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Note 22 - Financial Information of Subsidiary Issuer and Subsidiary Guarantors

12 Months Ended

Oct. 31, 2015

Disclosure Text Block Supplement [Abstract]

Condensed Financial Statements [Text Block]

22. 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 October 31, 2015, had issued and outstanding $992.0 million of senior secured notes ($981.3 million, net of discount), $780.3 million senior notes $12.8 million senior amortizing notes and $73.8 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 9).

The senior unsecured notes (except for the 2019 Notes and the 8.0% Senior Notes due 2019), senior amortizing notes and senior exchangeable notes have been registered under the Securities Act of 1933, as amended. The 2019 Notes, the 8.0% Senior Notes due 2019, 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 2019 Notes, the 8.0% Senior Notes due 2019, the 2020 Secured Notes or the 2021 Notes (however, the Guarantor Subsidiaries for the 2019 Notes, the 8.0% Senior Notes due 2019 and 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 Condensed 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.

CONSOLIDATING CONDENSED BALANCE SHEET

OCTOBER 31, 2015

(In thousands)	Parent		Subsidiary Issuer		Guarantor Subsidiaries	Nonguarantor Subsidiaries	Eliminations		Consolidated
Assets:
Homebuilding	$-		$230,358		$1,553,811	$367,869	$-		$2,152,038
Financial services					15,680	144,301			159,981
Income taxes receivable	128,176		(89,212	)	251,293	22			290,279
Intercompany receivable			1,575,712			58,280	(1,633,992	)	-
Investments in and amounts due from consolidated subsidiaries			1,013		383,032		(384,045	)	-
Total assets	$128,176		$1,717,871		$2,203,816	$570,472	$(2,018,037	)	$2,602,298
Liabilities and equity:
Homebuilding	$3,076		$87		$588,854	$65,947	$-		$657,964
Financial services					15,677	121,106			136,783
Notes payable			1,933,119		2,132	384			1,935,635
Intercompany payable	180,681				1,453,311		(1,633,992	)	-
Amounts due to consolidated subsidiaries	72,503						(72,503	)	-
Stockholders’ (deficit) equity	(128,084	)	(215,335	)	143,842	383,035	(311,542	)	(128,084	)
Total liabilities and equity	$128,176		$1,717,871		$2,203,816	$570,472	$(2,018,037	)	$2,602,298

CONSOLIDATING CONDENSED BALANCE SHEET

OCTOBER 31, 2014

(In thousands)	Parent		Subsidiary Issuer		Guarantor Subsidiaries	Nonguarantor Subsidiaries	Eliminations		Consolidated
Assets:
Homebuilding	$-		$195,177		$1,336,716	$353,151	$-		$1,885,044
Financial services					11,407	108,936			120,343
Income taxes receivable	244,391				40,152				284,543
Intercompany receivable			1,275,453			36,161	(1,311,614	)	-
Investments in and amounts due from consolidated subsidiaries					338,044		(338,044	)	-
Total assets	$244,391		$1,470,630		$1,726,319	$498,248	$(1,649,658	)	$2,289,930
Liabilities and equity:
Homebuilding	$2,842		$160		$544,088	$71,663	$-		$618,753
Financial services					11,210	87,987			99,197
Notes payable			1,685,892		3,336	551			1,689,779
Intercompany payable	308,700				1,002,914		(1,311,614	)	-
Amounts due to consolidated subsidiaries	50,648		11,902				(62,550	)	-
Stockholders’ (deficit) equity	(117,799	)	(227,324	)	164,771	338,047	(275,494	)	(117,799	)
Total liabilities and equity	$244,391		$1,470,630		$1,726,319	$498,248	$(1,649,658	)	$2,289,930

CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS

YEAR ENDED OCTOBER 31, 2015

(In thousands)	Parent			Subsidiary Issuer			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues:
Homebuilding	$	-		$	-		$	1,778,700		$	313,115		$	-		$	2,091,815
Financial services								8,685			47,980						56,665
Intercompany charges					124,361						-			(124,361	)		-
Total revenues		-			124,361			1,787,385			361,095			(124,361	)		2,148,480
Expenses:
Homebuilding		5,125			155,773			1,686,726			294,818						2,142,442
Financial services		105						6,490			25,377			-			31,972
Intercompany charges								124,360			1			(124,361	)		-
Total expenses		5,230			155,773			1,817,576			320,196			(124,361	)		2,174,414
Income from unconsolidated joint ventures		-						82			4,087						4,169
(Loss) income before income taxes		(5,230	)		(31,412	)		(30,109	)		44,986			-			(21,765	)
State and federal income tax (benefit) provision		(10,985	)		(30,486	)		35,808			(2	)					(5,665	)
Equity in (loss) income from subsidiaries		(21,855	)		12,915			44,988						(36,048	)		-
Net (loss) income	$	(16,100	)	$	11,989		$	(20,929	)	$	44,988		$	(36,048	)	$	(16,100	)

CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS

YEAR ENDED OCTOBER 31, 2014

(In thousands)	Parent		Subsidiary Issuer		Guarantor Subsidiaries	Non-Guarantor Subsidiaries	Eliminations		Consolidated
Revenues:
Homebuilding	$25		$-		$1,651,343	$369,598	$-		$2,020,966
Financial services					9,572	32,842			42,414
Intercompany charges			100,878				(100,878	)	-
Total revenues	25		100,878		1,660,915	402,440	(100,878	)	2,063,380
Expenses:
Homebuilding	3,286		131,730		1,549,659	336,651			2,021,326
Financial services	20				6,832	21,764			28,616
Intercompany charges					100,878		(100,878	)	-
Total expenses	3,306		131,730		1,657,369	358,415	(100,878	)	2,049,942
Loss on extinguishment of debt			(1,155	)					(1,155	)
Income from unconsolidated joint ventures					94	7,803			7,897
Income (loss) before income taxes	(3,281	)	(32,007	)	3,640	51,828	-		20,180
State and federal income tax (benefit) provision	(298,775	)	(908	)	12,719				(286,964	)
Equity in income (loss) from subsidiaries	11,650		(14,177	)	51,828		(49,301	)	-
Net income (loss)	$307,144		$(45,276	)	$42,749	$51,828	$(49,301	)	$307,144

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
Income (loss) 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 CASH FLOWS

YEAR ENDED OCTOBER 31, 2015

(In thousands)	Parent		Subsidiary Issuer		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Consolidated
Cash flows from operating activities:
Net (loss) income	$(16,100	)	$11,989		$(20,929	)	$44,988		$(36,048	)	$(16,100	)
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities	122,264		110,820		(456,704	)	(116,863	)	36,048		(304,435	)
Net cash (used in) provided by operating activities	106,164		122,809		(477,633	)	(71,875	)	-		(320,535	)
Cash flows from investing activities:
Proceeds from sale of property and assets					1,556		17				1,573
Purchase of property, equipment and other fixed assets and acquisitions					(2,054	)					(2,054	)
Decrease in restricted cash related to mortgage company							1,555				1,555
Decrease in restricted cash related to letters of credit			2,993								2,993
Investments in and advances to unconsolidated joint ventures			16		(114	)	(18,609	)			(18,707	)
Distributions of capital from unconsolidated joint ventures			315		646		16,151				17,112
Intercompany investing activities			(313,174	)					313,174		-
Net cash provided by (used in) investing activities	-		(309,850	)	34		(886	)	313,174		2,472
Cash flows from financing activities:
Net proceeds from mortgages and notes					27,881		11,502				39,383
Net proceeds from model sale leaseback financing programs					17,117		5,867				22,984
Net payments from land bank financing programs					(6,198	)	(1,147	)			(7,345	)
Proceeds from senior notes			250,000								250,000
Payments related to senior notes			(60,815	)							(60,815	)
Borrowings from revolving credit facility			47,000								47,000
Net proceeds related to mortgage warehouse lines of credit							31,956				31,956
Deferred financing costs from land bank financing programs and note issuances			(5,096	)	(2,732	)	(1,187	)			(9,015	)
Principal payments on amortizing and debt repurchases			(4,238	)							(4,238	)
Intercompany financing activities	(106,164	)			441,457		(22,119	)	(313,174	)	-
Net cash provided by (used in) financing activities	(106,164	)	226,851		477,525		24,872		(313,174	)	309,910
Net (decrease) increase in cash	-		39,810		(74	)	(47,889	)	-		(8,153	)
Cash and cash equivalents balance, beginning of period	-		159,508		(4,726	)	107,116		-		261,898
Cash and cash equivalents balance, end of period	$-		$199,318		$(4,800	)	$59,227		$-		$253,745

CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS

YEAR ENDED OCTOBER 31, 2014

(In thousands)	Parent		Subsidiary Issuer		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations		Consolidated
Cash flows from operating activities:
Net income (loss)	$307,144		$(45,276	)	$42,749		$51,828		$(49,301	)	$307,144
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities	(277,932	)	14,334		(303,507	)	20,075		49,301		(497,729	)
Net cash (used in) provided by operating activities	29,212		(30,942	)	(260,758	)	71,903		-		(190,585	)
Cash flows from investing activities:
Proceeds from sale of property and assets					467		48				515
Purchase of property, equipment and other fixed assets and acquisitions					(3,395	)	(28	)			(3,423	)
(Increase) in restricted cash related to mortgage company							(655	)			(655	)
Investments in and advances to unconsolidated joint ventures			(95	)	(831	)	(20,773	)			(21,699	)
Distributions of capital from unconsolidated joint ventures			203		3,787		7,117				11,107
Intercompany investing activities			(167,370	)					167,370		-
Net cash (used in) provided by investing activities	-		(167,262	)	28		(14,291	)	167,370		(14,155	)
Cash flows from financing activities:
Net proceeds from mortgages and notes					39,345		1,425				40,770
Net proceeds from model sale leaseback financing programs					17,232		1,982				19,214
Net payments from land bank financing programs					(8,297	)	(9,009	)			(17,306	)
Net proceeds from senior notes			121,447								121,447
Net payments related to mortgage warehouse lines of credit							(14,744	)			(14,744	)
Deferred financing costs from land bank financing programs and note issuances			(7,205	)	(4,051	)	(691	)			(11,947	)
Intercompany financing activities	(29,212	)			218,254		(21,672	)	(167,370	)	-
Net cash provided by (used in) financing activities	(29,212	)	114,242		262,483		(42,709	)	(167,370	)	137,434
Net (decrease) increase in cash and cash equivalents	-		(83,962	)	1,753		14,903		-		(67,306	)
Cash and cash equivalents balance, beginning of period			243,470		(6,479	)	92,213				329,204
Cash and cash equivalents balance, end of period	$-		$159,508		$(4,726	)	$107,116		$-		$261,898

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 (used in) provided by 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 provided by (used in) 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