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Note 21 - Financial Information of Subsidiary Issuer and Subsidiary Guarantors

6 Months Ended

Apr. 30, 2015

Disclosure Text Block Supplement [Abstract]

Condensed Financial Statements [Text Block]

21.

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, 2015, had issued and outstanding approximately $992.0 million of senior secured notes ($980.6 million, net of discount), $841.1 million senior notes ($840.9 million, net of discount) and $15.0 million senior amortizing notes and $71.9 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, 2015

(In Thousands)

	Parent		Subsidiary Issuer		Guarantor Subsidiaries	Nonguarantor Subsidiaries	Eliminations		Consolidated
ASSETS:
Homebuilding	$-		$247,616		$1,478,889	$362,600	$-		$2,089,105
Financial services					10,327	116,974			127,301
Income taxes receivable	258,121				42,467				300,588
Intercompany receivable			1,467,671			36,727	(1,504,398	)	-
Investments in and amounts due from consolidated subsidiaries					365,247		(365,247	)	-
Total assets	$258,121		$1,715,287		$1,896,930	$516,301	(1,869,645	)	$2,516,994

LIABILITIES AND EQUITY:
Homebuilding	$3,183		$196		$550,981	$55,853			$610,213
Financial services					10,021	94,776			104,797
Notes payable			1,946,342		1,551	425			1,948,318
Intercompany payable	305,378				1,199,020		(1,504,398	)	-
Amounts due to consolidated subsidiaries	95,894		38,266				(134,160	)	-
Stockholders’ (deficit) equity	(146,334	)	(269,517	)	135,357	365,247	(231,087	)	(146,334	)
Total liabilities and equity	$258,121		$1,715,287		$1,896,930	$516,301	(1,869,645	)	$2,516,994

CONDENSED CONSOLIDATING 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

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

THREE MONTHS ENDED APRIL 30, 2015

(In Thousands)

	Parent		Subsidiary Issuer		Guarantor Subsidiaries		Nonguarantor Subsidiaries	Eliminations		Consolidated
Revenues:
Homebuilding	$-		$-		$390,898		$65,594	$-		$456,492
Financial services					1,935		10,522			12,457
Intercompany charges			31,873				66	(31,939	)	-
Total revenues	-		31,873		392,833		76,182	(31,939	)	468,949

Expenses:
Homebuilding	3,082		38,387		392,535		58,384			492,388
Financial services	20				1,556		5,932			7,508
Intercompany charges					31,939			(31,939	)	-
Total expenses	3,102		38,387		426,030		64,316	(31,939	)	499,896
Income from unconsolidated joint ventures							1,466			1,466
(Loss) income before income taxes	(3,102	)	(6,514	)	(33,197	)	13,332	-		(29,481	)
State and federal income tax benefit	(5,906	)			(4,016	)				(9,922	)
Equity in (loss) income of consolidated subsidiaries	(22,363	)	(13,558	)	13,332			22,589		-
Net (loss) income	$(19,559	)	$(20,072	)	$(15,849	)	$13,332	$22,589		$(19,559	)

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

SIX MONTHS ENDED APRIL 30, 2015

(In Thousands)

	Parent		Subsidiary Issuer		Guarantor Subsidiaries		Nonguarantor Subsidiaries	Eliminations		Consolidated
Revenues:
Homebuilding	$-		$-		$756,087		$134,997	$-		$891,084
Financial services					3,768		19,811			23,579
Intercompany charges			60,385					(60,385	)	-
Total revenues	-		60,385		759,855		154,808	(60,385	)	914,663

Expenses:
Homebuilding	6,793		76,215		750,044		118,865			951,917
Financial services	88				3,129		11,608			14,825
Intercompany charges					60,321		64	(60,385	)	-
Total expenses	6,881		76,215		813,494		130,537	(60,385	)	966,742
(Loss) income from unconsolidated joint ventures					(14	)	2,932			2,918
(Loss) income before income taxes	(6,881	)	(15,830	)	(53,653	)	27,203	-		(49,161	)
State and federal income tax (benefit) provision	(18,192	)			2,966					(15,226	)
Equity in (loss) income of consolidated subsidiaries	(45,246	)	(26,364	)	27,203			44,407		-
Net (loss) income	$(33,935	)	$(42,194	)	$(29,416	)	$27,203	$44,407		$(33,935	)

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 CASH FLOWS

SIX MONTHS ENDED APRIL 30, 2015

(In Thousands)

	Parent		Subsidiary Issuer		Guarantor Subsidiaries		Nonguarantor Subsidiaries		Eliminations		Consolidated
Cash flows from operating activities:
Net (loss) income	$(33,935	)	$(42,194	)	$(29,416	)	$27,203		$44,407		$(33,935	)
Adjustments to reconcile net (loss) income to net cash used in operating activities	(7,989	)	18,740		(101,623	)	(86,915	)	(44,407	)	(222,194	)
Net cash used in operating activities	(41,924	)	(23,454	)	(131,039	)	(59,712	)	-		(256,129	)
Cash flows from investing activities:
Proceeds from sale of property and assets					952		31				983
Purchase of property, equipment & other fixed assets and acquisitions					(1,172	)					(1,172	)
Decrease in restricted cash related to mortgage company							1,645				1,645
Investments in and advances to unconsolidated joint ventures			81		146		(15,766	)			(15,539	)
Distributions of capital from unconsolidated joint ventures			(33	)	339		7,039				7,345
Intercompany investing activities			(165,853	)					165,853		-
Net cash (used in) provided by investing activities	-		(165,805	)	265		(7,051	)	165,853		(6,738	)
Cash flows from financing activities:
Net proceeds from mortgages and notes					6,336		8,375				14,711
Net proceeds from model sale leaseback financing programs					11,746		1,595				13,341
Net payments related to land bank financing programs					(9,124	)	(3,879	)			(13,003	)
Proceeds from senior notes			250,000								250,000
Net proceeds related to mortgage warehouse lines of credit							6,047				6,047
Deferred financing costs from land bank financing programs and note issuances			(4,627	)	(1,016	)	(850	)			(6,493	)
Principal payments and debt repurchases			(2,062	)							(2,062	)
Intercompany financing activities	41,924				124,498		(569	)	(165,853	)	-
Net cash provided by (used in) financing activities	41,924		243,311		132,440		10,719		(165,853	)	262,541
Net increase (decrease) in cash and cash equivalents	-		54,052		1,666		(56,044	)	-		(326	)
Cash and cash equivalents balance, beginning of period			159,508		(4,726	)	107,116				261,898
Cash and cash equivalents balance, end of period	$-		$213,560		$(3,060	)	$51,072		$-		$261,572

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