HOVNANIAN ENTERPRISES, INC (OTCMKTS:HOVVB) Files An 8-K Results of Operations and Financial ConditionItem 2.02. Results of Operations and Financial Condition.
On June 2, 2017, Hovnanian Enterprises, Inc. (the “Company”) issued a press release announcing its preliminary financial results for the fiscal second quarter ended April 30, 2017. A copy of the press release is attached as Exhibit 99.1.
The information in this Current Report on Form 8-K and the Exhibit attached hereto is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
The attached earnings press release contains information about consolidated earnings before interest expense and income taxes (“EBIT”) and before depreciation and amortization (“EBITDA”) and before inventory impairment loss and land option write-offs and loss (gain) on extinguishment of debt (“Adjusted EBITDA”), which are non-GAAP financial measures. The most directly comparable GAAP financial measure is net income (loss). A reconciliation for historical periods of EBIT, EBITDA and Adjusted EBITDA to net income (loss) is contained in the earnings press release.
The attached earnings press release contains information about homebuilding gross margin, before costs of sales interest expense and land charges, and homebuilding gross margin percentage, before costs of sales interest expense and land charges, which are non-GAAP financial measures. The most directly comparable GAAP financial measures are homebuilding gross margin and homebuilding gross margin percentage, respectively. A reconciliation for historical periods of homebuilding gross margin, before costs of sales interest expense and land charges, and homebuilding gross margin percentage, before costs of sales interest expense and land charges, to homebuilding gross margin and homebuilding gross margin percentage, respectively, is contained in the earnings press release.
The attached earnings press release contains information about loss before income taxes excluding land-related charges and loss (gain) on extinguishment of debt, which is a non-GAAP financial measure. The most directly comparable GAAP financial measure is income (loss) before income taxes. A reconciliation for historical periods of loss before income taxes excluding land-related charges and loss (gain) on extinguishment of debt to income (loss) before income taxes is contained in the earnings press release.
The attached earnings press release contains information about adjusted homebuilding EBIT to inventory which is defined as adjusted homebuilding EBIT for the last 12 months divided by the last five quarter average inventory, excluding inventory not owned and capitalized interest. Adjusted homebuilding EBIT is a non-GAAP financial measure. The most directly comparable GAAP financial measure is net income (loss). The calculation of adjusted homebuilding EBIT to inventory and a reconciliation for historical periods of adjusted homebuilding EBIT to net income (loss) is contained in the earnings press release.
Management believes EBITDA to be relevant and useful information as EBITDA is a standard measure commonly reported and widely used by analysts, investors and others to measure and benchmark the Company’s financial performance without the effects of various items the Company does not believe are characteristic of its ongoing operating performance. EBITDA does not take into account substantial costs of doing business, such as income taxes and interest expense. While many in the financial community consider EBITDA to be an important measure of comparative operating performance, it should be considered in addition to, but not as a substitute for, income (loss) before income taxes, net income (loss) and other measures of financial performance prepared in accordance with accounting principles generally accepted in the United States that are presented on the financial statements included in the Company’s reports filed with the Securities and Exchange Commission. Additionally, the Company’s calculation of EBITDA may be different than the calculation used by other companies, and, therefore, comparability may be affected.
Management believes homebuilding gross margin, before costs of sales interest expense and land charges, enables investors to better understand the Company’s operating performance. This measure is also useful internally, helping management to evaluate the Company’s operating results on a consolidated basis and relative to other companies in the Company’s industry. In particular, the magnitude and volatility of land charges for the Company, and for other homebuilders, have been significant and, as such, have made financial analysis of the Company’s industry more difficult. Homebuilding metrics excluding land charges, as well as interest amortized to cost of sales, and other similar presentations prepared by analysts and other companies are frequently used to assist investors in understanding and comparing the operating characteristics of homebuilding activities by eliminating many of the differences in companies’ respective levels of impairments and levels of debt. Homebuilding gross margin, before cost of sales interest expense and land charges, should be considered in addition to, but not as an alternative to, homebuilding gross margin determined in accordance with GAAP as an indicator of operating performance. Additionally, the Company’s calculation of homebuilding gross margin, before costs of sales interest expense and land charges, may be different than the calculation used by other companies, and, therefore, comparability may be affected.
Management believes loss before income taxes excluding land-related charges and loss (gain) on extinguishment of debt to be relevant and useful information because it provides a better metric of the Company’s operating performance. Loss before income taxes excluding land-related charges and loss (gain) on extinguishment of debt should be considered in addition to, but not as a substitute for, income (loss) before income taxes, net income (loss) and other measures of financial performance prepared in accordance with accounting principles generally accepted in the United States that are presented on the financial statements included in the Company’s reports filed with the Securities and Exchange Commission. Additionally, the Company’s calculation of loss before income taxes excluding land-related charges and loss (gain) on extinguishment of debt may be different than the calculation used by other companies, and, therefore, comparability may be affected.
Management believes adjusted homebuilding EBIT to inventory to be relevant and useful information to measure and benchmark the Company’s operating performance and its return on its inventory investment relative to other companies in its industry without the effects of interest and other costs associated with the Company’s debt profile, which has been substantial in recent years. Adjusted homebuilding EBIT does not take into account substantial costs of doing business, such as income taxes and interest expense. While management considers Adjusted Homebuilding EBIT to inventory to be an important measure of comparative operating performance, it should be considered in addition to, but not as a substitute for, income (loss) before income taxes, net income (loss) and other measures of financial performance prepared in accordance with accounting principles generally accepted in the United States that are presented on the financial statements included in the Company’s reports filed with the Securities and Exchange Commission. For our comparative purposes, our calculation of adjusted homebuilding EBIT to inventory is done on a consistent basis for the Company and the other builders. However, the Company’ calculation of adjusted homebuilding EBIT to inventory may be different than the calculation of return on investment prepared by other companies, and, therefore, comparability may be affected when reviewing other builders’ published results.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
Exhibit 99.1 Earnings Press Release–Fiscal Second Quarter Ended April 30, 2017.
About HOVNANIAN ENTERPRISES, INC (OTCMKTS:HOVVB)
Hovnanian Enterprises, Inc. is a builder of residential homes. The Company designs, constructs, markets and sells single-family detached homes, attached townhomes and condominiums, urban infill and active lifestyle homes in planned residential developments. The Company has two distinct operations: homebuilding and financial services. Its homebuilding operations consist of six segments: Northeast: New Jersey and Pennsylvania; Mid-Atlantic: Delaware, Maryland, Virginia, Washington, District of Columbia, and West Virginia; Midwest: Illinois and Ohio; Southeast: Florida, Georgia and South Carolina; Southwest: Arizona and Texas, and West: California. Its financial services operations provide mortgage loans and title services to the customers of its homebuilding operations. The Company markets and builds homes for first-time buyers, first-time and second-time move-up buyers, luxury buyers, active lifestyle buyers and empty nesters. HOVNANIAN ENTERPRISES, INC (OTCMKTS:HOVVB) Recent Trading Information
HOVNANIAN ENTERPRISES, INC (OTCMKTS:HOVVB) closed its last trading session 00.00 at 2.50 with 100 shares trading hands.