equivalents balance, beginning of period		10			212,370			(12,812	)		167,612			-			367,180
Cash and cash equivalents balance, end of period		$-			$112,122			$(4,989	)		$143,607			$-			$250,740