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Note 23 - Financial Information of Subsidiary Issuer and Subsidiary Guarantors

6 Months Ended

Apr. 30, 2014

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 and preferred stock, which is represented by depository shares. One of its wholly owned subsidiaries, K. Hovnanian Enterprises, Inc. (the “Subsidiary Issuer”), acts as a finance entity that, as of April 30, 2014, had issued and outstanding approximately $992.0 million of senior secured notes ($979.3 million, net of discount), $591.1 million senior notes ($590.1 million, net of discount), $19.0 million senior amortizing notes and $68.3 million senior exchangeable notes (issued as components of our 6.0% Exchangeable Note Units). The senior secured notes, senior notes, senior amortizing notes and senior exchangeable 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 and senior 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 11).

The senior unsecured notes (except for the 2019 Notes), senior amortizing notes and senior exchangeable notes have been registered under the Securities Act of 1933, as amended. The 2019 Notes, 2020 Secured Notes and the 2021 Notes (see Note 11) are not, pursuant to the indentures under which such notes were issued, required to be registered. The Condensed Consolidating Financial Statements presented below are in respect of our registered notes only and not the 2019 Notes, 2020 Secured Notes or the 2021 Notes (however, the Guarantor Subsidiaries for the 2019 Notes and the 2020 Secured Notes are the same as those represented by the accompanying Condensed Consolidating Financial Statements). In lieu of providing separate financial statements for the Guarantor Subsidiaries of our registered notes, we have included the accompanying Condensed Consolidating Financial Statements. Therefore, separate financial statements and other disclosures concerning such Guarantor Subsidiaries are not presented.

The following Condensed Consolidating 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.

CONDENSED CONSOLIDATING BALANCE SHEET

APRIL 30, 2014

(In Thousands)

	Parent		Subsidiary Issuer		Guarantor Subsidiaries		Nonguarantor Subsidiaries	Eliminations		Consolidated
ASSETS:
Homebuilding			$191,410		$1,264,666		$314,593	(16,528	)	$1,754,141
Financial services					12,182		72,500			84,682
Intercompany receivable (payable)			1,291,281				26,236	(1,317,517	)	-
Investments in and amounts due to and from consolidated subsidiaries	(94,617	)	(21,749	)	312,298			(195,932	)	-
Total assets	$(94,617	)	$1,460,942		$1,589,146		$413,329	(1,529,977	)	$1,838,823

LIABILITIES AND EQUITY:
Homebuilding	$2,211		$176		$494,285		$49,928			$546,600
Financial services					11,902		50,424			62,326
Notes payable			1,685,332		3,423		232			1,688,987
Intercompany payable	327,508				1,034,657			(1,362,165	)	-
Income taxes payable (receivable)	38,624				(35,201	)				3,423
Stockholders’ (deficit) equity	(462,960	)	(224,566	)	80,080		312,298	(167,812	)	(462,960	)
Noncontrolling interest in consolidated joint ventures							447			447
Total liabilities and equity	$(94,617	)	$1,460,942		$1,589,146		$413,329	(1,529,977	)	$1,838,823

CONDENSED CONSOLIDATING 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	)
Noncontrolling 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

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

THREE MONTHS ENDED APRIL 30, 2014

(In Thousands)

	Parent		Subsidiary Issuer		Guarantor Subsidiaries		Nonguarantor Subsidiaries	Eliminations		Consolidated
Revenues:
Homebuilding			$(31	)	$366,152		$74,396			$440,517
Financial services					2,236		7,176			9,412
Intercompany charges			25,978		(27,019	)	249	792		-
Total revenues	-		25,947		341,369		81,821	792		449,929

Expenses:
Homebuilding	1,942		33,629		349,322		67,129	(1,590	)	450,432
Financial services	5				1,694		5,008			6,707
Total expenses	1,947		33,629		351,016		72,137	(1,590	)	457,139
Loss on extinguishment of debt			(1,155	)						(1,155	)
Income from unconsolidated joint ventures					37		1,030			1,067
(Loss) income before income taxes	(1,947	)	(8,837	)	(9,610	)	10,714	2,382		(7,298	)
State and federal income tax (benefit) provision	(2,236	)			2,840					604
Equity in (loss) income of consolidated subsidiaries	(8,191	)	(11,945	)	10,714			9,422		-
Net (loss) income	$(7,902	)	$(20,782	)	$(1,736	)	$10,714	$11,804		$(7,902	)

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

THREE MONTHS ENDED APRIL 30, 2013

(In Thousands)

	Parent		Subsidiary Issuer		Guarantor Subsidiaries		Nonguarantor Subsidiaries		Eliminations		Consolidated
Revenues:
Homebuilding	$1		$(54	)	$362,496		$51,121		$(1,248	)	$412,316
Financial services					2,586		8,096				10,682
Intercompany charges			20,207		(25,013	)	(877	)	5,683		-
Total revenues	1		20,153		340,069		58,340		4,435		422,998

Expenses:
Homebuilding	2,396		29,838		345,306		40,482		(69	)	417,953
Financial services	5				1,848		5,284				7,137
Total expenses	2,401		29,838		347,154		45,766		(69	)	425,090
(Loss) income from unconsolidated joint ventures					(123	)	950				827
(Loss) income before income taxes	(2,400	)	(9,685	)	(7,208	)	13,524		4,504		(1,265	)
State and federal income tax (benefit) provision	(2,714	)			131						(2,583	)
Equity in income (loss) of consolidated subsidiaries	1,004		(11,601	)	13,524				(2,927	)	-
Net income (loss)	$1,318		$(21,286	)	$6,185		$13,524		$1,577		$1,318

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

SIX MONTHS ENDED APRIL 30, 2014

(In Thousands)

	Parent		Subsidiary Issuer		Guarantor Subsidiaries		Nonguarantor Subsidiaries	Eliminations		Consolidated
Revenues:
Homebuilding			$(77	)	$649,190		$147,358			$796,471
Financial services					4,071		13,435			17,506
Intercompany charges			46,555		(48,281	)		1,726		-
Total revenues	-		46,478		604,980		160,793	1,726		813,977

Expenses:
Homebuilding	5,925		64,018		638,940		128,138	(2,752	)	834,269
Financial services	9				3,219		10,151			13,379
Total expenses	5,934		64,018		642,159		138,289	(2,752	)	847,648
Loss on extinguishment of debt			(1,155	)						(1,155	)
Income from unconsolidated joint ventures					60		3,578			3,638
(Loss) income before income taxes	(5,934	)	(18,695	)	(37,119	)	26,082	4,478		(31,188	)
State and federal income tax (benefit) provision	(5,828	)			7,065					1,237
Equity in (loss) income of consolidated subsidiaries	(32,319	)	(24,024	)	26,082			30,261		-
Net (loss) income	$(32,425	)	$(42,719	)	$(18,102	)	$26,082	$34,739		$(32,425	)

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

SIX MONTHS ENDED APRIL 30, 2013

(In Thousands)

	Parent		Subsidiary Issuer		Guarantor Subsidiaries		Nonguarantor Subsidiaries		Eliminations		Consolidated
Revenues:
Homebuilding	$3		$(99	)	$661,511		$99,948		$(2,495	)	$758,868
Financial services					4,663		17,678				22,341
Intercompany charges			40,407		(50,334	)	(1,751	)	11,678		-
Total revenues	3		40,308		615,840		115,875		9,183		781,209

Expenses:
Homebuilding	2,744		59,699		643,076		83,895		2,413		791,827
Financial services	9				3,690		10,866				14,565
Total expenses	2,753		59,699		646,766		94,761		2,413		806,392
(Loss) gain on extinguishment of debt			(770,009	)	770,009						-
Income from unconsolidated joint ventures					2,259		857				3,116
(Loss) income before income taxes	(2,750	)	(789,400	)	741,342		21,971		6,770		(22,067	)
State and federal income tax (benefit) provision	(17,075	)			4,998						(12,077	)
Equity in (loss) income of consolidated subsidiaries	(24,315	)	(22,719	)	21,971				25,063		-
Net (loss) income	$(9,990	)	$(812,119	)	$758,315		$21,971		$31,833		$(9,990	)

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

SIX MONTHS ENDED APRIL 30, 2014

(In Thousands)

	Parent		Subsidiary Issuer		Guarantor Subsidiaries		Nonguarantor Subsidiaries		Eliminations		Consolidated
Cash flows from operating activities:
Net (loss) income	$(32,425	)	$(42,719	)	$(18,102	)	$26,082		$34,739		$(32,425	)
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities	(1,140	)	9,969		(172,179	)	44,408		(34,739	)	(153,681	)
Net cash (used in) provided by operating activities	(33,565	)	(32,750	)	(190,281	)	70,490		-		(186,106	)
Net cash provided by investing activities			76		664		4,988				5,728
Net cash provided by (used in) financing activities			120,553		39,646		(63,793	)			96,406
Intercompany investing and financing activities – net	33,565		(173,351	)	151,533		(11,747	)			-
Net (decrease) increase in cash	-		(85,472	)	1,562		(62	)	-		(83,972	)
Cash and cash equivalents balance, beginning of period			243,470		(6,479	)	92,213				329,204
Cash and cash equivalents balance, end of period	$-		$157,998		$(4,917	)	$92,151		$-		$245,232

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

SIX MONTHS ENDED APRIL 30, 2013

(In Thousands)

	Parent		Subsidiary Issuer		Guarantor Subsidiaries		Nonguarantor Subsidiaries		Eliminations		Consolidated
Cash flows from operating activities:
Net (loss) income	$(9,990	)	$(812,119	)	$758,315		$21,971		$31,833		$(9,990	)
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities	14,384		773,776		(773,952	)	11,695		(31,833	)	(5,930	)
Net cash provided by (used in) operating activities	4,394		(38,343	)	(15,637	)	33,666		-		(15,920	)
Net cash provided by investing activities			242		12,033		5,399				17,674
Net cash (used in) provided by financing activities			(2,169	)	20,087		(48,042	)			(30,124	)
Intercompany investing and financing activities – net	(4,394	)	28,338		(17,970	)	(5,974	)			-
Net decrease in cash	-		(11,932	)	(1,487	)	(14,951	)	-		(28,370	)
Cash and cash equivalents balance, beginning of period			197,097		(2,017	)	78,152				273,232
Cash and cash equivalents balance, end of period	$-		$185,165		$(3,504	)	$63,201		$-		$244,862