Hovnanian Enterprises Reports Fiscal 2006 Third quarter Results; Maintains Fiscal 2006 EPS Projection

RED BANK, N.J., Sept. 6 /PRNewswire-FirstCall/ -- Hovnanian Enterprises, Inc. , a leading national homebuilder, reported net income available to common stockholders of $74.4 million, or $1.15 per fully diluted common share, on $1.6 billion in total revenues for the quarter ended July 31, 2006. For the nine-month period ended July 31, 2006, revenues reached $4.4 billion, a 23% increase from $3.6 billion in revenues in the year earlier period. Net income available to common stockholders for the first nine months of fiscal 2006 was $256.8 million, or $3.95 per fully diluted common share, compared to $303.7 million, or $4.63 per fully diluted common share, in the same period a year ago. Common stockholders' equity grew to $1.9 billion, or $31.07 per common share, at July 31, 2006, a 29% increase from $1.5 billion, or $24.16 per common share, on July 31, 2005.

Comments From Management

"Since the end of last summer, we have experienced a deteriorating environment for new home sales in many of our more regulated markets," said Ara K. Hovnanian, President and Chief Executive Officer of the Company. "This current market slowdown is unique, because the economy is relatively strong - jobs are being created and interest rates remain at levels that are low on a historical basis. Under similar economic circumstances, the homebuilding market historically performed well. We believe the current slower housing market has resulted from the sudden and substantial increase in the inventory of homes offered for resale, combined with mounting negative sentiment among homebuyers that has caused many to postpone their purchase decisions."

"We do not know how long the elevated levels of resale listings will persist and it is equally difficult to predict what events might cause a reversal in buyers' sentiment. Thus, we are making decisions today with the assumption that current conditions will persist for the foreseeable future. We remain focused on competitively pricing our homes on a community-by-community basis to balance our margins and sales pace at an optimal level relative to market conditions," Mr. Hovnanian continued.

"We continue to take down land and open new communities where the economic returns achieve acceptable returns under today's sales pace and pricing assumptions. Conversely, we attempt to renegotiate option contracts when current conditions yield a lower than acceptable return on our investment," Mr. Hovnanian said. "In situations where we have been unsuccessful in renegotiating, we believe the walk-away costs we have incurred are preferable to investing a much larger Dollar amount to own land that would generate a sub-par return on capital. The flexibility we gain through the use of options allows us to maximize returns on capital over the long-term," Mr. Hovnanian concluded.

"Our profits have been negatively impacted by the increased use of incentives and concessions, as well as expenses related to walking away from option deposits," said J. Larry Sorsby, Executive Vice President and Chief Financial Officer. "We incurred $11.4 million of charge-offs associated with walk-away costs and an additional $0.8 million in land write-downs in the third quarter. We continue to renegotiate a significant number of our land contracts, and are likely to incur additional walk-away costs in conjunction with some of these situations. Although a certain number of such costs are factored into our guidance for the fourth quarter, we cannot quantify the exact amount or reserve for them until each contract renegotiation is finalized, thus creating an additional variable in our forecast. Based on current market conditions, we anticipate fully diluted earnings per common share in a range of $1.05 to $1.80 in our fourth quarter," Mr. Sorsby continued. "Our balance sheet remains strong. We expect to achieve an average ratio of net recourse debt to capital at or below 50% for fiscal 2006."

In Closing

"Our targeted hurdle rate on all new land acquisitions, combined with our discipline in evaluating such acquisitions on the basis of current sales absorption and pricing, acts as a self regulating mechanism in less robust markets by naturally slowing our acquisitions as sales conditions deteriorate. Despite the current slowdown, including deliveries from unconsolidated joint ventures, we still expect to deliver more than 20,000 homes and generate pretax income in the range of $535 million to $610 million, and net income in a range of $325 million to $375 million on revenues of greater than $6 billion in fiscal 2006. At the same time, during the current slowdown, our associates are working hard to maximize our homebuyers' satisfaction through processes and initiatives that we have implemented over the past few years, keeping us focused on our goal of delivering quality and value to each of our homebuyers," Mr. Hovnanian concluded.

Hovnanian Enterprises will webcast its third quarter earnings conference call at 11:00 a.m. E.T. on Thursday, September 7, 2006, 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.

The Company's summary projection for the fiscal year ending October 31, 2006 is available on the "Company Projections" section of the "Investor Relations" section of the Company's website at http://www.khov.com/.

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, 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 2005 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.comor 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") is not a generally accepted accounting principle (GAAP) financial measure. The most directly comparable GAAP financial measure is net income. The reconciliation of 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, 2005.

(Financial Tables Follow) Hovnanian Enterprises, Inc. July 31, 2006 Statements of Consolidated Income (Dollars in Thousands, Except Per Share) Three Months Ended, Nine Months Ended, July 31, July 31, ------------------------- ------------------------- 2006 2005 2006 2005 ------------ ----------- ------------ ----------- (Unaudited) (Unaudited) Total Revenues $1,550,519 $1,312,726 $4,402,632 $3,576,756 Costs and Expenses 1,426,403 1,131,742 3,997,814 3,097,914 Income/(Loss) From Unconsolidated Joint Ventures (3,239) 13,907 13,833 22,482 ------------ ----------- ------------ ----------- Income Before Income Taxes 120,877 194,891 418,651 501,324 Provision for Taxes 43,830 78,797 153,859 197,612 ------------ ----------- ------------ ----------- Net Income 77,047 116,094 264,792 303,712 ------------ ----------- ------------ ----------- Less: Preferred Stock Dividends 2,668 - 8,006 - ------------ ----------- ------------ ----------- Net Income Available to Common Stockholders $74,379 $116,094 $256,786 $303,712 ============ =========== ============ =========== Per Share Data: Basic: Income per common share $1.18 $1.85 $4.09 $4.87 Weighted Average Number of Common Shares Outstanding 62,804 62,754 62,843 62,412 Assuming Dilution: Income per common share $1.15 $1.76 $3.95 $4.63 Weighted Average Number of Common Shares Outstanding 64,460 65,796 64,989 65,574 Hovnanian Enterprises, Inc. July 31, 2006 Gross Margin (Dollars in Thousands) Homebuilding Gross Margin Homebuilding Gross Margin Three Months Ended Nine Months Ended July 31, July 31, ------------------------- ------------------------- 2006 2005 2006 2005 ----------- ----------- ----------- ----------- (Unaudited) (Unaudited) Sale of Homes $1,499,826 $1,289,373 $4,225,571 $3,495,014 Cost of Sales, excluding interest (a) 1,148,530 939,815 3,203,882 2,571,916 ----------- ----------- ----------- ----------- Homebuilding Gross Margin, excluding interest $351,296 $349,558 $1,021,689 $923,098 Homebuilding Cost of Sales interest 25,551 22,304 61,523 58,324 ----------- ----------- ----------- ----------- Homebuilding Gross Margin, including interest $325,745 $327,254 $960,166 $864,774 =========== =========== =========== =========== Gross Margin Percentage, excluding interest 23.4% 27.1% 24.2% 26.4% Gross Margin Percentage, including interest 21.7% 25.4% 22.7% 24.7% Land Sales Gross Margin Land Sales Gross Margin Three Months Ended Nine Months Ended July 31, July 31, ------------------------- ------------------------- 2006 2005 2006 2005 ----------- ----------- ----------- ----------- (Unaudited) (Unaudited) Land Sales $23,045 $441 $103,838 $24,618 Cost of Sales, excluding interest (a) 21,742 387 81,376 16,369 ----------- ----------- ----------- ----------- Land Sales Gross Margin, excluding interest $1,303 $54 $22,462 $8,249 Land Sales interest 50 28 930 239 ----------- ----------- ----------- ----------- Land Sales Gross Margin, including interest $1,253 $26 $21,532 $8,010 =========== =========== =========== =========== (a) Does not include costs associated with walking away from land options which are recorded as inventory impairment losses in the income statement. Hovnanian Enterprises, Inc. July 31, 2006 Reconciliation of EBITDA to Net Income (Dollars in Thousands) Three Months Ended Nine Months Ended July 31, July 31, -------------------- ------------------- 2006 2005 2006 2005 --------- ---------- --------- --------- (Unaudited) (Unaudited) Net Income $77,047 $116,094 $264,792 $303,712 Income Taxes 43,830 78,797 153,859 197,612 Interest expense 26,250 23,481 64,622 60,406 --------- ---------- ---------- --------- EBIT(1) $147,127 $218,372 $483,273 $561,730 Depreciation 4,269 2,400 10,588 5,913 Amortization of Debt Costs 644 377 1,653 1,086 Amortization of Intangibles 13,331 11,781 38,391 32,255 Other Amortization - - - 528 --------- ---------- ---------- --------- EBITDA(2) $165,371 $232,930 $533,905 $601,512 ========= ========== ========== ========= INTEREST INCURRED $41,515 $27,991 $108,569 $71,939 EBITDA TO INTEREST INCURRED 3.98 8.32 4.92 8.36 (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. Hovnanian Enterprises, Inc. July 31, 2006 Interest Incurred, Expensed and Capitalized (Dollars in Thousands) Three Months Ended Nine Months Ended July 31, July 31, ------------------ ----------------- 2006 2005 2006 2005 -------- --------- -------- -------- (Unaudited) Interest Capitalized at Beginning of Period $77,048 $44,488 $48,366 $37,465 Plus Interest Incurred 41,515 27,991 108,569 71,939 Less Interest Expensed 26,250 23,481 64,622 60,406 -------- -------- -------- -------- Interest Capitalized at End of Period $92,313 $48,998 $92,313 $48,998 ======== ======== ======== ======== Hovnanian Enterprises, Inc. July 31, 2006 Summary Financial Projection (Dollars in Millions, except per share or where noted) (Unaudited) Projection Fiscal Fiscal Fiscal Trailing Fiscal Yr. Yr. Yr. 12 Months Yr. 10/31/03 10/31/04 10/31/05(1) 07/31/06(1) 10/31/06*(1) -------- -------- ----------- ----------- ------------ Total Revenues ($ Billion) $3.20 $4.15 $5.35 $6.17 $6.1 - $6.3 Income Before Income Taxes $411.5 $549.8 $780.6 $697.9 $535 - $610 Pre-tax Margin 12.9% 13.2% 14.6% 11.3% 8.8% - 9.7% Net Income Available to Common Stockholders $257.4 $348.7 $469.1 $422.2 $325 - $375 Earnings Per Common Share (fully diluted) $3.93 $5.35 $7.16 $6.48 $5.00 - $5.75 ------------------------------------------------------------------------- * 2006 Projection is based on one quarter of projected results and three quarters of actual data. (1) Net Income less preferred dividends paid. HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In Thousands Except Share Amounts) July 31, October 31, 2006 2005 ----------- ----------- ASSETS (unaudited) Homebuilding: Cash and cash equivalents $36,787 $201,641 ----------- ----------- Restricted cash 9,500 17,189 ----------- ----------- Inventories - At the lower of cost or fair value: Sold and unsold homes and lots under development 3,589,248 2,459,431 ----------- ----------- Land and land options held for future development or sale 501,059 595,806 ----------- ----------- Consolidated Inventory Not Owned: Specific performance options 12,872 9,289 Variable interest entities 369,705 242,825 Other options 175,021 129,269 ----------- ----------- Total Consolidated Inventory Not Owned 557,598 381,383 ----------- ----------- Total Inventories 4,647,905 3,436,620 ----------- ----------- Investments in and advances to unconsolidated joint ventures 217,153 187,205 ----------- ----------- Receivables, deposits, and notes 103,102 125,388 ----------- ----------- Property, plant, and equipment - net 111,542 96,891 ----------- ----------- Prepaid expenses and other assets 182,964 131,845 ----------- ----------- Goodwill 32,658 32,658 ----------- ----------- Definite life intangibles 200,525 249,506 ----------- ----------- Total Homebuilding 5,542,136 4,478,943 ----------- ----------- Financial Services: Cash and cash equivalents 11,015 9,632 Restricted cash 1,285 1,037 Mortgage loans held for sale 174,747 211,248 Other assets 8,722 15,375 ----------- ----------- Total Financial Services 195,769 237,292 ----------- ----------- Income Taxes Receivable - Including Deferred Tax Benefits 150,795 9,903 ----------- ----------- Total Assets $5,888,700 $4,726,138 =========== =========== HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In Thousands Except Share Amounts) July 31, October 31, 2006 2005 ----------- ----------- LIABILITIES AND STOCKHOLDERS' EQUITY (unaudited) Homebuilding: Nonrecourse land mortgages $33,046 $48,673 Accounts payable and other liabilities 546,668 510,529 Customers' deposits 205,721 259,930 Nonrecourse mortgages secured by operating properties 23,852 24,339 Liabilities from inventory not owned 283,905 177,014 ----------- ----------- Total Homebuilding 1,093,192 1,020,485 ----------- ----------- Financial Services: Accounts payable and other liabilities 8,666 8,461 Mortgage warehouse line of credit 166,923 198,856 ----------- ----------- Total Financial Services 175,589 207,317 ----------- ----------- Notes Payable: Revolving credit agreement 273,225 Senior notes 1,649,510 1,098,739 Senior subordinated notes 400,000 400,000 Accrued interest 30,762 26,991 ----------- ----------- Total Notes Payable 2,353,497 1,525,730 ----------- ----------- Total Liabilities 3,622,278 2,753,532 ----------- ----------- Minority interest from inventory not owned 208,542 180,170 ----------- ----------- Minority interest from consolidated joint ventures 3,563 1,079 ----------- ----------- Stockholders' Equity: Preferred Stock, $.01 par value- authorized 100,000 shares; issued 5,600 shares at July 31, 2006 and at October 31, 2005 with a liquidation preference of $140,000 135,299 135,389 Common Stock, Class A, $.01 par value-authorized 200,000,000 shares; issued 58,593,879 shares at July 31, 2006 and 57,976,455 shares at October 31, 2005 (including 11,494,720 shares at July 31, 2006 and 10,995,656 shares at October 31, 2005 held in Treasury) 586 580 Common Stock, Class B, $.01 par value (convertible to Class A at time of sale) authorized 30,000,000 shares; issued 15,360,360 shares at July 31, 2006 and 15,370,250 shares at October 31, 2005 (including 691,748 shares at July 31, 2006 and October 31, 2005 held in Treasury) 154 154 Paid in Capital - Common Stock 247,488 236,001 Retained Earnings 1,779,738 1,522,952 Deferred Compensation (19,648) Treasury Stock - at cost (108,948) (84,071) ------------ ------------ Total Stockholders' Equity 2,054,317 1,791,357 ------------ ------------ Total Liabilities and Stockholders' Equity $ 5,888,700 $ 4,726,138 ============ ============ HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In Thousands Except Per Share Data) (Unaudited) Three Months Ended Nine Months Ended July 31, July 31, ----------------------- ----------------------- 2006 2005 2006 2005 ---------- ---------- ---------- ---------- Revenues: Homebuilding: Sale of homes $1,499,826 $1,289,373 $4,225,571 $3,495,014 Land sales and other revenues 28,032 4,820 113,947 32,747 ---------- ---------- ---------- ---------- Total Homebuilding 1,527,858 1,294,193 4,339,518 3,527,761 Financial Services 22,661 18,533 63,114 48,995 ---------- ---------- ---------- ---------- Total Revenues 1,550,519 1,312,726 4,402,632 3,576,756 ---------- ---------- ---------- ---------- Expenses: Homebuilding: Cost of sales, excluding interest 1,170,272 940,202 3,285,258 2,588,285 Cost of sales interest 25,601 22,332 62,453 58,563 ---------- ---------- ---------- ---------- Total Cost of Sales 1,195,873 962,534 3,347,711 2,646,848 Selling, general and administrative 154,050 116,388 441,137 319,680 Inventory impairment and land option deposit write-offs 12,274 1,354 20,978 3,352 ---------- ---------- ---------- ---------- Total Homebuilding 1,362,197 1,080,276 3,809,826 2,969,880 Financial Services 15,127 12,296 43,174 33,683 Corporate General and Administrative 26,744 18,884 80,377 49,678 Other Interest 649 1,149 2,169 1,843 Other Operations 8,355 7,356 23,877 10,575 Intangible Amortization 13,331 11,781 38,391 32,255 ---------- ---------- ---------- ---------- Total Expenses 1,426,403 1,131,742 3,997,814 3,097,914 Income (loss) from unconsolidated joint ventures (3,239) 13,907 13,833 22,482 ---------- ---------- ---------- ---------- Income Before Income Taxes 120,877 194,891 418,651 501,324 ---------- ---------- ---------- ---------- State and Federal Income Taxes: State (3,897) 10,535 7,212 26,299 Federal 47,727 68,262 146,647 171,313 ---------- ---------- ---------- ---------- Total Taxes 43,830 78,797 153,859 197,612 ---------- ---------- ---------- ---------- Net Income 77,047 116,094 264,792 303,712 Less: Preferred Stock Dividends 2,668 8,006 ---------- ---------- ---------- ---------- Net Income Available to Common Stockholders $74,379 $116,094 $256,786 $303,712 ---------- ---------- ---------- ---------- Per Share Data: Basic: Income per common share $1.18 $1.85 $4.09 $4.87 Weighted average number of common shares outstanding 62,804 62,754 62,843 62,412 Assuming dilution: Income per common share $1.15 $1.76 $3.95 $4.63 Weighted average number of common shares outstanding 64,460 65,796 64,989 65,574 HOVNANIAN ENTERPRISES, INC. (DOLLARS IN THOUSANDS EXCEPT AVG. PRICE) (UNAUDITED) Communities Under Development Three Months - 7/31/06 Net Contracts (1) ---------------------------------- Three Months Ended July 31, ---------------------------------- 2006 2005 % Change ---------------------------------- NorthEast Region (2) Homes 695 725 (4.1%) Dollars 252,873 286,296 (11.7%) Avg. Price 363,846 394,891 (7.9%) SouthEast Region (3) Homes 1,058 1,263 (16.2%) Dollars 370,753 485,785 (23.7%) Avg. Price 350,429 384,628 (8.9%) SouthWest Region Homes 945 1,201 (21.3%) Dollars 199,492 247,439 (19.4%) Avg. Price 211,103 206,027 2.5% West Region Homes 651 954 (31.8%) Dollars 271,904 411,976 (34.0%) Avg. Price 417,671 431,841 (3.3%) Consolidated Total Homes 3,349 4,143 (19.2%) Dollars 1,095,022 1,431,496 (23.5%) Avg. Price 326,970 345,522 (5.4%) Unconsolidated Joint Ventures Homes 249 722 (65.5%) Dollars 85,228 309,494 (72.5%) Avg. Price 342,282 428,663 (20.2%) Total Homes 3,598 4,865 (26.0%) Dollars 1,180,250 1,740,990 (32.2%) Avg. Price 328,030 357,860 (8.3%) HOVNANIAN ENTERPRISES, INC. (DOLLARS IN THOUSANDS EXCEPT AVG. PRICE) (UNAUDITED) Communities Under Development Three Months - 7/31/06 Deliveries Three Months Ended July 31, ---------------------------------- 2006 2005 % Change ---------------------------------- NorthEast Region (2) Homes 721 644 12.0% Dollars 286,250 244,973 16.8% Avg. Price 397,018 380,393 4.4% SouthEast Region (3) Homes 2,030 1,212 67.5% Dollars 617,412 405,467 52.3% Avg. Price 304,144 334,544 (9.1%) SouthWest Region Homes 1,022 1,021 0.1% Dollars 220,211 189,766 16.0% Avg. Price 215,471 185,862 15.9% West Region Homes 850 1,090 (22.0%) Dollars 375,953 449,167 (16.3%) Avg. Price 442,298 412,080 7.3% Consolidated Total Homes 4,623 3,967 16.5% Dollars 1,499,826 1,289,373 16.3% Avg. Price 324,427 325,025 (0.2%) Unconsolidated Joint Ventures Homes 498 571 (12.8%) Dollars 189,287 195,716 (3.3%) Avg. Price 380,094 342,759 10.9% Total Homes 5,121 4,538 12.8% Dollars 1,689,113 1,485,089 13.7% Avg. Price 329,840 327,256 0.8% HOVNANIAN ENTERPRISES, INC. (DOLLARS IN THOUSANDS EXCEPT AVG. PRICE) (UNAUDITED) Communities Under Development Three Months - 7/31/06 Contract Backlog July 31, ---------------------------------- 2006 2005 % Change ---------------------------------- NorthEast Region (2) Homes 2,249 2,181 3.1% Dollars 862,227 798,113 8.0% Avg. Price 383,382 365,939 4.8% SouthEast Region (3) Homes 5,771 3,305 74.6% Dollars 1,950,945 1,232,152 58.3% Avg. Price 338,060 372,815 (9.3%) SouthWest Region Homes 1,329 1,608 (17.4%) Dollars 300,375 333,875 (10.0%) Avg. Price 226,015 207,634 8.9% West Region Homes 964 1,936 (50.2%) Dollars 490,893 840,758 (41.6%) Avg. Price 509,225 434,276 17.3% Consolidated Total Homes 10,313 9,030 14.2% Dollars 3,604,440 3,204,898 12.5% Avg. Price 349,504 354,917 (1.5%) Unconsolidated Joint Ventures Homes 1,548 2,301 (32.7%) Dollars 706,057 993,259 (28.9%) Avg. Price 456,109 431,664 5.7% Total Homes 11,861 11,331 4.7% Dollars 4,310,497 4,198,157 2.7% Avg. Price 363,418 370,502 (1.9%) DELIVERIES INCLUDE EXTRAS Notes: (1) Net contracts are defined as 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 Northeast in the 2006 third quarter include the effect of the Oster Homes acquisition, which closed in August 2005. (3) The number and the dollar amount of net contracts in the Southeast in the 2006 third quarter include the effects of the First Home Builders of Florida and CraftBuilt Homes acquisitions, which closed in August 2005 and April 2006, respectively. HOVNANIAN ENTERPRISES, INC. (DOLLARS IN THOUSANDS EXCEPT AVG. PRICE) (UNAUDITED) Communities Under Development Nine Months - 7/31/06 Net Contracts (1) ---------------------------------- Nine Months Ended July 31, ---------------------------------- 2006 2005 % Change ---------------------------------- NorthEast Region (2) Homes 2,064 1,981 4.2% Dollars 754,855 729,637 3.5% Avg. Price 365,725 368,317 (0.7%) SouthEast Region (3) Homes 3,673 3,630 1.2% Dollars 1,371,689 1,308,952 4.8% Avg. Price 373,452 360,593 3.6% SouthWest Region Homes 2,981 3,320 (10.2%) Dollars 635,986 647,975 (1.9%) Avg. Price 213,346 195,173 9.3% West Region Homes 1,943 3,076 (36.8%) Dollars 872,358 1,272,462 (31.4%) Avg. Price 448,975 413,674 8.5% Consolidated Total Homes 10,661 12,007 (11.2%) Dollars 3,634,888 3,959,026 (8.2%) Avg. Price 340,952 329,726 3.4% Unconsolidated Joint Ventures (4) Homes 903 1,426 (36.7%) Dollars 323,557 671,277 (51.8%) Avg. Price 358,314 470,742 (23.9%) Total Homes 11,564 13,433 (13.9%) Dollars 3,958,445 4,630,303 (14.5%) Avg. Price 342,308 344,696 (0.7%) HOVNANIAN ENTERPRISES, INC. (DOLLARS IN THOUSANDS EXCEPT AVG. PRICE) (UNAUDITED) Communities Under Development Nine Months - 7/31/06 Deliveries Nine Months Ended July 31, ---------------------------------- 2006 2005 % Change ---------------------------------- NorthEast Region (2) 1,979 2,056 (3.7%) 744,704 750,679 (0.8%) 376,303 365,116 3.1% SouthEast Region (3) 5,364 3,232 66.0% 1,647,282 1,004,201 64.0% 307,100 310,706 (1.2%) SouthWest Region 2,948 2,636 11.8% 635,759 489,810 29.8% 215,658 185,815 16.1% West Region 2,732 3,057 (10.6%) 1,197,826 1,250,324 (4.2%) 438,443 409,004 7.2% Consolidated Total 13,023 10,981 18.6% 4,225,571 3,495,014 20.9% 324,470 318,278 1.9% Unconsolidated Joint Ventures (4) 1,695 944 79.6% 648,301 331,033 95.8% 382,478 350,670 9.1% Total 14,718 11,925 23.4% 4,873,872 3,826,047 27.4% 331,150 320,843 3.2% HOVNANIAN ENTERPRISES, INC. (DOLLARS IN THOUSANDS EXCEPT AVG. PRICE) (UNAUDITED) Communities Under Development Nine Months - 7/31/06 Contract Backlog July 31, ---------------------------------- 2006 2005 % Change ---------------------------------- NorthEast Region (2) 2,249 2,181 3.1% 862,227 798,113 8.0% 383,382 365,939 4.8% SouthEast Region (3) 5,771 3,305 74.6% 1,950,945 1,232,152 58.3% 338,060 372,815 (9.3%) SouthWest Region 1,329 1,608 (17.4%) 300,375 333,875 (10.0%) 226,015 207,634 8.9% West Region 964 1,936 (50.2%) 490,893 840,758 (41.6%) 509,225 434,276 17.3% Consolidated Total 10,313 9,030 14.2% 3,604,440 3,204,898 12.5% 349,504 354,917 (1.5%) Unconsolidated Joint Ventures (4) 1,548 2,301 (32.7%) 706,057 993,259 (28.9%) 456,109 431,664 5.7% Total 11,861 11,331 4.7% 4,310,497 4,198,157 2.7% 363,418 370,502 (1.9%) DELIVERIES INCLUDE EXTRAS Notes: (1) Net contracts are defined as 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 Northeast in the 2006 first nine months include the effect of the Oster Homes acquisition, which closed in August 2005. (3) The number and the dollar amount of net contracts in the Southeast in the 2006 first nine months include the effects of the Cambridge Homes, First Home Builders of Florida and CraftBuilt Homes acquisitions, which closed in March 2005, August 2005 and April 2006, respectively. (4) The number and the dollar amount of net contracts in Unconsolidated Joint Ventures in the 2006 first nine months include the effect of the Town & Country Homes acquisition, which closed in March 2005.