Hovnanian Enterprises Reports Fiscal 2007 Second Quarter Results

RED BANK, N.J., May 31 /PRNewswire-FirstCall/ -- Hovnanian Enterprises, Inc. , a leading national homebuilder, reported a net loss of $30.7 million, after tax, or $0.49 per common share for the quarter ended April 30, 2007. For the six-month period ended April 30, 2007, revenues declined 20.2% to $2.3 billion, from $2.9 billion in the year earlier period. The Company reported a net loss of $88.0 million for the first half of 2007, or $1.40 per common share, compared to net income of $182.4 million, or $2.80 per fully diluted common share, in the same period a year ago.

Homebuilding gross margin, before interest expense included in cost of sales, was 16.3% for the second quarter of fiscal 2007, a 740 basis point decline from 23.7% in the prior year's second quarter. The Company's pretax income from Financial Services in the second quarter of fiscal 2007 declined 6.3% over the same period in 2006, to $6.3 million.

The number of active selling communities on April 30, 2007, excluding unconsolidated joint ventures, was 437, an increase of 6% compared with 411 active communities at the end of the same period last year. The Company's contract cancellation rate, excluding unconsolidated joint ventures, for the second quarter of fiscal 2007 was 32%, a decrease from the rate of 36% reported in the first quarter of 2007.

Comments From Management

"We are frustrated to report that the housing market has continued to slip further in many locations in terms of both sales pace and sales prices," commented Ara K. Hovnanian, President and Chief Executive Officer of the Company. "The housing market weakened in the latter part of the second quarter and the slower conditions have continued into May. Lower prices offered to buyers to close homes during the quarter also led to a further reduction in margins and a net loss for the quarter."

"After a 3% increase in our February contracts over last year, the overall market fell off again, and our net contracts declined approximately 30% year over year through March and April," Mr. Hovnanian said. "We believe that much of this decline was a reaction to recent problems in the sub-prime mortgage market. While we have felt the sub-prime impact directly in the form of fewer potential homebuyers qualifying for a mortgage as lending standards have tightened, the more significant impact has been indirectly through a further pullback in home buyers' psychology toward making a purchase," Mr. Hovnanian stated.

"Given the increased uncertainty of housing market conditions, we have discontinued offering earnings guidance and we have increased our focus on improving our balance sheet and generating positive cash flow," Mr. Hovnanian said.

"Our use of options to control land allows us to walk away from land options that do not meet our financial hurdle rates and thus slow our investments during this current housing market slowdown," said J. Larry Sorsby, Executive Vice President and Chief Financial Officer. "As of April 30, 2007, we had 52,147 lots held under option contracts and controlled a total of 85,902 lots, a 29% decline from the end of the second quarter of fiscal 2006. To further enhance cash flow, we are evaluating walking away from additional land options," Mr. Sorsby stated.

"Despite a challenging environment, we remain focused on realistically pricing homes to achieve a reasonable balance of absorption and margin and modifying product offerings so that we can steadily work through our land inventory," Mr. Sorsby continued. "We are also focused on reevaluating and renegotiating land options and slowing down expenditures on land development to manage our inventory levels, generate cash flow, reduce leverage and improve our overall financial performance. As a result of delaying land take downs, walking away from additional communities, and delaying the opening of certain communities, we have lowered our expectations for the number of selling communities at the end of the year. While we are primarily focused on the balance sheet, we are also renegotiating with subcontractors and reducing our overheads," Mr. Sorsby stated.

"While conditions in many of our markets have recently deteriorated further, there are some bright spots in some of our markets where we outperformed our expectations during the second quarter," said Mr. Hovnanian. "For instance, our operations in San Diego and Minnesota, which had experienced substantial slowdowns over the past year or so, reported significant increases in sales per community on a year-over-year comparison for the second quarter. Although we are not confident that we've seen a bottom in these or any other markets yet, the improved pace of sales does give us confidence that over time our strategy to adjust the pricing on our homes is having its intended impact."

"An excess supply consisting primarily of existing homes remains in many of our markets," Mr. Hovnanian said. "Before the current housing market correction is over, the market needs to work through those inventories. Throughout our 48-year history, we have successfully navigated past down cycles, and we are confident that we will emerge from the current slowdown with a solid financial footing and positioned to capitalize on strategic opportunities in our markets," Mr. Hovnanian concluded.

Hovnanian Enterprises will webcast its second quarter earnings conference call at 11:00 a.m. E.T. on Friday, June 1, 2007, hosted by Ara K. Hovnanian, President and Chief Executive Officer of the Company. The webcast can be accessed live through the "Investor Relations" section of Hovnanian Enterprises' Web site at http://www.khov.com/. For those who are not available to listen to the live webcast, an archive of the broadcast will be available under the "Audio Archives" section of the Investor Relations page on the Hovnanian Web site at http://www.khov.com/. The archive will be available for 12 months.

About Hovnanian Enterprises

Hovnanian Enterprises, Inc., founded in 1959 by Kevork S. Hovnanian, Chairman, is headquartered in Red Bank, New Jersey. The Company is one of the nation's largest homebuilders with operations in Arizona, California, Delaware, Florida, Georgia, Illinois, Kentucky, Maryland, Michigan, Minnesota, New Jersey, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Texas, Virginia and West Virginia. The Company's homes are marketed and sold under the trade names K. Hovnanian Homes, Matzel & Mumford, Forecast Homes, Parkside Homes, Brighton Homes, Parkwood Builders, Windward Homes, Cambridge Homes, Town & Country Homes, Oster Homes, First Home Builders of Florida and CraftBuilt Homes. As the developer of K. Hovnanian's Four Seasons communities, the Company is also one of the nation's largest builders of active adult homes.

Additional information on Hovnanian Enterprises, Inc., including a summary investment profile and the Company's 2006 annual report, can be accessed through the "Investor Relations" section of Hovnanian Enterprises' website at http://www.khov.com/. To be added to Hovnanian's investor e-mail or fax lists, please send an e-mail to IR@khov.com or sign up at http://www.khov.com/.

Hovnanian Enterprises, Inc. is a member of the Public Home Builders Council of America ("PHBCA") (http://www.phbca.org/), a nonprofit group devoted to improving understanding of the business practices of America's largest publicly-traded home building companies, the competitive advantages they bring to the home building market, and their commitment to creating value for their home buyers and stockholders. The PHBCA's 14 member companies build one out of every five homes in the United States.

Non-GAAP Financial Measures:

Consolidated earnings before interest expense, income taxes, depreciation and amortization ("EBITDA") and before inventory impairment loss and land option write-offs ("Adjusted EBITDA") are not generally accepted accounting principle (GAAP) financial measures. The most directly comparable GAAP financial measure is net income. The reconciliation of EBITDA and Adjusted EBITDA to net income is presented in a table attached to this earnings release.

Note: All statements in this Press Release that are not historical facts should be considered as "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such risks, uncertainties and other factors include, but are not limited to, (1) changes in general and local economic and business conditions, (2) adverse weather conditions and natural disasters, (3) changes in market conditions, (4) changes in home prices and sales activity in the markets where the Company builds homes, (5) government regulation, including regulations concerning development of land, the home building, sales and customer financing processes and the environment, (6) fluctuations in interest rates and the availability of mortgage financing, (7) shortages in, and price fluctuations of, raw materials and labor, (8) the availability and cost of suitable land and improved lots, (9) levels of competition, (10) availability of financing to the Company, (11) utility shortages and outages or rate fluctuations, (12) geopolitical risks, terrorist acts and other acts of war and (13) other factors described in detail in the Company's Form 10-K for the year ended October 31, 2006.

(Financial Tables Follow) Hovnanian Enterprises, Inc. April 30, 2007 Statements of Consolidated Operations (Dollars in Thousands, Except Per Share) Three Months Ended, Six Months Ended, April 30, April 30, ---------------------- ---------------------- 2007 2006 2007 2006 ---------------------- ---------------------- (Unaudited) (Unaudited) Total Revenues $ 1,110,658 $ 1,574,121 $ 2,276,459 $ 2,852,113 Costs and Expenses(a) 1,149,931 1,421,070 2,384,326 2,571,411 (Loss) Income from Unconsolidated Joint Ventures (2,160) 9,497 (195) 17,072 --------- --------- --------- --------- (Loss) Income Before Income Taxes (41,433) 162,548 (108,062) 297,774 Income Tax (Benefit) Provision (13,374) 58,899 (25,395) 110,029 --------- --------- --------- --------- Net (Loss) Income (28,059) 103,649 (82,667) 187,745 --------- --------- --------- --------- Less: Preferred Stock Dividends 2,669 2,669 5,338 5,338 Net (Loss) Income Available to Common Stockholders $(30,728) $100,980 $(88,005) $182,407 ========= ========= ========= ========= Per Share Data: Basic: (Loss) Income per common share $ (0.49) $1.60 $ (1.40) $2.90 Weighted Average Number of Common Shares Outstanding 63,004 62,919 62,953 62,864 Assuming Dilution: (Loss) Income per common share $ (0.49) $1.55 $ (1.40) $2.80 Weighted Average Number of Common Shares Outstanding(b) 63,004 65,106 62,953 65,254 (a) Includes inventory impairment loss and land option write-offs. (b) For periods with a net loss, basic shares are used in accordance with GAAP rules. Hovnanian Enterprises, Inc. April 30, 2007 Gross Margin (Dollars in Thousands) Homebuilding Gross Margin Homebuilding Gross Margin Three Months Ended Six Months Ended April 30, April 30, ---------------------- ---------------------- 2007 2006 2007 2006 --------- --------- --------- --------- (Unaudited) (Unaudited) Sale of Homes $ 1,058,014 $ 1,479,548 $ 2,193,930 $ 2,725,745 Cost of Sales, excluding interest(a) 885,783 1,128,530 1,817,266 2,055,352 --------- --------- --------- --------- Homebuilding Gross Margin, excluding interest 172,231 351,018 376,664 670,393 Homebuilding Cost of Sales interest 28,578 19,861 55,394 35,972 --------- --------- --------- --------- Homebuilding Gross Margin, including interest $143,653 $331,157 $321,270 $634,421 ========= ========= ========= ========= Gross Margin Percentage, excluding interest 16.3% 23.7% 17.2% 24.6% Gross Margin Percentage, including interest 13.6% 22.4% 14.6% 23.3% Land Sales Gross Margin Land Sales Gross Margin Three Months Ended Six Months Ended April 30, April 30, ---------------------- ---------------------- 2007 2006 2007 2006 --------- --------- --------- --------- (Unaudited) (Unaudited) Land Sales $31,695 $70,238 $35,294 $80,793 Cost of Sales, excluding interest(a) 18,027 51,769 20,519 59,634 --------- --------- --------- --------- Land Sales Gross Margin, excluding interest 13,668 18,469 14,775 21,159 Land Sales interest 178 422 234 880 --------- --------- --------- --------- Land Sales Gross Margin, including interest $13,490 $18,047 $14,541 $20,279 ========= ========= ========= ========= (a) Does not include cost associated with walking away from land options which are recorded as inventory impairment losses in the Statements of Consolidated Operations. Hovnanian Enterprises, Inc. April 30, 2007 Reconciliation of Adjusted EBITDA to Net (Loss) Income (Dollars in Thousands) Three Months Ended Six Months Ended April 30, April 30, --------------------- --------------------- 2007 2006 2007 2006 ------- ------- ------- ------- (Unaudited) (Unaudited) Net (Loss) Income $ (28,059) $ 103,649 $ (82,667) $ 187,745 Income Tax (Benefit) Provision (13,374) 58,899 (25,395) 110,029 Interest expense 35,422 20,983 63,514 38,372 ------- ------- ------- ------- EBIT (1) (6,011) 183,531 (44,548) 336,146 Depreciation 4,588 3,233 8,972 6,319 Amortization of Debt Costs 672 573 1,372 1,009 Amortization of Intangibles 6,718 13,391 68,274 25,060 ------- ------- ------- ------- EBITDA(2) 5,967 200,728 34,070 368,534 Inventory Impairment Loss and Land Option Write-offs 34,353 5,595 75,827 8,704 ------- ------- ------- ------- Adjusted EBITDA(3) $40,320 $ 206,323 $ 109,897 $ 377,238 ======= ======= ======= ======= INTEREST INCURRED $53,501 $36,250 $98,798 $67,054 ADJUSTED EBITDA TO INTEREST INCURRED 0.75 5.69 1.11 5.63 (1) EBIT is a non-GAAP financial measure. The comparable GAAP financial measure is net income. EBIT represents earnings before interest expense and income taxes. (2) EBITDA is a non-GAAP financial measure. The comparable GAAP financial measure is net income. EBITDA represents earnings before interest expense, income taxes, depreciation and amortization. (3) Adjusted EBITDA is a non-GAAP financial measure. The comparable GAAP financial measure is net income. Adjusted EBITDA represents earnings before interest expense, income taxes, depreciation, amortization and inventory impairment loss and land option write-offs. Hovnanian Enterprises, Inc. April 30, 2007 Interest Incurred, Expensed and Capitalized (Dollars in Thousands) Three Months Ended Six Months Ended April 30, April 30, ------------------ ------------------ 2007 2006 2007 2006 -------- ------- -------- ------- (Unaudited) (Unaudited) Interest Capitalized at Beginning of Period $ 120,054 $ 61,781 $ 102,849 $ 48,366 Plus Interest Incurred 53,501 36,250 98,798 67,054 Less Interest Expensed 35,422 20,983 63,514 38,372 -------- ------- -------- ------- Interest Capitalized at End of Period $ 138,133 $ 77,048 $ 138,133 $ 77,048 ======== ======= ======== ======= HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In Thousands Except Share Amounts) April 30, October 31, 2007 2006 ---------- ----------- ASSETS (unaudited) Homebuilding: Cash and cash equivalents $10,144 $43,635 ---------- ----------- Restricted cash 11,332 9,479 ---------- ----------- Inventories - at the lower of cost or fair value: Sold and unsold homes and lots under development 3,428,811 3,297,766 ---------- ----------- Land and land options held for future development or sale 392,274 362,760 ---------- ----------- Consolidated inventory not owned: Specific performance options 14,996 20,340 Variable interest entities 185,443 208,167 Other options 216,006 181,808 ---------- ----------- Total consolidated inventory not owned 416,445 410,315 ---------- ----------- Total inventories 4,237,530 4,070,841 ---------- ----------- Investments in and advances to unconsolidated joint ventures 215,962 212,581 ---------- ----------- Receivables, deposits, and notes 82,904 94,750 ---------- ----------- Property, plant, and equipment - net 113,098 110,704 ---------- ----------- Prepaid expenses and other assets 182,324 175,603 ---------- ----------- Goodwill 32,658 32,658 ---------- ----------- Definite life intangibles 71,814 165,053 ---------- ----------- Total homebuilding 4,957,766 4,915,304 ---------- ----------- Financial services: Cash and cash equivalents 9,387 10,688 Restricted cash 8,777 1,585 Mortgage loans held for sale 133,326 281,958 Other assets 6,637 10,686 ---------- ----------- Total financial services 158,127 304,917 ---------- ----------- Income taxes receivable - including deferred tax benefits 293,139 259,814 ---------- ----------- Total assets $5,409,032 $5,480,035 ========== =========== HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In Thousands Except Share Amounts) April 30, October 31, 2007 2006 ---------- ----------- LIABILITIES AND STOCKHOLDERS' EQUITY (unaudited) Homebuilding: Nonrecourse land mortgages $10,190 $26,088 Accounts payable and other liabilities 381,252 582,393 Customers' deposits 127,232 184,943 Nonrecourse mortgages secured by operating Properties 23,341 23,684 Liabilities from inventory not owned 261,438 205,067 ---------- ----------- Total homebuilding 803,453 1,022,175 ---------- ----------- Financial services: Accounts payable and other liabilities 15,284 12,158 Mortgage warehouse line of credit 121,837 270,171 ---------- ----------- Total financial services 137,121 282,329 ---------- ----------- Notes payable: Revolving credit agreement 412,300 Senior notes 1,650,336 1,649,778 Senior subordinated notes 400,000 400,000 Accrued interest 49,812 51,105 ---------- ----------- Total notes payable 2,512,448 2,100,883 ---------- ----------- Total liabilities 3,453,022 3,405,387 ---------- ----------- Minority interest from inventory not owned 94,533 130,221 ---------- ----------- Minority interest from consolidated joint ventures 1,599 2,264 ---------- ----------- Stockholders' equity: Preferred stock, $.01 par value-authorized 100,000 shares; issued 5,600 shares at April 30, 2007 and at October 31, 2006 with a liquidation preference of $140,000 135,299 135,299 Common stock, Class A, $.01 par value- authorized 200,000,000 shares; issued 59,232,205 shares at April 30, 2007 and 58,653,723 shares at October 31, 2006 (including 11,694,720 shares at April 30, 2007 and 11,494,720 shares at October 31, 2006 held in Treasury) 592 587 Common stock, Class B, $.01 par value (convertible to Class A at time of sale) authorized 30,000,000 shares; issued 15,341,316 shares at April 30, 2007 and 15,343,410 shares at October 31, 2006 (including 691,748 shares at April 30, 2007 and October 31, 2006 held in Treasury) 153 153 Paid in capital - common stock 265,286 253,262 Retained earnings 1,573,805 1,661,810 Treasury stock - at cost (115,257) (108,948) ---------- ----------- Total stockholders' equity 1,859,878 1,942,163 ---------- ----------- Total liabilities and stockholders' equity $5,409,032 $5,480,035 ---------- ----------- HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In Thousands Except Per Share Data) (Unaudited) Three Months Ended Six Months Ended April 30, April 30, ---------------------- ----------------------- 2007 2006 2007 2006 --------- --------- --------- --------- Revenues: Homebuilding: Sale of homes $1,058,014 $1,479,548 $2,193,930 $2,725,745 Land sales and other revenues 34,761 73,382 43,098 85,915 --------- --------- --------- --------- Total homebuilding 1,092,775 1,552,930 2,237,028 2,811,660 Financial services 17,883 21,191 39,431 40,453 --------- --------- --------- --------- Total revenues 1,110,658 1,574,121 2,276,459 2,852,113 --------- --------- --------- --------- Expenses: Homebuilding: Cost of sales, excluding interest 903,810 1,180,299 1,837,785 2,114,986 Cost of sales interest 28,756 20,283 55,628 36,852 Inventory impairment loss and land option write-offs 34,353 5,595 75,827 8,704 --------- --------- --------- --------- Total cost of sales 966,919 1,206,177 1,969,240 2,160,542 Selling, general and administrative 137,637 151,853 269,779 287,087 --------- --------- --------- --------- Total homebuilding 1,104,556 1,358,030 2,239,019 2,447,629 Financial services 11,628 14,517 24,698 28,047 Corporate general and administrative 19,558 25,911 42,191 53,633 Other interest 6,666 700 7,886 1,520 Other operations 805 8,521 2,258 15,522 Intangible amortization 6,718 13,391 68,274 25,060 --------- --------- --------- --------- Total expenses 1,149,931 1,421,070 2,384,326 2,571,411 --------- --------- --------- --------- (Loss) income from unconsolidated joint ventures (2,160) 9,497 (195) 17,072 --------- --------- --------- --------- (Loss) income before income taxes (41,433) 162,548 (108,062) 297,774 --------- --------- --------- --------- State and federal income tax (benefit)/provision: State 1,094 6,235 (1,252) 11,109 Federal (14,468) 52,664 (24,143) 98,920 --------- --------- --------- --------- Total taxes (13,374) 58,899 (25,395) 110,029 --------- --------- --------- --------- Net (loss) income (28,059) 103,649 (82,667) 187,745 Less: preferred stock dividends 2,669 2,669 5,338 5,338 --------- --------- --------- --------- Net (loss) income available to common stockholders $(30,728) $100,980 $(88,005) $182,407 --------- --------- --------- --------- Per share data: Basic: (Loss) income per common share $(0.49) $1.60 $(1.40) $2.90 Weighted average number of common shares outstanding 63,004 62,919 62,953 62,864 Assuming dilution: (Loss) income per common share $(0.49) $1.55 $(1.40) $2.80 Weighted average number of common shares outstanding 63,004 65,106 62,953 65,254 HOVNANIAN ENTERPRISES, INC. (DOLLARS IN THOUSANDS EXCEPT AVG. PRICE) (UNAUDITED) Communities Under Development Three Months - 4/30/07 Net Contracts (1) Three Months Ended April 30, 2007 2006 % Change Northeast Homes 408 501 -18.6% Dollars 202,884 225,355 -10.0% Avg.Price 497,264 449,810 10.5% Mid-Atlantic Homes 513 615 -16.6% Dollars 239,485 309,773 -22.7% Avg.Price 466,832 503,696 -7.3% Southeast(2) Homes 350 633 -44.7% Dollars 107,345 189,762 -43.4% Avg.Price 306,699 299,782 2.3% Southwest Homes 989 1,235 -19.9% Dollars 222,119 265,790 -16.4% Avg.Price 224,589 215,215 4.4% Midwest Homes 286 260 10.0% Dollars 68,735 52,226 31.6% Avg.Price 240,331 200,869 19.6% West Homes 570 718 -20.6% Dollars 248,815 343,303 -27.5% Avg.Price 436,518 478,138 -8.7% Consolidated Total Homes 3,116 3,962 -21.4% Dollars 1,089,383 1,386,209 -21.4% Avg.Price 349,610 349,876 -0.1% Unconsolidated Joint Ventures Homes 202 380 -46.8% Dollars 61,782 129,757 -52.4% Avg.Price 305,853 341,466 -10.4% Total Homes 3,318 4,342 -23.6% Dollars 1,151,165 1,515,966 -24.1% Avg.Price 346,945 349,140 -0.6% Deliveries Three Months Ended April 30, 2007 2006 % Change Northeast Homes 409 437 -6.4% Dollars 185,852 203,828 -8.8% Avg.Price 454,406 466,426 -2.6% Mid-Atlantic Homes 402 491 -18.1% Dollars 189,370 251,012 -24.6% Avg.Price 471,070 511,226 -7.9% Southeast(2) Homes 766 1,316 -41.8% Dollars 207,844 311,202 -33.2% Avg.Price 271,337 236,476 14.7% Southwest Homes 866 1,054 -17.8% Dollars 200,053 232,289 -13.9% Avg.Price 231,008 220,388 4.8% Midwest Homes 199 209 -4.8% Dollars 41,524 29,124 42.6% Avg.Price 208,663 139,349 49.7% West Homes 508 1,048 -51.5% Dollars 233,371 452,093 -48.4% Avg.Price 459,392 431,386 6.5% Consolidated Total Homes 3,150 4,555 -30.8% Dollars 1,058,014 1,479,548 -28.5% Avg.Price 335,877 324,818 3.4% Unconsolidated Joint Ventures Homes 275 612 -55.1% Dollars 103,241 244,402 -57.8% Avg.Price 375,422 399,350 -6.0% Total Homes 3,425 5,167 -33.7% Dollars 1,161,255 1,723,950 -32.6% Avg.Price 339,053 333,646 1.6% Contract Backlog April 30, 2007 2006 % Change Northeast Homes 1,143 1,665 -31.4% Dollars 592,250 758,960 -22.0% Avg.Price 518,154 455,832 13.7% Mid-Atlantic Homes 1,206 1,478 -18.4% Dollars 587,339 761,279 -22.8% Avg.Price 487,014 515,074 -5.4% Southeast(2) Homes 2,727 5,265 -48.2% Dollars 785,921 1,438,488 -45.4% Avg.Price 288,200 273,217 5.5% Southwest Homes 1,066 1,406 -24.2% Dollars 245,148 315,309 -22.3% Avg.Price 229,970 224,260 2.5% Midwest Homes 813 610 33.3% Dollars 167,350 110,774 51.1% Avg.Price 205,842 181,597 13.4% West Homes 811 1,163 -30.3% Dollars 357,982 587,465 -39.1% Avg.Price 441,408 505,129 -12.6% Consolidated Total Homes 7,766 11,587 -33.0% Dollars 2,735,990 3,972,275 -31.1% Avg.Price 352,304 342,822 2.8% Unconsolidated Joint Ventures Homes 811 1,797 -54.9% Dollars 370,634 810,115 -54.2% Avg.Price 457,008 450,815 1.4% Total Homes 8,577 13,384 -35.9% Dollars 3,106,624 4,782,390 -35.0% Avg.Price 362,204 357,321 1.4% DELIVERIES INCLUDE EXTRAS Notes: (1) Net contracts are defined as a new contracts signed during the period for the purchase of homes, less cancellations of prior contracts. (2) The number and the Dollar amount of net contracts in the Southeast in the 2007 second quarter include the effect of CraftBuilt Homes acquisition, which closed in April 2006. HOVNANIAN ENTERPRISES, INC. (DOLLARS IN THOUSANDS EXCEPT AVG. PRICE) (UNAUDITED) Communities Under Development Six Months - 4/30/2007 Net Contracts (1) Six Months Ended April 30, 2007 2006 % Change Northeast Homes 794 961 -17.4% Dollars 377,932 420,376 -10.1% Avg.Price 475,984 437,436 8.8% Mid-Atlantic Homes 944 967 -2.4% Dollars 432,124 497,147 -13.1% Avg.Price 457,759 514,113 -11.0% Southeast (2) Homes 494 1,648 -70.0% Dollars 147,366 503,789 -70.7% Avg.Price 298,311 305,697 -2.4% Southwest Homes 1,720 2,036 -15.5% Dollars 388,321 436,494 -11.0% Avg.Price 225,768 214,388 5.3% Midwest Homes 540 408 32.4% Dollars 124,680 81,606 52.8% Avg.Price 230,889 200,015 15.4% West Homes 1,194 1,292 -7.6% Dollars 523,668 600,454 -12.8% Avg.Price 438,583 464,748 -5.6% Consolidated Total Homes 5,686 7,312 -22.2% Dollars 1,994,091 2,539,866 -21.5% Avg.Price 350,702 347,356 1.0% Unconsolidated Joint Ventures Homes 245 654 -62.5% Dollars 59,612 238,329 -75.0% Avg.Price 243,315 364,417 -33.2% Total Homes 5,931 7,966 -25.5% Dollars 2,053,703 2,778,195 -26.1% Avg.Price 346,266 348,757 -0.7% Deliveries Six Months Ended April 30, 2007 2006 % Change Northeast Homes 869 879 -1.1% Dollars 399,138 400,127 -0.2% Avg.Price 459,307 455,207 0.9% Mid-Atlantic Homes 872 870 0.2% Dollars 412,058 448,890 -8.2% Avg.Price 472,544 515,966 -8.4% Southeast (2) Homes 1,580 2,464 -35.9% Dollars 425,569 580,980 -26.7% Avg.Price 269,347 235,787 14.2% Southwest Homes 1,653 1,926 -14.2% Dollars 376,223 415,548 -9.5% Avg.Price 227,600 215,757 5.5% Midwest Homes 395 379 4.2% Dollars 80,103 58,327 37.3% Avg.Price 202,792 153,897 31.8% West Homes 1,047 1,882 -44.4% Dollars 500,839 821,873 -39.1% Avg.Price 478,356 436,702 9.5% Consolidated Total Homes 6,416 8,400 -23.6% Dollars 2,193,930 2,725,745 -19.5% Avg.Price 341,947 324,493 5.4% Unconsolidated Joint Ventures Homes 564 1,197 -52.9% Dollars 211,737 459,014 -53.9% Avg.Price 375,419 383,470 -2.1% Total Homes 6,980 9,597 -27.3% Dollars 2,405,667 3,184,759 -24.5% Avg.Price 344,651 331,849 3.9% Contract Backlog April 30, 2007 2006 % Change Northeast Homes 1,143 1,665 -31.4% Dollars 592,250 758,960 -22.0% Avg.Price 518,154 455,832 13.7% Mid-Atlantic Homes 1,206 1,478 -18.4% Dollars 587,339 761,279 -22.8% Avg.Price 487,014 515,074 -5.4% Southeast (2) Homes 2,727 5,265 -48.2% Dollars 785,921 1,438,488 -45.4% Avg.Price 288,200 273,217 5.5% Southwest Homes 1,066 1,406 -24.2% Dollars 245,148 315,309 -22.3% Avg.Price 229,970 224,260 2.5% Midwest Homes 813 610 33.3% Dollars 167,350 110,774 51.1% Avg.Price 205,842 181,597 13.4% West Homes 811 1,163 -30.3% Dollars 357,982 587,465 -39.1% Avg.Price 441,408 505,129 -12.6% Consolidated Total Homes 7,766 11,587 -33.0% Dollars 2,735,990 3,972,275 -31.1% Avg.Price 352,304 342,822 2.8% Unconsolidated Joint Ventures Homes 811 1,797 -54.9% Dollars 370,634 810,115 -54.2% Avg.Price 457,008 450,815 1.4% Total Homes 8,577 13,384 -35.9% Dollars 3,106,624 4,782,390 -35.0% Avg.Price 362,204 357,321 1.4% DELIVERIES INCLUDE EXTRAS Notes: (1) Net contracts are defined as a new contracts signed during the period for the purchase of homes, less cancellations of prior contracts. (2) The number and the dollar amount of net contracts in the Southeast in the first six months of 2007 include the effect of CraftBuilt Homes acquisition, which closed in April 2006.