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Note 20 - Financial Information of Subsidiary Issuer and Subsidiary Guarantors | 3 Months Ended
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Jan. 31, 2017
Notes to Financial Statements |
Condensed Financial Statements [Text Block] |
20. | 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 January 31, 2017, had issued and outstanding $1,067.0 million of senior secured notes ($1,042.6 million, net of discount and debt issuance costs), $368.5 million senior notes ($365.3 million net of debt issuance costs) and $4.0 million senior amortizing notes ($3.9 million net of debt issuance costs) and $51.9 million senior exchangeable notes (issued as components of our 6.0% Exchangeable Note Units) ($51.6 million net of debt issuance costs). 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, “Notes Guarantors”), with the exception of our home mortgage subsidiaries, certain of our title insurance subsidiaries, joint ventures and subsidiaries holding interests in our joint ventures (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 and the 9.5% Notes), senior notes, senior exchangeable notes and senior amortizing notes. The Notes Guarantors are directly or indirectly 100% owned subsidiaries of the Parent. The 2021 Notes and the 9.5% Notes are guaranteed by the Notes Guarantors and the members of the JV Holdings Secured Group (see Note 11). The senior amortizing notes and senior exchangeable notes have been registered under the Securities Act of 1933, as amended. The 7.0% Senior Notes due 2019, the 8.0% Senior Notes due 2019 and our senior secured notes (see Note 11) are not, pursuant to the indentures under which such notes were issued, required to be registered under the Act. The Condensed Consolidating Financial Statements presented below are in respect of our registered notes only and not the 7.0% Senior Notes due 2019, the 8.0% Senior Notes due 2019 or the senior secured notes (however, the Notes Guarantors for the 7.0% Senior Notes due 2019, the 8.0% Senior Notes due 2019, the 2020 Secured Notes and the 10.0% Second Lien Notes are the same as those represented by the accompanying Condensed Consolidating Financial Statements). In lieu of providing separate financial statements for the Notes Guarantors of our registered notes, we have included the accompanying Condensed Consolidating Financial Statements. Therefore, separate financial statements and other disclosures concerning such Notes Guarantors 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 Notes Guarantors, (iv) the Nonguarantor Subsidiaries and (v) the eliminations to arrive at the information for Hovnanian Enterprises, Inc. on a consolidated basis. HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING BALANCE SHEET JANUARY 31, 2017 (In Thousands)
|  | Parent |  |  | Subsidiary Issuer |  |  | Guarantor Subsidiaries |  |  | Nonguarantor Subsidiaries |  |  | Eliminations |  |  | Consolidated |
ASSETS: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Homebuilding |  | $- |  |  | $147,033 |  |  | $1,216,610 |  |  | $385,082 |  |  | $- |  |  | $1,748,725 |
Financial services |  |  |  |  |  |  |  | 19,392 |  |  | 93,857 |  |  |  |  |  | 113,249 |
Income taxes receivable |  | 130,251 |  |  | (51,663 | ) |  | 204,702 |  |  | 32 |  |  |  |  |  | 283,322 |
Intercompany receivable |  |  |  |  | 1,312,141 |  |  |  |  |  | 7,353 |  |  | (1,319,494 | ) |  | - |
Investments in and amounts due from consolidated subsidiaries |  |  |  |  |  |  |  | 357,276 |  |  |  |  |  | (357,276 | ) |  | - |
Total assets |  | $130,251 |  |  | $1,407,511 |  |  | $1,797,980 |  |  | $486,324 |  |  | $(1,676,770 | ) |  | $2,145,296 |
LIABILITIES AND EQUITY: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Homebuilding, excluding Notes payable and term loan and Revolving credit facility |  | $2,179 |  |  | $545 |  |  | $502,953 |  |  | $61,856 |  |  | $- |  |  | $567,533 |
Financial services |  |  |  |  |  |  |  | 19,197 |  |  | 67,173 |  |  |  |  |  | 86,370 |
Notes payable and term loan and Revolving credit facility |  |  |  |  | 1,616,009 |  |  | 3,648 |  |  | 16 |  |  |  |  |  | 1,619,673 |
Intercompany payable |  | 157,245 |  |  |  |  |  | 1,162,249 |  |  |  |  |  | (1,319,494 | ) |  | - |
Amounts due to consolidated subsidiaries |  | 99,107 |  |  | 9,089 |  |  |  |  |  |  |  |  | (108,196 | ) |  | - |
Stockholders’ (deficit) equity |  | (128,280 | ) |  | (218,132 | ) |  | 109,933 |  |  | 357,279 |  |  | (249,080 | ) |  | (128,280 | )
Total liabilities and equity |  | $130,251 |  |  | $1,407,511 |  |  | $1,797,980 |  |  | $486,324 |  |  | $(1,676,770 | ) |  | $2,145,296 |
HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING BALANCE SHEET OCTOBER 31, 2016 (In Thousands)
|  | Parent |  |  | Subsidiary Issuer |  |  | Guarantor Subsidiaries |  |  | Nonguarantor Subsidiaries |  |  | Eliminations |  |  | Consolidated |
ASSETS: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Homebuilding |  | $- |  |  | $271,216 |  |  | $1,194,267 |  |  | $408,610 |  |  | $ - |  |  | $1,874,093 |
Financial services |  |  |  |  |  |  |  | 13,453 |  |  | 183,777 |  |  |  |  |  | 197,230 |
Income taxes receivable |  | 115,940 |  |  | (58,597 | ) |  | 226,258 |  |  | 32 |  |  |  |  |  | 283,633 |
Intercompany receivable |  |  |  |  | 1,227,334 |  |  |  |  |  | 88,112 |  |  | (1,315,446 | ) |  | - |
Investments in and amounts due from consolidated subsidiaries |  |  |  |  | 4,914 |  |  | 437,628 |  |  |  |  |  | (442,542 | ) |  | - |
Total assets |  | $115,940 |  |  | $1,444,867 |  |  | $1,871,606 |  |  | $680,531 |  |  | $(1,757,988 | ) |  | $2,354,956 |
LIABILITIES AND EQUITY: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Homebuilding , excluding Notes payable and term loan and Revolving credit facility |  | $3,506 |  |  | $1,118 |  |  | $565,163 |  |  | $83,476 |  |  | $- |  |  | $653,263 |
Financial services |  |  |  |  |  |  |  | 13,338 |  |  | 159,107 |  |  |  |  |  | 172,445 |
Notes payable and term loan and Revolving credit facility |  |  |  |  | 1,652,357 |  |  | 5,084 |  |  | 317 |  |  |  |  |  | 1,657,758 |
Intercompany payable |  | 157,993 |  |  |  |  |  | 1,157,453 |  |  |  |  |  | (1,315,446 | ) |  | - |
Amounts due to consolidated subsidiaries |  | 82,951 |  |  |  |  |  |  |  |  |  |  |  | (82,951 | ) |  | - |
Stockholders’ (deficit) equity |  | (128,510 | ) |  | (208,608 | ) |  | 130,568 |  |  | 437,631 |  |  | (359,591 | ) |  | (128,510 | )
Total liabilities and equity |  | $115,940 |  |  | $1,444,867 |  |  | $1,871,606 |  |  | $680,531 |  |  | $(1,757,988 | ) |  | $2,354,956 |
HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS THREE MONTHS ENDED JANUARY 31, 2017 (In Thousands)
|  | Parent |  |  | Subsidiary Issuer |  |  | Guarantor Subsidiaries |  |  | Nonguarantor Subsidiaries |  |  | Eliminations |  |  | Consolidated |
Revenues: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Homebuilding |  | $- |  |  | $- |  |  | $455,372 |  |  | $83,788 |  |  | $- |  |  | $539,160 |
Financial services |  |  |  |  |  |  |  | 2,498 |  |  | 10,351 |  |  |  |  |  | 12,849 |
Intercompany charges |  |  |  |  | 22,940 |  |  |  |  |  |  |  |  | (22,940 | ) |  | - |
Total revenues |  | - |  |  | 22,940 |  |  | 457,870 |  |  | 94,139 |  |  | (22,940 | ) |  | 552,009 |
Expenses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Homebuilding |  | 528 |  |  | 33,042 |  |  | 444,593 |  |  | 72,648 |  |  |  |  |  | 550,811 |
Financial services |  |  |  |  |  |  |  | 1,713 |  |  | 5,142 |  |  |  |  |  | 6,855 |
Intercompany charges |  |  |  |  |  |  |  | 22,940 |  |  |  |  |  | (22,940 | ) |  | - |
Total expenses |  | 528 |  |  | 33,042 |  |  | 469,246 |  |  | 77,790 |  |  | (22,940 | ) |  | 557,666 |
Gain on extinguishment of debt |  |  |  |  | 7,646 |  |  |  |  |  |  |  |  |  |  |  | 7,646 |
Income (loss) from unconsolidated joint ventures |  |  |  |  |  |  |  | 16 |  |  | (1,682 | ) |  |  |  |  | (1,666 | )
(Loss) income before income taxes |  | (528 | ) |  | (2,456 | ) |  | (11,360 | ) |  | 14,667 |  |  | - |  |  | 323 |
State and federal income tax (benefit) provision |  | (16,541 | ) |  | (6,935 | ) |  | 23,942 |  |  |  |  |  |  |  |  | 466 |
Equity in (loss) income of consolidated subsidiaries |  | (16,156 | ) |  | (14,003 | ) |  | 14,667 |  |  |  |  |  | 15,492 |  |  | - |
Net (loss) income |  | $(143 | ) |  | $(9,524 | ) |  | $(20,635 | ) |  | $14,667 |  |  | $15,492 |  |  | $(143 | )
HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS THREE MONTHS ENDED JANUARY 31, 2016 (In Thousands)
|  | Parent |  |  | Subsidiary Issuer |  |  | Guarantor Subsidiaries |  |  | Nonguarantor Subsidiaries |  |  | Eliminations |  |  | Consolidated |
Revenues: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Homebuilding |  | $- |  |  | $- |  |  | $474,910 |  |  | $82,469 |  |  | $- |  |  | $557,379 |
Financial services |  |  |  |  |  |  |  | 2,245 |  |  | 15,981 |  |  |  |  |  | 18,226 |
Intercompany charges |  |  |  |  | 34,540 |  |  |  |  |  |  |  |  | (34,540 | ) |  | - |
Total revenues |  | - |  |  | 34,540 |  |  | 477,155 |  |  | 98,450 |  |  | (34,540 | ) |  | 575,605 |
Expenses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Homebuilding |  | 1,940 |  |  | 35,811 |  |  | 466,620 |  |  | 74,733 |  |  |  |  |  | 579,104 |
Financial services |  |  |  |  |  |  |  | 1,624 |  |  | 6,591 |  |  |  |  |  | 8,215 |
Intercompany charges |  |  |  |  |  |  |  | 34,463 |  |  | 77 |  |  | (34,540 | ) |  | - |
Total expenses |  | 1,940 |  |  | 35,811 |  |  | 502,707 |  |  | 81,401 |  |  | (34,540 | ) |  | 587,319 |
Income (loss) from unconsolidated joint ventures |  |  |  |  |  |  |  | 16 |  |  | (1,496 | ) |  |  |  |  | (1,480 | )
(Loss) income before income taxes |  | (1,940 | ) |  | (1,271 | ) |  | (25,536 | ) |  | 15,553 |  |  | - |  |  | (13,194 | )
State and federal income tax (benefit) provision |  | (14,550 | ) |  | (6,918 | ) |  | 24,447 |  |  |  |  |  |  |  |  | 2,979 |
Equity in (loss) income of consolidated subsidiaries |  | (28,783 | ) |  | (13,510 | ) |  | 15,553 |  |  |  |  |  | 26,740 |  |  | - |
Net (loss) income |  | $(16,173 | ) |  | $(7,863 | ) |  | $(34,430 | ) |  | $15,553 |  |  | $26,740 |  |  | $(16,173 | )
HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS THREE MONTHS ENDED JANUARY 31, 2017 (In Thousands)
|  | Parent |  |  | Subsidiary Issuer |  |  | Guarantor Subsidiaries |  |  | Nonguarantor Subsidiaries |  |  | Eliminations |  |  | Consolidated |
Cash flows from operating activities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net (loss) income |  | $(143 | ) |  | $(9,524 | ) |  | $(20,635 | ) |  | $14,667 |  |  | $15,492 |  |  | $(143 | )
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities |  | (15,265 | ) |  | (10,126 | ) |  | 66,555 |  |  | 387 |  |  | (15,492 | ) |  | 26,059 |
Net cash (used in) provided by operating activities |  | (15,408 | ) |  | (19,650 | ) |  | 45,920 |  |  | 15,054 |  |  | - |  |  | 25,916 |
Cash flows from investing activities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Proceeds from sale of property and assets |  |  |  |  |  |  |  | 60 |  |  |  |  |  |  |  |  | 60 |
Purchase of property, equipment & other fixed assets and acquisitions |  |  |  |  |  |  |  | (560 | ) |  |  |  |  |  |  |  | (560 | )
Increase in restricted cash related to mortgage company |  |  |  |  |  |  |  |  |  |  | (2,324 | ) |  |  |  |  | (2,324 | )
Decrease in restricted cash related to letters of credit |  |  |  |  | (1 | ) |  |  |  |  |  |  |  |  |  |  | (1 | )
Investments in and advances to unconsolidated joint ventures |  |  |  |  | (93 | ) |  | (94 | ) |  | (14,452 | ) |  |  |  |  | (14,639 | )
Distributions of capital from unconsolidated joint ventures |  |  |  |  |  |  |  | 231 |  |  | 1,708 |  |  |  |  |  | 1,939 |
Intercompany investing activities |  |  |  |  | (70,802 | ) |  |  |  |  |  |  |  | 70,802 |  |  | - |
Net cash (used in) provided by investing activities |  | - |  |  | (70,896 | ) |  | (363 | ) |  | (15,068 | ) |  | 70,802 |  |  | (15,525 | )
Cash flows from financing activities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net payments from mortgages and notes |  |  |  |  |  |  |  | 2,154 |  |  | (11,065 | ) |  |  |  |  | (8,911 | )
Net proceeds from model sale leaseback financing programs |  |  |  |  |  |  |  | (2,205 | ) |  | (1,316 | ) |  |  |  |  | (3,521 | )
Net proceeds from land bank financing programs |  |  |  |  |  |  |  | (18,371 | ) |  | (4,491 | ) |  |  |  |  | (22,862 | )
Payments related to senior notes and senior amortizing notes |  |  |  |  | (33,086 | ) |  |  |  |  |  |  |  |  |  |  | (33,086 | )
Net proceeds related to mortgage warehouse lines of credit |  |  |  |  |  |  |  |  |  |  | (86,058 | ) |  |  |  |  | (86,058 | )
Deferred financing cost from land bank financing program and note issuances |  |  |  |  | (528 | ) |  | (397 | ) |  | (13 | ) |  |  |  |  | (938 | )
Intercompany financing activities |  | 15,408 |  |  |  |  |  | (25,365 | ) |  | 80,759 |  |  | (70,802 | ) |  | - |
Net cash provided by (used in) financing activities |  | 15,408 |  |  | (33,614 | ) |  | (44,184 | ) |  | (22,184 | ) |  | (70,802 | ) |  | (155,376 | )
Net decrease in cash and cash equivalents |  | - |  |  | (124,160 | ) |  | 1,373 |  |  | (22,198 | ) |  | - |  |  | (144,985 | )
Cash and cash equivalents balance, beginning of period |  |  |  |  | 261,553 |  |  | (395 | ) |  | 85,607 |  |  |  |  |  | 346,765 |
Cash and cash equivalents balance, end of period |  | $- |  |  | $137,393 |  |  | $978 |  |  | $63,409 |  |  | $- |  |  | $201,780 |
HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS THREE MONTHS ENDED JANUARY 31, 2016 (In Thousands)
|  | Parent |  |  | Subsidiary Issuer |  |  | Guarantor Subsidiaries |  |  | Nonguarantor Subsidiaries |  |  | Eliminations |  |  | Consolidated |
Cash flows from operating activities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net (loss) income |  | $(16,173 | ) |  | $(7,863 | ) |  | $(34,430 | ) |  | $15,553 |  |  | $26,740 |  |  | $(16,173 | )
Adjustments to reconcile net (loss) income to net cash used in operating activities |  | (11,768 | ) |  | (16,045 | ) |  | 80,623 |  |  | (74,978 | ) |  | (26,740 | ) |  | (48,908 | )
Net cash used in operating activities |  | (27,941 | ) |  | (23,908 | ) |  | 46,193 |  |  | (59,425 | ) |  | - |  |  | (65,081 | )
Cash flows from investing activities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Proceeds from sale of property and assets |  |  |  |  |  |  |  | 72 |  |  | 21 |  |  |  |  |  | 93 |
Purchase of property, equipment & other fixed assets and acquisitions |  |  |  |  |  |  |  | (1,223 | ) |  | (30 | ) |  |  |  |  | (1,253 | )
Increase in restricted cash related to mortgage company |  |  |  |  |  |  |  |  |  |  | (81 | ) |  |  |  |  | (81 | )
Decrease in restricted cash related to mortgage company |  |  |  |  | 52 |  |  |  |  |  |  |  |  |  |  |  | 52 |
Investments in and advances to unconsolidated joint ventures |  |  |  |  | (130 | ) |  | (865 | ) |  | (10,502 | ) |  |  |  |  | (11,497 | )
Distribution of capital from unconsolidated joint ventures |  |  |  |  |  |  |  | 80 |  |  | 2,052 |  |  |  |  |  | 2,132 |
Intercompany investing activities |  |  |  |  | 117,284 |  |  |  |  |  |  |  |  | (117,284 | ) |  | - |
Net cash used in investing activities |  | - |  |  | 117,206 |  |  | (1,936 | ) |  | (8,540 | ) |  | (117,284 | ) |  | (10,554 | )
Cash flows from financing activities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net proceeds from mortgages and notes |  |  |  |  |  |  |  | (10,035 | ) |  | (5,358 | ) |  |  |  |  | (15,393 | )
Net proceeds from model sale leaseback financing programs |  |  |  |  |  |  |  | 2,118 |  |  | 111 |  |  |  |  |  | 2,229 |
Net proceeds from land bank financing programs |  |  |  |  |  |  |  | 106,813 |  |  | 28,261 |  |  |  |  |  | 135,074 |
Payments related to senior notes and senior amortizing notes |  |  |  |  | (175,040 | ) |  |  |  |  |  |  |  |  |  |  | (175,040 | )
Net proceeds related to mortgage warehouse lines of credit |  |  |  |  |  |  |  |  |  |  | 31,481 |  |  |  |  |  | 31,481 |
Deferred financing cost from land bank financing program and note issuances |  |  |  |  |  |  |  | (2,496 | ) |  | (1,387 | ) |  |  |  |  | (3,883 | )
Intercompany financing activities |  | 27,941 |  |  |  |  |  | (143,237 | ) |  | (1,988 | ) |  | 117,284 |  |  | - |
Net cash provided by financing activities |  | 27,941 |  |  | (175,040 | ) |  | (46,837 | ) |  | 51,120 |  |  | 117,284 |  |  | (25,532 | )
Net decrease in cash |  | - |  |  | (81,742 | ) |  | (2,580 | ) |  | (16,845 | ) |  | - |  |  | (101,167 | )
Cash and cash equivalents balance, beginning of period |  |  |  |  | 199,318 |  |  | (4,800 | ) |  | 59,227 |  |  |  |  |  | 253,745 |
Cash and cash equivalents balance, end of period |  | $- |  |  | $117,576 |  |  | $(7,380 | ) |  | $42,382 |  |  | $- |  |  | $152,578 |

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