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Note 20 - Investments in Unconsolidated Homebuilding and Land Development Joint Ventures | 6 Months Ended
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Apr. 30, 2014
Equity Method Investments and Joint Ventures [Abstract] |
Equity Method Investments and Joint Ventures Disclosure [Text Block] |
20. | Investments in Unconsolidated Homebuilding and Land Development Joint Ventures
We enter into homebuilding and land development joint ventures from time to time as a means of accessing lot positions, expanding our market opportunities, establishing strategic alliances, managing our risk profile, leveraging our capital base and enhancing returns on capital. Our homebuilding joint ventures are generally entered into with third-party investors to develop land and construct homes that are sold directly to third-party homebuyers. Our land development joint ventures include those entered into with developers and other homebuilders as well as financial investors to develop finished lots for sale to the joint venture’s members or other third parties. The tables set forth below summarize the combined financial information related to our unconsolidated homebuilding and land development joint ventures that are accounted for under the equity method.
(Dollars in thousands) |  | April 30, 2014 |
|  | Homebuilding |  |  | Land Development |  |  | Total |
Assets: |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $23,812 |  |  | $377 |  |  | $24,189 |
Inventories |  | 109,491 |  |  | 9,670 |  |  | 119,161 |
Other assets |  | 5,697 |  |  | - |  |  | 5,697 |
Total assets |  | $139,000 |  |  | $10,047 |  |  | $149,047 |
Liabilities and equity: |  |  |  |  |  |  |  |  |
Accounts payable and accrued liabilities |  | $30,890 |  |  | $2,837 |  |  | $33,727 |
Notes payable |  | 18,370 |  |  | - |  |  | 18,370 |
Total liabilities |  | 49,260 |  |  | 2,837 |  |  | 52,097 |
Equity of: |  |  |  |  |  |  |  |  |
Hovnanian Enterprises, Inc. |  | 39,302 |  |  | 2,795 |  |  | 42,097 |
Others |  | 50,438 |  |  | 4,415 |  |  | 54,853 |
Total equity |  | 89,740 |  |  | 7,210 |  |  | 96,950 |
Total liabilities and equity |  | $139,000 |  |  | $10,047 |  |  | $149,047 |
Debt to capitalization ratio |  | 17 | % |  | 0 | % |  | 16 | %
(Dollars in thousands) |  | October 31, 2013 |
|  | Homebuilding |  |  | Land Development |  |  | Total |
Assets: |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  |  | $30,102 |  |  |  | $639 |  |  |  | $30,741 |
Inventories |  |  | 101,735 |  |  |  | 11,080 |  |  |  | 112,815 |
Other assets |  |  | 6,868 |  |  |  | - |  |  |  | 6,868 |
Total assets |  |  | $138,705 |  |  |  | $11,719 |  |  |  | $150,424 |
Liabilities and equity: |  |  |  |  |  |  |  |  |  |  |  |
Accounts payable and accrued liabilities |  |  | $28,016 |  |  |  | $4,047 |  |  |  | $32,063 |
Notes payable |  |  | 23,904 |  |  |  | - |  |  |  | 23,904 |
Total liabilities |  |  | 51,920 |  |  |  | 4,047 |  |  |  | 55,967 |
Equity of: |  |  |  |  |  |  |  |  |  |  |  |
Hovnanian Enterprises, Inc. |  |  | 44,141 |  |  |  | 2,703 |  |  |  | 46,844 |
Others |  |  | 42,644 |  |  |  | 4,969 |  |  |  | 47,613 |
Total equity |  |  | 86,785 |  |  |  | 7,672 |  |  |  | 94,457 |
Total liabilities and equity |  |  | $138,705 |  |  |  | $11,719 |  |  |  | $150,424 |
Debt to capitalization ratio |  |  | 22 | % |  |  | 0 | % |  |  | 20 | %
As of April 30, 2014 and October 31, 2013, we had advances outstanding of approximately $5.6 million and $4.6 million, respectively, to these unconsolidated joint ventures, which were included in the “Accounts payable and accrued liabilities” balances in the tables above. On our Condensed Consolidated Balance Sheets our “Investments in and advances to unconsolidated joint ventures” amounted to $47.7 million and $51.4 million at April 30, 2014 and October 31, 2013, respectively. In some cases, our net investment in these joint ventures is less than our proportionate share of the equity reflected in the tables above because of the differences between asset impairments recorded against our joint venture investments and any impairments recorded in the applicable joint venture. Impairments of our joint venture equity investments are recorded when we deem a decline in fair value to be other than temporary while impairments recorded in the joint ventures are recorded when undiscounted cash flows of its community indicate that the carrying amount is not recoverable. During fiscal 2013 and the first six months of fiscal 2014, we did not write down any joint venture investments based on our determination that none of the investments of our joint ventures sustained any impairment during those periods.
|  | For the Three Months Ended April 30, 2014 |
(In thousands) |  | Homebuilding |  |  | Land Development |  |  | Total |
Revenues |  | $33,746 |  |  | $3,355 |  |  | $37,101 |
Cost of sales and expenses |  | (31,644 | ) |  | (3,466 | ) |  | (35,110 | )
Joint venture net income (loss) |  | $2,102 |  |  | $(111 | ) |  | $1,991 |
Our share of net income (loss) |  | $1,030 |  |  | $(55 | ) |  | $975 |
|  | For the Three Months Ended April 30, 2013 |
(In thousands) |  | Homebuilding |  |  | Land Development |  |  | Total |
Revenues |  | $74,423 |  |  | $1,661 |  |  | $76,084 |
Cost of sales and expenses |  | (70,826 | ) |  | (1,506 | ) |  | (72,332 | )
Joint venture net income |  | $3,597 |  |  | $155 |  |  | $3,752 |
Our share of net income |  | $807 |  |  | $78 |  |  | $885 |
|  | For the Six Months Ended April 30, 2014 |
(In thousands) |  | Homebuilding |  |  | Land Development |  |  | Total |
Revenues |  | $85,019 |  |  | $5,269 |  |  | $90,288 |
Cost of sales and expenses |  | (77,725 | ) |  | (5,085 | ) |  | (82,810 | )
Joint venture net income |  | $7,294 |  |  | $184 |  |  | $7,478 |
Our share of net income |  | $3,577 |  |  | $92 |  |  | $3,669 |
|  | For the Six Months Ended April 30, 2013 |
(In thousands) |  | Homebuilding |  |  | Land Development |  |  | Total |
Revenues |  | $134,566 |  |  | $9,475 |  |  | $144,041 |
Cost of sales and expenses |  | (127,115 | ) |  | (4,455 | ) |  | (131,570 | )
Joint venture net income |  | $7,451 |  |  | $5,020 |  |  | $12,471 |
Our share of net income |  | $716 |  |  | $2,510 |  |  | $3,226 |
“Income from unconsolidated joint ventures” is reflected as a separate line in the accompanying Condensed Consolidated Statements of Operations and reflects our proportionate share of the income or loss of these unconsolidated homebuilding and land development joint ventures. The difference between our share of the income or loss from these unconsolidated joint ventures disclosed in the tables above compared to the Condensed Consolidated Statements of Operations for the three and six months ended April 30, 2014 and 2013 is due primarily to the reclassification of the intercompany portion of management fee income from certain joint ventures (discussed below) and the deferral of income for lots purchased by us from certain joint ventures. To compensate us for the administrative services we provide as the manager of certain joint ventures, we receive a management fee based on a percentage of the applicable joint venture’s revenues. These management fees, which totaled $1.6 million and $2.7 million, for the three months ended April 30, 2014 and 2013, respectively, and $3.7 million and $5.5 million for the six months ended April 30, 2014 and 2013, respectively, are recorded in “Homebuilding: Selling, general and administrative” on the Condensed Consolidated Statement of Operations. In determining whether or not we must consolidate joint ventures that we manage, we assess whether the other partners have specific rights to overcome the presumption of control by us as the manager of the joint venture. In most cases, the presumption is overcome because the joint venture agreements require that both partners agree on establishing the operations and capital decisions of the partnership, including budgets in the ordinary course of business. Typically, our unconsolidated joint ventures obtain separate project specific mortgage financing. The amount of financing is generally targeted to be no more than 50% of the joint venture’s total assets. For our more recent joint ventures, obtaining financing has become challenging, therefore, some of our joint ventures are capitalized only with equity. Including the impact of impairments recorded by the joint ventures, the total debt to capitalization ratio of all our joint ventures as of April 30, 2014 was 16%. Any joint venture financing is on a nonrecourse basis, with guarantees from us limited only to performance and completion of development, environmental warranties and indemnification, standard indemnification for fraud, misrepresentation and other similar actions, including a voluntary bankruptcy filing. In some instances, the joint venture entity is considered a VIE under ASC 810-10 "Consolidation – Overall" due to the returns being capped to the equity holders; however, in these instances, we are not the primary beneficiary, and therefore we do not consolidate these entities.

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- Definition The entire disclosure for equity method investments and joint ventures. Equity method investments are investments that give the investor the ability to exercise significant influence over the operating and financial policies of an investee. Joint ventures are entities owned and operated by a small group of businesses as a separate and specific business or project for the mutual benefit of the members of the group. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02.12) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 323 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6382943&loc=d3e33918-111571 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 323 -SubTopic 10 -Section 35 -Paragraph 35 -URI http://asc.fasb.org/extlink&oid=7658923&loc=d3e32847-111569 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 323 -SubTopic 10 -Section 35 -Paragraph 32 -URI http://asc.fasb.org/extlink&oid=7658923&loc=d3e32787-111569 + Details
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