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Note 23 - Financial Information of Subsidiary Issuer and Subsidiary Guarantors
 12 Months Ended
Oct. 31, 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 October 31, 2014, had issued and outstanding approximately $992.0 million of senior secured notes ($979.9 million, net of discount), $591.1 million senior notes ($590.5 million, net of discount) and $17.0 million senior amortizing notes and $70.1 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), 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 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, 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 Consolidating Financial Statements). In lieu of providing separate financial statements for the Guarantor Subsidiaries of our registered notes, we have included the accompanying Consolidating 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, 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 (payable)

        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 (receivable)

  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

)

Noncontrolling interest in consolidated joint ventures

                                -  

Total liabilities and equity

  $244,391     $1,470,630     $1,726,319     $498,248     $(1,649,658

)

  $2,289,930  

CONSOLIDATING CONDENSED 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

)

Non-controlling 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  

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 income

        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  

(Loss) income 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  

(Loss) income 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 OPERATIONS


YEAR ENDED OCTOBER 31, 2012


(In thousands)

 

Parent

   

Subsidiary

Issuer

   

Guarantor

Subsidiaries

   

Non-

Guarantor

Subsidiaries

   

Eliminations

   

Consolidated

 

Revenues:

                                               

Homebuilding

    $9       $(270

)

    $1,364,733       $87,124       $(4,978

)

    $1,446,618  

Financial services

                    8,082       30,653               38,735  

Intercompany charges

            98,805       (120,094

)

    (3,590

)

    24,879       -  

Total revenues

    9       98,535       1,252,721       114,187       19,901       1,485,353  

Expenses:

                                               

Homebuilding

    3,030       150,297       1,300,728       79,899       5,334       1,539,288  

Financial services

    (28

)

            5,737       17,951       (12

)

    23,648  

Total expenses

    3,002       150,297       1,306,465       97,850       5,322       1,562,936  

Loss on extinguishment of debt

            (29,066

)

                            (29,066

)

Income from unconsolidated joint ventures

                    561       4,840               5,401  

(Loss) income before income taxes

    (2,993

)

    (80,828

)

    (53,183

)

    21,177       14,579       (101,248

)

State and federal income tax (benefit) provision

    (17,495

)

            (17,580

)

    24               (35,051

)

Equity in (loss) income from subsidiaries

    (80,699

)

    (1,521 )      21,153               61,067       -  

Net (loss) income

    $(66,197

)

    $(82,349

)

    $(14,450

)

    $21,153       $75,646       $(66,197

)


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 provided by (used in) 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

)

Investment 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 cost from land banking financing program and note issuances

        (7,205

)

  (4,051

)

  (691

)

        (11,947

)

Intercompany financing activities   (29,212 )         218,254     (21,672 )    (167,370 )   -  

Net cash (used in) provided by 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 provided by (used in) 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 (used in) provided by 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  

CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS


YEAR ENDED OCTOBER 31, 2012


(In thousands)

 

Parent

   

Subsidiary

Issuer

   

Guarantor

Subsidiaries

   

Non-

Guarantor

Subsidiaries

   

Eliminations

   

Consolidated

 

Cash flows from operating activities:

                                               

Net (loss) income

    $(66,197

)

    $(82,349

)

    $(14,450

)

    $21,153       $75,646       $(66,197

)

Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities

    37,030       53,114       124,875       (140,174

)

    (75,646

)

    (801

)

Net cash (used in) provided by operating activities

    (29,167

)

    (29,235

)

    110,425       (119,021

)

    -       (66,998

)

Net cash provided by (used in) investing activities

    -       146       (3,260

)

    1,614       -       (1,500

)

Net cash provided by (used in) financing activities

    47,221       (79,976

)

    49,670       74,075       -       90,990  

Intercompany financing activities - net

    (18,054

)

    194,040       (153,863

)

    (22,123

)

    -       -  

Net increase (decrease) in cash

    -       84,975       2,972       (65,455

)

    -       22,492  

Cash and cash equivalents balance, beginning of period

    -       112,122       (4,989

)

    143,607       -       250,740  

Cash and cash equivalents balance, end of period

    $-       $197,097       $(2,017

)

    $78,152       $-       $273,232