XML 86 R27.htm IDEA: XBRL DOCUMENT

Note 21 - Financial Information of Subsidiary Issuer and Subsidiary Guarantors

9 Months Ended

Jul. 31, 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 July 31, 2015, had issued and outstanding approximately $992.0 million of senior secured notes ($981.0 million, net of discount), $841.1 million senior notes ($841.1 million, net of discount) and $12.8 million senior amortizing notes and $72.8 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 11).

The senior unsecured notes (except for the 2019 Notes and the 8% 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% Senior Notes due 2019, the 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, the 8% Senior Notes due 2019, the 2020 Secured Notes or the 2021 Notes (however, the Guarantor Subsidiaries for the 2019 Notes, the 8% Senior Notes due 2019 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

JULY 31, 2015

(In Thousands)

	Parent			Subsidiary Issuer			Guarantor Subsidiaries		Nonguarantor Subsidiaries		Eliminations			Consolidated
ASSETS:
Homebuilding		$-			$192,365			$1,545,467		$371,632		$-			$2,109,464
Financial services								12,189		123,901					136,090
Income taxes receivable		255,664						48,126							303,790
Intercompany receivable					1,505,551					48,335		(1,553,886	)		-
Investments in and amounts due from consolidated subsidiaries								380,721				(380,721	)		-
Total assets		$255,664			$1,697,916			$1,986,503		$543,868		(1,934,607	)		$2,549,344

LIABILITIES AND EQUITY:
Homebuilding		$3,076			$76			$584,370		$61,487		$-			$649,009
Financial services								12,247		101,303					113,550
Notes payable					1,936,130			1,805		357					1,938,292
Intercompany payable		303,173						1,250,713				(1,553,886	)		-
Amounts due to consolidated subsidiaries		100,922			52,121							(153,043	)		-
Stockholders’ (deficit) equity		(151,507	)		(290,411	)		137,368		380,721		(227,678	)		(151,507	)
Total liabilities and equity		$255,664			$1,697,916			$1,986,503		$543,868		(1,934,607	)		$2,549,344

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 JULY 31, 2015

(In Thousands)

	Parent			Subsidiary Issuer			Guarantor Subsidiaries			Nonguarantor Subsidiaries			Eliminations			Consolidated
Revenues:
Homebuilding		$-			$-			$446,581			$79,672			$-			$526,253
Financial services								2,146			12,214						14,360
Intercompany charges					31,246						64			(31,310	)		-
Total revenues		-			31,246			448,727			91,950			(31,310	)		540,613

Expenses:
Homebuilding		2,416			38,284			431,816			69,406						541,922
Financial services		16			-			1,618			6,610						8,244
Intercompany charges								31,310						(31,310	)		-
Total expenses		2,432			38,284			464,744			76,016			(31,310	)		550,166
Income (loss) from unconsolidated joint ventures								12			(460	)					(448	)
(Loss) income before income taxes		(2,432	)		(7,038	)		(16,005	)		15,474			-			(10,001	)
State and federal income tax provision (benefit)		224						(2,541	)								(2,317	)
Equity in (loss) income of consolidated subsidiaries		(5,028	)		(13,855	)		15,474						3,409			-
Net (loss) income		$(7,684	)		$(20,893	)		$2,010			$15,474			$3,409			$(7,684	)

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

THREE MONTHS ENDED JULY 31, 2014

(In Thousands)

	Parent			Subsidiary Issuer			Guarantor Subsidiaries			Nonguarantor Subsidiaries			Eliminations			Consolidated
Revenues:
Homebuilding		$-			$(52	)		$436,085			$103,870			$-			$539,903
Financial services								2,396			8,710						11,106
Intercompany charges					26,411			(28,110	)		(42	)		1,741			-
Total revenues		-			26,359			410,371			112,538			1,741			551,009

Expenses:
Homebuilding		3,098			32,751			406,479			86,894			(586	)		528,636
Financial services		6						1,699			5,507						7,212
Total expenses		3,104			32,751			408,178			92,401			(586	)		535,848
Income from unconsolidated joint ventures								10			201						211
(Loss) income before income taxes		(3,104	)		(6,392	)		2,203			20,338			2,327			15,372
State and federal income tax (benefit) provision		(4,213	)					2,480									(1,733	)
Equity in income (loss) of consolidated subsidiaries		15,996			(12,584	)		20,338						(23,750	)		-
Net income (loss)		$17,105			$(18,976	)		$20,061			$20,338			$(21,423	)		$17,105

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

NINE MONTHS ENDED JULY 31, 2015

(In Thousands)

	Parent			Subsidiary Issuer			Guarantor Subsidiaries			Nonguarantor Subsidiaries		Eliminations			Consolidated
Revenues:
Homebuilding		$-			$-			$1,202,668			$214,669		$-			$1,417,337
Financial services								5,914			32,025					37,939
Intercompany charges					91,631								(91,631	)		-
Total revenues		-			91,631			1,208,582			246,694		(91,631	)		1,455,276

Expenses:
Homebuilding		9,209			114,499			1,181,860			188,271					1,493,839
Financial services		104						4,747			18,218					23,069
Intercompany charges								91,631					(91,631	)		-
Total expenses		9,313			114,499			1,278,238			206,489		(91,631	)		1,516,908
(Loss) income from unconsolidated joint ventures								(2	)		2,472					2,470
(Loss) income before income taxes		(9,313	)		(22,868	)		(69,658	)		42,677		-			(59,162	)
State and federal income tax (benefit) provision		(17,968	)					425								(17,543	)
Equity in (loss) income of consolidated subsidiaries		(50,274	)		(40,219	)		42,677					47,816			-
Net (loss) income		$(41,619	)		$(63,087	)		$(27,406	)		$42,677		$47,816			$(41,619	)

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

NINE MONTHS ENDED JULY 31, 2014

(In Thousands)

	Parent			Subsidiary Issuer			Guarantor Subsidiaries			Nonguarantor Subsidiaries			Eliminations			Consolidated
Revenues:
Homebuilding		$-			$(129	)		$1,085,275			$251,228			$-			$1,336,374
Financial services								6,467			22,145						28,612
Intercompany charges					72,966			(76,391	)		(42	)		3,467			-
Total revenues		-			72,837			1,015,351			273,331			3,467			1,364,986

Expenses:
Homebuilding		9,023			96,769			1,045,419			215,032			(3,338	)		1,362,905
Financial services		15						4,918			15,658						20,591
Total expenses		9,038			96,769			1,050,337			230,690			(3,338	)		1,383,496
Loss on extinguishment of debt					(1,155	)											(1,155	)
Income from unconsolidated joint ventures								70			3,779						3,849
(Loss) income before income taxes		(9,038	)		(25,087	)		(34,916	)		46,420			6,805			(15,816	)
State and federal income tax (benefit) provision		(10,041	)					9,545									(496	)
Equity in (loss) income of consolidated subsidiaries		(16,323	)		(36,608	)		46,420						6,511			-
Net (loss) income		$(15,320	)		$(61,695	)		$1,959			$46,420			$13,316			$(15,320	)

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED JULY 31, 2015

(In Thousands)

	Parent			Subsidiary Issuer			Guarantor Subsidiaries			Nonguarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net (loss) income		$(41,619	)		$(63,087	)		$(27,406	)		$42,677			$47,816			$(41,619	)
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities		(3,128	)		12,191			(154,619	)		(97,689	)		(47,816	)		(291,061	)
Net cash used in operating activities		(44,747	)		(50,896	)		(182,025	)		(55,012	)		-			(332,680	)
Cash flows from investing activities:
Proceeds from sale of property and assets								1,112			31						1,143
Purchase of property, equipment and other fixed assets and acquisitions								(1,653	)								(1,653	)
Decrease in restricted cash related to mortgage company											1,466						1,466
Investments in and advances to unconsolidated joint ventures					81			184			(17,266	)					(17,001	)
Distributions of capital from unconsolidated joint ventures					315			646			9,760						10,721
Intercompany investing activities					(189,879	)								189,879			-
Net cash (used in) provided by investing activities		-			(189,483	)		289			(6,009	)		189,879			(5,324	)
Cash flows from financing activities:
Net proceeds from mortgages and notes								18,682			12,103						30,785
Net proceeds from model sale leaseback financing programs								17,918			1,846						19,764
Net payments related to land bank financing programs								(10,065	)		(311	)					(10,376	)
Proceeds from senior notes					250,000												250,000
Net proceeds related to mortgage warehouse lines of credit											11,635						11,635
Deferred financing costs from land bank financing programs and note issuances					(4,689	)		(1,781	)		(1,057	)					(7,527	)
Principal payments and debt repurchases					(4,238	)											(4,238	)
Intercompany financing activities		44,747						157,306			(12,174	)		(189,879	)		-
Net cash provided by (used in) financing activities		44,747			241,073			182,060			12,042			(189,879	)		290,043
Net increase (decrease) in cash and cash equivalents		-			694			324			(48,979	)		-			(47,961	)
Cash and cash equivalents balance, beginning of period					159,508			(4,726	)		107,116						261,898
Cash and cash equivalents balance, end of period		$-			$160,202			$(4,402	)		$58,137			$-			$213,937

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED JULY 31, 2014

(In Thousands)

	Parent			Subsidiary Issuer			Guarantor Subsidiaries			Nonguarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net (loss) income		$(15,320	)		$(61,695	)		$1,959			$46,420			$13,316			$(15,320	)
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities		2,080			6,913			(251,746	)		11,846			(13,316	)		(244,223	)
Net cash (used in) provided by operating activities		(13,240	)		(54,782	)		(249,787	)		58,266			-			(259,543	)
Net cash (used in) investing activities								(1,009	)		(8,306	)					(9,315	)
Net cash provided by (used in) financing activities					118,599			45,442			(40,666	)					123,375
Intercompany investing and financing activities – net		13,240			(207,001	)		206,190			(12,429	)					-
Net (decrease) increase in cash		-			(143,184	)		836			(3,135	)		-			(145,483	)
Cash and cash equivalents balance, beginning of period					243,470			(6,479	)		92,213						329,204
Cash and cash equivalents balance, end of period		$-			$100,286			$(5,643	)		$89,078			$-			$183,721